John Hancock Trust

Registration No. 2-94157/811-04146

As filed with the Securities and Exchange Commission on April 30, 2009

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT

under

THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 88

and

THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 89

JOHN HANCOCK TRUST

(Exact Name of Registrant as Specified in Charter)

601 Congress Street
Boston, Massachusetts 02210
(Address of Principal Executive Offices)

Thomas Kinzler
Secretary
John Hancock Trust
601 Congress Street
Boston, Massachusetts 02210
(Name and Address of Agent for Service)

Copies to:


John W. Blouch		Mark Goshko
Dykema Gossett PLLC		Kirkpatrick & Lockhart Preston Gates Ellis LLP
Franklin Square, Suite 300 West		State Street Financial Center
13001 I Street, N.W.		1 Lincoln Street
Washington D.C. 20005-3306		Boston, MA 02111-2950

It is proposed that this filing will become effective:

	o		immediately upon filing pursuant to paragraph (b)

	þ		on (May 1, 2009) pursuant to paragraph (b)

	o		60 days after filing pursuant to paragraph (a)(1)

	o		on (date) pursuant to paragraph (a)(1)

	o		on (date) pursuant to paragraph (a)(2)

	o		75 days after filing pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

o this post-effective amendment designates a new effective date for a previously filed post-effective amendment.

JOHN HANCOCK TRUST
601 Congress Street, Boston, Massachusetts 02210

John Hancock Trust (“JHT”) is an open-end management investment company, commonly known as a mutual fund. Shares of JHT are not offered directly to the public but are sold only to insurance companies and their separate accounts as the underlying investment medium for variable contracts. JHT provides a range of investment objectives through 122 separate investment portfolios or funds (each a “fund,” collectively the “funds”). The following funds are described in this Prospectus:

500 INDEX TRUST

500 INDEX TRUST B

ABSOLUTE RETURN TRUST

ACTIVE BOND TRUST

ALL CAP CORE TRUST

ALL CAP GROWTH TRUST

ALL CAP VALUE TRUST

ALPHA OPPORTUNITIES TRUST

AMERICAN ASSET ALLOCATION TRUST

AMERICAN BLUE CHIP INCOME AND GROWTH TRUST

AMERICAN BOND TRUST

AMERICAN DIVERSIFIED GROWTH & INCOME TRUST

AMERICAN FUNDAMENTAL HOLDINGS TRUST

AMERICAN GLOBAL DIVERSIFICATION TRUST

AMERICAN GLOBAL GROWTH TRUST

AMERICAN GLOBAL SMALL CAPITALIZATION TRUST

AMERICAN GROWTH TRUST

AMERICAN GROWTH-INCOME TRUST

AMERICAN HIGH-INCOME BOND TRUST

AMERICAN INTERNATIONAL TRUST

AMERICAN NEW WORLD TRUST

BALANCED TRUST

BLUE CHIP GROWTH TRUST

CAPITAL APPRECIATION TRUST

CAPITAL APPRECIATION VALUE TRUST

CORE ALLOCATION TRUST

CORE ALLOCATION PLUS TRUST

CORE BALANCED TRUST

CORE BOND TRUST

CORE DISCIPLINED DIVERSIFICATION TRUST

CORE FUNDAMENTAL HOLDINGS TRUST

CORE GLOBAL DIVERSIFICATION TRUST

CORE STRATEGY TRUST (FORMERLY, INDEX ALLOCATION TRUST)

DISCIPLINED DIVERSIFICATION TRUST

EMERGING MARKETS VALUE TRUST

EMERGING SMALL COMPANY TRUST

EQUITY-INCOME TRUST

FINANCIAL SERVICES TRUST

FLOATING RATE INCOME TRUST

FRANKLIN TEMPLETON FOUNDING ALLOCATION TRUST

FUNDAMENTAL VALUE TRUST

GLOBAL ALLOCATION TRUST

GLOBAL BOND TRUST

GLOBAL REAL ESTATE TRUST

GLOBAL TRUST

GROWTH EQUITY TRUST

GROWTH OPPORTUNITIES TRUST

GROWTH TRUST

HEALTH SCIENCES TRUST

HIGH INCOME TRUST

HIGH YIELD TRUST

INCOME TRUST

INTERNATIONAL CORE TRUST

INTERNATIONAL EQUITY INDEX TRUST A

INTERNATIONAL EQUITY INDEX TRUST B

INTERNATIONAL GROWTH TRUST

INTERNATIONAL INDEX TRUST

INTERNATIONAL OPPORTUNITIES TRUST

INTERNATIONAL SMALL CAP TRUST

INTERNATIONAL SMALL COMPANY TRUST

INTERNATIONAL VALUE TRUST

INTRINSIC VALUE TRUST

INVESTMENT QUALITY BOND TRUST

LARGE CAP TRUST

LARGE CAP VALUE TRUST

LIFECYCLE 2010 TRUST

LIFECYCLE 2015 TRUST

LIFECYCLE 2020 TRUST

LIFECYCLE 2025 TRUST

LIFECYCLE 2030 TRUST

LIFECYCLE 2035 TRUST

LIFECYCLE 2040 TRUST

LIFECYCLE 2045 TRUST

LIFECYCLE 2050 TRUST

LIFECYCLE RETIREMENT TRUST

LIFESTYLE AGGRESSIVE TRUST

LIFESTYLE BALANCED TRUST

LIFESTYLE CONSERVATIVE TRUST

LIFESTYLE GROWTH TRUST

LIFESTYLE MODERATE TRUST

MID CAP INDEX TRUST

MID CAP INTERSECTION TRUST

MID CAP STOCK TRUST

MID CAP VALUE EQUITY TRUST

MID VALUE TRUST

MONEY MARKET TRUST

MONEY MARKET TRUST B

MUTUAL SHARES TRUST

NATURAL RESOURCES TRUST

OPTIMIZED ALL CAP TRUST

OPTIMIZED VALUE TRUST

OVERSEAS EQUITY TRUST

PACIFIC RIM TRUST

REAL ESTATE EQUITY TRUST

REAL ESTATE SECURITIES TRUST

REAL RETURN BOND TRUST

SCIENCE & TECHNOLOGY TRUST

SHORT-TERM BOND TRUST

SHORT TERM GOVERNMENT INCOME TRUST

SMALL CAP GROWTH TRUST

SMALL CAP INDEX TRUST

SMALL CAP INTRINSIC VALUE TRUST

SMALL CAP OPPORTUNITIES TRUST

SMALL CAP VALUE TRUST

SMALL COMPANY GROWTH TRUST

SMALL COMPANY VALUE TRUST

SMALLER COMPANY GROWTH TRUST

SPECTRUM INCOME TRUST

STRATEGIC BOND TRUST

STRATEGIC INCOME TRUST

TOTAL BOND MARKET TRUST A

TOTAL BOND MARKET TRUST B

TOTAL RETURN TRUST

TOTAL STOCK MARKET INDEX TRUST

U.S. GOVERNMENT SECURITIES TRUST

U.S. HIGH YIELD BOND TRUST

U.S. MULTI-SECTOR TRUST

UTILITIES TRUST

VALUE & RESTRUCTURING TRUST

VALUE OPPORTUNITIES TRUST

VALUE TRUST

VISTA TRUST

Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense. No person, including any dealer or salesperson, has been authorized to give any information or to make any representations, unless the information or representation is set forth in this Prospectus. If any such unauthorized information or representation is given, it should not be relied upon as having been authorized by JHT, the adviser or any subadvisers to JHT or the principal underwriter of the shares. This Prospectus is not an offer to sell shares of JHT in any state where such offer or sale would be prohibited.

Prospectus dated May 1, 2009

FUND DESCRIPTIONS:
INVESTMENT OBJECTIVES AND STRATEGIES, RISKS AND PERFORMANCE

The investment objectives, principal investment strategies and principal risks of the funds are set forth in the fund descriptions below, together with performance information for each fund. Each of the American Funds operates as a “feeder fund” (referred to as “JHT Feeder Funds”) which means that the fund does not buy investment securities directly. Instead, it invests in a “master fund” which in turn purchases investment securities. See “American Feeder Funds — Master — Feeder Structure.” The prospectus of the master fund for each of these feeder funds will be delivered together with this Prospectus.


1.	*Investment Management*

John Hancock Investment Management Services, LLC (the “Adviser”) is the investment adviser to JHT and the funds (except the JHT Feeder Funds which do not have an adviser). The Adviser administers the business and affairs of JHT and retains and compensates the investment subadvisers which manage the assets of the funds. The subadvisers formulate a continuous investment program for the funds, consistent with their investment goals and policies. The Adviser and subadvisers are registered as investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), or are exempt from such registration. The Adviser is a wholly-owned subsidiary of 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 U.S.


2.	*Investment Objectives and Strategies*

Each fund has a stated investment objective, which it pursues through separate investment strategies or policies. The investment objective is nonfundamental (meaning that it may be changed without the approval of the shareholders of the fund). There can be no assurance that a fund will achieve its investment objective. The differences in objectives and policies among the funds can be expected to affect the return of each fund and the degree of market and financial risk to which each fund is subject. See “Additional Information About the Funds’ Principal Risks and Investment Policies.”

Temporary Defensive Investing. Except as otherwise stated below in the description of a particular fund, during unusual or unsettled market conditions, for purposes of meeting redemption requests, or pending investment of its assets, each fund may invest all or a portion of its assets in cash and securities that are highly liquid, including: (a) high quality money market instruments, such as short-term U.S. government obligations, commercial paper, repurchase agreements or other cash equivalents; and (b) securities of other investment companies that are money market funds. In the case of funds investing extensively in foreign securities, these investments may be denominated in either U.S. or non-U.S. dollars and may include debt of foreign corporations and governments and debt of supranational organizations. To the extent a fund is in a defensive position, its ability to achieve its investment objective will be limited.

Use of Hedging and Other Strategic Transactions. Except as otherwise stated below in the description of a particular fund, each fund is authorized to use all of the various investment strategies referred to under “Risks of Investing in Certain Types of Securities — Hedging, derivatives and other strategic transactions risk.” More complete descriptions of options, futures, currency and other derivative transactions that certain funds may engage in are set forth in the Statement of Additional Information (the “SAI”).

More complete descriptions of the money market instruments and certain other instruments in which certain funds may invest are set forth in the SAI. A more complete description of the debt security ratings used by JHT assigned by Moody’s Investors Service, Inc. (“Moody’s”) or Standard & Poor’s Ratings Group (“S&P”) is included in Appendix A of the SAI.


3.	*Principal Risks of Investing*

Certain risks of investing in each fund are set forth in the fund’s description. If these risks materialize, an investor could lose money in a fund. The following risks as well as the definition of a non-diversified fund and the risks associated with such a fund, are more fully described below under “Additional Information About the Funds’ Principal Risks and Investment Policies.”


	•	Active management risk
	•	Arbitrage securities and distressed companies risk
	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Derivatives risk
	•	Distressed investments risk
	•	Equity securities risk
	•	Exchange traded funds (“ETFs”) risk
	•	Fund of funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Index management risk
	•	Industry and sector investing risk
	•	Initial public offerings (“IPOs”) risk
	•	Investment company securities risk


	•	Issuer risk
	•	Liquidity risk
	•	Loan participations risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk
	•	Non-diversified fund risk
	•	Real estate securities risk
	•	Securities lending risk
	•	Short sales risk

Recent instability in the financial markets has led the United States Government and other governments to take a number of unprecedented actions designed to support certain financial institutions and segments of the financial markets that have experienced extreme volatility, and in some cases a lack of liquidity. Federal, state, and other governments, their regulatory agencies, or self regulatory organizations may take actions that affect the regulation of the instruments in which the funds invest, or the issuers of such instruments, in ways that are unforeseeable. Legislation or regulation may also change the way in which the funds themselves are regulated. Such legislation or regulation could limit or preclude a fund’s ability to achieve its investment objective.

Governments or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear, and such a program may have positive or negative effects on the liquidity, valuation and performance of the funds’ portfolio holdings. Furthermore, volatile financial markets can expose the funds to greater market and liquidity risk and potential difficulty in valuing portfolio instruments held by the funds.

An investment in any of the funds is not a deposit of any bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.


4.	*Past Performance*

Each fund’s description contains a bar chart and a performance table, which provide some indication of the risks of investing in the fund. If a fund has less than one complete calendar year of performance, performance information is not provided for the fund.

Bar Chart. The bar chart shows changes in the performance of Series I or Series II shares of each fund from year to year over a ten-year period, if available. The performance of NAV shares of each fund would be higher since NAV shares do not have Rule 12b-1 fees. Funds with less than ten years of performance history show performance from the inception date of the fund.

Performance Table. The table compares each fund’s one, five and ten year average annual returns as of December 31, 2008 for each class of shares to those of a broad-based securities market index.

Performance information in the bar chart and the performance table reflects all fees charged to each fund, such as advisory fees and all fund expenses. None of the funds charges a sales load or a surrender fee. The performance information does not reflect the fees and expenses, including any sales loads or surrender charges, of any variable insurance contract which may use JHT as its underlying investment medium. If such fees and expenses had been reflected, performance would be lower.


5.	*Portfolio Managers*

See “Subadvisory Arrangements and Management Biographies” for information relating to the funds’ portfolio managers.


6.	*Fees and Expenses*

The different share classes have different expense arrangements, including different Rule 12b-1 fees for Series I, Series II and Series III (NAV shares are not subject to Rule 12b-1 fees). Each class of shares is the same except for differences in class expenses, including different Rule 12b-1 fees, and certain voting rights with respect to matters affecting only one or more classes as described under “Multiple Classes of Shares.” The table below describes the fees and expenses for each class of shares of each fund offered through this Prospectus. The fees and expenses do not reflect the fees and expenses of any variable insurance contract that may use JHT as its underlying investment medium and would be higher if they did. Such fees and expenses are listed in the Prospectus for the variable insurance contract. None of the funds charges a sales load or surrender fee although these fees may be imposed by the variable insurance contract.

FUND ANNUAL EXPENSES

Unless otherwise noted in the footnotes to the Expense Table, expense information for all funds except the New Funds (those with less than six months of operations as of December 31, 2008) is based on expenses incurred during the fiscal year ended December 31, 2008 expressed as a percentage of fund average net assets during the period. For New Funds, expense information is based on estimated amounts for the current fiscal year. Each fund’s annual operating expenses will likely vary throughout the year and from year to year. A fund’s expenses for the current fiscal year may be higher than the expenses in the table below if the fund’s

assets have decreased significantly from 2008 average net assets because certain fund expenses do not decrease as asset levels decrease and advisory fee rate breakpoints may not be achieved as asset levels decrease.


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
500 Index^3,4

Series I		0.46%		0.05%		0.03%		0.00%		0.54%		0.00%		0.54%

Series II		0.46%		0.25%		0.03%		0.00%		0.74%		0.00%		0.74%

Series NAV		0.46%		0.00%		0.03%		0.00%		0.49%		0.00%		0.49%

500 Index B⁵

Series NAV		0.47%		0.00%		0.03%		0.00%		0.50%		-0.25%		0.25%

Absolute Return⁶

Series I		0.11%		0.05%		0.03%		0.74%		0.93%		0.00%		0.93%

Series II		0.11%		0.25%		0.03%		0.74%		1.13%		0.00%		1.13%

Series NAV		0.11%		0.00%		0.03%		0.74%		0.88%		0.00%		0.88%

Active Bond³

Series I		0.60%		0.05%		0.04%		0.00%		0.69%		0.00%		0.69%

Series II		0.60%		0.25%		0.04%		0.00%		0.89%		0.00%		0.89%

Series NAV		0.60%		0.00%		0.04%		0.00%		0.64%		0.00%		0.64%

All Cap Core³

Series I		0.77%		0.05%		0.05%		0.00%		0.87%		0.00%		0.87%

Series II		0.77%		0.25%		0.05%		0.00%		1.07%		0.00%		1.07%

Series NAV		0.77%		0.00%		0.05%		0.00%		0.82%		0.00%		0.82%

All Cap Growth³

Series I		0.85%		0.05%		0.10%		0.00%		1.00%		0.00%		1.00%

Series II		0.85%		0.25%		0.10%		0.00%		1.20%		0.00%		1.20%

Series NAV		0.85%		0.00%		0.10%		0.00%		0.95%		0.00%		0.95%

All Cap Value³

Series I		0.85%		0.05%		0.09%		0.00%		0.99%		0.00%		0.99%

Series II		0.85%		0.25%		0.09%		0.00%		1.19%		0.00%		1.19%

Series NAV		0.85%		0.00%		0.09%		0.00%		0.94%		0.00%		0.94%

Alpha Opportunities^3,6

Series I		1.02%		0.05%		0.04%		0.00%		1.11%		0.00%		1.11%

Series II		1.02%		0.25%		0.04%		0.00%		1.31%		0.00%		1.31%

Series NAV		1.02%		0.00%		0.04%		0.00%		1.06%		0.00%		1.06%

American Diversified Growth and Income^6,7

Series I		0.05%		0.60%		0.04%		0.63%		1.32%		-0.05%		1.27%

Series II		0.05%		0.75%		0.04%		0.63%		1.47%		-0.05%		1.42%

Series III		0.05%		0.25%		0.04%		0.63%		0.97%		-0.05%		0.92%

Series NAV		0.05%		0.00%		0.04%		0.63%		0.72%		-0.05%		0.67%

American Fundamental Holdings^6,7

Series I		0.05%		0.60%		0.04%		0.40%		1.09%		-0.05%		1.04%

Series II		0.05%		0.75%		0.04%		0.40%		1.24%		-0.05%		1.19%

Series III		0.05%		0.25%		0.04%		0.40%		0.74%		-0.05%		0.69%

American Global Diversification^6,7

Series I		0.05%		0.60%		0.04%		0.63%		1.32%		-0.05%		1.27%

Series II		0.05%		0.75%		0.04%		0.63%		1.47%		-0.05%		1.42%

Series III		0.05%		0.25%		0.04%		0.63%		0.97%		-0.05%		0.92%

Balanced⁸

Series I		0.84%		0.05%		0.07%		0.00%		0.96%		0.00%		0.96%

Series II		0.84%		0.25%		0.07%		0.00%		1.16%		0.00%		1.16%

Series NAV		0.84%		0.00%		0.07%		0.00%		0.91%		0.00%		0.91%


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
Blue Chip Growth^3,8

Series I		0.81%		0.05%		0.04%		0.00%		0.90%		0.00%		0.90%

Series II		0.81%		0.25%		0.04%		0.00%		1.10%		0.00%		1.10%

Series NAV		0.81%		0.00%		0.04%		0.00%		0.85%		0.00%		0.85%

Capital Appreciation³

Series I		0.72%		0.05%		0.04%		0.00%		0.81%		0.00%		0.81%

Series II		0.72%		0.25%		0.04%		0.00%		1.01%		0.00%		1.01%

Series NAV		0.72%		0.00%		0.04%		0.00%		0.76%		0.00%		0.76%

Capital Appreciation Value^3,8,9

Series I		0.95%		0.05%		0.15%		0.00%		1.15%		0.00%		1.15%

Series II		0.95%		0.25%		0.15%		0.00%		1.35%		0.00%		1.35%

Series NAV		0.95%		0.00%		0.15%		0.00%		1.10%		0.00%		1.10%

Core Allocation^6,10

Series I		0.05%		0.05%		0.07%		0.85%		1.02%		-0.05%		0.97%

Series II		0.05%		0.25%		0.07%		0.85%		1.22%		-0.05%		1.17%

Series NAV		0.05%		0.00%		0.07%		0.85%		0.97%		-0.05%		0.92%

Core Allocation Plus^3,9

Series I		0.92%		0.05%		0.22%		0.00%		1.19%		0.00%		1.19%

Series II		0.92%		0.25%		0.22%		0.00%		1.39%		0.00%		1.39%

Series NAV		0.92%		0.00%		0.22%		0.00%		1.14%		0.00%		1.14%

Core Balanced^6,10

Series I		0.05%		0.05%		0.07%		0.79%		0.96%		-0.05%		0.91%

Series II		0.05%		0.25%		0.07%		0.79%		1.16%		-0.05%		1.11%

Series NAV		0.05%		0.00%		0.07%		0.79%		0.91%		-0.05%		0.86%

Core Bond^3,9

Series I		0.64%		0.05%		0.07%		0.00%		0.76%		0.00%		0.76%

Series II		0.64%		0.25%		0.07%		0.00%		0.96%		0.00%		0.96%

Series NAV		0.64%		0.00%		0.07%		0.00%		0.71%		0.00%		0.71%

Core Disciplined Diversification^6,10

Series I		0.05%		0.05%		0.07%		0.63%		0.80%		-0.05%		0.75%

Series II		0.05%		0.25%		0.07%		0.63%		1.00%		-0.05%		0.95%

Series NAV		0.05%		0.00%		0.07%		0.63%		0.75%		-0.05%		0.70%

Core Fundamental Holdings^6,10

Series I		0.05%		0.35%		0.05%		0.41%		0.86%		-0.05%		0.81%

Series II		0.05%		0.55%		0.05%		0.41%		1.06%		-0.05%		1.01%

Series III		0.05%		0.15%		0.05%		0.41%		0.66%		-0.05%		0.61%

Series NAV		0.05%		0.00%		0.05%		0.41%		0.51%		-0.05%		0.46%

Core Global Diversification^6,10

Series I		0.05%		0.35%		0.05%		0.42%		0.87%		-0.05%		0.82%

Series II		0.05%		0.55%		0.05%		0.42%		1.07%		-0.05%		1.02%

Series III		0.05%		0.15%		0.05%		0.42%		0.67%		-0.05%		0.62%

Series NAV		0.05%		0.00%		0.05%		0.42%		0.52%		-0.05%		0.47%

Core Strategy¹¹

Series I		0.05%		0.05%		0.05%		0.52%		0.67%		-0.08%		0.59%

Series II		0.05%		0.25%		0.05%		0.52%		0.87%		-0.08%		0.79%

Series NAV		0.05%		0.00%		0.05%		0.52%		0.62%		-0.08%		0.54%

Disciplined Diversification^3,12

Series I		0.80%		0.05%		0.19%		0.00%		1.04%		-0.29%		0.75%

Series II		0.80%		0.25%		0.19%		0.00%		1.24%		-0.29%		0.95%

Series NAV		0.80%		0.00%		0.19%		0.00%		0.99%		-0.29%		0.70%


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
Emerging Markets Value³

Series I		0.96%		0.05%		0.13%		0.00%		1.14%		0.00%		1.14%

Series II⁶		0.96%		0.25%		0.13%		0.00%		1.34%		0.00%		1.34%

Series NAV		0.96%		0.00%		0.13%		0.00%		1.09%		0.00%		1.09%

Emerging Small Company³

Series I		0.97%		0.05%		0.08%		0.00%		1.10%		0.00%		1.10%

Series II		0.97%		0.25%		0.08%		0.00%		1.30%		0.00%		1.30%

Series NAV		0.97%		0.00%		0.08%		0.00%		1.05%		0.00%		1.05%

Equity-Income^3,8

Series I		0.81%		0.05%		0.05%		0.00%		0.91%		0.00%		0.91%

Series II		0.81%		0.25%		0.05%		0.00%		1.11%		0.00%		1.11%

Series NAV		0.81%		0.00%		0.05%		0.00%		0.86%		0.00%		0.86%

Financial Services³

Series I		0.82%		0.05%		0.08%		0.00%		0.95%		0.00%		0.95%

Series II		0.82%		0.25%		0.08%		0.00%		1.15%		0.00%		1.15%

Series NAV		0.82%		0.00%		0.08%		0.00%		0.90%		0.00%		0.90%

Floating Rate Income³

Series I⁶		0.70%		0.05%		0.06%		0.00%		0.81%		0.00%		0.81%

Series II⁶		0.70%		0.25%		0.06%		0.00%		1.01%		0.00%		1.01%

Series NAV		0.70%		0.00%		0.06%		0.00%		0.76%		0.00%		0.76%

Franklin Templeton Founding Allocation¹³

Series I		0.04%		0.05%		0.04%		0.83%		0.96%		-0.05%		0.91%

Series II		0.04%		0.25%		0.04%		0.83%		1.16%		-0.05%		1.11%

Series NAV		0.04%		0.00%		0.04%		0.83%		0.91%		-0.05%		0.86%

Fundamental Value³

Series I		0.76%		0.05%		0.05%		0.00%		0.86%		0.00%		0.86%

Series II		0.76%		0.25%		0.05%		0.00%		1.06%		0.00%		1.06%

Series NAV		0.76%		0.00%		0.05%		0.00%		0.81%		0.00%		0.81%

Global^3,9,14,15

Series I		0.81%		0.05%		0.11%		0.00%		0.97%		-0.01%		0.96%

Series II		0.81%		0.25%		0.11%		0.00%		1.17%		-0.01%		1.16%

Series NAV		0.81%		0.00%		0.11%		0.00%		0.92%		-0.01%		0.91%

Global Allocation^3,9

Series I		0.85%		0.05%		0.10%		0.05%		1.05%		0.00%		1.05%

Series II		0.85%		0.25%		0.10%		0.05%		1.25%		0.00%		1.25%

Series NAV		0.85%		0.00%		0.10%		0.05%		1.00%		0.00%		1.00%

Global Bond^3,9

Series I		0.70%		0.05%		0.10%		0.00%		0.85%		0.00%		0.85%

Series II		0.70%		0.25%		0.10%		0.00%		1.05%		0.00%		1.05%

Series NAV		0.70%		0.00%		0.10%		0.00%		0.80%		0.00%		0.80%

Global Real Estate³

Series I		0.93%		0.05%		0.12%		0.00%		1.10%		0.00%		1.10%

Series II⁶		0.93%		0.25%		0.12%		0.00%		1.30%		0.00%		1.30%

Series NAV		0.93%		0.00%		0.12%		0.00%		1.05%		0.00%		1.05%

Growth^3,6

Series I		0.80%		0.05%		0.08%		0.00%		0.93%		0.00%		0.93%

Series II		0.80%		0.25%		0.08%		0.00%		1.13%		0.00%		1.13%

Series NAV		0.80%		0.00%		0.08%		0.00%		0.88%		0.00%		0.88%


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
Growth Equity³

Series I⁶		0.74%		0.05%		0.06%		0.00%		0.85%		0.00%		0.85%

Series II⁶		0.74%		0.25%		0.06%		0.00%		1.05%		0.00%		1.05%

Series NAV		0.74%		0.00%		0.06%		0.00%		0.80%		0.00%		0.80%

Growth Opportunities^3,6

Series I		0.80%		0.05%		0.14%		0.00%		0.99%		0.00%		0.99%

Series II		0.80%		0.25%		0.14%		0.00%		1.19%		0.00%		1.19%

Series NAV		0.80%		0.00%		0.14%		0.00%		0.94%		0.00%		0.94%

Health Sciences^3,8,9

Series I		1.05%		0.05%		0.08%		0.00%		1.18%		0.00%		1.18%

Series II		1.05%		0.25%		0.08%		0.00%		1.38%		0.00%		1.38%

Series NAV		1.05%		0.00%		0.08%		0.00%		1.13%		0.00%		1.13%

High Income³

Series I⁶		0.67%		0.05%		0.07%		0.00%		0.79%		0.00%		0.79%

Series II		0.67%		0.25%		0.07%		0.00%		0.99%		0.00%		0.99%

Series NAV		0.67%		0.00%		0.07%		0.00%		0.74%		0.00%		0.74%

High Yield³

Series I		0.66%		0.05%		0.06%		0.00%		0.77%		0.00%		0.77%

Series II		0.66%		0.25%		0.06%		0.00%		0.97%		0.00%		0.97%

Series NAV		0.66%		0.00%		0.06%		0.00%		0.72%		0.00%		0.72%

Income^3,16

Series I⁶		0.81%		0.05%		0.06%		0.00%		0.92%		0.00%		0.92%

Series II⁶		0.81%		0.25%		0.06%		0.00%		1.12%		0.00%		1.12%

Series NAV		0.81%		0.00%		0.06%		0.00%		0.87%		0.00%		0.87%

International Core^3,9

Series I		0.89%		0.05%		0.14%		0.00%		1.08%		0.00%		1.08%

Series II		0.89%		0.25%		0.14%		0.00%		1.28%		0.00%		1.28%

Series NAV		0.89%		0.00%		0.14%		0.00%		1.03%		0.00%		1.03%

International Equity Index A^3,4,17

Series I		0.53%		0.05%		0.05%		0.00%		0.63%		0.00%		0.63%

Series II		0.53%		0.25%		0.05%		0.00%		0.83%		0.00%		0.83%

Series NAV		0.53%		0.00%		0.05%		0.00%		0.58%		0.00%		0.58%

International Equity Index B^5,17

Series NAV		0.53%		0.00%		0.06%		0.00%		0.59%		-0.24%		0.35%

International Growth^3,6

Series I		0.91%		0.05%		0.13%		0.00%		1.09%		0.00%		1.09%

Series II		0.91%		0.25%		0.13%		0.00%		1.29%		0.00%		1.29%

Series NAV		0.91%		0.00%		0.13%		0.00%		1.04%		0.00%		1.04%

International Index⁶

Series I		0.48%		0.05%		0.04%		0.00%		0.57%		0.00%		0.57%

Series II		0.48%		0.25%		0.04%		0.00%		0.77%		0.00%		0.77%

Series NAV		0.48%		0.00%		0.04%		0.00%		0.52%		0.00%		0.52%

International Opportunities^3,9

Series I		0.87%		0.05%		0.13%		0.00%		1.05%		0.00%		1.05%

Series II		0.87%		0.25%		0.13%		0.00%		1.25%		0.00%		1.25%

Series NAV		0.87%		0.00%		0.13%		0.00%		1.00%		0.00%		1.00%

International Small Cap^3,9

Series I		0.94%		0.05%		0.16%		0.00%		1.15%		0.00%		1.15%

Series II		0.94%		0.25%		0.16%		0.00%		1.35%		0.00%		1.35%

Series NAV		0.94%		0.00%		0.16%		0.00%		1.10%		0.00%		1.10%


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
International Small Company³

Series I⁶		0.96%		0.05%		0.15%		0.00%		1.16%		0.00%		1.16%

Series II⁶		0.96%		0.25%		0.15%		0.00%		1.36%		0.00%		1.36%

Series NAV		0.96%		0.00%		0.15%		0.00%		1.11%		0.00%		1.11%

International Value^3,9,14

Series I		0.81%		0.05%		0.14%		0.00%		1.00%		-0.02%		0.98%

Series II		0.81%		0.25%		0.14%		0.00%		1.20%		-0.02%		1.18%

Series NAV		0.81%		0.00%		0.14%		0.00%		0.95%		-0.02%		0.93%

Intrinsic Value^3,6

Series I		0.78%		0.05%		0.13%		0.00%		0.96%		0.00%		0.96%

Series II		0.78%		0.25%		0.13%		0.00%		1.16%		0.00%		1.16%

Series NAV		0.78%		0.00%		0.13%		0.00%		0.91%		0.00%		0.91%

Investment Quality Bond³

Series I		0.59%		0.05%		0.09%		0.00%		0.73%		0.00%		0.73%

Series II		0.59%		0.25%		0.09%		0.00%		0.93%		0.00%		0.93%

Series NAV		0.59%		0.00%		0.09%		0.00%		0.68%		0.00%		0.68%

Large Cap³

Series I		0.72%		0.05%		0.03%		0.00%		0.80%		0.00%		0.80%

Series II		0.72%		0.25%		0.03%		0.00%		1.00%		0.00%		1.00%

Series NAV		0.72%		0.00%		0.03%		0.00%		0.75%		0.00%		0.75%

Large Cap Value³

Series I		0.81%		0.05%		0.05%		0.00%		0.91%		0.00%		0.91%

Series II		0.81%		0.25%		0.05%		0.00%		1.11%		0.00%		1.11%

Series NAV		0.81%		0.00%		0.05%		0.00%		0.86%		0.00%		0.86%

Lifecycle 2010⁶

Series I		0.06%		0.05%		0.09%		0.73%		0.93%		0.00%		0.93%

Series II		0.06%		0.25%		0.09%		0.73%		1.13%		0.00%		1.13%

Series NAV		0.06%		0.00%		0.09%		0.73%		0.88%		0.00%		0.88%

Lifecycle 2015⁶

Series I		0.06%		0.05%		0.09%		0.74%		0.94%		0.00%		0.94%

Series II		0.06%		0.25%		0.09%		0.74%		1.14%		0.00%		1.14%

Series NAV		0.06%		0.00%		0.09%		0.74%		0.89%		0.00%		0.89%

Lifecycle 2020⁶

Series I		0.06%		0.05%		0.09%		0.74%		0.94%		0.00%		0.94%

Series II		0.06%		0.25%		0.09%		0.74%		1.14%		0.00%		1.14%

Series NAV		0.06%		0.00%		0.09%		0.74%		0.89%		0.00%		0.89%

Lifecycle 2025⁶

Series I		0.06%		0.05%		0.09%		0.75%		0.95%		0.00%		0.95%

Series II		0.06%		0.25%		0.09%		0.75%		1.15%		0.00%		1.15%

Series NAV		0.06%		0.00%		0.09%		0.75%		0.90%		0.00%		0.90%

Lifecycle 2030⁶

Series I		0.06%		0.05%		0.09%		0.76%		0.96%		0.00%		0.96%

Series II		0.06%		0.25%		0.09%		0.76%		1.16%		0.00%		1.16%

Series NAV		0.06%		0.00%		0.09%		0.76%		0.91%		0.00%		0.91%

Lifecycle 2035⁶

Series I		0.06%		0.05%		0.09%		0.77%		0.97%		0.00%		0.97%

Series II		0.06%		0.25%		0.09%		0.77%		1.17%		0.00%		1.17%

Series NAV		0.06%		0.00%		0.09%		0.77%		0.92%		0.00%		0.92%


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
Lifecycle 2040⁶

Series I		0.06%		0.05%		0.09%		0.78%		0.98%		0.00%		0.98%

Series II		0.06%		0.25%		0.09%		0.78%		1.18%		0.00%		1.18%

Series NAV		0.06%		0.00%		0.09%		0.78%		0.93%		0.00%		0.93%

Lifecycle 2045⁶

Series I		0.06%		0.05%		0.09%		0.78%		0.98%		0.00%		0.98%

Series II		0.06%		0.25%		0.09%		0.78%		1.18%		0.00%		1.18%

Series NAV		0.06%		0.00%		0.09%		0.78%		0.93%		0.00%		0.93%

Lifecycle 2050⁶

Series I		0.06%		0.05%		0.09%		0.78%		0.98%		0.00%		0.98%

Series II		0.06%		0.25%		0.09%		0.78%		1.18%		0.00%		1.18%

Series NAV		0.06%		0.00%		0.09%		0.78%		0.93%		0.00%		0.93%

Lifecycle Retirement⁶

Series I		0.06%		0.05%		0.09%		0.69%		0.89%		0.00%		0.89%

Series II		0.06%		0.25%		0.09%		0.69%		1.09%		0.00%		1.09%

Series NAV		0.06%		0.00%		0.09%		0.69%		0.84%		0.00%		0.84%

Lifestyle Aggressive²¹

Series I		0.04%		0.05%		0.04%		0.86%		0.99%		0.00%		0.99%

Series II		0.04%		0.25%		0.04%		0.86%		1.19%		0.00%		1.19%

Series NAV		0.04%		0.00%		0.04%		0.86%		0.94%		0.00%		0.94%

Lifestyle Balanced²¹

Series I		0.04%		0.05%		0.03%		0.76%		0.88%		0.00%		0.88%

Series II		0.04%		0.25%		0.03%		0.76%		1.08%		0.00%		1.08%

Series NAV		0.04%		0.00%		0.03%		0.76%		0.83%		0.00%		0.83%

Lifestyle Conservative²¹

Series I		0.04%		0.05%		0.03%		0.71%		0.83%		0.00%		0.83%

Series II		0.04%		0.25%		0.03%		0.71%		1.03%		0.00%		1.03%

Series NAV		0.04%		0.00%		0.03%		0.71%		0.78%		0.00%		0.78%

Lifestyle Growth²¹

Series I		0.04%		0.05%		0.03%		0.76%		0.88%		0.00%		0.88%

Series II		0.04%		0.25%		0.03%		0.76%		1.08%		0.00%		1.08%

Series NAV		0.04%		0.00%		0.03%		0.76%		0.83%		0.00%		0.83%

Lifestyle Moderate²¹

Series I		0.04%		0.05%		0.03%		0.74%		0.86%		0.00%		0.86%

Series II		0.04%		0.25%		0.03%		0.74%		1.06%		0.00%		1.06%

Series NAV		0.04%		0.00%		0.03%		0.74%		0.81%		0.00%		0.81%

Mid Cap Index^3,4

Series I		0.47%		0.05%		0.03%		0.00%		0.55%		0.00%		0.55%

Series II		0.47%		0.25%		0.03%		0.00%		0.75%		0.00%		0.75%

Series NAV		0.47%		0.00%		0.03%		0.00%		0.50%		0.00%		0.50%

Mid Cap Intersection³

Series I		0.87%		0.05%		0.06%		0.00%		0.98%		0.00%		0.98%

Series II		0.87%		0.25%		0.06%		0.00%		1.18%		0.00%		1.18%

Series NAV		0.87%		0.00%		0.06%		0.00%		0.93%		0.00%		0.93%

Mid Cap Stock³

Series I		0.84%		0.05%		0.05%		0.00%		0.94%		0.00%		0.94%

Series II		0.84%		0.25%		0.05%		0.00%		1.14%		0.00%		1.14%

Series NAV		0.84%		0.00%		0.05%		0.00%		0.89%		0.00%		0.89%


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
Mid Cap Value Equity^3,9

Series I⁶		0.87%		0.05%		0.11%		0.00%		1.03%		0.00%		1.03%

Series II⁶		0.87%		0.25%		0.11%		0.00%		1.23%		0.00%		1.23%

Series NAV		0.87%		0.00%		0.11%		0.00%		0.98%		0.00%		0.98%

Mid Value^3,8

Series I		0.98%		0.05%		0.10%		0.00%		1.13%		0.00%		1.13%

Series II		0.98%		0.25%		0.10%		0.00%		1.33%		0.00%		1.33%

Series NAV		0.98%		0.00%		0.10%		0.00%		1.08%		0.00%		1.08%

Money Market³

Series I		0.47%		0.05%		0.06%		0.00%		0.58%		0.00%		0.58%

Series II		0.47%		0.25%		0.06%		0.00%		0.78%		0.00%		0.78%

Series NAV⁶		0.47%		0.00%		0.06%		0.00%		0.53%		0.00%		0.53%

Money Market B⁵

Series NAV		0.49%		0.00%		0.04%		0.00%		0.53%		-0.24%		0.29%

Mutual Shares^3,16

Series I		0.96%		0.05%		0.11%		0.00%		1.12%		-0.01%		1.11%

Series II⁶		0.96%		0.25%		0.11%		0.00%		1.32%		-0.01%		1.31%

Series NAV		0.96%		0.00%		0.11%		0.00%		1.07%		-0.01%		1.06%

Natural Resources³

Series I		1.00%		0.05%		0.08%		0.00%		1.13%		0.00%		1.13%

Series II		1.00%		0.25%		0.08%		0.00%		1.33%		0.00%		1.33%

Series NAV		1.00%		0.00%		0.08%		0.00%		1.08%		0.00%		1.08%

Optimized All Cap³

Series I		0.68%		0.05%		0.06%		0.00%		0.79%		0.00%		0.79%

Series II		0.68%		0.25%		0.06%		0.00%		0.99%		0.00%		0.99%

Series NAV		0.68%		0.00%		0.06%		0.00%		0.74%		0.00%		0.74%

Optimized Value³

Series I		0.65%		0.05%		0.05%		0.00%		0.75%		0.00%		0.75%

Series II		0.65%		0.25%		0.05%		0.00%		0.95%		0.00%		0.95%

Series NAV		0.65%		0.00%		0.05%		0.00%		0.70%		0.00%		0.70%

Overseas Equity^3,9

Series I⁶		0.98%		0.05%		0.14%		0.00%		1.17%		0.00%		1.17%

Series II		0.98%		0.25%		0.14%		0.00%		1.37%		0.00%		1.37%

Series NAV		0.98%		0.00%		0.14%		0.00%		1.12%		0.00%		1.12%

Pacific Rim^3,9

Series I		0.80%		0.05%		0.25%		0.00%		1.10%		0.00%		1.10%

Series II		0.80%		0.25%		0.25%		0.00%		1.30%		0.00%		1.30%

Series NAV		0.80%		0.00%		0.25%		0.00%		1.05%		0.00%		1.05%

Real Estate Equity^3,8

Series I⁶		0.86%		0.05%		0.07%		0.00%		0.98%		0.00%		0.98%

Series II⁶		0.86%		0.25%		0.07%		0.00%		1.18%		0.00%		1.18%

Series NAV		0.86%		0.00%		0.07%		0.00%		0.93%		0.00%		0.93%

Real Estate Securities³

Series I		0.70%		0.05%		0.05%		0.00%		0.80%		0.00%		0.80%

Series II		0.70%		0.25%		0.05%		0.00%		1.00%		0.00%		1.00%

Series NAV		0.70%		0.00%		0.05%		0.00%		0.75%		0.00%		0.75%

Real Return Bond^3,9,18

Series I		0.68%		0.05%		0.06%		0.00%		0.79%		0.00%		0.79%

Series II		0.68%		0.25%		0.06%		0.00%		0.99%		0.00%		0.99%

Series NAV		0.68%		0.00%		0.06%		0.00%		0.74%		0.00%		0.74%


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
Science and Technology^3,8,9

Series I		1.05%		0.05%		0.07%		0.00%		1.17%		0.00%		1.17%

Series II		1.05%		0.25%		0.07%		0.00%		1.37%		0.00%		1.37%

Series NAV		1.05%		0.00%		0.07%		0.00%		1.12%		0.00%		1.12%

Short-Term Bond³

Series I⁶		0.59%		0.05%		0.07%		0.00%		0.71%		0.00%		0.71%

Series II⁶		0.59%		0.25%		0.07%		0.00%		0.91%		0.00%		0.91%

Series NAV		0.59%		0.00%		0.07%		0.00%		0.66%		0.00%		0.66%

Short Term Government Income³

Series I⁶		0.57%		0.05%		0.08%		0.00%		0.70%		0.00%		0.70%

Series II⁶		0.57%		0.25%		0.08%		0.00%		0.90%		0.00%		0.90%

Series NAV⁶		0.57%		0.00%		0.08%		0.00%		0.65%		0.00%		0.65%

Small Cap Growth³

Series I		1.06%		0.05%		0.08%		0.00%		1.19%		0.00%		1.19%

Series II		1.06%		0.25%		0.08%		0.00%		1.39%		0.00%		1.39%

Series NAV		1.06%		0.00%		0.08%		0.00%		1.14%		0.00%		1.14%

Small Cap Index^3,4

Series I		0.49%		0.05%		0.04%		0.00%		0.58%		0.00%		0.58%

Series II		0.49%		0.25%		0.04%		0.00%		0.78%		0.00%		0.78%

Series NAV		0.49%		0.00%		0.04%		0.00%		0.53%		0.00%		0.53%

Small Cap Intrinsic Value³

Series I		0.90%		0.05%		0.30%		0.00%		1.25%		0.00%		1.25%

Series II⁶		0.90%		0.25%		0.30%		0.00%		1.45%		0.00%		1.45%

Series NAV		0.90%		0.00%		0.30%		0.00%		1.20%		0.00%		1.20%

Small Cap Opportunities^3,19

Series I		1.00%		0.05%		0.06%		0.00%		1.11%		0.00%		1.11%

Series II		1.00%		0.25%		0.06%		0.00%		1.31%		0.00%		1.31%

Series NAV		1.00%		0.00%		0.06%		0.00%		1.06%		0.00%		1.06%

Small Cap Value³

Series I		1.06%		0.05%		0.06%		0.00%		1.17%		0.00%		1.17%

Series II		1.06%		0.25%		0.06%		0.00%		1.37%		0.00%		1.37%

Series NAV		1.06%		0.00%		0.06%		0.00%		1.12%		0.00%		1.12%

Small Company Growth³

Series I⁶		1.05%		0.05%		0.08%		0.00%		1.18%		0.00%		1.18%

Series II⁶		1.05%		0.25%		0.08%		0.00%		1.38%		0.00%		1.38%

Series NAV		1.05%		0.00%		0.08%		0.00%		1.13%		0.00%		1.13%

Small Company Value^3,8

Series I		1.02%		0.05%		0.06%		0.00%		1.13%		0.00%		1.13%

Series II		1.02%		0.25%		0.06%		0.00%		1.33%		0.00%		1.33%

Series NAV		1.02%		0.00%		0.06%		0.00%		1.08%		0.00%		1.08%

Smaller Company Growth^6,14

Series I		1.08%		0.05%		0.06%		0.00%		1.19%		-0.11%		1.08%

Series II		1.08%		0.25%		0.06%		0.00%		1.39%		-0.11%		1.28%

Series NAV		1.08%		0.00%		0.06%		0.00%		1.14%		-0.11%		1.03%

Spectrum Income^3,8,9,18

Series I⁶		0.73%		0.05%		0.07%		0.00%		0.85%		0.00%		0.85%

Series II⁶		0.73%		0.25%		0.07%		0.00%		1.05%		0.00%		1.05%

Series NAV		0.73%		0.00%		0.07%		0.00%		0.80%		0.00%		0.80%


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
Strategic Bond^3,9

Series I		0.67%		0.05%		0.06%		0.00%		0.78%		0.00%		0.78%

Series II		0.67%		0.25%		0.06%		0.00%		0.98%		0.00%		0.98%

Series NAV		0.67%		0.00%		0.06%		0.00%		0.73%		0.00%		0.73%

Strategic Income³

Series I		0.69%		0.05%		0.08%		0.00%		0.82%		0.00%		0.82%

Series II		0.69%		0.25%		0.08%		0.00%		1.02%		0.00%		1.02%

Series NAV		0.69%		0.00%		0.08%		0.00%		0.77%		0.00%		0.77%

Total Bond Market Index A^3,4

Series I		0.47%		0.05%		0.05%		0.00%		0.57%		0.00%		0.57%

Series II		0.47%		0.25%		0.05%		0.00%		0.77%		0.00%		0.77%

Series NAV		0.47%		0.00%		0.05%		0.00%		0.52%		0.00%		0.52%

Total Bond Market Index B^5,20

Series NAV		0.47%		0.00%		0.06%		0.00%		0.53%		-0.28%		0.25%

Total Return^3,18

Series I		0.69%		0.05%		0.06%		0.00%		0.80%		0.00%		0.80%

Series II		0.69%		0.25%		0.06%		0.00%		1.00%		0.00%		1.00%

Series NAV		0.69%		0.00%		0.06%		0.00%		0.75%		0.00%		0.75%

Total Stock Market Index^3,4

Series I		0.49%		0.05%		0.04%		0.00%		0.58%		0.00%		0.58%

Series II		0.49%		0.25%		0.04%		0.00%		0.78%		0.00%		0.78%

Series NAV		0.49%		0.00%		0.04%		0.00%		0.53%		0.00%		0.53%

U.S. Government Securities³

Series I		0.61%		0.05%		0.09%		0.00%		0.75%		0.00%		0.75%

Series II		0.61%		0.25%		0.09%		0.00%		0.95%		0.00%		0.95%

Series NAV		0.61%		0.00%		0.09%		0.00%		0.70%		0.00%		0.70%

U.S. High Yield Bond³

Series I		0.73%		0.05%		0.06%		0.00%		0.84%		0.00%		0.84%

Series II		0.73%		0.25%		0.06%		0.00%		1.04%		0.00%		1.04%

Series NAV		0.73%		0.00%		0.06%		0.00%		0.79%		0.00%		0.79%

U.S. Multi-Sector³

Series I⁶		0.76%		0.05%		0.05%		0.00%		0.86%		0.00%		0.86%

Series II⁶		0.76%		0.25%		0.05%		0.00%		1.06%		0.00%		1.06%

Series NAV		0.76%		0.00%		0.05%		0.00%		0.81%		0.00%		0.81%

Utilities^3,9

Series I		0.83%		0.05%		0.10%		0.00%		0.98%		0.00%		0.98%

Series II		0.83%		0.25%		0.10%		0.00%		1.18%		0.00%		1.18%

Series NAV		0.83%		0.00%		0.10%		0.00%		0.93%		0.00%		0.93%

Value³

Series I		0.74%		0.05%		0.06%		0.00%		0.85%		0.00%		0.85%

Series II		0.74%		0.25%		0.06%		0.00%		1.05%		0.00%		1.05%

Series NAV		0.74%		0.00%		0.06%		0.00%		0.80%		0.00%		0.80%

Value & Restructuring³

Series I⁶		0.81%		0.05%		0.06%		0.00%		0.92%		0.00%		0.92%

Series II⁶		0.81%		0.25%		0.06%		0.00%		1.12%		0.00%		1.12%

Series NAV		0.81%		0.00%		0.06%		0.00%		0.87%		0.00%		0.87%

Value Opportunities^3,6

Series I		0.84%		0.05%		0.05%		0.00%		0.94%		0.00%		0.94%

Series II		0.84%		0.25%		0.05%		0.00%		1.14%		0.00%		1.14%

Series NAV		0.84%		0.00%		0.05%		0.00%		0.89%		0.00%		0.89%


							Acquired
			Distibution				Fund Fees		Total		Contractual		Net fund
	Management		and service		Other		and		Operating		Expense		Operating
Fund/Class	fee		(12b-1) fees		Expenses		Expenses		Expenses ¹		Reimbursement ²		Expenses
Vista^3,9

Series I⁶		0.89%		0.05%		0.11%		0.00%		1.05%		0.00%		1.05%

Series II⁶		0.89%		0.25%		0.11%		0.00%		1.25%		0.00%		1.25%

Series NAV		0.89%		0.00%		0.11%		0.00%		1.00%		0.00%		1.00%


	Feeder Fund												Master Fund
																	Total		Total
			Distibution				Total		Contractual		Net fund						Master Fund and		Master Fund and
	Management		and service		Other		Operating		Expense		Operating		Management		Other		Feeder Fund		Net Feeder
Fund/Class	fee		(12b-1) fees		Expenses		Expenses ¹		Reimbursement ²		Expenses		fees ²²		Expenses		Expenses		Fund Expenses
American Asset Allocation²³

Series I		0.00%		0.60%		0.04%		0.64%		-0.01%		0.63%		0.31%		0.01%		0.96%		0.95%

Series II		0.00%		0.75%		0.04%		0.79%		-0.01%		0.78%		0.31%		0.01%		1.11%		1.10%

Series III		0.00%		0.25%		0.04%		0.29%		-0.01%		0.28%		0.31%		0.01%		0.61%		0.60%

American Blue Chip Income and Growth

Series I		0.00%		0.60%		0.06%		0.66%		0.00%		0.66%		0.42%		0.01%		1.09%		1.09%

Series II		0.00%		0.75%		0.06%		0.81%		0.00%		0.81%		0.42%		0.01%		1.24%		1.24%

Series III		0.00%		0.25%		0.06%		0.31%		0.00%		0.31%		0.42%		0.01%		0.74%		0.74%

American Bond

Series I		0.00%		0.60%		0.04%		0.64%		0.00%		0.64%		0.39%		0.01%		1.04%		1.04%

Series II		0.00%		0.75%		0.04%		0.79%		0.00%		0.79%		0.39%		0.01%		1.19%		1.19%

Series III		0.00%		0.25%		0.04%		0.29%		0.00%		0.29%		0.39%		0.01%		0.69%		0.69%

American Global Growth²³

Series I⁶		0.00%		0.60%		0.06%		0.66%		-0.03%		0.63%		0.53%		0.02%		1.21%		1.18%

Series II		0.00%		0.75%		0.06%		0.81%		-0.03%		0.78%		0.53%		0.02%		1.36%		1.33%

Series III		0.00%		0.25%		0.06%		0.31%		-0.03%		0.28%		0.53%		0.02%		0.86%		0.83%

American Global Small Capitalization²³

Series I⁶		0.00%		0.60%		0.11%		0.71%		-0.08%		0.63%		0.71%		0.03%		1.45%		1.37%

Series II		0.00%		0.75%		0.11%		0.86%		-0.08%		0.78%		0.71%		0.03%		1.60%		1.52%

Series III		0.00%		0.25%		0.11%		0.36%		-0.08%		0.28%		0.71%		0.03%		1.10%		1.02%

American Growth

Series I		0.00%		0.60%		0.04%		0.64%		0.00%		0.64%		0.32%		0.01%		0.97%		0.97%

Series II		0.00%		0.75%		0.04%		0.79%		0.00%		0.79%		0.32%		0.01%		1.12%		1.12%

Series III		0.00%		0.25%		0.04%		0.29%		0.00%		0.29%		0.32%		0.01%		0.62%		0.62%

American Growth-Income

Series I		0.00%		0.60%		0.04%		0.64%		0.00%		0.64%		0.27%		0.01%		0.92%		0.92%

Series II		0.00%		0.75%		0.04%		0.79%		0.00%		0.79%		0.27%		0.01%		1.07%		1.07%

Series III		0.00%		0.25%		0.04%		0.29%		0.00%		0.29%		0.27%		0.01%		0.57%		0.57%

American High-Income Bond²³

Series I⁶		0.00%		0.60%		0.21%		0.81%		-0.18%		0.63%		0.47%		0.01%		1.29%		1.11%

Series II		0.00%		0.75%		0.21%		0.96%		-0.18%		0.78%		0.47%		0.01%		1.44%		1.26%

Series III		0.00%		0.25%		0.21%		0.46%		-0.18%		0.28%		0.47%		0.01%		0.94%		0.76%

American International

Series I		0.00%		0.60%		0.04%		0.64%		0.00%		0.64%		0.49%		0.03%		1.16%		1.16%

Series II		0.00%		0.75%		0.04%		0.79%		0.00%		0.79%		0.49%		0.03%		1.31%		1.31%

Series III		0.00%		0.25%		0.04%		0.29%		0.00%		0.29%		0.49%		0.03%		0.81%		0.81%


	Feeder Fund												Master Fund
																	Total		Total
			Distibution				Total		Contractual		Net fund						Master Fund and		Master Fund and
	Management		and service		Other		Operating		Expense		Operating		Management		Other		Feeder Fund		Net Feeder
Fund/Class	fee		(12b-1) fees		Expenses		Expenses ¹		Reimbursement ²		Expenses		fees ²²		Expenses		Expenses		Fund Expenses
American New World²³

Series I⁶		0.00%		0.60%		0.13%		0.73%		-0.10%		0.63%		0.76%		0.05%		1.54%		1.44%

Series II		0.00%		0.75%		0.13%		0.88%		-0.10%		0.78%		0.76%		0.05%		1.69%		1.59%

Series III		0.00%		0.25%		0.13%		0.38%		-0.10%		0.28%		0.76%		0.05%		1.19%		1.09%

The “Total Operating Expenses” include fees and expenses incurred indirectly by a fund as a result of its investment in other investment companies (“Acquired Fund Fees and Expenses”). The Total Operating Expenses shown may not correlate to the Fund’s ratio of expenses to average net assets shown in the “Financial Highlights” section, which does not include Acquired Fund Fees and Expenses. Acquired Fund Fees and Expenses are based on the estimated indirect net expenses associated with the fund’s investment in the underlying funds.

Effective January 1, 2009, the Adviser may recapture operating expenses reimbursed or fees waived under previous expense limitation or waiver arrangements and made subsequent to January 1, 2009, for a period of three years following the beginning of the month in which such reimbursement or waivers occurred.

Effective January 1, 2006, the Adviser has agreed to waive its management fee for certain funds or otherwise reimburse the expenses of those funds (“Participating Funds”). The reimbursement will equal, on an annualized basis, to 0.02% of that portion of the aggregate net assets of all the Participating Funds that exceeds $50 billion. The amount of the Reimbursement will be calculated daily and allocated among all the Participating Funds in proportion to the daily net assets of each fund.

⁴

The Adviser has agreed to reduce its advisory fee for each class of shares of the Fund in an amount equal to the amount by which the Expenses of such class of the fund exceed the Expense Limit (as a percentage of the average annual net assets of the Fund attributable to the class) of 0.050% and, if necessary, to remit to that class of the Fund an amount necessary to ensure that such Expenses do not exceed that Expense Limit. “Expenses” means all the expenses of a class of the Fund excluding: (a) advisory fees, (b) Rule 12b-1 fees, (c) transfer agency fees and service fees, (d) blue sky fees, (e) taxes, (f) portfolio brokerage commissions, (g) interest, and (h) litigation and indemnification expenses and (i) other extraordinary expenses not incurred in the ordinary course of JHT’s business. This expense limitation will continue in effect unless otherwise terminated by the Adviser upon notice to JHT. This voluntary expense limitation may be terminated at any time.

⁵

JHT sells shares of these Funds only to certain variable life insurance and variable annuity separate accounts of John Hancock Life Insurance Company and its affiliates. As reflected in the table, each Fund is subject to an expense cap pursuant to an agreement between JHT and the Adviser and the expense cap is as follows: the Adviser has agreed to waive its advisory fee (or, if necessary, reimburse expenses of the Fund) in an amount so that the rate of the Fund’s Operating Expenses does not exceed its “Net Operating Expenses” as listed in the table above. A Fund’s “Total Operating Expenses” includes all of its operating expenses including advisory fees and Rule 12b-1 fees, but excludes taxes, brokerage commissions, interest, litigation and indemnification expenses and extraordinary expenses (estimated at 0.01% or less of the funds average net assets) of the Fund not incurred in the ordinary course of the Fund’s business. Under the agreement, the Adviser’s obligation to provide the expense cap with respect to a particular Fund will remain in effect until May 1, 2010 and will terminate after that date only if JHT, without the prior written consent of the Adviser, sells shares of the Fund to (or has shares of the Fund held by) any person other than the variable life insurance or variable annuity insurance separate accounts of John Hancock Life Insurance Company or any of its affiliates that are specified in the agreement.

⁶

For funds and classes that have not commenced operations or have inception date of less than six months as of December 31, 2008, expenses are estimated.

⁷

The management fee of 0.05% of average annual net assets is being waived until May 1, 2010.

⁸

T. Rowe Price has voluntarily agreed to waive a portion of its subadvisory fee for the following funds of the Trust: Blue Chip Growth Trust, Equity-Income Trust, Science & Technology Trust, Small Company Value Trust, Health Sciences Trust, Mid Value Trust, Balanced Trust, Spectrum Income Trust, Real Estate Equity Trust, and Capital Appreciation Value Trust. This waiver is based on the combined average daily net assets of these Funds and the following funds of John Hancock Funds II: Blue Chip Growth Fund, Equity-Income Fund, Mid Value Fund, Small Company Value Fund, Spectrum Income Fund and Real Estate Equity Fund (collectively, the “T. Rowe Portfolios”). Based on the combined average daily net assests of the T. Rowe Portfolios, the percentage fee reduction (as a percentage of the Subadvisory Fee) is as follows: 0.00% for the first $750 million, 5.0% for the next $750 million, 7.5% for the next $1.5 billion, and 10.0% if over $3 billion. The Adviser has also voluntarily agreed to reduce the advisory fee for each Fund by the amount that the subadvisory fee is reduced. This voluntary fee waiver may be terminated by T.Rowe Price or the Adviser at any time.

⁹

“Other Expenses” includes an estimated expense based on new contractual custody agreement that became effective April 1, 2009.

¹⁰

The Adviser has contractually agreed to waive the advisory fee. This waiver will expire May 1, 2010 unless extended by the Adviser.

¹¹

The Adviser has contractually agreed to reimburse Expenses of the Fund that exceed 0.02% of the average annual net assets of the fund. Expenses includes all expenses of the fund except Rule 12b-1 fees, Underlying Fund expenses, class specific expenses such as blue sky and transfer agency fees, portfolio brokerage, interest, and litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. This reimbursement may be terminated any time after May 1, 2010.

¹²

The Adviser has contractually agreed to reimburse Expenses of the Fund that exceed 0.70% of the average annual net assets of the fund. Expenses includes all expenses of the fund except Rule 12b-1 fees, class specific expenses such as blue sky and transfer agency fees, portfolio brokerage, interest, and litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business. This contractual reimbursement will be in effect until May 1, 2010 and thereafter until terminated by the Adviser on notice to JHT..

¹³

The Adviser has contractually agreed to limit Fund Expenses to 0.025% until May 1, 2010. Fund Expenses includes advisory fee and other operating expenses of the fund but excludes 12b-1fees, underlying fund expenses, taxes, brokerage commissions, interest expenses, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business.

¹⁴

The Adviser has contractually agreed to waive its advisory fees so that the amount retained by the Adviser after payment of the subadvisory fees for the Fund does not exceed 0.45% of the Fund’s average net assets. This advisory fee waiver will remain in place until May 1, 2010.

¹⁵

The Adviser has contractually agreed to reduce its advisory fee for each class of shares of the Fund in an amount equal to the amount by which the Expenses of such class of the fund exceed the Expense Limit (as a percentage of the average annual net assets of the fund attributable to the class) of 0.15% and, if necessary, to remit to that class of the fund an amount necessary to ensure that such Expenses do not exceed that Expense Limit. “Expenses” means all the expenses of a class of a fund excluding: (a) advisory fees, (b) Rule 12b-1 fees, (c) transfer agency fees and service fees, (d) blue sky fees, (e) taxes, (f) portfolio brokerage commissions, (g) interest, and (h) litigation and indemnification expenses and (i) other extraordinary expenses not incurred in the ordinary course of JHT’s business. This contractual reimbursement will be in effect until May 1, 2010 and thereafter until terminated by the Adviser on notice to the fund.

¹⁶

The Adviser has contractually agreed to reduce its advisory fee for each class of shares of the fund in an amount equal to the amount by which the Expenses of such class of the fund exceed the Expense Limit (as a percentage of the average annual net assets of the fund attributable to the class) of 0.10% and, if necessary, to remit to that class of the fund an amount necessary to ensure that such Expenses do not exceed that Expense Limit. “Expenses” means all the expenses of a class of the fund excluding: (a) advisory fees, (b) Rule 12b-1 fees, (c) transfer agency fees and service fees, (d) blue sky fees, (e) taxes, (f) portfolio brokerage commissions, (g) interest, and (h) litigation and indemnification expenses and (i) other extraordinary expenses not incurred in the ordinary course of JHT’s business. This contractual reimbursement will be in effect until May 1, 2010 and thereafter until terminated by the Adviser on notice to the fund.

¹⁷

The “Total expenses” include fees and expenses which are less than 0.01% that were incurred indirectly by the Portfolios as a result of its investment in other investment companies (e.g. Underlying Funds) (each, an “Acquired Fund”). The Total operating expenses shown may not correlate to the Portfolio’s ratio of expenses to average net assets shown in “Financial Highlights”section, which does not include Acquired Fund Fees and Expenses. Acquired Fund Fees and Expenses are estimated, not actual, amounts based on the Fund’s current fiscal year.

¹⁸

“Other Expenses” reflects the estimate expenses to be paid as substitute dividend expenses on securities borrowed for the settlement of short sales.

¹⁹

The Adviser has agreed to waive its advisory fees so that the amount retained by the Adviser after payment of the subadvisory fees for the Fund does not exceed 0.45% of the fund’s average net assets.

²⁰

Other Expenses does not include an interest expense which was charged in 2008. This expense is considered extraordinary and not anticipated in the future.

²¹

“Acquired Fund Fees and Expenses” are estimated based on a rebalance of investments in underlying funds.

²²

Capital Research Management Company (the adviser to the master fund for each of the JHT Feeder Funds) waived a portion of its management fee from September 1, 2004 through December 31,2008. The fees shown do not reflect any waivers. See the financial highlights table in the American Funds Insurance Series’ prospectus or annual report for further information.

²³

The Adviser has contractually limited other fund level expenses to 0.03% until May 1, 2010. Other fund level expenses consist of operating expenses of the the fund, excluding adviser fee, 12b-1 fee, transfer agent fees, blue sky, taxes, brokerage commissions, interest expense, litigation and indemnification expenses and other extraordinary expenses not incurred in the ordinary course of business.

EXAMPLES OF EXPENSES

The Examples are intended to help an investor compare the cost of investing in each fund with the cost of investing in other mutual funds. The Examples assume that $10,000 is invested in a fund for the time periods indicated and then all the shares are redeemed at the end of those periods. The Examples also assume that the investment has a 5% return each year, that a fund’s operating expenses remain the same, after contractual (but not voluntary) expense reimbursements. The Examples do not reflect the expenses of any variable insurance contract that may use a fund as its underlying investment medium. If such expenses were

reflected, the expense amounts indicated would be higher. Although a particular investor’s actual expenses may be higher or lower, based on these assumptions the expenses would be:


Fund/Class	Year 1		Year 3		Year 5		Year 10
500 Index

Series I	$	55	$	173	$	302	$	677

Series II	$	76	$	237	$	411	$	918

Series NAV	$	50	$	157	$	274	$	616

500 Index B

Series NAV	$	26	$	135	$	255	$	604

Absolute Return

Series I	$	95	$	296	$	515	$	1,143

Series II	$	115	$	359	$	622	$	1,375

Series NAV	$	90	$	281	$	488	$	1,084

Active Bond

Series I	$	70	$	221	$	384	$	859

Series II	$	91	$	284	$	493	$	1,096

Series NAV	$	65	$	205	$	357	$	798

All Cap Core

Series I	$	89	$	278	$	482	$	1,073

Series II	$	109	$	340	$	590	$	1,306

Series NAV	$	84	$	262	$	455	$	1,014

All Cap Growth

Series I	$	102	$	318	$	552	$	1,225

Series II	$	122	$	381	$	660	$	1,455

Series NAV	$	97	$	303	$	525	$	1,166

All Cap Value

Series I	$	101	$	315	$	547	$	1,213

Series II	$	121	$	378	$	654	$	1,443

Series NAV	$	96	$	300	$	520	$	1,155

Alpha Opportunities

Series I	$	113	$	353	$	612	$	1,352

Series II	$	133	$	415	$	718	$	1,579

Series NAV	$	108	$	337	$	585	$	1,294

American Asset Allocation

Series I	$	97	$	304	$	529	$	1,176

Series II	$	112	$	351	$	610	$	1,350

Series III	$	61	$	193	$	338	$	760

American Blue Chip Income and Growth

Series I	$	111	$	347	$	601	$	1,329

Series II	$	126	$	393	$	681	$	1,500

Series III	$	76	$	237	$	411	$	918

American Bond

Series I	$	106	$	331	$	574	$	1,271

Series II	$	121	$	378	$	654	$	1,443

Series III	$	70	$	221	$	384	$	859


Fund/Class	Year 1		Year 3		Year 5		Year 10
American Diversified Growth and Income

Series I	$	129	$	408	$	713	$	1,581

Series II	$	145	$	455	$	793	$	1,748

Series III	$	94	$	299	$	526	$	1,180

Series NAV	$	68	$	220	$	390	$	884

American Fundamental Holdings

Series I	$	106	$	336	$	591	$	1,319

Series II	$	121	$	383	$	671	$	1,490

Series III	$	70	$	226	$	401	$	908

American Global Diversification

Series I	$	129	$	408	$	713	$	1,581

Series II	$	145	$	455	$	793	$	1,748

Series III	$	94	$	299	$	526	$	1,180

American Global Growth

Series I	$	120	$	378	$	659	$	1,460

Series II	$	135	$	425	$	739	$	1,629

Series III	$	85	$	268	$	471	$	1,055

American Global Small Capitalization

Series I	$	139	$	442	$	776	$	1,720

Series II	$	155	$	489	$	855	$	1,885

Series III	$	104	$	333	$	590	$	1,325

American Growth

Series I	$	99	$	309	$	536	$	1,190

Series II	$	114	$	356	$	617	$	1,363

Series III	$	63	$	199	$	346	$	774

American Growth-Income

Series I	$	94	$	293	$	509	$	1,131

Series II	$	109	$	340	$	590	$	1,306

Series III	$	58	$	183	$	318	$	714

American High-Income Bond

Series I	$	113	$	372	$	671	$	1,522

Series II	$	128	$	419	$	751	$	1,690

Series III	$	78	$	262	$	483	$	1,119

American International

Series I	$	118	$	368	$	638	$	1,409

Series II	$	133	$	415	$	718	$	1,579

Series III	$	83	$	259	$	450	$	1,002

American New World

Series I	$	147	$	466	$	819	$	1,815

Series II	$	162	$	512	$	898	$	1,979

Series III	$	111	$	357	$	634	$	1,424

Balanced

Series I	$	98	$	306	$	531	$	1,178

Series II	$	118	$	368	$	638	$	1,409

Series NAV	$	93	$	290	$	504	$	1,120


Fund/Class	Year 1		Year 3		Year 5		Year 10
Blue Chip Growth

Series I	$	92	$	287	$	498	$	1,108

Series II	$	112	$	350	$	606	$	1,340

Series NAV	$	87	$	271	$	471	$	1,049

Capital Appreciation

Series I	$	83	$	259	$	450	$	1,002

Series II	$	103	$	322	$	558	$	1,236

Series NAV	$	78	$	243	$	422	$	942

Capital Appreciation Value

Series I	$	117	$	248	$	516	$	1,280

Series II	$	137	$	290	$	602	$	1,486

Series NAV	$	112	$	238	$	494	$	1,228

Core Allocation

Series I	$	99	$	320	$	558	$	1,243

Series II	$	119	$	382	$	666	$	1,473

Series NAV	$	94	$	304	$	531	$	1,185

Core Allocation Plus

Series I	$	121	$	378	$	654	$	1,443

Series II	$	142	$	440	$	761	$	1,669

Series NAV	$	116	$	362	$	628	$	1,386

Core Balanced

Series I	$	93	$	301	$	526	$	1,173

Series II	$	113	$	364	$	633	$	1,405

Series NAV	$	88	$	285	$	499	$	1,115

Core Bond

Series I	$	78	$	243	$	422	$	942

Series II	$	98	$	306	$	531	$	1,178

Series NAV	$	73	$	227	$	395	$	883

Core Disciplined Diversification

Series I	$	77	$	250	$	439	$	985

Series II	$	97	$	313	$	548	$	1,220

Series NAV	$	72	$	235	$	412	$	926

Core Fundamental Holdings

Series I	$	83	$	269	$	472	$	1,056

Series II	$	103	$	332	$	580	$	1,290

Series III	$	62	$	206	$	363	$	818

Series NAV	$	47	$	159	$	280	$	636

Core Global Diversification

Series I	$	84	$	273	$	477	$	1,068

Series II	$	104	$	335	$	585	$	1,301

Series III	$	63	$	209	$	368	$	830

Series NAV	$	48	$	162	$	286	$	648

Core Strategy

Series I	$	60	$	198	$	357	$	818

Series II	$	81	$	261	$	466	$	1,057

Series NAV	$	55	$	182	$	329	$	758


Fund/Class	Year 1		Year 3		Year 5		Year 10
Disciplined Diversification

Series I	$	77	$	271	$	515	$	1,214

Series II	$	97	$	334	$	622	$	1,444

Series NAV	$	72	$	256	$	488	$	1,156

Emerging Markets Value

Series I	$	116	$	362	$	628	$	1,386

Series II	$	136	$	425	$	734	$	1,613

Series NAV	$	111	$	347	$	601	$	1,329

Emerging Small Company

Series I	$	112	$	350	$	606	$	1,340

Series II	$	132	$	412	$	713	$	1,568

Series NAV	$	107	$	334	$	579	$	1,283

Equity-Income

Series I	$	93	$	290	$	504	$	1,120

Series II	$	113	$	353	$	612	$	1,352

Series NAV	$	88	$	274	$	477	$	1,061

Financial Services

Series I	$	97	$	303	$	525	$	1,166

Series II	$	117	$	365	$	633	$	1,398

Series NAV	$	92	$	287	$	498	$	1,108

Floating Rate Income

Series I	$	83	$	259	$	450	$	1,002

Series II	$	103	$	322	$	558	$	1,236

Series NAV	$	78	$	243	$	422	$	942

Franklin Templeton Founding Allocation

Series I	$	93	$	296	$	521	$	1,168

Series II	$	113	$	358	$	628	$	1,399

Series NAV	$	88	$	280	$	494	$	1,110

Fundamental Value

Series I	$	88	$	274	$	477	$	1,061

Series II	$	108	$	337	$	585	$	1,294

Series NAV	$	83	$	259	$	450	$	1,002

Global

Series I	$	98	$	307	$	534	$	1,188

Series II	$	118	$	370	$	642	$	1,418

Series NAV	$	93	$	291	$	507	$	1,129

Global Allocation

Series I	$	107	$	334	$	579	$	1,283

Series II	$	127	$	397	$	686	$	1,511

Series NAV	$	102	$	318	$	552	$	1,225

Global Bond

Series I	$	87	$	271	$	471	$	1,049

Series II	$	107	$	334	$	579	$	1,283

Series NAV	$	82	$	255	$	444	$	990


Fund/Class	Year 1		Year 3		Year 5		Year 10
Global Real Estate

Series I	$	112	$	350	$	606	$	1,340

Series II	$	132	$	412	$	713	$	1,568

Series NAV	$	107	$	334	$	579	$	1,283

Growth

Series I	$	95	$	296	$	515	$	1,143

Series II	$	115	$	359	$	622	$	1,375

Series NAV	$	90	$	281	$	488	$	1,084

Growth Equity

Series I	$	87	$	271	$	471	$	1,049

Series II	$	107	$	334	$	579	$	1,283

Series NAV	$	82	$	255	$	444	$	990

Growth Opportunities

Series I	$	101	$	315	$	547	$	1,213

Series II	$	121	$	378	$	654	$	1,443

Series NAV	$	96	$	300	$	520	$	1,155

Health Sciences

Series I	$	120	$	375	$	649	$	1,432

Series II	$	140	$	437	$	755	$	1,657

Series NAV	$	115	$	359	$	622	$	1,375

High Income

Series I	$	81	$	252	$	439	$	978

Series II	$	101	$	315	$	547	$	1,213

Series NAV	$	76	$	237	$	411	$	918

High Yield

Series I	$	79	$	246	$	428	$	954

Series II	$	99	$	309	$	536	$	1,190

Series NAV	$	74	$	230	$	401	$	894

Income

Series I	$	94	$	293	$	509	$	1,131

Series II	$	114	$	356	$	617	$	1,363

Series NAV	$	89	$	278	$	482	$	1,073

International Core

Series I	$	110	$	343	$	595	$	1,317

Series II	$	130	$	406	$	702	$	1,545

Series NAV	$	105	$	328	$	569	$	1,259

International Equity Index A

Series I	$	64	$	202	$	351	$	786

Series II	$	85	$	265	$	460	$	1,025

Series NAV	$	59	$	186	$	324	$	726

International Equity Index B

Series NAV	$	36	$	165	$	305	$	715

International Growth

Series I	$	111	$	347	$	601	$	1,329

Series II	$	131	$	409	$	708	$	1,556

Series NAV	$	106	$	331	$	574	$	1,271


Fund/Class	Year 1		Year 3		Year 5		Year 10
International Index

Series I	$	58	$	183	$	318	$	714

Series II	$	79	$	246	$	428	$	954

Series NAV	$	53	$	167	$	291	$	653

International Opportunities

Series I	$	107	$	334	$	579	$	1,283

Series II	$	127	$	397	$	686	$	1,511

Series NAV	$	102	$	318	$	552	$	1,225

International Small Cap

Series I	$	117	$	365	$	633	$	1,398

Series II	$	137	$	428	$	739	$	1,624

Series NAV	$	112	$	350	$	606	$	1,340

International Small Company

Series I	$	118	$	368	$	638	$	1,409

Series II	$	138	$	431	$	745	$	1,635

Series NAV	$	113	$	353	$	612	$	1,352

International Value

Series I	$	100	$	314	$	548	$	1,221

Series II	$	120	$	377	$	656	$	1,451

Series NAV	$	95	$	299	$	521	$	1,162

Intrinsic Value

Series I	$	98	$	306	$	531	$	1,178

Series II	$	118	$	368	$	638	$	1,409

Series NAV	$	93	$	290	$	504	$	1,120

Investment Quality Bond

Series I	$	75	$	233	$	406	$	906

Series II	$	95	$	296	$	515	$	1,143

Series NAV	$	69	$	218	$	379	$	847

Large Cap

Series I	$	82	$	255	$	444	$	990

Series II	$	102	$	318	$	552	$	1,225

Series NAV	$	77	$	240	$	417	$	930

Large Cap Value

Series I	$	93	$	290	$	504	$	1,120

Series II	$	113	$	353	$	612	$	1,352

Series NAV	$	88	$	274	$	477	$	1,061

Lifecycle 2010

Series I	$	95	$	296	$	515	$	1,143

Series II	$	115	$	359	$	622	$	1,375

Series NAV	$	90	$	281	$	488	$	1,084

Lifecycle 2015

Series I	$	96	$	300	$	520	$	1,155

Series II	$	116	$	362	$	628	$	1,386

Series NAV	$	91	$	284	$	493	$	1,096


Fund/Class	Year 1		Year 3		Year 5		Year 10
Lifecycle 2020

Series I	$	96	$	300	$	520	$	1,155

Series II	$	116	$	362	$	628	$	1,386

Series NAV	$	91	$	284	$	493	$	1,096

Lifecycle 2025

Series I	$	97	$	303	$	525	$	1,166

Series II	$	117	$	365	$	633	$	1,398

Series NAV	$	92	$	287	$	498	$	1,108

Lifecycle 2030

Series I	$	98	$	306	$	531	$	1,178

Series II	$	118	$	368	$	638	$	1,409

Series NAV	$	93	$	290	$	504	$	1,120

Lifecycle 2035

Series I	$	99	$	309	$	536	$	1,190

Series II	$	119	$	372	$	644	$	1,420

Series NAV	$	94	$	293	$	509	$	1,131

Lifecycle 2040

Series I	$	100	$	312	$	542	$	1,201

Series II	$	120	$	375	$	649	$	1,432

Series NAV	$	95	$	296	$	515	$	1,143

Lifecycle 2045

Series I	$	100	$	312	$	542	$	1,201

Series II	$	120	$	375	$	649	$	1,432

Series NAV	$	95	$	296	$	515	$	1,143

Lifecycle 2050

Series I	$	100	$	312	$	542	$	1,201

Series II	$	120	$	375	$	649	$	1,432

Series NAV	$	95	$	296	$	515	$	1,143

Lifecycle Retirement

Series I	$	91	$	284	$	493	$	1,096

Series II	$	111	$	347	$	601	$	1,329

Series NAV	$	86	$	268	$	466	$	1,037

Lifestyle Aggressive

Series I	$	101	$	315	$	547	$	1,213

Series II	$	121	$	378	$	654	$	1,443

Series NAV	$	96	$	300	$	520	$	1,155

Lifestyle Balanced

Series I	$	90	$	281	$	488	$	1,084

Series II	$	110	$	343	$	595	$	1,317

Series NAV	$	85	$	265	$	460	$	1,025

Lifestyle Conservative

Series I	$	85	$	265	$	460	$	1,025

Series II	$	105	$	328	$	569	$	1,259

Series NAV	$	80	$	249	$	433	$	966


Fund/Class	Year 1		Year 3		Year 5		Year 10
Lifestyle Growth

Series I	$	90	$	281	$	488	$	1,084

Series II	$	110	$	343	$	595	$	1,317

Series NAV	$	85	$	265	$	460	$	1,025

Lifestyle Moderate

Series I	$	88	$	274	$	477	$	1,061

Series II	$	108	$	337	$	585	$	1,294

Series NAV	$	83	$	259	$	450	$	1,002

Mid Cap Index

Series I	$	56	$	176	$	307	$	689

Series II	$	77	$	240	$	417	$	930

Series NAV	$	51	$	160	$	280	$	628

Mid Cap Intersection

Series I	$	100	$	312	$	542	$	1,201

Series II	$	120	$	375	$	649	$	1,432

Series NAV	$	95	$	296	$	515	$	1,143

Mid Cap Stock

Series I	$	96	$	300	$	520	$	1,155

Series II	$	116	$	362	$	628	$	1,386

Series NAV	$	91	$	284	$	493	$	1,096

Mid Cap Value Equity

Series I	$	105	$	328	$	569	$	1,259

Series II	$	125	$	390	$	676	$	1,489

Series NAV	$	100	$	312	$	542	$	1,201

Mid Value

Series I	$	115	$	359	$	622	$	1,375

Series II	$	135	$	421	$	729	$	1,601

Series NAV	$	110	$	343	$	595	$	1,317

Money Market B

Series NAV	$	30	$	146	$	272	$	642

Money Market

Series I	$	59	$	186	$	324	$	726

Series II	$	80	$	249	$	433	$	966

Series NAV	$	54	$	170	$	296	$	665

Mutual Shares

Series I	$	113	$	354	$	615	$	1,361

Series II	$	133	$	416	$	721	$	1,588

Series NAV	$	108	$	338	$	588	$	1,304

Natural Resources

Series I	$	115	$	359	$	622	$	1,375

Series II	$	135	$	421	$	729	$	1,601

Series NAV	$	110	$	343	$	595	$	1,317

Optimized All Cap

Series I	$	81	$	252	$	439	$	978

Series II	$	101	$	315	$	547	$	1,213

Series NAV	$	76	$	237	$	411	$	918


Fund/Class	Year 1		Year 3		Year 5		Year 10
Optimized Value

Series I	$	77	$	240	$	417	$	930

Series II	$	97	$	303	$	525	$	1,166

Series NAV	$	72	$	224	$	390	$	871

Overseas Equity

Series I	$	119	$	372	$	644	$	1,420

Series II	$	139	$	434	$	750	$	1,646

Series NAV	$	114	$	356	$	617	$	1,363

Pacific Rim

Series I	$	112	$	350	$	606	$	1,340

Series II	$	132	$	412	$	713	$	1,568

Series NAV	$	107	$	334	$	579	$	1,283

Real Estate Equity

Series I	$	100	$	312	$	542	$	1,201

Series II	$	120	$	375	$	649	$	1,432

Series NAV	$	95	$	296	$	515	$	1,143

Real Estate Securities

Series I	$	82	$	255	$	444	$	990

Series II	$	102	$	318	$	552	$	1,225

Series NAV	$	77	$	240	$	417	$	930

Real Return Bond

Series I	$	81	$	252	$	439	$	978

Series II	$	101	$	315	$	547	$	1,213

Series NAV	$	76	$	237	$	411	$	918

Science and Technology

Series I	$	119	$	372	$	644	$	1,420

Series II	$	139	$	434	$	750	$	1,646

Series NAV	$	114	$	356	$	617	$	1,363

Short Term Government Income

Series I	$	72	$	224	$	390	$	871

Series II	$	92	$	287	$	498	$	1,108

Series NAV	$	66	$	208	$	362	$	810

Short-Term Bond

Series I	$	73	$	227	$	395	$	883

Series II	$	93	$	290	$	504	$	1,120

Series NAV	$	67	$	211	$	368	$	822

Small Cap Growth

Series I	$	121	$	378	$	654	$	1,443

Series II	$	142	$	440	$	761	$	1,669

Series NAV	$	116	$	362	$	628	$	1,386

Small Cap Index

Series I	$	59	$	186	$	324	$	726

Series II	$	80	$	249	$	433	$	966

Series NAV	$	54	$	170	$	296	$	665


Fund/Class	Year 1		Year 3		Year 5		Year 10
Small Cap Intrinsic Value

Series I	$	127	$	397	$	686	$	1,511

Series II	$	148	$	459	$	792	$	1,735

Series NAV	$	122	$	381	$	660	$	1,455

Small Cap Opportunities

Series I	$	113	$	353	$	612	$	1,352

Series II	$	133	$	415	$	718	$	1,579

Series NAV	$	108	$	337	$	585	$	1,294

Small Cap Value

Series I	$	119	$	372	$	644	$	1,420

Series II	$	139	$	434	$	750	$	1,646

Series NAV	$	114	$	356	$	617	$	1,363

Small Company Growth

Series I	$	120	$	375	$	649	$	1,432

Series II	$	140	$	437	$	755	$	1,657

Series NAV	$	115	$	359	$	622	$	1,375

Small Company Value

Series I	$	115	$	359	$	622	$	1,375

Series II	$	135	$	421	$	729	$	1,601

Series NAV	$	110	$	343	$	595	$	1,317

Smaller Company Growth

Series I	$	110	$	367	$	644	$	1,433

Series II	$	130	$	429	$	750	$	1,659

Series NAV	$	105	$	351	$	617	$	1,376

Spectrum Income

Series I	$	87	$	271	$	471	$	1,049

Series II	$	107	$	334	$	579	$	1,283

Series NAV	$	82	$	255	$	444	$	990

Strategic Bond

Series I	$	80	$	249	$	433	$	966

Series II	$	100	$	312	$	542	$	1,201

Series NAV	$	75	$	233	$	406	$	906

Strategic Income

Series I	$	84	$	262	$	455	$	1,014

Series II	$	104	$	325	$	563	$	1,248

Series NAV	$	79	$	246	$	428	$	954

Total Bond Market Index A

Series I	$	58	$	183	$	318	$	714

Series II	$	79	$	246	$	428	$	954

Series NAV	$	53	$	167	$	291	$	653

Total Bond Market Index B

Series NAV	$	26	$	142	$	268	$	638

Total Return

Series I	$	82	$	255	$	444	$	990

Series II	$	102	$	318	$	552	$	1,225

Series NAV	$	77	$	240	$	417	$	930

SMALL CAP FUNDS

EMERGING SMALL COMPANY TRUST


Subadviser:		RCM Capital Management LLC


*Investment Objective:*		To seek long term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) at the time of investment in securities of small cap companies. The subadviser defines small cap companies as common stocks and other equity securities of U.S. companies that have a market capitalization that does not exceed the highest market capitalization of any company contained in either the Russell 2000 Index ($3.7 billion as of February 28, 2009) or the S&P Small Cap 600 Index ($2.1 billion as of February 28, 2009).

The subadviser seeks to create an investment portfolio of growth stocks across major industry groups. The portfolio managers evaluate individual stocks based on their growth, quality and valuation characteristics. Examples of growth characteristics include the potential for sustained earnings growth and the development of proprietary products or services; examples of quality characteristics include the integrity of management and a strong balance sheet; and examples of valuation characteristics include relative valuation and upside potential.

In addition to traditional research activities, the portfolio managers use Grassroots (SM) Research which prepares research reports based on field interviews with customers, distributors and competitors of the companies in which the fund invests or contemplates investing and provides a “second look” at potential investments and checks market place assumptions about market demand for particular products and services. The subadviser sells securities it deems appropriate in accordance with sound investment practices and the fund’s investment objectives and as necessary for redemption purposes.

The fund may invest up to 25% of its net assets in foreign securities.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its net asset value (NAV) and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

The performance information below does not reflect fees and expenses of any variable insurance contract which may use JHT as its underlying investment medium. If such fees and expenses had been reflected, performance would be lower. The past performance of any fund is not necessarily an indication of how a fund will perform in the future.

Calendar Year Total Returns for Series I:





73.53%	-4.30%	-22.24%	-29.20%	39.73%	11.52%	5.04%	2.41%	8.05%	-43.28%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		59.08% (Quarter ended 12/31/1999) Worst Quarter: -27.39% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-43.28%		-5.97%		-0.62%		1/1/1997
Series II^A		-43.40%		-6.15%		-0.75%		1/28/2002
Series NAV^B		-43.23%		-5.92%		-0.60%		2/28/2005
Russell 2000 Growth Index		-38.54%		-2.35%		-0.76%

^A Series II shares were first offered on January 28, 2002. Performance shown for period prior to that date reflects the performance of Series I shares. Series I shares have lower expenses than Series II shares. Had the performamce for periods prior to January 28, 2002 reflected Series II expenses, performance would have been lower.

^B NAV shares were first offered on February 28, 2005. Performance prior to February 28, 2005 is that of Series I shares. Series I shares have higher expenses than NAV shares. Had the performance reflected NAV share expenses, performance would have been higher.

SMALL CAP GROWTH TRUST


Subadviser:		Wellington Management Company, LLP


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in small-cap companies. For the purposes of the fund, “small cap companies” are those with market capitalizations, at the time of investment, not exceeding the maximum market capitalization of any company represented in either the Russell 2000 Index ($3.7 billion as of February 28, 2009) or the S&P Small Cap 600 Index ($2.1 billion as of February 28, 2009).

The fund invests in small-cap companies that are believed to offer above-average potential for growth in revenues and earnings. Market capitalizations of companies in the indices change over time; however, the fund will not sell a security just because a company has grown to a market capitalization outside the maximum range of the indices.

The subadviser selects stocks using a combination of quantitative screens and bottom-up, fundamental security research. Quantitative screening seeks to narrow the list of small capitalization companies and to identify a group of companies with strong revenue growth and accelerating earnings. Fundamental equity research seeks to identify individual companies from that group with a higher potential for earnings growth and capital appreciation.

The subadviser looks for companies based on a combination of criteria including one or more of the following:


	•	Improving market shares and positive financial trends;
	•	Superior management with significant equity ownership; and
	•	Attractive valuations relative to earnings growth outlook.

The fund is likely to experience periods of higher turnover in portfolio securities because the subadviser frequently adjusts the selection of companies and/or their position size based on these criteria. The fund’s sector exposures are broadly diversified, but are primarily a result of stock selection and therefore may vary significantly from its benchmark. The fund may invest up to 25% of its total assets in foreign securities, including emerging market securities.

Except as otherwise stated under “Additional Investment Policies — Temporary Defensive Investing,” the fund normally has 10% or less (usually lower) of its total assets in cash and cash equivalents.

The fund may invest in “IPOs”. The fund may also purchase each of the following types of securities, but not as a principal investment strategy: U.S. dollar denominated foreign securities, certain ETFs, and certain derivatives (investments whose value is based on an index or other securities).

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk


	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series NAV:





-3.43%	-8.89%	-3.78%	-28.21%	48.83%	9.45%	17.34%	13.47%	13.98%	-39.54%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		26.90% (Quarter ended 12/31/2001) Worst Quarter: -27.11% (Quarter ended 9/30/2001)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I^A		-39.68%		0.02%		-0.99%		4/29/2005
Series II^A		-39.80%		-0.14%		-1.07%		4/29/2005
Series NAV^B		-39.54%		0.08%		-0.96%		5/1/1996
Russell 2000 Growth Index		-38.54%		-2.35%		-0.76%

^A The Series I and Series II shares of the fund were first offered on April 29, 2005. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Small Cap Emerging Growth Fund, the fund’s predecessor. The performance of this class of shares would have been lower if it reflected the higher expenses of the Series I and Series II shares.

^B The Series NAV shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of the Small Cap Emerging Growth Fund of John Hancock Variable Series Trust I (“JHVST”) in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the JHVST Small Cap Emerging Growth Fund, the fund’s predecessor. These shares were first issued on May 1, 1996.

SMALL CAP INTRINSIC VALUE TRUST


Subadviser:		MFC Global Investment Management (U.S.), LLC


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowing for investment purposes) in equity securities of small-capitalization companies (companies in the capitalization range of the Russell 2000 Index, which was $3.2 million to $3.7 billion as of February 28, 2009). Equity securities include common and preferred stocks and their equivalents.

In managing the fund, the subadviser emphasizes a value-oriented “bottom-up” approach to individual stock selection. With the aid of proprietary financial models, the subadviser looks for companies that are selling at what appear to be substantial discounts to their long-term intrinsic values. These companies often have identifiable catalysts for growth, such as new products, business reorganizations or mergers.

The subadviser uses fundamental financial analysis of individual companies to identify those with substantial cash flows, reliable revenue streams, strong competitive positions and strong management. The fund may attempt to take advantage of short-term market volatility by investing in companies involved in managing corporate restructuring or pending acquisitions.

The fund may invest up to 35% of its total assets in foreign securities. The fund may invest up to 20% of its total assets in bonds of any maturity rated as low as CC by S&P or Ca by Moody’s and their unrated equivalents (bonds rated below BBB by S&P or Baa by Moody’s are considered “junk bonds”). The fund may make limited use of certain derivatives (investments whose value is based on securities, indexes or currencies).

In abnormal circumstances, the fund may temporarily invest extensively in investment-grade short-term securities. In these and other cases, the fund might not achieve its goal.

The fund may trade securities actively, which could increase its transaction costs thus lowering performance.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series NAV:





				-57.66%

				2008


Best Quarter:		-1.67% (Quarter ended 6/30/2008) Worst Quarter: -36.09% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-57.66%

-42.31%

4/30/2007

Russell 2000 Index^A

-33.79%

-24.30%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

SMALL CAP OPPORTUNITIES TRUST


Subadvisers:		Invesco Aim Capital Management, Inc. (“Invesco Aim”) and Dimensional Fund Advisors LP (“Dimensional” or “DFA”)


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of small-capitalization companies. Each subadviser’s investment strategy is described below.

Invesco Aim

Invesco Aim will manage its portion of the fund’s assets (the “Invesco Aim Subadvised Assets”) as follows:

Under normal market conditions, Invesco Aim invests at least 80% of the Invesco Aim Subadvised Assets (plus any borrowings for investment purposes) in equity securities, including convertible securities, of small-capitalization companies. Invesco Aim considers small-capitalization companies to be those companies with market capitalizations, at the time of investment, no larger than the largest capitalized company included in the Russell 2000 Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. As of February 28, 2009, the capitalization of companies in the Russell 2000 Index range from $3.2 million to $ 3.7 billion.

Invesco Aim considers selling a security if a change in industry or company fundamentals indicates a problem, the price target set at purchase (i.e., the projected price level as stated by an investment analyst) is exceeded or a change in technical outlook indicates poor relative strength.

The Invesco Aim Subadvised Assets may include synthetic instruments. Synthetic instruments are investments that have economic characteristics similar to the fund’s direct investments, and may include warrants, futures, options, exchange traded funds (ETFs) and American Depositary Receipts. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.

Invesco Aim attempts to provide potentially higher returns than a fund that invests primarily in larger, more established companies. Since small companies are generally not as well known to investors or have less of an investor following than larger companies, they may provide higher returns due to inefficiencies in the marketplace. Under normal conditions, the top 10 holdings may comprise up to 25% of the Invesco Aim Subadvised Assets.

In selecting investments, Invesco Aim utilizes a disciplined portfolio construction process that aligns the fund with the S&P Small Cap 600 Index, which Invesco Aim believes represents the small cap core asset class. The security selection process is based on a three-step process that includes fundamental, valuation and timeliness analysis:

Arrow Pointing Right Fundamental analysis involves building a series of financial models (tools to analyze stock), as well as conducting in-depth interviews with company management. The goal is to find high quality, fundamentally sound companies operating in an attractive industry.

Arrow Pointing Right Valuation analysis focuses on identifying attractively valued securities given their growth potential over a one- to two-year horizon.

Arrow Pointing Right Timeliness analysis is used to help identify the “timeliness” of a purchase. In this step, relative price strength (the price of stock in comparison to the rest of the market), trading volume characteristics, and trend analysis (using past data to predict future movement of stock) are reviewed for signs of deterioration. If a stock shows signs of deterioration, it will not be considered as a candidate for the portfolio.

Invesco Aim may invest up to 25% of the Invesco Aim Subadvised Assets in foreign securities. The fund’s investments in foreign securities may include direct investments in non-U.S. dollar denominated securities traded outside of the U.S.

Invesco Aim may invest up to 15% of the Invesco Aim Subadvised Assets in real estate investment trusts (“REITs”).

Dimensional

DFA will manage its portion of the fund’s assets (the “DFA Subadvised Assets”) as follows:

DFA generally will invest the DFA Subadvised Assets in a broad and diverse group of common stocks of small and mid cap companies traded on a U.S. national securities exchange or on the over-the counter market that DFA determines to be value stocks at the time of purchase. Securities are considered value stocks primarily because a company’s shares have a high book value in relation to their market value (a “book to market ratio”). In assessing value, DFA may consider additional factors, such as price to cash flow or price to earnings ratios, as well as economic conditions and developments in the issuer’s industry. The criteria DFA uses for assessing value are subject to change from time to time. As of the date of this Prospectus, DFA considers for investment

companies whose market capitalizations are generally smaller than the 500th largest U.S. company. DFA uses a market capitalization weighted approach in weighing portfolio securities. See “Market Capitalization Weighted Approach” below. DFA does not intend to purchase or sell securities based on the prospects for the economy, the securities markets or the individual issuers whose shares are eligible for purchase.

DFA may sell portfolio securities when the issuer’s market capitalization increases to a level that exceeds that of the issuer with the largest market capitalization that is then eligible for investment by the DFA Subadvised Assets. In addition, DFA may sell portfolio securities when their book to market ratios fall below those of the security with the lowest such ratio that is then eligible for purchase by the DFA Subadvised Assets. However, DFA may retain securities of issuers with relatively smaller market capitalizations for longer periods, despite a decrease in the issuers’ book to market ratios.

The total market capitalization ranges, and the value criteria used by DFA for the DFA Subadvised Assets, as described above, generally apply at the time of purchase. DFA will not be required to dispose of a security if the security’s issuer is no longer within the total market capitalization range or does not meet current value criteria. Similarly, DFA is not required to sell a security even if the decline in the market capitalization reflects a serious financial difficulty or potential or actual insolvency of the company. Securities that do meet the market capitalization and/or value criteria nevertheless may be sold at any time when, in DFA’s judgment, circumstances warrant their sale.

DFA may use derivatives, such as futures contracts and options on futures contracts, to gain market exposure on uninvested cash pending investment in securities or to maintain liquidity to pay redemptions. DFA may enter into futures contracts and options on futures contracts for U.S. equity securities and indices. DFA may also invest in ETFs and similarly structured pooled investments for the purpose of gaining exposure to the U.S. equity markets while maintaining liquidity.

Market Capitalization Weighted Approach

The strategy used by DFA in managing the DFA Subadvised Assets involves market capitalization weighting in determining individual security weights. Generally, the relative market capitalization of the issuer determines the weighting of the security in the fund’s portfolio. Market capitalization weighting will be adjusted by DFA for trading strategies and a variety of other factors. DFA may deviate from market capitalization weighting to limit or fix the exposure of the DFA Subadvised Assets to a particular issuer to a maximum proportion of the assets of the DFA Subadvised Assets. DFA may exclude the stock of a company that meets applicable market capitalization criterion if DFA determines that the purchase of such security is inappropriate in light of other conditions. These adjustments will result in a deviation from traditional market capitalization weighting. A more complete description of Market Capitalization Weighted Approach is set forth in the SAI.

The fund’s investment process may, at times, result in a higher than average portfolio turnover rate and increased trading expense.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Investment company securities risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Real estate securities risk

Past Performance

Calendar Year Total Returns for Series I:





25.78%	7.77%	10.45%	-7.66%	-42.13%

2004	2005	2006	2007	2008


Best Quarter:		13.31% (Quarter ended 12/31/2004) Worst Quarter: -26.09% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-42.13%		-4.36%		2.03%		5/5/2003
Series II		-42.25%		-4.55%		1.83%		5/5/2003
Series NAV^A		-42.13%		-4.33%		2.05%		2/28/2005
Russell 2000 Value Index^B		-28.92%		0.27%		6.45%
Russell 2000 Index^C		-33.79%		-0.93%		4.85%

^A NAV shares were first offered on February 28, 2005. Performance prior to February 28, 2005 is that of Series I shares. Series I shares have higher expenses than NAV shares. Had the performance reflected NAV share expenses, performance would have been higher.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

^C Effective December 19, 2008, the fund changed the index to which it compares its performance from the Russell 2000 Value Index to the Russell 2000 Index which more accurately reflects the combined investment style of the subadivsers to the fund.

SMALL CAP VALUE TRUST


Subadviser:		Wellington Management Company, LLP


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in small-cap companies that are believed to be undervalued by various measures and offer good prospects for capital appreciation. For the purposes of the fund, “small cap companies” are those with market capitalizations, at the time of investment, not exceeding the maximum market capitalization of any company represented in either the Russell 2000 Index ($3.7 billion as of February 28, 2009) or the S&P Small Cap 600 Index ($2.1 billion as of February 28, 2009).

The fund invests primarily in a diversified mix of common stocks of U.S. small-cap companies. The subadviser employs a value-oriented investment approach in selecting stocks, using proprietary fundamental research to identify stocks the subadviser believes have distinct value characteristics based on industry-specific valuation criteria. The subadviser focuses on high quality companies with a proven record of above average rates of profitability that sell at a discount relative to the overall small-cap market.

Fundamental research is then used to identify those companies demonstrating one or more of the following characteristics:


	•	Sustainable competitive advantages within a market niche;
	•	Strong profitability and free cash flows;
	•	Strong market share positions and trends;
	•	Quality of and share ownership by management; and
	•	Financial structures that are more conservative than the relevant industry average.

The fund’s sector exposures are broadly diversified, but are primarily a result of stock selection and may, therefore, vary significantly from its benchmark. The fund may invest up to 15% of its total assets in foreign securities (with no more than 5% in emerging market securities).

Except as otherwise stated under “Investment Objectives and Strategies — Temporary Defensive Investing,” the fund normally has 10% or less (usually lower) of its total assets invested in cash and cash equivalents.

The fund may invest in IPOs. The fund may also purchase each of the following types of securities: REITs or other real estate-related equity securities, U.S. dollar denominated foreign securities, certain ETFs, and certain derivatives (investments whose value is based on an index or other securities). For purposes of the fund, ETFs are considered securities with a market capitalization equal to the weighted average market capitalization of the basket of securities comprising the ETF.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Real estate securities risk

Past Performance

Calendar Year Total Returns for Series NAV:





34.19%	19.10%	-6.43%	37.97%	25.45%	9.21%	19.32%	-2.86%	-26.12%

2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		18.86% (Quarter ended 6/30/2003) Worst Quarter: -23.35% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I^A		-26.08%		3.23%		10.51%		4/29/2005
Series II^A		-26.31%		3.06%		10.41%		4/29/2005
Series NAV^B		-26.12%		3.25%		10.52%		8/30/1999
Russell 2000 Value Index^C		-28.92%		0.27%		6.67%

^A The Series I and Series II shares of the fund were first offered on April 29, 2005. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Small Cap Value Fund, the fund’s predecessor. The performance of this class of shares would have been lower if it reflected the higher expenses of the Series I and Series II shares.

^B The Series NAV shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of the Small Cap Value Fund of John Hancock Variable Series Trust I in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the actual performance of

the sole class of shares of the John Hancock Variable Series Trusts Small Cap Value Fund, the fund’s predecessor. These shares were first issued on August 30, 1999.

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

SMALL COMPANY GROWTH TRUST


Subadviser:		Invesco Aim Capital Management, Inc.


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities of small-capitalization companies. The fund considers a company to be a small-capitalization company if it has a market capitalization, at the time of investment, no larger than the largest capitalized company included in the Russell 2000 Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. As of February 28, 2009, the capitalizations of companies included in the Russell 2000 Index ranged from $3.2 million to $3.7 billion.

The fund will invest primarily in marketable equity securities, including convertible securities, but its investments may include other securities, such as synthetic and derivative instruments. Synthetic instruments are investments that have economic characteristics similar to the fund’s direct investments and may include warrants, futures, options, ETFs and American Depositary Receipts (ADRs). Synthetic and derivative instruments may have the effect of leveraging the fund’s portfolio. The fund may also invest up to 20% of its net assets in equity securities of issuers that have market capitalizations, at the time of purchase, in other market capitalization ranges, and in investment grade non-convertible debt securities, U.S. government securities and high-quality money market instruments. The fund may invest up to 25% of its total assets in foreign securities. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.

In selecting investments, the subadviser utilizes a disciplined portfolio construction process that constrains the fund’s industry group weightings within a specific range versus the industry group weightings of the Russell 2000 Index which the subadviser believes represents the small cap growth asset class. The security selection process is based on a three-step process that includes fundamental, valuation and timeliness analysis.

Arrow Pointing Right Fundamental analysis involves building a series of financial models, as well as conducting in-depth interviews with company management. The goal is to find high quality, fundamentally sound companies operating in an attractive industry.

Arrow Pointing Right Valuation analysis focuses on identifying attractively valued securities given their growth potential over a one- to two-year horizon.

Arrow Pointing Right Timeliness analysis is used to help identify the “timeliness” of a purchase. In this step, relative price strength, trading volume characteristics, and trend analysis are reviewed for signs of deterioration. If a stock shows signs of deterioration, it will not be considered as a candidate for the portfolio.

The subadviser consider selling a security if a change in industry or company fundamentals indicates a problem, the price target set at purchase is exceeded or a change in technical outlook indicates poor relative strength.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series NAV:





13.83%	10.34%	-38.57%

2006	2007	2008


Best Quarter:		11.44% (Quarter ended 3/31/2006) Worst Quarter: -26.67% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-38.57%

-6.03%

10/24/2005

Russell 2000 Growth Index^A

-38.54%

-7.28%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

SMALL COMPANY VALUE TRUST


Subadviser:		T. Rowe Price Associates, Inc.


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in companies with market capitalizations, at the time of investment, that do not exceed the maximum market capitalization of any security in the Russell 2000 Index ($3.2 million to $3.7 billion as of February 28, 2009). The fund invests in small companies whose common stocks are believed to be undervalued.

Reflecting a value approach to investing, the fund will seek the stocks of companies whose current stock prices do not appear to adequately reflect their underlying value as measured by assets, earnings, cash flow, or business franchises. The subadviser’s in-house research team seeks to identify companies that appear to be undervalued by various measures, and may be temporarily out of favor, but have good prospects for capital appreciation. In selecting investments, they generally look for some of the following factors:


	•	Low price/earnings, price/book value or price/cash flow ratios relative to the S&P 500, the company’s peers or its own historic norm;
	•	Low stock price relative to a company’s underlying asset values;
	•	Above-average dividend yield relative to a company’s peers or its own historic norm;
	•	A plan to improve the business through restructuring; and/or
	•	A sound balance sheet and other positive financial characteristics.

While most assets will be invested in U.S. common stocks, the fund may purchase other securities, including foreign securities (up to 20% of its total net assets), futures, and options. The fund may invest in fixed income and convertible securities without regard to quality or rating, including up to 10% of total assets in non-investment grade fixed income securities (“junk bonds”). The fund’s fixed income investments may include privately negotiated notes or loans, including loan participations and assignments (“bank loans”). These investments in bank loans will be made only in companies, municipalities or entities that meet the fund’s investment criteria. Direct investments in bank loans may be illiquid and holding a loan could expose the fund to the risks of being a direct lender. Since the fund invests primarily in equity securities, the risks associated with fixed income securities will not affect the fund as much as they would a fund that invests more of its assets in fixed income securities.

The fund holds a certain portion of its assets in money market reserves which can consist of shares of the T. Rowe Price Reserve Investment Fund (or any other internal T. Rowe Price money market fund) as well as U.S. and foreign dollar-denominated money market securities, including repurchase agreements, in the two highest rating categories, maturing in one year or less. The fund may invest reserves in U.S. dollars and foreign currencies.

The fund may sell securities for a variety of reasons, such as to secure gains, limit losses or redeploy assets into more promising opportunities.

The fund may invest up to 10% of its total assets in hybrid instruments. Hybrid instruments are a type of high-risk derivatives which can combine the characteristics of securities, futures and options. Such securities may bear interest or pay dividends at below (or even relatively nominal) rates. The SAI contains a more complete description of such instruments and the risks associated therewith.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Loan participations risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





8.00%	5.93%	6.54%	-5.93%	33.67%	25.31%	6.93%	15.42%	-1.20%	-27.05%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		16.97% (Quarter ended 6/30/2003) Worst Quarter: -25.40% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-27.05%		2.20%		5.50%		10/1/1997
Series II^A		-27.26%		1.98%		5.37%		1/28/2002
Series NAV^B		-27.04%		2.23%		5.52%		2/28/2005
Russell 2000 Value Index		-28.92%		0.27%		6.11%

^A Series II shares were first offered on January 28, 2002. For periods prior to January 28, 2002, performance shown reflects the performance of Series I shares. Series I shares have lower expenses than Series II shares. Had the performamce for periods prior to January 28, 2002 reflected Series II expenses, performance would have been lower.

SMALLER COMPANY GROWTH TRUST


Subadvisers:		Frontier Capital Management Company, LLC; Perimeter Capital Management; and MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To seek long term capital appreciation.

*Investment Strategies:*		Under normal circumstances, the fund invests at least 80% of its assets in small cap equity securities.

The fund currently defines small cap equity securities as equity securities of companies with market capitalizations not exceeding $5.5 billion at the time of purchase. (The fund is not required to sell a security that has appreciated or depreciated outside this stated market capital range.) While the fund’s investments will generally consist of U.S.-traded securities, including American Depository Receipts (“ADRs”), the fund may also invest in foreign securities and have exposure to foreign securities. The fund may invest in IPOs.

The fund employs a multi-manager approach with three subadvisers, each of which employs its own investment approach and independently manages its portion of the fund. The Adviser may change the allocation of fund assets among the subadvisers at any time.

The fund may buy or sell derivatives (such as futures, options and swaps) to use as a substitute for a purchase or sale of a position in the underlying asset and/or as part of a strategy designed to reduce exposure to other risks, such as market risk. The fund may invest in ETFs.

The portion of the fund managed by MFC Global (U.S.A.) will generally be invested in (a) common stocks included in the MSCI U.S. Small Cap Growth Index; and (b) securities which may or may not be included in the MSCI U.S. Small Cap Growth Index that MFC Global (U.S.A.) believes as a group will behave in a manner similar to the index. As of February 28, 2009, the market capitalizations of companies included in the MSCI U.S. Small Cap Growth Index range from approximately $5 million to $4 billion.

The fund’s investment process may, at times, result in a higher than average portfolio turnover rate, which increases trading expenses and could lower performance.

Temporary Defensive Investing. During unusual or unsettled market conditions, for purposes of meeting redemption requests or pending investment of its assets, the fund may invest all or a portion of its assets in cash and securities that are highly liquid, including: (a) high quality money market instruments such as short-term U.S. government obligations, commercial paper, repurchase agreements or other cash equivalents; and (b) money market funds. To the extent that the fund is in a defensive position, its ability to achieve its investment objective will be limited.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past performance

This section normally shows how the fund’s total return has varied from year to year, along with a broad-based securities market index for reference. Because the fund has less than one calendar year of performance as of the date of this prospectus, there is no past performance to report.

VALUE OPPORTUNITIES TRUST


Subadviser:		Grantham, Mayo, Van Otterloo & Co. LLC


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its assets in securities of small- and mid-cap companies and the fund seeks to achieve its objective by outperforming its benchmark, the Russell 2500 Value Index. The fund typically makes equity investments in U.S. companies that issue stocks included in the Russell 2500 Index, and in companies with similar market capitalizations (“small- and mid-cap companies”). As of February 28, 2009, the average market capitalization of companies in the Russell 2500 Index ranged from $3 million to $5.8 billion. In addition, as of February 28, 2009, the average market capitalization of companies that issue stocks included in the Russell 2500 Index was approximately $1.6 billion, and the median market capitalization was approximately $327 million.

The subadviser uses proprietary research and multiple quantitative models to identify small- and mid-cap company stocks it believes have improving fundamentals and which trade at prices below what the subadviser believes to be their fundamental value. The subadviser also uses proprietary techniques to adjust the fund’s portfolio for factors such as stock selection discipline (criteria used for selecting stocks), industry and sector weights. The factors considered by the subadviser and the models used may change over time.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

MID CAP FUNDS

GROWTH OPPORTUNITIES TRUST


Subadviser:		Grantham, Mayo, Van Otterloo & Co. LLC


*Investment Objective:*		To seek long-term capital growth.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets in small- and mid-cap companies and seeks to achieve its objective by outperforming its benchmark, the Russell 2500 Growth Index. The fund typically makes equity investments in U.S. companies whose stocks are included in the Russell 2500 Index, and in companies with total market capitalizations similar to those of companies with stocks in the Index (“small- and mid-cap companies”). As of February 28, 2009, the market capitalizations of companies in the Russell 2500 Index ranged from $3 million to $5.8 billion. In addition, as of February 28, 2009, the average market capitalization of companies that issue stocks included in the Russell 2500 Index was approximately $1.6 billion, and the median market capitalization was approximately $327 million.

The subadviser uses proprietary research and multiple quantitative models to identify small- and mid-cap company stocks the subadviser believes have improving fundamentals. The subadviser then narrows the selection to small- and mid-cap company stocks it believes have growth characteristics, and are undervalued. Generally, these growth stocks are trading at prices below what the manager believes to be their fundamental value. The subadviser also uses proprietary techniques to adjust the fund for factors such as stock selection discipline (criteria used for selecting stocks) and industry and sector weights. The factors considered by the subadviser and the models used may change over time.

The fund is non-diversified, which means it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Non-diversified risk

Past performance

MID CAP INTERSECTION TRUST


Subadviser:		Wellington Management Company, LLP


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of medium-sized companies with significant capital appreciation potential. For the purposes of the fund, “medium-sized companies” are those with market capitalizations, at the time of investment, within the market capitalization range of companies represented in either the Russell MidCap Index ($41 million to $13.8 billion as of February 28, 2009) or the S&P MidCap 400 Index ($42 million to $4.6 billion as of February 28, 2009).

The fund is constructed stock by stock, an investment approach the subadviser refers to as “bottom-up.” The fund combines the subadviser’s proprietary fundamental and quantitative research inputs to create a portfolio of holdings within a disciplined framework.

The fund invests primarily in a diversified portfolio of equity securities based on the combined ratings of the subadviser’s Global Industry Analysts and proprietary quantitative stock selection models. Global Industry Analyst ratings are based upon the subadviser’s fundamental analysis. The subadviser’s fundamental analysis of a company involves the assessment of such factors as its business environment, management quality, balance sheet, income statement, anticipated earnings, revenues and dividends, and other related measures or indicators of value.

The subadviser then complements its fundamental research with an internally-developed quantitative analytical approach. This quantitative approach evaluates each security favoring those with attractive valuation and timeliness measures. Valuation factors compare securities within sectors based on measures such as price ratios and balance sheet strength. The subadviser’s assessment of timeliness focuses on stocks with favorable earnings and stock price momentum.

In constructing the portfolio, the subadviser analyzes and monitors different sources of active management risk including stock-specific risk, industry risk and style risk. Risk analysis is conducted in order to minimize any unintended consequences of bottom-up stock picking. The portfolio seeks to be well diversified, not taking large industry and style positions relative to the market benchmark.

The fund may invest in IPOs and ETFs.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





				-42.05%

				2008


Best Quarter:		8.44% (Quarter ended 6/30/2008) Worst Quarter: -26.76% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-42.05%

-30.87%

4/30/2007

Series II

-42.17%

-31.02%

4/30/2007

Series NAV

-42.00%

-30.82%

4/30/2007

S&P MidCap 400 Index^A

-36.23%

-24.04%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

MID CAP STOCK TRUST


Subadviser:		Wellington Management Company, LLP


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of medium-sized companies with significant capital appreciation potential. For the fund, “medium-sized companies” are those with market capitalizations within the collective market capitalization range of companies represented in either the Russell MidCap Index ($41 million to $13.8 billion as of February 28, 2009) or the S&P MidCap 400 Index ($42 million to $4.6 billion as of February 28, 2009).

The subadviser’s investment approach is based primarily on proprietary fundamental analysis. Fundamental analysis involves the assessment of a company through such factors as its business environment, management, balance sheet, income statement, anticipated earnings, revenues and other related measures of value. In analyzing companies for investment, the subadviser looks for, among other things, a strong balance sheet, strong earnings growth, attractive industry dynamics, strong competitive advantages (e.g., great management teams), and attractive relative value within the context of a security’s primary trading market. Securities are sold when the investment has achieved its intended purpose, or because it is no longer considered attractive. The fund may invest up to 25% of its total assets in foreign securities, including emerging market securities.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





-3.97%	-10.99%	-22.56%	42.33%	19.04%	14.57%	13.55%	23.57%	-43.76%

2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		20.74% (Quarter ended 12/31/2001) Worst Quarter: -25.36% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-43.76%		1.48%		0.22%		5/1/1999
Series II^A		-43.93%		1.26%		0.09%		1/28/2002
Series NAV^B		-43.75%		1.53%		0.25%		2/28/2005
Russell MidCap Growth Index^C		-44.32%		-2.33%		-1.00%

^A Series II shares were first offered on January 28, 2002. For periods prior to January 28, 2002, the performance shown reflects the performance of Series I shares. Series I shares have lower expenses than Series II shares. Had the performance for periods prior to January 28, 2002 reflected Series II expenses, performance would be lower.

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

MID CAP VALUE EQUITY TRUST


Subadviser:		RiverSource Investments, LLC


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (including any borrowings for investment purposes) in equity securities of medium-sized companies. Medium-sized companies are those whose market capitalizations, at the time of investment, that fall within the range of the Russell MidCap Value Index. As of February 28, 2009, the range of this Index was between $41 million and $13.8 billion. The market capitalization range of the Index is subject to change.

Up to 20% of the fund may be invested in stocks of small or large companies, preferreds, convertibles, or other debt securities. The fund may invest up to 25% of its net assets in foreign investments. The fund can invest in any economic sector, and at times, it may emphasize one or more particular sectors.

In pursuit of the fund’s objective, the subadviser chooses equity investments by:


	•	Selecting companies that are undervalued based on a variety of measures, including, but not limited to price-to-earnings ratios, price-to-book ratios, price-to-free cash flow, current and projected dividends, sum-of-the parts or breakup value and historic relative price valuations.
	•	Identifying companies with growth potential based on:


	–	effective management, as demonstrated by overall performance,
	–	financial strength, and
	–	underappreciated potential for improvement in industry and thematic trends.

In evaluating whether to sell a security, the subadviser considers, among other factors, whether:


	•	The security is overvalued relative to alternative investments.
	•	The security has reached the subadviser’s price objective.
	•	The company has met the subadviser’s earnings and/or growth expectations.


	•	The security exhibits unacceptable correlation characteristics with other portfolio holdings.
	•	The company or the security continues to meet the other standards described above.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Industry or sector investing risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series NAV:





				10.72%		-44.21%

				2007		2008


Best Quarter:		10.35% (Quarter ended 6/30/2007) Worst Quarter: -27.70% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-44.21%

-15.07%

4/28/2006

Russell MidCap Value Index^A

-38.44%

-13.83%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

MID VALUE TRUST


Subadviser:		T. Rowe Price Associates, Inc.


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets in companies with market capitalizations that are within the S&P Mid Cap 400 Index ($42 million to $4.6 billion as of February 28, 2009) or the Russell MidCap Value Index ($41 million to $13.8 billion as of February 28, 2009). The fund invests in a diversified mix of common stocks of mid-size U.S. companies that are believed to be undervalued by various measures and offer good prospects for capital appreciation.

The subadviser employs a value approach in selecting investments. The subadviser’s in-house research team seeks to identify companies whose stock prices do not appear to reflect their underlying values. The subadviser generally looks for companies with one or more of the following characteristics:


	•	Low stock prices relative to net assets, earnings, cash flow, sales or business franchise value;
	•	Demonstrated or potentially attractive operating margins, profits and/or significant cash flow generation;
	•	Sound balance sheets and other positive financial characteristics;


	•	Significant stock ownership by management; and
	•	Experienced and capable management.

The fund’s sector exposure is broadly diversified as a result of stock selection and therefore may vary significantly from its benchmark, the Russell MidCap Value Index. The market capitalization of companies held by the fund and included in the indices changes over time. The fund will not automatically sell or cease to purchase stock of a company it already owns just because the company’s market capitalization grows or falls outside these ranges.

The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.

In pursuing the fund’s investment objective, the subadviser has the discretion to purchase some securities that do not meet its normal investment criteria, as described above, when it perceives an unusual opportunity for gain. These special situations might arise when the subadviser believes a security could increase in value for a variety of reasons, including a change in management, an extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities.

The fund may invest in IPOs. While most assets will be invested in U.S. common stocks, the fund may purchase other types of securities, for example: convertible securities and warrants, foreign securities (up to 20% of total assets), certain exchange traded funds (ETFs), and certain derivatives (investments whose value is based on indices or other securities). For purposes of the fund, ETFs are considered securities with a market capitalization equal to the weighted average market capitalization of the basket of securities comprising the ETF.

The fund holds a certain portion of its assets in money market reserves which can consist of shares of the T. Rowe Price Reserve Investment Fund (or any other internal T. Rowe Price money market fund) as well as money market securities, including repurchase agreements, in the two highest rating categories, maturing in one year or less.

The fund may invest up to 10% of its total assets in hybrid instruments. Hybrid instruments are a type of high-risk derivative which can combine the characteristics of securities, futures and options. Such securities may bear interest or pay dividends at below (or even relatively nominal) rates. The SAI contains a more complete description of such instruments and risks associated therewith.

Except when engaged in temporary defensive investing, the fund normally has less than 10% of its assets in cash and cash equivalents.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series NAV:





20.54%	4.63%	0.53%	-15.19%	45.15%	18.74%	7.39%	20.34%	0.60%	-34.74%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		21.36% (Quarter ended 6/30/2003) Worst Quarter: -23.60% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I^A		-34.72%		0.15%		4.63%		4/29/2005
Series II^A		-34.88%		-0.02%		4.54%		4/29/2005
Series NAV^B		-34.74%		0.15%		4.63%		5/1/1998
Russell MidCap Value Index^C		-38.44%		0.33%		4.44%

^A The Series I and Series II shares of the fund were first offered on April 29, 2005. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Mid Value Fund B, the fund’s predecessor. The performance of this class of shares would have been lower if it reflected the higher expenses of the Series I and Series II shares.

^B The Series NAV shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of the Mid Value Fund B of John Hancock Variable Series Trust I in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Mid Value Fund B, the fund’s predecessor. These shares were first issued on May 1, 1998.

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

VALUE TRUST


Subadviser:		Morgan Stanley Investment Management Inc. doing business as Van Kampen


*Investment Objective:*		To realize an above-average total return over a market cycle of three to five years, consistent with reasonable risk.

*Investment Strategies:*		Under normal market conditions, the fund invests in equity securities of companies with capitalizations, at the time of investment, similar to the market capitalization of companies in the Russell MidCap Value Index ($41 million to $13.8 billion as of February 28, 2009).

The fund invests at least 65% of its total assets in equity securities. These primarily include common stocks but may also include preferred stocks, convertible securities, rights, warrants and ADRs. The fund may invest without limit in ADRs and may invest up to 5% of its total assets in foreign equities excluding ADRs. The fund may invest up to 15% of its net assets in REITs.

The subadviser’s approach is to select equity securities which are believed to be undervalued relative to the stock market in general as measured by the Russell MidCap Value Index. Generally, medium market capitalization companies will consist primarily of those that the subadviser believes are selling below their intrinsic value and offer the opportunity for growth of capital. The fund emphasizes a “value” style of investing focusing on those companies with strong fundamentals, consistent track records, growth prospects, and attractive valuations. The subadviser may favor securities of companies that are in undervalued industries. The subadviser may purchase stocks that do not pay dividends. The subadviser may also invest the fund’s assets in companies with smaller or larger market capitalizations.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Real estate securities risk

Past Performance

Calendar Year Total Returns for Series I:





-2.79%	24.57%	3.42%	-22.80%	38.76%	15.18%	12.56%	21.05%	8.22%	-40.87%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		20.39% (Quarter ended 6/30/2003) Worst Quarter: -27.95% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-40.87%		0.08%		3.02%		1/1/1997
Series II^A		-40.96%		-0.09%		2.92%		1/28/2002
Series NAV^B		-40.84%		0.11%		3.04%		4/29/2005
Russell MidCap Value		-38.44%		0.33%		4.44%

^B NAV shares were first offered on April 29, 2005. Performance prior to April 29, 2005 is that of Series I shares. Series I shares have higher expenses than NAV shares. Had such performance reflected NAV share expenses, performance would be higher.

VISTA TRUST


Subadviser:		American Century Investment Management, Inc.


*Investment Objective:*		To seek long-term capital growth.

*Investment Strategies:*		Under normal market conditions, the fund invests in common stocks of companies that are medium-sized and smaller at the time of purchase, but the fund may purchase other types of securities as well.

In managing the fund, the subadviser looks for stocks of medium-sized and smaller companies it believes will increase in value over time, using a proprietary investment strategy. When determining the size of a company, the subadviser will consider, among other factors, the capitalization of the company and the amount of revenues as well as other information obtained about the company.

In implementing this strategy, the subadviser uses a bottom-up approach to stock selection. This means that the subadviser makes investment decisions based primarily on its analysis of individual companies, rather than on broad economic forecasts. The subadviser manages the fund based on the belief that, over the long-term, stock price movements follow growth in earnings and revenue. The subadviser uses its extensive computer database, as well as other primary analytical research tools, to track financial

information for thousands of individual companies to identify and evaluate trends in earnings, revenues and other business fundamentals. The subadviser’s principal analytical technique involves the identification of companies with earnings and revenues that are not only growing but growing at an accelerating pace. This includes companies whose growth rates, although still negative, are less negative than prior periods, and companies whose growth rates are expected to accelerate. In addition to accelerating growth, the fund also considers companies demonstrating price strength relative to their peers. These techniques help the subadviser buy or hold the stocks of companies it believes have favorable growth prospects and sell the stocks of companies whose characteristics no longer meet its criteria.

Although the subadviser intends to invest the fund’s assets primarily in U.S. stocks, the fund may invest in securities of foreign companies, including companies located in emerging markets. The fund may also invest in IPOs.

The subadviser does not attempt to time the market. Instead, under normal market conditions, it intends to keep the fund essentially fully invested in stocks regardless of the movement of stock prices generally. When the subadviser believes it is prudent, the fund may invest a portion of its assets in debt securities, options, preferred stock, and equity-equivalent securities, such as convertible securities, stock futures contracts or stock index futures contracts. The fund generally limits its purchase of debt securities to investment grade obligations. Futures contracts, a type of derivative security, can help the fund’s cash assets remain liquid while performing more like stocks.

In addition, the fund may buy a large amount of a company’s stock quickly, and often will dispose of it quickly if the company’s earnings or revenues decline. While the subadviser believes that this strategy provides substantial appreciation potential over the long term, in the short term it can create a significant amount of share price volatility. This volatility may be greater than that of the average stock fund.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series NAV:





8.69%	38.44%	-48.88%

2006	2007	2008


Best Quarter:		14.28% (Quarter ended 6/30/2007) Worst Quarter: -25.98% (Quarter ended 12/31/2008)

LARGE CAP FUNDS

ALL CAP CORE TRUST


Subadviser:		Deutsche Investment Management Americas Inc.


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests in common stocks and other equity securities within all asset classes (small-, mid- and large-cap) of those within the Russell 3000 Index ($3 million to $337.87 billion as February 28, 2009).

The fund may invest in all types of equity securities including common stocks, preferred stocks and preferred and preference stocks, convertible securities and depositary receipts for such securities. These securities may be listed on securities exchanges, traded in various over-the-counter markets or have no organized markets. The fund may also invest in U.S. Government securities.

The subadviser pursues an actively managed, quantitative investment process. The subadviser’s investment philosophy is based on three central tenets:


	•	Securities have an intrinsic value from which they deviate over time. The subadviser believes that the best way to measure a security’s fair value is relative to its peers within its own industry.
	•	Finding attractive companies with long-term potential requires a consideration of both growth and value attributes. Technical analysis further enhances the stock selection process, helping to identify timely market opportunities.
	•	Quantitative investment models provide an improved framework for selecting mis-priced stocks in an unbiased, consistent and repeatable manner.

The subadviser blends fundamental equity analysis and quantitative investment theory into a disciplined and systematic process. This technique minimizes subjectivity and allows the team to analyze the broadest possible universe of stocks. The subadviser’s proprietary U.S. stock evaluation model, the Quantitative Investment Model, incorporates valuation and growth investment parameters and is used to select securities. The subadviser believes that combining techniques used by fundamental value investors with extensive growth and earnings analysis minimizes investment style bias and ultimately produces a “pure” stock selection process that seeks to add value in any market environment. The subadviser also incorporates technical analysis to capture short-term price changes and market responsiveness to new information.

The subadviser extensively screens the Russell 3000 Index universe using multiple investment parameters to identify what the subadviser believes are the most and least attractive securities. Expected returns are generated for each stock relative to its own industry. Securities are then selected based on expected returns, risk control constraints and anticipated transaction costs.

By applying a rigorous portfolio construction process, the subadviser targets excess return levels similar to traditional managers, while holding a significantly more diversified basket of stocks. Non-linear market impact assumptions are also incorporated into the process to maximize the trade-off between the anticipated pickup from trading and the costs associated with making these trades.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series I:





37.20%	-27.29%	-21.36%	-25.23%	31.54%	16.33%	9.08%	14.75%	2.66%	-39.63%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		23.59% (Quarter ended 12/31/1999) Worst Quarter: -24.41% (Quarter ended 3/31/2001)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-39.63%		-2.03%		-3.55%		7/15/1996
Series II^A		-39.75%		-2.23%		-3.68%		1/28/2002
Series NAV^B		-39.61%		-1.99%		-3.53%		4/29/2005
Russell 3000 Index		-37.31%		-1.95%		-0.80%
Combined Index^C		-37.31%		-1.95%		-3.32%

^B NAV shares were first offered on April 29, 2005. Performance prior to April 29, 2005 is that of Series I shares. Series I shares have higher expenses than NAV shares. Had the performance reflected NAV share expenses, performance would be higher.

^C The Combined Index is a blend of the Russell 1000 Growth Index from inception through December 31, 2002 and the Russell 3000 Index from January 1, 2003 and thereafter.

ALL CAP GROWTH TRUST


Subadviser:		Invesco Aim Capital Management, Inc.


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests its assets principally in common stocks of companies of all market capitalizations. The subadviser focuses on stocks of companies exhibiting long-term sustainable earnings and cash flow growth that is not yet reflected in investor expectations or equity valuations.

The fund may purchase the common stocks of foreign companies. It is not anticipated, however, that foreign securities will constitute more than 25% of the total assets of the fund. The fund’s investments in foreign securities may include direct investments in non-U.S. dollar denominated securities traded outside of the U.S. Any percentage limitations with respect to assets of the fund are applied at the time of purchase.

The fund uses hedging and other strategic transactions and may:


	•	purchase and sell stock index futures contracts,
	•	purchase options on stock index futures as a hedge against changes in market conditions,
	•	purchase and sell futures contracts and purchase related options in order to hedge the value of its portfolio against changes in market conditions,
	•	write (sell) covered call options (up to 20% of the value of its portfolio’s total assets), or
	•	engage in foreign exchange transactions to hedge against possible variations in foreign exchange rates between currencies of countries in which the fund is invested including: the direct purchase or sale of foreign currency, the purchase or sale of options on futures contract with respect to foreign currency, the purchase or sale of forward contracts, exchange traded futures contracts and options of futures contracts.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The subadviser actively manages the fund using a two-step stock selection process that combines quantitative and fundamental analyses. The quantitative analysis involves using a stock ranking model to rank stocks based primarily upon earnings growth, revenue growth, earnings quality and earnings sustainability.

The fundamental analysis focuses on identifying and analyzing both industries and companies with strong characteristics of revenue, earnings and cash flow growth. Valuation metrics are also incorporated in the analysis.

The subadviser looks for key company-specific attributes including:


	•	market leadership position with the potential for additional growth;
	•	value added products or services with pricing power;
	•	superior growth in revenue, earnings and cash flow;
	•	potential to improve profitability and return on capital; and
	•	a strong balance sheet, appropriate financial leverage and a prudent use of capital.

The subadviser also focuses on other industry attributes such as a rational competitive environment, pricing flexibility and differentiation of products and services.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





44.69%	-10.79%	-23.77%	-24.41%	29.24%	6.52%	8.99%	6.58%	12.06%	-41.94%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		36.09% (Quarter ended 12/31/1999) Worst Quarter: -23.20% (Quarter ended 9/30/2001)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-41.94%		-4.25%		-2.53%		3/4/1996
Series II^A		-42.06%		-4.44%		-2.66%		1/28/2002
Series NAV^B		-41.91%		-4.20%		-2.51%		2/28/2005
Russell 3000 Growth Index		-38.44%		-3.33%		-4.01%
Combined Index^C		-38.44%		-3.33%		-3.37%

^A Series II shares were first offered on January 28, 2002. For periods prior to January 28, 2002, the performance shown reflects the performance of Series I shares. Series I shares have lower expenses than Series II shares. Had such performance reflected Series II expenses, performance would be lower.

^B NAV shares were first offered on February 28, 2005. Performance prior to February 28, 2005 is that of Series I shares. Series I shares have higher expenses than NAV shares. Had such performance reflected NAV share expenses, performance would be higher.

^C The Combined Index is a blend of the performance of the Russell MidCap Growth Index since inception until November 30, 1999, and the performance of the Russell 3000 Growth Index from December 1, 1999 and thereafter.

ALL CAP VALUE TRUST


Subadviser:		Lord, Abbett & Co. LLC


*Investment Objective:*		To seek capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests in equity securities of U.S. and multinational companies in all capitalization ranges that the subadviser believes are undervalued. The fund will invest at least 50% of its net assets in equity securities of large, seasoned companies with market capitalizations at the time of purchase that fall within the market capitalization range of the Russell 1000 Index ($41 million to $337.87 billion as of February 28, 2009). This range varies daily. The fund will invest the remainder of its assets in mid-sized and small company securities.

Equity securities may include common stocks, preferred stock, convertible securities, warrants, and similar instruments. The fund invests in 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).

In selecting investments, the subadviser attempts to invest in securities selling at reasonable prices in relation to its assessment of their potential value. While there is the risk that an investment may never reach what the subadviser thinks is its full value, or may go down in value, the subadviser’s emphasis on large, seasoned company value stocks may limit the fund’s downside risk. This is because value stocks are believed to be underpriced, and large, seasoned company stocks tend to be issued by more established companies and less volatile than mid-sized or small company stock. Although small companies may present greater risks than larger companies, they also may present higher potential for attractive long-term returns. The subadviser generally sells a stock when it thinks it seems less likely to benefit from the current market and economic environment, shows deteriorating fundamentals, or has reached the subadviser valuation target.

The fund may invest up to 10% of its net assets in foreign equity securities. The subadviser does not consider American Depositary Receipts (ADRs) and securities of companies domiciled outside the U.S. but that are traded in the United States to be “foreign securities.” Accordingly, such investments are not subject to the 10% limitation on foreign securities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





-27.83%	38.36%	15.96%	5.71%	13.71%	8.33%	-28.78%

2002	2003	2004	2005	2006	2007	2008


Best Quarter:		16.11% (Quarter ended 6/30/2003) Worst Quarter: -23.92% (Quarter ended 9/30/2002)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-28.78%		1.46%		1.05%		4/30/2001
Series II^A		-28.95%		1.27%		0.89%		1/28/2002
Series NAV^B		-28.79%		1.55%		1.11%		2/28/2005
Russell 3000 Value Index^C		-36.25%		-0.72%		0.44%

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

ALPHA OPPORTUNITIES TRUST


Subadviser:		Wellington Management Company, LLP


*Investment Objective:*		To seek long-term total return.

*Investment Strategies:*		The fund employs a “multiple sleeve structure” which means the fund has several components that are managed separately in different styles. The fund seeks to obtain its objective by combining these different component styles into a single fund.

Each component “sleeve” has a distinct investment philosophy and analytical process to identify specific securities for purchase or sale based on internal, proprietary research. Each component sleeve tends to be flexible, opportunistic, and total return oriented such that the aggregate portfolio represents a wide range of investment philosophies, companies, industries and market capitalizations. Investment personnel for each component sleeve have complete discretion and responsibility for selection and portfolio construction decisions within their specific sleeve.

The subadviser is responsible for selecting styles or approaches for component sleeves with a focus on combining complementary investment styles, monitoring the risk profile, strategically rebalancing the portfolio, and maintaining a consistent fund profile. In choosing prospective investments, the subadviser analyzes a number of factors, such as business environment, management quality, balance sheet, income statement, anticipated earnings, expected growth rates, revenues, dividends and other related measures of value.

Under normal market conditions, the fund invests at least 65% of its total assets in equity and equity-related securities, including common stock, preferred stock, depositary receipts (including American Depositary Receipts (ADRs) and Global Depository Receipts), index-related securities (including exchange traded funds (“ETFs”)), real estate investment structures

(including REITs), convertible securities, preferred stock, private placements, convertible preferred stock, rights, and warrants, derivatives linked to equity securities or indexes, and other similar equity equivalents. The fund may invest in listed and unlisted domestic and foreign equity and equity-related securities or instruments. These equity and equity-related instruments may include equity securities of, or derivatives linked to, emerging market issuers or indexes.

The fund may invest up to 35% of its total assets in the securities of foreign issuers and non-dollar securities, including companies that conduct their principal business activities in emerging markets or whose securities are traded principally on exchanges in emerging markets.

The fund may also invest in fixed-income securities, fixed-income related instruments, and cash and cash equivalents. These fixed income securities may include non-investment grade instruments.

The fund may invest in over-the-counter and exchange traded derivatives, including but not limited to futures, forward contracts, swaps, options, options on futures, swaptions, structured notes, and market access products.

The fund may invest in IPOs. The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

Use of Hedging and Other Strategic Transactions. The fund is authorized to use all of the various investment strategies referred to under “Hedging and Other Strategic Transactions.” More complete descriptions of options, futures currency and other derivative transactions are set forth in the SAI.

More complete descriptions of the money market instruments and certain other instruments in which the fund may invest are set forth in the SAI. A more complete description of the debt security ratings used by JHT assigned by Moody’s or S&P is included in Appendix I of the SAI.

Temporary Defensive Investing. During unusual or unsettled market conditions, for purposes of meeting redemption requests or pending investment of its assets, the fund may invest all or a portion of its assets in cash and securities that are highly liquid, including: (a) high quality money market instruments such as short-term U.S. government obligations, commercial paper, repurchase agreements or other cash equivalents, and (b) securities of other investment companies that are money market funds. To the extent the fund is in a defensive position, its ability to achieve its investment objective will be limited.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Real estate securities risk

Past performance

BLUE CHIP GROWTH TRUST


Subadviser:		T. Rowe Price Associates, Inc.


*Investment Objective:*		To provide long-term growth of capital. Current income is a secondary objective.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in the common stocks of large and medium-sized blue chip growth companies. These are firms that, in the subadviser’s view, are well established in their industries and have the potential for above-average earnings growth.

In identifying blue chip companies, the subadviser generally considers the following characteristics:

Leading market positions. Blue chip companies often have leading market positions that are expected to be maintained or enhanced over time. Strong positions, particularly in growing industries, can give a company pricing flexibility as well as the potential for good unit sales. These factors, in turn, can lead to higher earnings growth and greater share price appreciation.

Seasoned management teams. Seasoned management teams with a track record of providing superior financial results are important for a company’s long-term growth prospects. The subadviser’s analysts will evaluate the depth and breadth of a company’s management experience.

Strong financial fundamentals. Companies should demonstrate faster earnings growth than their competitors and the market in general; high profit margins relative to competitors; strong cash flow; a healthy balance sheet with relatively low debt; and a high return on equity with a comparatively low dividend payout ratio.

The subadviser evaluates the growth prospects of companies and the industries in which they operate. The subadviser seeks to identify companies with strong market franchises in industries that appear to be strategically poised for long-term growth. This investment approach reflects the subadviser’s belief that the combination of solid company fundamentals (with emphasis on the potential for above-average growth in earnings or operating cash flow) along with a positive industry outlook will ultimately reward investors with strong investment performance. Some of the companies the subadviser targets will have good prospects for dividend growth.

While most of the assets of the fund are invested in U.S. common stocks, the fund may also purchase other types of securities, including (i) U.S. and non-U.S. dollar denominated foreign securities (up to 20% of its net assets) including American Depositary Receipts (ADRs), (ii) convertible stocks, warrants and bonds, and (iii) futures and options. Investments in convertible securities, preferred stocks and debt securities are limited to 25% of total assets.

The fund may invest in debt securities of any type without regard to quality or rating. Such securities would be issued by companies which meet the investment criteria for the fund but may include non-investment grade debt securities (“junk bonds”). The fund will not purchase a non-investment grade debt security if, immediately after such purchase, the fund would have more than 5% of its total assets invested in such securities.

The fund’s debt securities may include privately negotiated notes or loans, including loan participations and assignments (“bank loans”). These investments will only be made in companies, municipalities or entities that meet the fund’s investment criteria. Direct investments in bank loans may be illiquid and holding a loan could expose the fund to the risks of being a direct lender. Since the fund invests primarily in equity securities, the risks associated with fixed income securities will not effect the fund as much as they would a fund that invests more of its assets in fixed income securities.

The fund may sell securities for a variety of reasons such as to secure gains, limit losses or redeploy assets into more promising opportunities.

In pursuing the fund’s investment objective, the subadviser has the discretion to purchase some securities that do not meet its normal investment criteria, as described above, when it perceives an unusual opportunity for gain. These special situations might arise when the subadviser believes a security could increase in value for a variety of reasons including a change in management, an extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Loan participations risk

Past Performance

Calendar Year Total Returns for Series I:





19.43%	-2.76%	-14.61%	-24.26%	29.17%	9.03%	5.60%	9.58%	12.75%	-42.53%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		16.34% (Quarter ended 12/31/1999) Worst Quarter: -24.87% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-42.53%		-3.95%		-2.29%		12/11/1992
Series II^A		-42.63%		-4.15%		-2.41%		1/28/2002
Series NAV^B		-42.52%		-3.92%		-2.27%		2/28/2005
S&P 500 Index		-37.00%		-2.19%		-1.38%

^A Series II shares were first offered on January 28, 2002. For periods prior to January 28, 2002, the performance shown reflects the performance of Series I shares. Series I shares have lower expenses than Series II shares. Had such performance reflected Series II expenses, performance would be lower.

CAPITAL APPRECIATION TRUST


Subadviser:		Jennison Associates LLC


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 65% of its total assets in equity and equity-related securities of companies, at the time of investment, that exceed $1 billion in market capitalization and that the subadviser believes have above-average growth prospects. These companies are generally medium- to large-capitalization companies.

The subadviser follows a highly disciplined investment selection and management process that seeks to identify companies that show superior absolute and relative earnings growth and also are attractively valued. The subadviser looks for companies that experience some or all of the following: (i) above average revenue and earnings per share growth, (ii) strong market position, (iii) improving profitability and distinctive attributes such as unique marketing ability, (iv) strong research and development and productive new product flow and (v) financial strength. Such companies generally trade at high prices relative to their current earnings. Earnings predictability and confidence in earnings forecasts are important parts of the selection process.

Securities in which the fund invests have historically been more volatile than the S&P 500 Index. Also, companies that have an earnings growth rate higher than that of the average S&P 500 company tend to reinvest their earnings rather than distribute them. Therefore, the fund is not likely to receive significant dividend income on its securities.

In addition to common stocks, nonconvertible preferred stock and convertible securities, equity-related securities in which the fund invests include: (i) ADRs; (ii) warrants and rights that can be exercised to obtain stock; (iii) investments in various types of business ventures, including partnerships and joint ventures; (iv) real estate investment trusts (REITs); and (v) initial public

offerings (IPOs) and similar securities. (Convertible securities are securities — like bonds, corporate notes and preferred stocks — that the fund can convert into the company’s common stock, cash value of common stock, or some other equity security).

In addition to the principal strategies discussed above, the fund may also use the following investment strategies to attempt to increase the fund’s return or protect its assets if market conditions warrant:


	•	The fund may make short sales of a security including short sales “against the box.”
	•	The fund may invest up to 20% of the fund’s total asset in foreign equity securities. (For purposes of this 20% limit, ADRs and other similar receipts or shares traded in U.S. markets are not considered to be foreign securities).
	•	The fund may invest in U.S. government securities issued or guaranteed by the U.S. government or by an agency or instrumentality of the U.S. government.
	•	The fund may invest in mortgage-related securities issued or guaranteed by U.S. governmental entities, including collateralized mortgage obligations, multi-class pass through securities and stripped mortgage backed securities.
	•	The fund may invest in fixed-income securities rated investment grade. These include corporate debt and other debt obligations of U.S. and foreign issuers. The fund may invest in obligations that are not rated, but that the subadviser believes are of comparable quality to these obligations.
	•	The fund may invest in repurchase agreements.

The subadviser considers selling or reducing a stock position when, in the opinion of the subadviser, the stock has experienced a fundamental disappointment in earnings, it has reached an intermediate price objective and its outlook no longer seems sufficiently promising, a relatively more attractive stock emerges or the stock has experienced adverse price movement.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk
	•	Real estate securities risk
	•	Short sales risk

Past Performance

Calendar Year Total Returns for Series I:





-18.41%	-30.61%	29.47%	9.33%	13.99%	2.26%	11.61%	-37.22%

2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		16.38% (Quarter ended 12/31/2001) Worst Quarter: -20.87% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-37.22%		-2.24%		-6.57%		11/1/2000
Series II^A		-37.36%		-2.43%		-6.71%		1/28/2002
Series NAV^B		-37.23%		-2.18%		-6.53%		2/28/2005
Russell 1000 Growth Index^C		-38.44%		-3.42%		-7.77%

^A Series II shares were first offered on January 28, 2002. For periods prior to January 28, 2002, the performance shown reflects the performance of Series I shares. Series I shares have lower expenses than Series II shares. Had such performance reflected Series II expenses, performance would be lower.

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

EQUITY-INCOME TRUST


Subadviser:		T. Rowe Price Associates, Inc.


*Investment Objective:*		To provide substantial dividend income and also long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities, with at least 65% in common stocks of well-established companies paying above-average dividends.

Under normal market conditions, substantial dividend income means that the yield on the fund’s portfolio securities generally exceeds the yield on the fund’s benchmark. The subadviser believes that income can contribute significantly to total return over time and expects the fund’s yield to exceed that of the S&P 500 Index. Dividends can also help reduce the fund’s volatility during periods of market turbulence and help offset losses when stock prices are falling.

The fund employs a “value” approach and invests in stocks and other securities that appear to be temporarily undervalued by various measures and may be temporarily out of favor but have good prospects for capital appreciation and dividend growth. Value investors seek to buy a stock (or other security) when its price is low in relation to what they believe to be its real worth or future prospects. By identifying companies whose stocks are currently out of favor, value investors hope to realize significant appreciation as other investors recognize a stock’s intrinsic value. Finding undervalued stocks requires considerable research to identify the particular stocks, to analyze each company’s underlying financial condition and prospects, and to assess the likelihood that a stock’s underlying value will be recognized by the market and reflected in its price.

The fund will generally consider companies with the following characteristics:


	•	established operating histories;
	•	above-average dividend yield relative to the S&P 500 Index;
	•	low price/earnings ratios relative to the S&P 500 Index;
	•	sound balance sheets and other financial characteristics; and
	•	low stock price relative to a company’s underlying value, as measured by assets, cash flow or business franchises.

The fund may also purchase other types of securities in keeping with its objective, including:


	•	U.S. and non-U.S. dollar denominated foreign securities including American Depositary Receipts (ADRs) (up to 25% of total assets);
	•	preferred stocks;
	•	convertible stocks, bonds, and warrants;
	•	futures and options; and
	•	bank debt, loan participations and assignments.

The fund may invest in fixed income securities without regard to quality or rating, including up to 10% in non-investment grade fixed income securities (“junk bonds”). The fund’s fixed income investments may include privately negotiated notes or loans, including loan participations and assignments (“bank loans”). These investments will only be made in companies, municipalities or entities that meet the fund’s investment criteria. Direct investments in bank loans may be illiquid and holding a loan could expose the fund to the risks of being a direct lender. Since the fund invests primarily in equity securities, the risks associated with fixed income securities will not effect the fund as much as they would a fund that invests more of its assets in fixed income securities.

The fund may sell securities for a variety of reasons such as to secure gains, limit losses or redeploy assets into more promising opportunities.

The fund may invest up to 10% of its total assets in hybrid instruments. Hybrid instruments are a type of high-risk derivative which can combine the characteristics of securities, futures and options. Such securities may bear interest or pay dividends at below market (or even relatively nominal) rates. The SAI contains more complete description of such instruments and the risks associated therewith.

In pursuing the fund’s investment objective, the subadviser has the discretion to purchase some securities that do not meet its normal investment criteria, as described above, when it perceives an unusual opportunity for gain. These special situations might arise when the subadviser believes a security could increase in value for a variety of reasons including a change in management, an extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Loan participations risk

Past Performance

Calendar Year Total Returns for Series I:





3.40%	12.99%	1.29%	-13.28%	25.57%	14.81%	3.92%	19.02%	3.35%	-35.96%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		16.68% (Quarter ended 6/30/2003) Worst Quarter: -22.37% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-35.96%		-1.23%		1.93%		2/19/1993
Series II^A		-36.16%		-1.45%		1.80%		1/28/2002
Series NAV^B		-35.94%		-1.20%		1.95%		2/28/2005
Russell 1000 Value Index		-36.85%		-0.79%		1.36%

FUNDAMENTAL VALUE TRUST


Subadviser:		Davis Selected Advisers, L.P.


*Investment Objective:*		To seek growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests primarily in common stocks of U.S. companies with market capitalizations of at least $10 billion. The fund may also invest in companies with smaller capitalizations.

The subadviser uses the Davis Investment Discipline in managing the fund’s portfolio. The Davis Investment Discipline involves conducting extensive research to try to identify companies with durable business models that can be purchased at attractive valuations relative to their intrinsic value. The subadviser emphasizes individual stock selection and believes that the ability to evaluate management is critical. The subadviser routinely visits managers at their places of business in order to gain insight into the relative value of different businesses. Such research, however rigorous, involves predictions and forecasts that are inherently uncertain.

The subadviser has developed the following list of characteristics that it believes help companies to create shareholder value over the long term and manage risk. While few companies possess all of these characteristics at any given time, the subadviser seeks to invest in companies that demonstrate a majority, or an appropriate mix of these characteristics, although there is no guarantee that it will be successful in doing so.


	•	Proven track record
	•	Significant alignment of interest in business
	•	Strong balance sheet
	•	Low cost structure
	•	High returns on capital
	•	Non-obsolescent products/services
	•	Dominant or growing market share
	•	Global presence and brand names
	•	Smart application of technology to improve business and lower costs

The subadviser’s goal is to invest in companies for the long term. The subadviser considers selling a security if it believes the stock’s market price exceeds its estimates of intrinsic value, or if the ratio of the risks and rewards of continuing to own the stock is no longer attractive.

The fund may invest up to 20% of total assets in foreign securities and up to 20% of total assets in fixed income securities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





-16.20%	29.83%	11.80%	8.84%	14.51%	4.04%	-39.32%

2002	2003	2004	2005	2006	2007	2008


Best Quarter:		17.39% (Quarter ended 6/30/2003) Worst Quarter: -24.81% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-39.32%		-2.53%		-1.39%		4/30/2001
Series II^A		-39.46%		-2.74%		-1.57%		1/28/2002
Series NAV^B		-39.27%		-2.49%		-1.36%		2/28/2005
S&P 500 Index^C		-37.00%		-2.19%		-2.36%

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

GROWTH TRUST


Subadviser:		Grantham, Mayo, Van Otterloo & Co. LLC


*Investment Objective:*		To seek long-term capital growth.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets in investments tied economically to the U.S. The fund typically makes equity investments in U.S. companies that, at the time of investment, are included in the Russell 1000 Growth Index, or have size and growth characteristics similar to companies included in the Index. As of February 28, 2009, the market cap range of the Russell 1000 Growth Index was $42 million to $337.9 billion.

The subadviser uses proprietary research and multiple quantitative models to identify stocks it believes have improving fundamentals. The subadviser then narrows the selection to those stocks it believes have growth characteristics, and are undervalued. Generally, these growth stocks are trading at prices below what the subadviser believes to be their fundamental value. The subadviser also uses proprietary techniques to adjust the fund for factors such as stock selection discipline (criteria used for selecting stocks), industry and sector weights, and market capitalization. The factors considered by the subadviser and the models used may change over time.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Non-diversified risk

Past performance

GROWTH EQUITY TRUST


Subadviser:		Rainier Investment Management Inc.


*Investment Objective:*		To seek to maximize long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of large-capitalization growth companies traded in the U.S., which permits shareholders the opportunity to invest in some of the fastest-growing companies in the U.S. The term “growth company” denotes companies with the prospect of strong earnings, revenue or cash flow growth.

The subadviser’s stock selection focuses on companies that are likely to demonstrate superior earnings, revenue or cash flow growth relative to their Industry peers. The fund will normally invest in approximately 40 to 80 companies.

The subadviser considers large-capitalization companies to be those with market capitalizations of at least $3 billion at the time of investment. The fund may invest in common stock of companies of all sizes, including small-capitalization companies. Investments in companies with market capitalization below $3 billion will normally comprise less than 20% of the fund.

The subadviser compares the fund’s economic sector weightings to a Large Cap Growth Equity index, such as the Russell 1000 Growth Index. To help control risk, extreme overweighting and underweighting of the fund as compared to the major sectors of such a benchmark are avoided. The subadviser favors companies with attractive fundamentals, such as strong revenue, earnings or cash flow growth. Companies with sustainable competitive advantages, potential price or business catalysts, including earnings surprise or market expansion, and disciplined management with shareholder focus are emphasized. The subadviser also seeks to capture the capital appreciation sometimes associated with high-performing companies identified early in their growth cycles. For emerging companies lacking demonstrated financial results, the strength of the company’s business model, management team and competitive position are given greater analytical emphasis.

The fund may invest up to 25% of its total assets in foreign securities. These include U.S. dollar denominated securities of foreign issuers and securities of foreign issuers that are traded in the U.S. Currently, the subadviser intends to invest only in U.S. dollar denominated securities of foreign issuers or ADRs.

The subadviser considers the sale of specific common stock when fundamentals deteriorate, when a stock reaches or surpasses its price target or when better opportunities are perceived in alternative stocks.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

Under normal market conditions, the fund will stay fully invested in cash and stocks. The fund may, however, temporarily depart from its principal investment strategies by making short-term investments in cash equivalents in response to adverse market, economic or political conditions. This may result in the fund’s not achieving its investment objective.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk

Past performance

INTRINSIC VALUE TRUST


Subadviser:		Grantham, Mayo, Van Otterloo & Co. LLC


*Investment Objective:*		To seek long-term capital growth.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its assets in investments tied economically to the U.S. The fund typically makes equity investments in U.S. companies whose stocks, at the time of investment, are included in the Russell 1000 Value Index, or in companies with size and value characteristics similar to those of companies with stocks in the Index. As of February 28, 2009, the market capitalization range of the Russell 1000 Value Index was $41 million to $337.9 billion.

The subadviser uses proprietary research and multiple quantitative models to seek out stocks it believes are undervalued or have improving fundamentals and positive sentiment. Generally, these stocks are trading at prices below what the subadviser believes to be their fundamental value. The subadviser also uses proprietary techniques to adjust the fund for factors such as stock selection discipline (criteria used for selecting stocks), industry and sector weights, and market capitalization. The factors considered by the subadviser and the models used may change over time.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Non-diversified risk

Past performance

LARGE CAP TRUST


Subadviser:		UBS Global Asset Management (Americas) Inc.


*Investment Objective:*		To seek to maximize total return, consisting of capital appreciation and current income.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of U.S. large capitalization companies. The fund defines large capitalization companies as those with a market capitalization range, at the time of investment, equal to that of the fund’s benchmark, the Russell 1000 Index. As of February 28, 2009, the market capitalization range of the Russell 1000 Index was $41 million to $337.87 billion.

In general, the fund emphasizes large capitalization stocks, but it may also invest up to 20% of its net asset in equity securities of small and intermediate capitalization companies and/or the securities of foreign companies in developed countries. Investments in equity securities may include dividend-paying securities, common stock and preferred stock, IPOs, ETFs, shares of investment companies, convertible securities, warrants and rights. For purposes of the fund, ETFs are considered securities with a market capitalization equal to the weighted average market capitalization of the basket of securities comprising the ETF. The fund may (but is not required to) use options, futures and other derivatives as part of its investment strategy or to help manage fund risks.

In selecting securities, the subadviser focuses on, among other things, identifying discrepancies between a security’s fundamental value and its market price. In this context, the fundamental value of a given security is the subadviser’s assessment of what a security is worth. The subadviser will select a security whose estimated fundamental value is greater than its market value at any given time. For each stock under analysis, the subadviser bases its estimates of value upon economic, industry and company analysis, as well as upon a company’s management team, competitive advantage and core competencies. The subadviser then compares its assessment of a security’s value against the prevailing market prices, with the aim of constructing a portfolio of stocks with attractive relative price/value characteristics.

The fund may invest a portion of its assets in securities outside its capitalization range as described above.

The subadviser actively manages the fund which may, at times, result in a higher than average portfolio turnover ratio.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Investment company securities risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





14.36%	1.40%	-39.52%

2006	2007	2008


Best Quarter:		7.05% (Quarter ended 6/30/2007) Worst Quarter: -25.61% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-39.52%

-6.13%

4/29/2005

Series II

-39.67%

-6.34%

4/29/2005

Series NAV

-39.55%

-6.12%

4/29/2005

Russell 1000 Index^A

-37.60%

-4.60%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

LARGE CAP VALUE TRUST


Subadviser:		BlackRock Investment Management, LLC


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of large cap companies selected from those that are, at the time of purchase, included in the Russell 1000 Value Index. The fund will seek to achieve its investment objective by investing primarily in a diversified portfolio of equity securities of large cap companies located in the U.S. The fund will seek to outperform the Russell 1000 Value Index by investing in equity securities that the subadviser believes are selling at below normal valuations.

The Russell 1000 Value Index, a subset of the Russell 1000 Index, consists of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. As of February 28, 2009, the market capitalization range of companies comprising the Russell 1000 Value Index was $41 million to $337.9 billion.

In selecting securities for the fund, the subadviser uses a proprietary multi-factor quantitative model. The factors employed by the model include stock valuation, quality of earnings and potential future earnings growth. The subadviser looks for strong relative earnings growth, earnings quality and good relative valuation. A company’s stock price relative to its earnings and book value is also examined. If the subadviser believes that a company is overvalued, the company will not be considered as an investment for the fund.

After the initial screening, the subadviser relies on fundamental analysis, using both internal and external research, to optimize its quantitative model to choose companies the subadviser believes have strong, sustainable earnings growth with current momentum at attractive price valuations.

Because the fund will not hold all the stocks in the Russell 1000 Value Index and because the fund’s investments may be allocated in amounts that vary from the proportional weightings of the various stocks in that index, the fund is not an “index” fund. In seeking to outperform the fund’s benchmark, however, the subadviser reviews potential investments using certain criteria that are based on the securities in the index. These criteria currently include the following:


	•	Relative price-to-earnings and price-to-book ratios;
	•	Stability and quality of earnings;
	•	Earnings momentum and growth;
	•	Weighted median market capitalization of the fund;
	•	Allocation among the economic sectors of the fund as compared to the benchmark index; and
	•	Weighted individual stocks within the applicable index.

The fund may also invest in securities of foreign issuers that are represented by American Depositary Receipts (ADRs). The fund may also lend its portfolio securities and invest uninvested cash balances in affiliated money market funds.

The fund may invest in investment grade convertible securities, preferred stocks, illiquid securities, and U.S. Government debt securities (i.e., securities that are direct obligations of the U.S. Government). There are no restrictions on the maturity of the debt securities in which the fund may invest.

As a temporary measure for defensive purposes, the fund may invest in cash, cash equivalents or short-term U.S. government securities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series I:





21.80%	15.49%	15.93%	4.38%	-35.91%

2004	2005	2006	2007	2008


Best Quarter:		11.84% (Quarter ended 12/31/2004) Worst Quarter: -19.71% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-35.91%		1.76%		6.03%		5/5/2003
Series II		-36.02%		1.57%		5.83%		5/5/2003
Series NAV^A		-35.89%		1.80%		6.07%		2/28/2005
Russell 1000 Value Index^B		-36.85%		-0.79%		3.39%

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

OPTIMIZED ALL CAP TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 65% of its total assets in equity securities of U.S. companies. The fund will focus on equity securities of U.S. companies across the three market capitalization ranges of large, mid and small.

The subadviser ranks stocks based on financial attributes, including earnings, valuation, growth and momentum using quantitative analysis. (Quantitative analysis is the process of determining the value of a security by examining its numerical, measurable characteristics such as revenues, price, earnings, valuation and growth and by performing statistical and numerical analysis on this characteristic data.) The management team will then use fundamental analysis to identify large, mid and small cap companies with strong industry position, leading market share, proven management or strong financials. Stocks meeting fundamental and quantitative analysis will be considered for the fund.

The fund may invest in foreign securities and may 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 may include depositary receipts.

The fund may invest in or use the following derivatives for hedging purposes in a manner consistent with the investment objectives of the fund and as permitted by applicable securities legislation: buying futures and S&P Depositary Receipts. Such use would include the hedging of significant cash flows into or out of the fund.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

For defensive purposes during unusual or unsettled market conditions, for purposes of meeting redemption requests, or pending investment of its assets, the fund may invest all or a portion of its assets in cash and securities that are highly liquid, including (a) high quality money market instruments such as short-term U.S. government obligations, commercial paper, repurchase agreements or other cash equivalents and (b) securities of other investment companies that are money market funds. These investments may be denominated in either U.S. dollars or foreign currencies and may include debt of foreign corporations and governments and debt of supranational organizations. To the extent the fund is in a defensive position, its ability to achieve its investment objective will be limited.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





14.91%	8.58%	15.17%	3.78%	-43.18%

2004	2005	2006	2007	2008


Best Quarter:		11.25% (Quarter ended 12/31/2004) Worst Quarter: -24.37% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-43.18%		-3.26%		0.95%		5/5/2003
Series II		-43.24%		-3.44%		0.77%		5/5/2003
Series NAV^A		-43.16%		-3.16%		1.04%		4/29/2005
Russell 3000 Index^B		-37.31%		-1.95%		1.98%

^A NAV shares were first offered on April 29, 2005. Performance prior to April 29, 2005 is that of Series I shares. Series I shares have higher expenses than NAV shares. Had the performance reflected NAV share expenses, performance would be higher.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

OPTIMIZED VALUE TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 65% of its total assets in equity securities of U.S. companies with the potential for long-term growth of capital, with a market capitalization range, at the time of investment, equal to that of the fund’s benchmark, the Russell 1000 Value Index. As of February 28, 2009, the market capitalization range of the Russell 1000 Value Index was $41 million to $337.9 billion.

The subadviser uses both qualitative and quantitative analysis to determine the best investment values, emphasizing securities that may have been undervalued by the market.

Qualitative analysis may include company visits and management interviews while quantitative analysis may include evaluations of financial data, assessment of market share and industry position, and factors such as price-to-earnings ratios, dividend yield, and earnings growth.

The subadviser will then use fundamental analysis to identify large companies with strong industry position, leading market share, proven management or strong fundamentals. Stocks meeting fundamental and quantitative analysis will be considered for the fund.

The fund may also invest in foreign securities.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

For defensive purposes during unusual or unsettled market conditions, for purposes of meeting redemption requests, or pending investment of its assets, the fund may invest all or a portion of its assets in cash and securities that are highly liquid, including (a) high quality money market instruments such as short-term U.S. government obligations, commercial paper, repurchase agreements or other cash equivalents and (b) securities of other investment companies that are money market funds. These investments may be denominated in either U.S. or non-U.S. dollars and may include debt of foreign corporations and governments and debt of supranational organizations. To the extent the fund is in a defensive position, its ability to achieve its investment objective will be limited.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Large company risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





9.19%	21.09%	-5.13%	-41.20%

2005	2006	2007	2008


Best Quarter:		7.55% (Quarter ended 12/31/2006) Worst Quarter: -24.04% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-41.20%

-3.05%

5/3/2004

Series II

-41.36%

-3.25%

5/3/2004

Series NAV^A

-41.15%

-2.98%

2/28/2005

Russell 1000 Value Index^B

-36.85%

-1.15%

^A Series NAV shares were first offered on February 28, 2005. For periods prior to February 28, 2005, the performance shown reflects the performance of Series I shares. Series I shares have higher expenses than Series NAV shares. Had the performance for periods prior to February 28, 2005 reflected Series NAV expenses, performance would be higher.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

U.S. MULTI-SECTOR TRUST


Subadviser:		Grantham, Mayo, Van Otterloo & Co. LLC


*Investment Objective:*		To seek long term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in investments that are tied economically to the U.S. The fund seeks to achieve its objective by outperforming its benchmark, the Russell 3000 Index. The fund normally invests in securities in the Wilshire 5000 Stock Index, an independently maintained and published equity index which measures the performance of all equity securities (with readily available price data) of issuers with headquarters in the U.S.

The Russell 3000 Index is an independently maintained and published index which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. This index represents approximately 98% of the investable U.S. equity market. As of February 28, 2009, the market capitalizations of companies included in the Russell 3000 Index ranged from $3 million to $337.87 billion.

In managing the fund, the subadviser uses proprietary research and quantitative models to determine the fund’s selections of securities. These models use rolling multi-year forecasts of relative value and risk among the major sectors in the U.S. equity market (large cap value, large cap growth, large cap core, small and mid-cap value, small and mid-cap growth, and real estate investment trusts (“REITs”)) in which the fund invests.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Issuer risk
	•	Liquidity risk


	•	Medium and smaller company risk
	•	Non-diversified risk
	•	Real estate securities risk

Past Performance

Calendar Year Total Returns for Series NAV:





7.63%	2.38%	-27.30%

2006	2007	2008


Best Quarter:		5.24% (Quarter ended 6/30/2007) Worst Quarter: -14.03% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-27.30%

-5.46%

10/24/2005

Russell 3000 Index^A

-37.31%

-6.85%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

VALUE & RESTRUCTURING TRUST


Subadviser:		Columbia Management Advisors, LLC


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 65% of its total assets in common stocks of U.S. and foreign companies that the subadviser believes will benefit from various types of restructuring efforts or industry consolidation. The fund may invest in companies that have market capitalizations of any size.

The fund may invest in foreign securities. The fund may invest directly in foreign securities or indirectly through depositary receipts. Depositary receipts are receipts issued by a bank or trust company that evidence ownership of underlying securities issued by foreign companies.

The fund may invest in derivatives, including futures, forwards, options, swap contracts and other derivative instruments. The fund may invest in derivatives for both hedging and non-hedging purposes, including, for example, to seek to enhance returns or as a substitute for a position in an underlying asset.

The subadviser combines fundamental and quantitative analysis with risk management in identifying value opportunities and constructing the fund’s portfolio. The subadviser considers, among other factors:


	•	the potential impact of restructuring activities such as consolidations, outsourcing, corporate reorganizations, changes in management or business model changes on a company’s potential for long-term growth.
	•	businesses that are believed to be fundamentally sound and undervalued due to investor indifference, investor misperception of company prospects, or other factors.
	•	various measures of valuation, including price-to-cash flow, price-to-earnings, price-to-sales, price-to-book value and discounted cash flow. The subadviser believes that companies with lower valuations are generally more likely to provide opportunities for capital appreciation.
	•	a company’s current operating margins relative to its historic range and future potential.


	•	potential indicators of stock price appreciation, such as anticipated earnings growth, new product opportunities, or anticipated improvements in macroeconomic factors.

The subadviser may sell a security when the security’s price reaches a target set by the subadviser, if the subadviser believes that there is deterioration in the issuer’s financial circumstances or fundamental prospects, or that other investments are more attractive or for other reasons.

The fund’s strategy of investing in companies that the subadviser believes will benefit from restructuring or redeployment of assets carries the risk that an anticipated restructuring or business combination may fail to occur or may occur and fail to produce reasonably anticipated benefits. The prices of securities issued by such companies may suffer a decline in response. These factors contribute to price volatility.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series NAV:





14.43%	10.56%	-46.81%

2006	2007	2008


Best Quarter:		10.28% (Quarter ended 6/30/2007) Worst Quarter: -30.49% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-46.81%

-9.93%

10/24/2005

S&P 500 Index^A

-37.00%

-6.61%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

INTERNATIONAL FUNDS

EMERGING MARKETS VALUE TRUST


Subadviser:		Dimensional Fund Advisors LP


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal circumstances, the fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in companies associated with emerging markets designated from time to time by the Investment Committee of the subadviser.

The fund seeks long-term capital growth through investment primarily in emerging market equity securities. The fund seeks to achieve its investment objective by investing in companies associated with emerging markets designated by the Investment Committee of the subadviser (“Approved Markets”) from time to time. The fund invests its assets primarily in Approved Market equity securities listed on bona fide securities exchanges or actively traded on over-the-counter markets. (See below for a definition of Approved Markets securities.) These exchanges may be either within or outside the issuer’s domicile country. The securities may be listed or traded in the form of American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), Non-Voting Depositary Receipts (NVDRs) or other similar securities, including dual listed securities.

The fund seeks to purchase emerging market equity securities that are deemed by the subadviser to be value stocks at the time of purchase. The subadviser believes securities are considered value stocks primarily because they have a high book value in relation to their market value. In assessing value, the subadviser may consider additional factors, such as price-to-cash flow or price-to-earnings ratios, as well as economic conditions and developments in the issuer’s industry. The criteria the subadviser uses for assessing value are subject to change from time to time.

The fund will also seek to purchase emerging market equity securities across all market capitalizations, and specifically those which are deemed by the subadviser to be value stocks at the time of purchase, as described in the paragraph above. The fund may not invest in certain eligible companies or Approved Markets described above or achieve approximate market weights because of constraints imposed within Approved Markets, restrictions on purchases by foreigners and the fund’s policy to invest no more than 25% of its total assets in any one industry.

The fund also may invest up to 10% of its total assets in shares of other investment companies that invest in one or more Approved Markets, although it tends to do so only where access to those markets is otherwise significantly limited. In some Approved Markets it may be necessary or advisable for the fund to establish a wholly-owned subsidiary or trust for the purpose of investing in the local markets.

In determining what countries are eligible markets for the fund, the subadviser may consider various factors, including without limitation, the data, analysis and classification of countries published or disseminated by the World Bank, the International Finance Corporation, FTSE International, Morgan Stanley Capital International, Citigroup and the Heritage Foundation. Approved emerging markets may not include all emerging markets classified by such entities. In determining whether to approve markets for investment, the subadviser takes into account, among other things, market liquidity, relative availability of investor information, government regulation, including fiscal and foreign exchange repatriation rules and the availability of other access to these markets for the fund and other affiliated funds.

The fund may use derivatives, such as futures contracts and options on futures contracts, to gain market exposure on uninvested cash pending investment in securities or to maintain liquidity to pay redemptions. The fund may enter into futures contracts and options on futures contracts for Approved Market or other equity market securities and indices, including those of the United States.

The fund’s policy of seeking broad market diversification means the subadviser will not utilize “fundamental” securities research techniques in identifying securities selections. Changes in the composition and relative ranking (in terms of book to market ratio) of the stocks which are eligible for purchase by the fund take place with every trade when the securities markets are open for trading due primarily to price fluctuations of such securities. On a periodic basis, the subadviser will prepare lists of value stocks that are eligible for investment. Such lists will be revised no less than semi-annually.

The fund does not seek current income as an investment objective, and investments will not be based upon an issuer’s dividend payment policy or record. However, many of the companies whose securities will be held by the fund do pay dividends. It is anticipated, therefore, that the fund will receive dividend income.

Approved Markets

As of the date of this Prospectus, the fund is authorized to invest in the countries listed below. The subadviser will determine in its discretion when and whether to invest in countries that have been authorized, depending on a number of factors, such as asset

growth in the fund and characteristics of each country’s markets. The Investment Committee of the subadviser also may authorize other countries for investment in the future, in addition to the countries listed below. Also, the fund may continue to hold investments in countries that are not currently authorized for investment, but had been authorized for investment in the past.

Brazil

Chile

China

Czech Republic

Hungary

India

Indonesia

Israel

Malaysia

Mexico

Philippines

Poland

South Africa

South Korea

Taiwan

Thailand

Turkey

Approved Market Securities

“Approved Market Securities” are defined as securities that are associated with an Approved Market, and include, among others: (a) securities of companies that are organized under the laws of, or maintain their principal place of business in, an Approved Market; (b) securities for which the principal trading market is in an Approved Market; (c) securities issued or guaranteed by the government of an Approved Market country, its agencies or instrumentalities, or the central bank of such country; (d) securities denominated in an Approved Market currency issued by companies to finance operations in Approved Markets; (e) securities of companies that derive at least 50% of their revenues or profits from goods produced or sold, investments made or services performed in Approved Markets or have at least 50% of their assets in Approved Markets; (f) Approved Market equity securities in the form of depositary shares; (g) securities of pooled investment vehicles that invest primarily in Approved Markets securities or derivative instruments that derive their value from Approved Market securities; or (h) securities included in the fund’s benchmark index. Securities of Approved Markets may include securities of companies that have characteristics and business relationships common to companies in other countries. As a result, the value of the securities of such companies may reflect economic and market forces in such other countries as well as in the Approved Markets. The subadviser, however, will select only those companies which, in its view, have sufficiently strong exposure to economic and market forces in Approved Markets. For example, the subadviser may invest in companies organized and located in the United States or other countries outside of Approved Markets, including companies having their entire production facilities outside of Approved Markets, when such companies meet the definition of Approved Market securities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Investment company securities risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





				-52.17%

				2008


Best Quarter:		-4.55% (Quarter ended 6/30/2008) Worst Quarter: -27.57% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-52.17%

-28.06%

4/30/2007

Series NAV

-51.93%

-28.07%

4/30/2007

MSCI Emerging Markets Index^A

-53.20%

-25.54%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

GLOBAL TRUST


Subadviser:		Templeton Global Advisors Limited


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests primarily in the equity securities of companies located throughout the world, including emerging markets.

Depending upon current market conditions, the fund may invests up to 25% of its total assets in debt securities of companies and governments located anywhere in the world. Debt securities represent the obligation of the issuer to repay a loan of money to it, and generally pay interest to the holder. Bonds, notes and debentures are examples of debt securities. The fund also invests in depositary receipts. Equity securities may include common stocks, preferred stocks and convertible securities. The fund may lend certain of its portfolio securities to qualified banks and broker dealers.

When choosing equity investments for the fund, the subadviser applies a “bottom up,” value-oriented, long-term approach, focusing on the market price of a company’s securities relative to the subadviser’s evaluation of the company’s long-term earnings, asset value and cash flow potential. The subadviser also considers a company’s price/ earnings ratio, price/ cash flow ratio, profit margins and liquidation value.

The fund may use various derivative strategies to help to protect its assets, implement a cash or tax management strategy or enhance its returns. No more than 5% of the fund’s total assets may be invested in, or exposed to, options and swaps agreements (as measured at the time of investment).

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Securities lending risk

Past Performance

Calendar Year Total Returns for Series I:





3.66%	12.19%	-16.09%	-19.11%	27.46%	14.75%	10.72%	20.32%	1.28%	-39.51%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		17.83% (Quarter ended 6/30/2003) Worst Quarter: -19.79% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-39.51%		-1.30%		-0.59%		3/18/1988
Series II^A		-39.64%		-1.50%		-0.71%		1/28/2002
Series NAV^B		-39.49%		-1.27%		-0.58%		4/29/2005
MSCI World Index		-40.33%		0.01%		-0.19%

INTERNATIONAL CORE TRUST


Subadviser:		Grantham, Mayo, Van Otterloo & Co. LLC


*Investment Objective:*		To seek high total return.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its total assets in equity investments. The fund typically invests in equity investments in companies from developed markets outside the U.S.

The fund seeks to achieve its objective by outperforming its benchmark, the MSCI EAFE Index (Europe, Australasia, and Far East). As of February 28, 2009, the market capitalization of companies that issue stocks included in the MSCI EAFE Index ranged from $199 million to $126 billion.

The subadviser uses proprietary research and quantitative models to evaluate and select individual stocks, countries, and currencies based on several factors, including:


	•	Stocks — valuation, firm quality, and improving fundamentals;
	•	Countries — stock market valuation, GDP trends and positive market sentiment; and
	•	Currencies — export and producer price parity, balance of payments and interest rate differentials.

The factors considered by the subadviser and the models it uses may change over time. In using these models to construct the fund, the subadviser expects that stock selection will reflect a slight bias for value stocks over growth stocks. The subadviser seeks to manage the fund’s exposure to market capitalization categories (e.g., small cap, medium cap, and large cap) relative to the fund’s benchmark.

The fund intends to be fully invested and generally will not take temporary defensive positions through investment in cash and high quality money market instruments. In pursuing its investment objective, the fund may (but is not obligated to) use a wide variety of exchange-traded and over-the-counter derivative instruments, including options, futures, and swap contracts to (i) hedge equity exposure; (ii) replace direct investing (e.g., creating equity exposure through the use of futures contracts or other derivative instruments); (iii) manage risk by implementing shifts in investment exposure; or (iv) adjust its foreign currency exposure. The

fund’s foreign currency exposure may differ from the currency exposure represented by its equity investments. The fund may also take active overweighted and underweighted positions in particular currencies relative to its benchmark.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Large company risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





29.71%	-16.57%	-21.54%	-21.69%	30.27%	15.59%	15.94%	24.69%	11.49%	-38.62%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		23.58% (Quarter ended 12/31/1999) Worst Quarter: -22.22% (Quarter ended 9/30/2002)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-38.62%		2.72%		-0.09%		12/31/1996
Series II^A		-38.78%		2.51%		-0.20%		1/28/2002
Series NAV^B		-38.58%		2.78%		-0.06%		2/28/2005
MSCI EAFE Index		-43.06%		2.10%		1.18%

INTERNATIONAL GROWTH TRUST


Subadviser:		Grantham, Mayo, Van Otterloo & Co. LLC


*Investment Objective:*		To seek high total return primarily through capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its total assets in equity investments. The fund typically invests in a diversified portfolio of equity investments from a number of developed markets outside the U.S.

The subadviser, using proprietary research and multiple quantitative models, seeks to add value by capitalizing on inefficiencies it perceives in the pricing of growth stocks. The subadviser applies quantitative and fundamental investment principles to select growth stocks the subadviser believes have improving fundamentals and prices that reflect the relevant market’s discount to their fundamental value. The subadviser maintains diversification across countries, and tilts the fund’s portfolio in favor of countries that the subadviser believes have the highest growth prospects or that the subadviser believes are most undervalued. The subadviser also considers factors that may influence the growth potential of a particular country, such as currency valuation. The factors considered by the subadviser and the models used may change over time.

The fund intends to be fully invested, and generally will not take temporary defensive positions through investment in cash and high quality money market instruments. In pursuing its investment strategy, the fund may (but is not obligated to) use exchange-traded and over-the-counter derivatives and related instruments, including options, futures, and swap contracts, to (i) hedge equity exposure; (ii) replace direct investing (e.g., creating equity exposure through the use of futures contracts or other derivative instruments); (iii) manage risk by implementing shifts in investment exposure; and (iv) adjust its foreign currency exposure. The fund’s foreign currency exposure may differ significantly from the currency exposure represented by its equity investments. The fund may also take active over weighted and underweighted positions in particular currencies relative to its benchmark.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past performance

INTERNATIONAL OPPORTUNITIES TRUST


Subadviser:		Marsico Capital Management, LLC


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 65% of its total assets in common stocks of foreign companies that are selected for their long-term growth potential. The fund may invest in an unlimited number of companies of any size throughout the world. The fund invests in issuers from at least three different countries not including the U.S. The fund may invest in common stocks of companies economically tied to emerging markets. Some issuers or securities in the fund’s portfolio may be based in or economically tied to the U.S.

The fund may also invest in securities of foreign issuers that are represented by American Depositary Receipts (“ADRs”). ADRs and other securities representing underlying securities of foreign issuers are treated as foreign securities.

In selecting investments for the fund, the subadviser uses an approach that combines “top-down” macro-economic analysis with “bottom-up” stock selection.

The “top-down” approach may take into consideration macro-economic factors such as, without limitation, interest rates, inflation, demographics, the regulatory environment, and the global competitive landscape. In addition, the subadviser may also examine other factors that may include, without limitation, the most attractive global investment opportunities, industry consolidation, and the sustainability of financial trends observed. As a result of the “top-down” analysis, the subadviser seeks to identify sectors, industries and companies that may benefit from the overall trends the subadviser has observed.

The subadviser then looks for individual companies or securities with earnings growth potential that may not be recognized by the market at large. In determining whether a particular company or security may be a suitable investment, the subadviser may focus on any of a number of different attributes that may include, without limitation, the company’s specific market expertise or dominance; its franchise durability and pricing power; solid fundamentals (e.g., a strong balance sheet, improving returns on equity, the ability to generate free cash flow, apparent use of conservative accounting standards, and transparent financial disclosure); strong and ethical management; commitment to shareholder interests; reasonable valuations in the context of projected growth rates; and other indications that a company or security may be an attractive investment prospect. This process is called “bottom-up” stock selection.

As part of this fundamental, “bottom-up” research, the subadviser may visit with various levels of a company’s management, as well as with its customers and (as relevant) suppliers, distributors, and competitors. The subadviser also may prepare detailed earnings and cash flow models of companies. These models may assist the subadviser in projecting potential earnings growth and other important company financial characteristics under different scenarios. Each model is typically customized to follow a particular company and is generally intended to replicate and describe a company’s past, present and potential future performance. The models may include quantitative information and detailed narratives that reflect updated interpretations of corporate data and company and industry developments.

The subadviser may reduce or sell the fund’s investments in portfolio companies if, in the opinion of the subadviser, a company’s fundamentals change substantially, its stock price appreciates excessively in relation to fundamental prospects, the company appears not to realize its growth potential, or there are more attractive investment opportunities elsewhere or for other reasons.

The core investments of the fund generally may include established companies and securities that offer long-term growth potential. However, the portfolio also may typically include securities of less mature companies, companies or securities with more aggressive growth characteristics, and companies undergoing significant changes such as the introduction of a new product line, the appointment of a new management team, or an acquisition.

Primarily for hedging purposes, the fund may use options (including options on securities and securities indices), futures, and foreign currency forward contracts.

Under normal market conditions, the fund may invest up to 10% of its total assets in all types of fixed income securities and up to an additional 5% of its total assets in high-yield bonds (“junk bonds”) and mortgage and asset-backed securities. The fund may also invest in the securities of other investment companies to a limited extent.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





23.83%	20.10%	-50.56%

2006	2007	2008


Best Quarter:		11.28% (Quarter ended 12/31/2006) Worst Quarter: -27.88% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-50.56%

-2.43%

4/29/2005

Series II

-50.66%

-2.58%

4/29/2005

Series NAV

-50.51%

-2.36%

4/29/2005

MSCI EAFE Index^A

-43.06%

-2.24%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

INTERNATIONAL SMALL CAP TRUST


Subadviser:		Franklin Templeton Investments Corp.


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in investments of smaller companies outside the U.S., including emerging markets, which have total stock market capitalizations or annual revenues of $4 billion or less.

In some emerging markets, the fund may invest in companies that qualify as smaller companies but that still are among the largest in the market. The fund 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 generally are debt securities or preferred stock that may be converted into common stock after a certain time period or under certain circumstances.

The fund may invest more than 25% of its total assets in the securities of issuers located in any one country.

When choosing equity investments for this fund, the subadviser applies a “bottom up,” value-oriented, long-term approach, focusing on the market price of a company’s securities relative to the subadviser’s evaluation of the company’s long-term earnings, asset value and cash flow potential. The subadviser also considers a company’s price/earnings ratio, profits margins and liquidation value and other factors.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





84.92%	-29.16%	-31.10%	-16.73%	54.73%	21.23%	10.39%	27.34%	10.18%	-52.98%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		58.65% (Quarter ended 12/31/1999) Worst Quarter: -32.50% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-52.98%		-2.46%		0.26%		3/4/1996
Series II^A		-53.11%		-2.65%		0.15%		1/28/2002
Series NAV^B		-53.00%		-2.44%		0.27%		2/28/2005
Citigroup Global ex U.S. <$2 Billion Index		-49.15%		3.19%		5.95%
Combined Index^C		-49.15%		3.19%		2.96%

^C The Combined Index is a blend of the MSCI World ex US Index from inception through May 31, 2003 and the Citigroup Global Equity U.S. <$2 Billion Index from June 1, 2003 and thereafter.

INTERNATIONAL SMALL COMPANY TRUST


Subadviser:		Dimensional Fund Advisors LP


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities of small cap companies in the particular markets in which the fund invests. As of December 31, 2008, the maximum market capitalization range of eligible companies for purchase was approximately $468 million to $2,947 million, depending on the country. The fund will primarily invest its assets in equity securities of non-U.S. small companies of developed markets, but may also hold equity securities of companies located in emerging markets.

The fund will primarily invest in a broad and diverse group of readily marketable stocks of small companies associated with developed markets but may also hold equity securities associated with emerging markets. The fund invests its assets in securities listed on bona fide securities exchanges or traded on the over-the-counter markets, including securities listed or traded in the form of International Depositary Receipts (IDRs), American Depositary Receipts (ADRs), European Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), Non-Voting Depositary Receipts (NVDRs) and other similar securities, including dual listed securities. Each of these securities may be traded within or outside the issuer’s domicile country.

The subadviser measures company size on a country or region specific basis and based primarily on market capitalization. In the countries or regions authorized for investment, the subadviser first ranks eligible companies listed on selected exchanges based on the companies’ market capitalizations. The subadviser then determines the universe of eligible stocks by defining the maximum market capitalization of a small company that may be purchased by the fund with respect to each country or region. This threshold will vary by country or region, and dollar amounts will change due to market conditions.

The fund intends to purchase securities in each applicable country using a market capitalization weighted approach. The subadviser, using this approach and its judgment, will seek to set country weights based on the relative market capitalizations of eligible small companies within each country. See “Market Capitalization Weighted Approach” below. As a result, the weightings of certain countries in the fund may vary from their weightings in international indices, such as those published by FTSE International, Morgan Stanley Capital International or Citigroup.

The fund also may use derivatives, such as futures contracts and options on futures contracts, to gain market exposure on the fund’s uninvested cash pending investment in securities or to maintain liquidity to pay redemptions. The fund may enter into futures contracts and options on futures contracts for foreign or U.S. equity securities and indices. In addition to money market instruments and other short-term investments, the fund may invest in affiliated and unaffiliated unregistered money market funds to manage the fund’s cash pending investment in other securities or to maintain liquidity for the payment of redemptions or other purposes. Investments in money market funds may involve a duplication of certain fees and expenses.

The fund does not seek current income as an investment objective and investments will not be based upon an issuer’s dividend payment policy or record. However, many of the companies whose securities will be included in the fund do pay dividends. It is anticipated, therefore, that the fund will receive dividend income.

The subadviser will determine in its discretion when and whether to invest in countries that have been authorized for investment by its Investment Committee, depending on a number of factors such as asset growth in the fund and characteristics of each country’s market. The subadviser’s Investment Committee may authorize other countries for investment in the future and the fund may continue to hold investments in countries not currently authorized for investment but that had previously been authorized for investment.

Market Capitalization Weighted Approach

The fund structure involves market capitalization weighting in determining individual security weights and, where applicable, country or region weights. Market capitalization weighting means each security is generally purchased based on the issuer’s relative market capitalization. Market capitalization weighting will be adjusted by the subadviser for a variety of factors. The fund may deviate from market capitalization weighting to limit or fix the exposure to a particular country or issuer to a maximum proportion of the assets of the fund. Additionally, the subadviser may consider such factors as free float, momentum, trading strategies, liquidity management and other factors determined to be appropriate by the subadviser given market conditions. The subadviser may deviate from market capitalization weighting to limit or fix the exposure of the fund to a particular issuer to a maximum proportion of the assets of the fund. The subadviser may exclude the stock of a company that meets applicable market capitalization criteria if the subadviser determines that the purchase of such security is inappropriate in light of other conditions. These adjustments will result in a deviation from traditional market capitalization weighting.

Country weights may be based on the total market capitalization of companies within each country. The calculation of country market capitalization may take into consideration the free float of companies within a country or whether these companies are eligible to be purchased for the particular strategy. In addition, to maintain a satisfactory level of diversification, the Investment Committee may limit or adjust the exposure to a particular country or region to a maximum proportion of the assets of that vehicle. Country weights may also deviate from target weights due to general day-to-day trading patterns and price movements. As a result, the weighting of certain countries will likely vary from their weighting in published international indices. Also, deviation from target weights may result from holding securities from countries that are no longer authorized for future investments.

A more complete description of Market Capitalization Weighted Approach is set forth in the SAI.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series NAV:





				5.43%		-45.35%

				2007		2008


Best Quarter:		7.85% (Quarter ended 3/31/2007) Worst Quarter: -22.53% (Quarter ended 9/30/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-45.35%

-16.85%

4/28/2006

MSCI EAFE Small Cap Index^A

-46.78%

-18.11%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

INTERNATIONAL VALUE TRUST


Subadviser:		Templeton Investment Counsel, LLC


	•	Sub-Subadviser: Templeton Global Advisors Limited


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests primarily in equity securities of companies located outside the U.S., including in emerging markets.

Equity securities generally entitle the holder to participate in a company’s general operating results. These include common stocks and preferred stocks. The fund also invests in American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs), which are certificates typically issued by a bank or trust company that give their holders the right to receive securities issued by a foreign or domestic company.

The subadviser’s investment philosophy is “bottom-up,” value-oriented, and long-term. In choosing equity investments, the subadviser will focus on the market price of a company’s securities relative to its evaluation of the company’s long-term earnings, asset value and cash flow potential. A company’s historical value measure, including price/earnings ratio, profit margins and liquidation value, will also be considered.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





-6.46%	-9.97%	-17.84%	44.86%	21.54%	10.54%	29.59%	9.53%	-42.67%

2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		24.18% (Quarter ended 6/30/2003) Worst Quarter: -23.56% (Quarter ended 9/30/2002)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-42.67%		1.80%		1.35%		5/1/1999
Series II^A		-42.81%		1.60%		1.22%		1/28/2002
Series NAV^B		-42.64%		1.80%		1.35%		2/28/2005
MSCI EAFE Index^C		-43.06%		2.10%		0.65%

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

OVERSEAS EQUITY TRUST


Subadviser:		Capital Guardian Trust Company


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of a diversified mix of large established and medium-sized foreign companies located primarily in developed countries (outside of the U.S.) and, to a lesser extent, in emerging markets.

The subadviser has an extensive commitment to fundamental research, with a large team of experienced international equity analysts focused on gathering in-depth information firsthand on companies throughout the world. The subadviser’s research strength is leveraged through a bottom-up approach to portfolio construction. Returns for non-U.S. equity portfolios are pursued primarily through active security selection. While portfolio managers at the subadviser are mindful of benchmark characteristics, country and sector weightings are primarily the result of finding value in individual securities where ever they may be located.

The majority of the subadviser’s non-U.S. equity portfolio managers have over two decades of investment experience. Portfolios are segmented, with each individual manager responsible for a portion, managing it as if it were a stand-alone portfolio. The subadviser believes this allows for strong individual ideas to be acted upon while ensuring a diversity of ideas and continuity of management. The research analysts as a group also manage a portion of the portfolio.

Based on the research carried out by the equity analysts, portfolio managers look across countries and sectors in selecting stocks for the portfolio. With a long-term perspective, portfolio managers look for quality companies at attractive prices that will outperform their peers and the benchmark over time.

The fund will invest no more than 25% of its assets in emerging markets stocks and will invest in at least three different countries other than the U.S. The fund may also invest in initial public offerings (IPOs). The subadviser may use derivatives, such as futures and forwards, to implement foreign currency management strategies. Currency management strategies are primarily use for hedging purposes and to protect against anticipated changes in foreign currency exchange rates.

The fund may purchase other types of securities that are not primary investment vehicles, for example: American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), European Depositary Receipts (EDRs), certain ETFs, and certain derivatives (investments whose value is based on indices or other securities).

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series NAV:





34.01%	-16.36%	-20.93%	-18.22%	32.36%	11.02%	18.31%	19.86%	12.53%	-42.05%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		24.44% (Quarter ended 12/31/1999) Worst Quarter: -22.07% (Quarter ended 9/30/2002)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series II^A		-42.19%		0.38%		-0.22%		4/29/2005
Series NAV^B		-42.05%		0.53%		-0.15%		4/30/1996
MSCI EAFE Index		-43.06%		2.10%		1.18%
MSCI AC World ex U.S. Index		-45.25%		2.99%		2.27%

^A The Series II shares of the fund were first offered on April 29, 2005. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Overseas Equity B Fund, the fund’s predecessor. The performance of this class of shares would have been lower if it reflected the higher expenses of the Series II shares.

^B The Series NAV shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of the Overseas Equity B Fund of John Hancock Variable Series Trust I in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Overseas Equity B Fund, the fund’s predecessor. These shares were first issued on April 30, 1996.

PACIFIC RIM TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To achieve long-term growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in common stocks and equity-related securities of established, larger-capitalization non-U.S. companies located in the Pacific Rim region, including emerging markets, that have attractive long-term prospects for growth of capital. Current income from dividends and interest will not be an important consideration in the selection of fund securities.

The countries of the Pacific Rim region are:


	•	Australia
	•	Pakistan
	•	New Zealand
	•	Taiwan
	•	India
	•	China
	•	Philippines
	•	Thailand
	•	Hong Kong
	•	Indonesia
	•	South Korea
	•	Singapore
	•	Malaysia
	•	Japan

Equity-related securities in which the fund may invest include: (i) preferred stocks, (ii) warrants and (iii) securities convertible into or exchangeable for common stocks. The fund may also invest up to 20% of its net assets in countries outside the Pacific Rim region.

The subadviser’s decision to invest in a particular country or particular region will be based upon its evaluation of political, economic and market trends in the country or region and throughout the world. The subadviser will shift investments among countries and the world’s capital markets in accordance with its ongoing analyses of trends and developments affecting such markets and securities.

Use of Hedging and Other Strategic Transactions

The fund may also purchase and sell the following equity-related financial instruments:


	•	exchange-listed call and put options on equity indices,
	•	over-the-counter (“OTC”) and exchange-listed equity index futures,
	•	OTC and exchange-listed call and put options on currencies held by the fund, and
	•	OTC foreign currency futures contracts on currencies held by the fund.

A call option gives the holder the right to buy shares of the underlying security at a fixed price before a specified date in the future. A put option gives the holder the right to sell a specified number of shares of the underlying security at a particular price within a specified time period. See “Hedging and Other Strategic Transactions” for further information on these investment strategies.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series I:





62.87%	-24.37%	-18.57%	-12.53%	40.37%	17.19%	25.75%	11.05%	9.14%	-39.91%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		23.19% (Quarter ended 12/31/1999) Worst Quarter: -21.10% (Quarter ended 9/30/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I^A		-39.91%		1.42%		2.83%		10/4/1994
Series II^B		-40.04%		1.25%		2.73%		1/28/2002
Series NAV^C		-39.98%		1.83%		3.04%		4/29/2005
MSCI AC Pacific Index		-40.34%		2.69%		2.72%

^A On December 31, 1996, Manulife Series Fund, Inc. merged with JHT. Performance presented for this fund is based upon the performance of the respective predecessor Manulife Series Fund, Inc. Fund for periods prior to December 31, 1996.

^B Series II shares were first offered on January 28, 2002. For periods prior to January 28, 2002, the performance shown reflects the performance of Series I shares. Series I shares have lower expenses than Series II shares. Had the performance for periods prior to January 28, 2002 reflected Series II expenses, performance would be lower.

^C NAV shares were first offered on April 29, 2005. Performance prior to April 29, 2005 is that of Series I shares. Series I shares have higher expenses than NAV shares. Had the performance reflected NAV share expenses, performance would be higher.

FIXED-INCOME FUNDS

ACTIVE BOND TRUST


Subadvisers:		Declaration Management & Research LLC (“Declaration”) and MFC Global Investment Management (U.S.), LLC (“MFC Global (U.S.)”)


*Investment Objective:*		To seek income and capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in a diversified mix of debt securities and instruments.

The fund invests its assets in a diversified mix of debt securities and instruments with maturity durations of approximately 4 to 6 years. The investments include, but are not limited to:


	•	U.S. Treasury and agency securities;
	•	Asset-backed securities and mortgage-backed securities, including mortgage pass-through securities, commercial mortgage-backed securities (“CMBS”) and collateralized mortgage obligations (“CMOs”);
	•	Corporate bonds, both U.S. and foreign; and
	•	Foreign government and agency securities.

The fund employs a multi-manager approach with two subadvisers, each of which employs its own investment approach and independently manages its portion of the fund. The fund will be rebalanced quarterly so that the subadvisers manage the following portions of the fund:

65%* Declaration

35%* MFC Global (U.S.)

*Percentages are approximate. Since the fund is only rebalanced quarterly, the actual portion of the fund managed by each subadviser will vary during each calendar quarter.

This allocation methodology may change in the future.

Declaration

Declaration uses a combination of proprietary research and quantitative tools and seeks to identify bonds and bond sectors that are attractively priced based upon market fundamentals and technical factors. Declaration opportunistically emphasizes bonds with yields in excess of U.S. Treasury securities.

This portion of the fund normally has no more than 10% of its total assets in high yield bonds (“junk bonds”) and normally invests in foreign securities only if U.S. dollar denominated. This portion of the fund normally has an average credit rating of “A” or “AA.”

MFC Global (U.S.)

MFC Global (U.S.) uses proprietary research to identify specific bond sectors, industries and bonds that are attractively priced. MFC Global (U.S.) tries to anticipate shifts in the business cycle, using economic and industry analysis to determine which sectors and industries might benefit over the next 12 months.

This portion of the fund normally has no more than 25% of its total assets in high yield bonds (sometimes referred to as “junk bonds”) and may invest in both U.S. dollar denominated and non-U.S. dollar denominated foreign securities. This portion of the fund normally has an average credit rating of “A” or “AA.”

The fund may invest in asset-backed securities rated, at the time of purchase, less than A (but not rated lower than B by S&P or Moody’s). Under normal circumstances, no more than 15% of the total assets of the portion of the fund managed by MFC Global (U.S.) will be invested in asset-backed securities rated lower than A by both rating agencies.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk


	•	Fixed-income securities risk
	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

Calendar Year Total Returns for Series NAV:





-0.94%	10.45%	7.48%	7.25%	6.48%	4.78%	2.54%	4.54%	4.03%	-10.48%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		3.84% (Quarter ended 12/31/2000) Worst Quarter: -5.91% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I^A		-10.54%		0.87%		3.44%		4/29/2005
Series II^A		-10.76%		0.71%		3.36%		4/29/2005
Series NAV^B		-10.48%		0.91%		3.46%		3/29/1986
Barclays Capital U.S. Aggregate Bond Index		5.24%		4.65%		5.63%

^A The Series I and Series II shares of the fund were first offered on April 29, 2005. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Active Bond Fund, the fund’s predecessor. The performance of this class of shares would have been lower if it reflected the higher expenses of the Series I and Series II shares.

^B The Series NAV shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of the Active Bond Fund of John Hancock Variable Series Trust I in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Active Bond Fund, the fund’s predecessor. These shares were first issued on March 29, 1986.

CORE BOND TRUST


Subadviser:		Wells Capital Management, Incorporated


*Investment Objective:*		To seek total return consisting of income and capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in a broad range of investment grade debt securities, including U.S. Government obligations, corporate bonds, mortgage-backed and other asset-backed securities and money market instruments.

The subadviser invests in debt securities that the subadviser believes offer attractive yields and are undervalued relative to issues of similar credit quality and interest rate sensitivity. The fund may also invest in unrated bonds that the subadviser believes are comparable to investment grade debt securities.

The subadviser will maintain an effective duration of +/- 10% of the duration of the Barclays Capital U.S. Aggregate Bond Index. Under normal market conditions, the subadviser expects to maintain an effective duration within 10% (in either direction) of the duration of the Barclays Capital U.S. Aggregate Bond Index (the duration of this index as of February 28, 2009 was 4.13 years).

The fund may invest:


	•	Up to 25% of total assets in asset-backed securities, other than mortgage-backed securities;
	•	Up to 20% of total assets in dollar-denominated obligations of foreign issuers; and
	•	Up to 10% of total assets in stripped mortgage-backed securities.

As part of a mortgage-backed securities investment strategy, the fund may enter into dollar rolls. The fund may also enter into reverse repurchase agreements to enhance return. These strategies are further described under “Additional Investment Policies” in the SAI.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

Calendar Year Total Returns for Series I:




3.72%	6.26%	3.38%

2006	2007	2008


Best Quarter:		3.72% (Quarter ended 9/30/2006) Worst Quarter: -0.79% (Quarter ended 9/30/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

3.38%

3.93%

4/29/2005

Series II

3.23%

3.72%

4/29/2005

Series NAV

3.44%

3.94%

4/29/2005

Barclays Capital U.S. Aggregate Bond Index^A

5.24%

4.91%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

FLOATING RATE INCOME TRUST


Subadviser:		Western Asset Management Company


	•	Sub-Subadviser: Western Asset Management Company Limited


*Investment Objective:*		To seek a high level of current income.

*Investment Strategies:*		Under normal market conditions, the fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in floating rate loans, which often include debt securities of domestic and foreign issuers that are rated below investment grade (rated below Baa or BBB by a nationally recognized statistical rating organization such as Moody’s Investor Services (“Moody’s”) or Standard & Poor’s (“S&P”)), at the time of purchase, or are of comparable quality, as determined by the subadviser, and other floating rate securities.

The fund may invest in domestic and foreign issuer loans and loan participations that pay interest at rates that float or reset periodically at a margin above a generally recognized base lending rate such as the Prime Rate, the London Inter-Bank Offered Rate (“LIBOR”) or another generally recognized base lending rate. Loans and debt instruments rated below investment grade are considered to have speculative characteristics. The fund may invest in loans of companies whose financial conditions are troubled or uncertain and that may be involved in bankruptcy proceedings, reorganizations, or financial restructurings. The fund may also acquire, and subsequently hold, warrants and other equity interests.

In purchasing loans, loan participations and other securities for the fund, the subadviser may take full advantage of the entire range of maturities and durations, and may adjust from time to time the average maturity or duration of the investments held by the fund, depending on its assessment of the relative yields of different maturities and durations and its expectations of future changes in interest rates.

The fund may invest in any number of issuers, and may at times invest its assets in a small number of issuers. The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund. The fund may also invest in loans of any aggregate principal amount, and the average aggregate principal amount of the loans held by the fund will vary from time to time.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

During unusual or unsettled market conditions, for purposes of meeting redemption requests, or pending investment of its assets, the fund may invest all or a portion of its assets in cash and securities that are highly liquid, including (a) high quality money market instruments such as short-term U.S. government obligations, commercial paper, repurchase agreements or other cash equivalents and (b) securities of other investment companies that are money market funds. These investments may be denominated in either U.S. dollars or foreign currencies and may include debt of foreign corporations and governments and debt of supranational organizations. To the extent the fund is in a defensive position, its ability to achieve its investment objective will be limited.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Distressed investments risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Loan participations risk
	•	Non-diversified risk

Past Performance

Calendar Year Total Returns for Series NAV:





				-23.61%

				2008


Best Quarter:		4.40% (Quarter ended 6/30/2008) Worst Quarter: -20.96% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-23.61%

12/31/2007

S&P/LSTA Performing Loan Index^A

-29.14%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

GLOBAL BOND TRUST


Subadviser:		Pacific Investment Management Company LLC


*Investment Objective:*		To seek maximum total return, consistent with preservation of capital and prudent investment management.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in fixed income instruments that are economically tied to at least three countries (one of which may be the United States), which may be represented by futures contracts (including related options) with respect to such securities, and options on such securities. These fixed income instruments may be denominated in non-U.S. currencies or in U.S. dollars, which may be represented by forwards or derivatives, such as options, futures contracts, or swap agreements.

In selecting securities for the fund, the subadviser utilizes economic forecasting, interest rate anticipation, credit and call risk analysis, foreign currency exchange rate forecasting, and other security selection techniques. The proportion of the fund’s assets committed to investment in securities with particular characteristics (such as maturity, type and coupon rate) will vary based on the subadviser’s outlook for the U.S. and foreign economies, the financial markets, and other factors.

The types of fixed income securities in which the fund may invest include the following securities which, unless otherwise noted, may be issued by domestic or foreign issuers and may be denominated in U.S. dollars or non-U.S. currencies:


	•	securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises;
	•	corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper;
	•	mortgage-backed and other asset-backed securities;
	•	inflation-indexed bonds issued by both governments and corporations;
	•	structured notes, including hybrid or “indexed” securities and event-linked bonds;
	•	loan participations and assignments;
	•	delayed funding loans and revolving credit facilities;
	•	bank certificates of deposit, fixed time deposits and bankers’ acceptances;
	•	debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises;
	•	repurchase agreements and reverse repurchase agreements;
	•	obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and
	•	obligations of international agencies or supranational entities.

Fixed-income securities may have fixed, variable, or floating rates of interest, including rates of interest that vary inversely at a multiple of a designated or floating rate, or that vary according to change in relative values of currencies.

Depending on the subadviser’s current opinion as to the proper allocation of assets among domestic and foreign issuers, investments in the securities of issuers located outside the United States will normally be at 25% of the fund’s net assets. The fund may invest up to 20% of its total assets in securities and instruments that are economically tied to emerging market countries. The fund may invest up to 10% of its total assets in fixed income securities that are rated below investment grade but rated B or higher by Moody’s or equivalently rated by S&P or Fitch, or, if unrated, determined by the subadviser to be of comparable quality. The fund may invest in baskets of foreign currencies (such as the euro) and directly in currencies. The average portfolio duration of this fund normally varies within two years (plus or minus) of the duration of the benchmark index.

The fund is authorized to use all of the various investment strategies referred to under “Additional Information About the Funds’ Principal Risks and Investment Policies – Hedging, derivatives and other strategic transactions risk” including:


	•	purchase and sell options on domestic and foreign securities, securities indexes and currencies,
	•	purchase and sell futures and options on futures,
	•	purchase and sell currency or securities on a forward basis, and
	•	enter into interest rate, index, equity, total return, currency, and credit default swap agreements.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may make short sales of a security including short sales “against the box.”

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk
	•	Non-diversified risk
	•	Short sales risk

Past Performance

Calendar Year Total Returns for Series I:





-6.67%	1.68%	0.53%	20.12%	15.40%	10.38%	-6.66%	5.27%	9.63%	-4.48%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		10.64% (Quarter ended 6/30/2002) Worst Quarter: -9.49% (Quarter ended 9/30/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-4.48%		2.58%		4.15%		3/18/1988
Series II^A		-4.66%		2.39%		4.03%		1/28/2002
Series NAV^B		-4.42%		2.62%		4.17%		2/28/2005
JP Morgan Global-Unhedged Index		12.00%		6.24%		5.95%

HIGH INCOME TRUST


Subadviser:		MFC Global Investment Management (U.S.), LLC


*Investment Objective:*		To seek high current income; capital appreciation is a secondary goal.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets in U.S. and foreign fixed-income securities that, at the time of investment, are rated BB/Ba or lower or are unrated equivalents (“junk bonds”) as rated by S&P and Moody’s. These may include, but are not limited to, domestic and foreign corporate bonds, debentures and notes, convertible securities, preferred stocks, and domestic and foreign government obligations.

No more than 10% of the fund’s total assets may be invested in securities that are rated in default by S&P’s or by Moody’s. There is no limit on the fund’s average maturity. The foreign securities in which the fund may invest include both developed and emerging market securities.

In managing the fund’s portfolio, the subadviser concentrates on industry allocation and securities selection deciding which types of industries to emphasize at a given time, and then which individual securities to buy. The subadviser uses top-down analysis to determine which industries may benefit from current and future changes in the economy.

In choosing individual securities, the subadviser uses bottom-up research to find securities that appear comparatively under-valued. The subadviser looks at the financial condition of the issuers as well as the collateralization and other features of the securities themselves. The fund typically invests in a broad range of industries.

The fund may invest in both investment grade and non-investment grade asset-backed securities, including asset-backed securities rated BB/Ba or lower and their unrated equivalents.

The fund may use certain higher-risk investments, including derivatives (investments whose value is based on indexes, securities or currencies) and restricted or illiquid securities. The fund is authorized to use all of the various investment strategies referred to under “Hedging and Other Strategic Transactions” in the SAI. In addition, the fund may invest up to 20% of its net assets in U.S. and foreign common stocks of companies of any size. In abnormal circumstances, the fund may temporarily invest extensively in investment grade short-term securities. In these and other cases, the fund might not achieve its objectives.

The fund may trade securities actively, which could increase its transaction costs (thus lowering performance).

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

Calendar Year Total Returns for Series NAV:





				-3.40%		-43.65%

				2007		2008


Best Quarter:		2.74% (Quarter ended 3/31/2007) Worst Quarter: -27.53% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series II

-43.53%

-31.99%

4/30/2007

Series NAV

-43.65%

-16.35%

4/28/2006

Merrill US High Yield Master II Index^A

-26.39%

-7.46%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

HIGH YIELD TRUST


Subadviser:		Western Asset Management Company


	•	Sub-Subadviser: Western Asset Management Company Limited


*Investment Objective:*		To realize an above-average total return over a market cycle of three to five years, consistent with reasonable risk.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) at the time of investment in high yield securities, including corporate bonds, preferred stocks, U.S. Government and foreign securities, mortgage-backed securities, loan assignments or participations and convertible securities which have the following ratings (or, if unrated, are considered by the subadviser to be of equivalent quality):


Corporate Bonds, Preferred Stocks and Convertible Securities
Rating Agency


Moody’s		Ba through C
Standard & Poor’s		BB through D

Non-investment grade securities are commonly referred to as “junk bonds.” The fund may also invest in investment grade securities.

The fund may invest in foreign bonds and other fixed income securities denominated in foreign currencies, where, in the opinion of the subadviser, the combination of current yield and currency value offer attractive expected returns. Foreign securities in which the fund may invest include emerging market securities. The fund may invest up to 100% of its assets in foreign securities. The subadviser may utilize futures, swaps and other derivatives in managing the fund.

The fund may invest in fixed and floating-rate loans, generally in the form of loan participations and assignments of such loans.

The fund normally maintains an average fund duration of between 3 and 7 years. However, the fund may invest in individual securities of any duration. Duration is an approximate measure of the sensitivity of the market value of a security to changes in interest rates.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

Calendar Year Total Returns for Series I:





8.00%	-8.97%	-5.48%	-6.65%	24.15%	11.06%	3.70%	10.37%	1.64%	-29.52%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		7.94% (Quarter ended 6/30/2003) Worst Quarter: -20.68% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-29.52%		-1.86%		-0.20%		1/1/1997
Series II^A		-29.70%		-2.05%		-0.32%		1/28/2002
Series NAV^B		-29.48%		-1.80%		-0.16%		2/28/2005
Citigroup High Yield Index		-25.91%		-0.93%		2.19%

INCOME TRUST


Subadviser:		Franklin Advisers, Inc.


*Investment Objective:*		To seek to maximize income while maintaining prospects for capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests in a diversified portfolio of debt securities, such as bonds, notes and debentures, and equity securities, such as common stocks, preferred stocks and convertible securities.

The fund seeks income by selecting investments such as corporate and foreign debt securities and U.S. Treasury bonds, as well as stocks with attractive dividend yields. In its search for growth opportunities, the fund maintains the flexibility to invest in common stocks of companies from a variety of industries such as utilities, financials, energy, healthcare and telecommunications.

The fund may invest up to 100% of total assets in debt securities that are rated below investment grade (sometimes referred to as “junk bonds”), but is not currently expected to invest more than 50% of its total assets in such securities. Securities rated in the top four rating categories by independent rating organizations such as Standard & Poor’s (“S&P”) or Moody’s Investors Service (“Moody’s”) are considered investment grade. Below investment grade securities, such as those rated BB or lower by S&P, or Ba or lower by Moody’s, or unrated, but deemed by the subadviser to be of comparable quality, generally pay higher yields but involve greater risks than investment grade securities.

The subadviser searches for undervalued or out-of-favor securities it believes offer opportunities for current income and significant future growth. It generally performs independent analysis of the debt securities being considered for the fund’s portfolio, rather than relying principally on the ratings assigned by the rating agencies. In its analysis, the subadviser considers a variety of factors, including:


	•	the experience and managerial strength of the company;
	•	responsiveness to changes in interest rates and business conditions;
	•	debt maturity schedules and borrowing requirements;
	•	the company’s changing financial condition and market recognition of the change; and
	•	a security’s relative value based on such factors as anticipated cash flow, interest and dividend coverage, asset coverage and earnings prospects.

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-28.64%

-19.19%

4/30/2007

40% S&P 500 Index/60% Barclays Capital U.S. Aggregate Bond Index^A

-13.65%

-6.71%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

INVESTMENT QUALITY BOND TRUST


Subadviser:		Wellington Management Company, LLP


*Investment Objective:*		To provide a high level of current income consistent with the maintenance of principal and liquidity.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in bonds rated investment grade at the time of investment. The fund will tend to focus on corporate bonds and U.S. government bonds with intermediate to longer term maturities.

The subadviser’s investment decisions derive from a three-pronged analysis, including:


	•	sector analysis,
	•	credit research, and
	•	call protection.

Sector analysis focuses on the differences in yields among security types, issuers, and industry sectors. Credit research focuses on both quantitative and qualitative criteria established by the subadviser, such as call protection (payment guarantees), an issuer’s industry, operating and financial profiles, business strategy, management quality, and projected financial and business conditions. Individual purchase and sale decisions are made on the basis of relative value and the contribution of a security to the desired characteristics of the overall fund. Factors considered include:


	•	relative valuation of available alternatives,
	•	impact on portfolio yield, quality and liquidity, and
	•	impact on portfolio maturity and sector weights.

The subadviser attempts to maintain a high, steady and possibly growing income stream.

At least 80% of the fund’s net assets are invested in bonds and debentures, including:


	•	marketable debt securities of U.S. and foreign issuers (payable in U.S. dollars), rated as investment grade by Moody’s or S&P at the time of purchase, including privately placed debt securities, corporate bonds, asset-backed securities, mortgage-backed securities and commercial mortgage-backed securities;
	•	securities issued or guaranteed as to principal or interest by the U.S. Government or its agencies or instrumentalities, including mortgage-backed securities; and
	•	cash and cash equivalent securities which are authorized for purchase by the Money Market Trust.

The balance (no more than 20%) of the fund’s net assets may be invested in below investment grade bonds and other securities including privately placed debt securities:


	•	U.S. and foreign debt securities,
	•	preferred stocks,
	•	convertible securities (including those issued in the Euromarket),
	•	securities carrying warrants to purchase equity securities, and
	•	non-investment grade and investment grade non-U.S. dollar fixed income securities, including up to 5% emerging market fixed income securities.

In pursuing its investment objective, the fund may invest up to 20% of its net assets in U.S. and foreign high yield (high risk) corporate and government debt securities (commonly known as “junk bonds”). These instruments are rated “Ba” or below by Moody’s or “BB” or below by S&P (or, if unrated, are deemed of comparable quality as determined by the subadviser). The high yield sovereign debt securities in which the fund will invest are described below under “Strategic Bond Trust.” No minimum rating standard is required for a purchase of high yield securities by the fund. While the fund may only invest up to 20% of its net assets in securities rated in these rating categories at the time of investment, it is not required to dispose of bonds that may be downgraded after purchase, even though such downgrade may cause the fund to exceed this 20% maximum.

The fund may make short sales of a security including short sales “against the box.”

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk
	•	Short sales risk

Past Performance

Calendar Year Total Returns for Series I:





-1.79%	9.40%	7.33%	9.94%	7.32%	4.81%	2.26%	3.57%	6.21%	-1.67%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		4.40% (Quarter ended 9/30/2002) Worst Quarter: -3.39% (Quarter ended 9/30/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-1.67%		3.00%		4.66%		6/18/1985
Series II^A		-1.72%		2.81%		4.55%		1/28/2002
Series NAV^B		-1.52%		3.06%		4.69%		2/28/2005
Combined Index^C		4.51%		4.37%		5.53%
Barclays Capital U.S. Aggregate Bond Index		5.24%		4.65%		5.63%

^C The Combined Index is comprised of 50% of the return of the Barclays Capital Government Bond Index and 50% of the return of the Barclays Capital Credit Bond Index.

MONEY MARKET TRUST B

(NAV Shares Only)


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To obtain maximum current income consistent with preservation of principal and liquidity.

*Investment Strategies:*		Under normal market conditions, the fund invests in high quality, U.S. dollar denominated money market instruments.

The subadviser may invest the fund’s assets in high quality, U.S. dollar denominated money market instruments of the following types:


	•	obligations issued or guaranteed as to principal and interest by the U.S. Government, or any agency or authority controlled or supervised by and acting as an instrumentality of the U.S. Government pursuant to authority granted by Congress (“U.S. Government Securities”), or obligations of foreign governments including those issued or guaranteed as to principal or interest by the Government of Canada, the government of any province of Canada, or any Canadian or provincial Crown agency (any foreign obligation acquired by the fund must be payable in U.S. dollars);
	•	certificates of deposit, bank notes, time deposits, Eurodollars, Yankee obligations and bankers’ acceptances of U.S. banks, foreign branches of U.S. banks, foreign banks and U.S. savings and loan associations which at the date of investment have capital, surplus and undivided profits as of the date of their most recent published financial statements in excess of $100,000,000 (or less than $100,000,000 if the principal amount of such bank obligations is insured by the Federal Deposit Insurance Corporation or the Saving Association Insurance Fund);
	•	commercial paper which at the date of investment is rated (or guaranteed by a company whose commercial paper is rated) within the two highest rating categories by any NRSRO (such as “P-1” or “P-2” by Moody’s or “A-1” or “A-2” by Standard & Poor’s) or, if not rated, is issued by a company which the subadviser acting pursuant to guidelines established by the fund’s Board of Trustees, has determined to be of minimal credit risk and comparable quality;
	•	corporate obligations maturing in 397 days or less which at the date of investment are rated within the two highest rating categories by any NRSRO (such as “Aa” or higher by Moody’s or “AA” or higher by Standard & Poor’s);
	•	short-term obligations issued by state and local governmental issuers;
	•	securities that have been structured to be eligible money market instruments such as participation interests in special purpose trusts that meet the quality and maturity requirements in whole or in part due to features for credit enhancement or for shortening effective maturity; and
	•	repurchase agreements with respect to any of the foregoing obligations.

Commercial paper may include variable amount master demand notes, which are obligations that permit investment of fluctuating amounts at varying rates of interest. Such notes are direct lending arrangements between the fund and the note issuer. The subadviser monitors the creditworthiness of the note issuer and its earning power and cash flow. The subadviser will also consider situations in which all holders of such notes would redeem at the same time. Variable amount master demand notes are redeemable on demand.

All of the fund’s investments will mature in 397 days or less and the fund maintains a dollar-weighted average fund maturity of 90 days or less. By limiting the maturity of its investments, the fund seeks to lessen the changes in the value of its assets caused by fluctuations in short-term interest rates. In addition, the fund invests only in securities which the fund’s Board of Trustees determine to present minimal credit risks and which at the time of purchase are “eligible securities” as defined by Rule 2a-7 under the Investment Company Act of 1940, as amended (the “1940 Act”). The fund also intends to maintain, to the extent practicable, a constant per share NAV of $1.00. There is no assurance that the fund will be able to do so.

The fund may invest up to 20% of its total assets in any of the U.S. dollar denominated foreign securities described above. The fund is not authorized to enter into mortgage dollar rolls or warrants.

An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of a shareholder’s investment at $1.00 per share, it is possible to lose money by investing in the fund. For example, the fund could lose money if a security purchased by the fund is downgraded and the fund must sell the security at less than the cost of the security.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series NAV:




5.04%	6.31%	3.93%	1.48%	0.95%	1.09%	2.92%	4.71%	4.82%	2.11%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		1.60% (Quarter ended 9/30/2000) Worst Quarter: 0.20% (Quarter ended 3/31/2004)

Average Annual Total Returns For Period Ended 12/31/2008

One

Five

Ten

Date of

Year

Inception

Series NAV^A

2.11%

3.12%

3.32%

3/29/1986

Citigroup 3 Month Treasury Bill Index

1.80%

3.10%

3.30%

^A The Series NAV shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of the Money Market Fund of John Hancock Variable Series Trust I in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Money Market Fund, the fund’s predecessor. These shares were first issued on March 29, 1986.

MONEY MARKET TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To obtain maximum current income consistent with preservation of principal and liquidity.

*Investment Strategies:*		Under normal market conditions, the fund invests in high quality, U.S. dollar-denominated money market instruments.

The subadviser may invest the fund’s assets in high quality, U.S. dollar denominated money market instruments of the following types:


	•	obligations issued or guaranteed as to principal and interest by the U.S. Government, or any agency or authority controlled or supervised by and acting as an instrumentality of the U.S. Government pursuant to authority granted by Congress (“U.S. Government Securities”), or obligations of foreign governments including those issued or guaranteed as to principal or interest by the Government of Canada, the government of any province of Canada, or any Canadian or provincial Crown agency (any foreign obligation acquired by the fund must be payable in U.S. dollars);
	•	certificates of deposit, bank notes, time deposits, Eurodollars, Yankee obligations and bankers’ acceptances of U.S. banks, foreign branches of U.S. banks, foreign banks and U.S. savings and loan associations which at the date of investment have capital, surplus and undivided profits as of the date of their most recent published financial statements in excess of $100,000,000 (or less than $100,000,000 if the principal amount of such bank obligations is insured by the Federal Deposit Insurance Corporation or the Saving Association Insurance Fund);
	•	commercial paper which at the date of investment is rated (or guaranteed by a company whose commercial paper is rated) within the two highest rating categories by any NRSRO (such as “P-1” or “P-2” by Moody’s or “A-1” or “A-2” by S&P) or, if not rated, is issued by a company which the subadviser acting pursuant to guidelines established by the fund’s Board of Trustees, has determined to be of minimal credit risk and comparable quality;
	•	corporate obligations maturing in 397 days or less which at the date of investment are rated within the two highest rating categories by any NRSRO (such as “Aa” or higher by Moody’s or “AA” or higher by S&P);

100


	•	short-term obligations issued by state and local governmental issuers;
	•	securities that have been structured to be eligible money market instruments such as participation interests in special purpose trusts that meet the quality and maturity requirements in whole or in part due to features for credit enhancement or for shortening effective maturity; and
	•	repurchase agreements with respect to any of the foregoing obligations.

All of the fund’s investments will mature in 397 days or less and the fund maintains a dollar-weighted average fund maturity of 90 days or less. By limiting the maturity of their investments, the fund seeks to lessen the changes in the value of its assets caused by fluctuations in short-term interest rates. In addition, the fund invests only in securities which the fund’s Board of Trustees determine to present minimal credit risks and which at the time of purchase are “eligible securities” as defined by Rule 2a-7 under the Investment Company Act of 1940, as amended (the “1940 Act”). The fund also intends to maintain, to the extent practicable, a constant per share NAV of $10.00. There is no assurance that the fund will be able to do so.

The fund may invest up to 20% of its total assets in any of the U.S. dollar denominated foreign securities described above. The fund is not authorized to enter into mortgage dollar rolls or warrants.

An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of a shareholder’s investment at $10.00 per share, it is possible to lose money by investing in this fund. For example, the fund could lose money if a security purchased by the fund is downgraded and the fund must sell the security at less than the cost of the security.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:




4.60%	5.88%	3.59%	1.18%	0.58%	0.81%	2.66%	4.44%	4.56%	1.76%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		1.52% (Quarter ended 9/30/2000) Worst Quarter: 0.11% (Quarter ended 3/31/2004)

101

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		1.76%		2.84%		2.99%		6/18/1985
Series II^A		1.56%		2.63%		2.85%		1/28/2002
Citigroup 3 Month Treasury Bill Index		1.80%		3.10%		3.30%

REAL RETURN BOND TRUST


Subadviser:		Pacific Investment Management Company LLC


*Investment Objective:*		To seek maximum real return, consistent with preservation of real capital and prudent investment management.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus borrowings for investment purposes) in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities and corporations, which may be represented by forwards or derivatives such as options, futures contracts, or swap agreements.

Inflation-indexed bonds are fixed income securities that are structured to provide protection against inflation. The value of the bond’s principal or the interest income paid on the bond is adjusted to track changes in an official inflation measure. The U.S. Treasury uses the Consumer Price Index for Urban Consumers as the inflation measure. Inflation-indexed bonds issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. “Real return” equals total return less the estimated cost of inflation, which is typically measured by the change in an official inflation measure.


	•	securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises;
	•	corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper;
	•	mortgage-backed and other asset-backed securities;
	•	inflation-indexed bonds issued by both governments and corporations;
	•	structured notes, including hybrid or “indexed” securities and event-linked bonds;
	•	loan participations and assignments;
	•	delayed funding loans and revolving credit facilities;
	•	bank certificates of deposit, fixed time deposits and bankers’ acceptances;
	•	debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises;
	•	repurchase agreements and reverse repurchase agreements;
	•	obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and
	•	obligations of international agencies or supranational entities.

The fund invests primarily in investment grade securities, but may invest up to 10% of its total assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or equivalently rated by S&P or Fitch, or, if unrated, determined by the subadviser to be of comparable quality. The fund may also invest up to 30% of its total assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar denominated securities of foreign issuers. The fund may invest in baskets of foreign currencies (such as the Euro) and direct currency. The fund will normally limit its foreign currency exposure (from non-U.S. dollar denominated securities or currencies) to 20% of its total assets. The fund may invest up to 10% of its total assets in securities and instruments that are economically tied to emerging market countries. The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund. The effective duration of this fund normally varies within three years (plus or minus) of the duration of the benchmark index.

The fund may also lend its portfolio securities to brokers, dealers and other financial institutions to earn income. The fund may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using other investment techniques (such as buy backs or dollar rolls).

102

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may make short sales of a security including short sales “against the box.”

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk
	•	Non-diversified risk
	•	Short sales risk

Past Performance

Calendar Year Total Returns for Series I:





9.06%	1.44%	0.23%	11.49%	-11.28%

2004	2005	2006	2007	2008


Best Quarter:		5.80% (Quarter ended 3/31/2004) Worst Quarter: -8.12% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-11.28%		1.87%		2.51%		5/5/2003
Series II		-11.54%		1.62%		2.27%		5/5/2003
Series NAV^A		-11.30%		1.88%		2.52%		2/28/2005
Barclays Capital U.S. TIPS Index^B		-2.35%		4.07%		4.60%

^A NAV shares were first offered on February 28, 2005. Performance prior to February 28, 2005 is that of Series I shares. Series I shares have higher expenses than NAV shares. Had such performance reflected NAV share expenses, performance would be higher.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

103

SHORT TERM GOVERNMENT INCOME TRUST


Subadviser:		MFC Global Investment Management (U.S.) LLC (“MFC Global (U.S.)”)


*Investment Objective:*		To seek a high level of current income consistent with preservation of capital. Maintaining a stable share price is a secondary goal.

*Investment Strategies:*		The fund seeks to achieve its objective by investing under normal circumstances at least 80% of its assets in obligations issued or guaranteed by the U.S. government and its agencies, authorities or instrumentalities (U.S. government securities). Under normal circumstances, the fund’s effective duration is no more than 3 years.

U.S. government securities may be supported by:


	–	The full faith and credit of the United States government, such as Treasury bills, notes and bonds, and Government National Mortgage Association Certificates.
	–	The right of the issuer to borrow from the U.S. Treasury, such as obligations of the Federal Home Loan Mortgage Corporation.
	–	The credit of the instrumentality, such as obligations of the Federal National Mortgage Association.

The fund may invest in higher-risk securities, including U.S. dollar-denominated foreign government securities and asset-backed securities. It may also invest up to 10% of assets in foreign governmental high yield securities (junk bonds) rated as low as B and their unrated equivalents.

In managing the portfolio of the fund, MFC Global (U.S.) considers interest rate trends to determine which types of bonds to emphasize at a given time. The fund typically favors mortgage-related securities when it anticipates that interest rates will be relatively stable, and favors U.S. Treasuries at other times. Because high yield bonds often respond to market movements differently from U.S. government bonds, the fund may use them to manage volatility.

The fund may invest in mortgage-related securities and certain other derivatives (investments whose value is based on indexes, securities and currencies).

The fund may invest in other investment companies, including exchange traded funds (“ETFs”), and engage in short sales.

Under normal circumstances, the fund’s effective duration is no more than 3 years which means that the fund may purchase securities with a duration of greater than 3 years as long as the fund’s average duration does not exceed 3 years.

Temporary Defensive Investing. During unusual or unsettled market conditions, for purposes of meeting redemption requests or pending investment of its assets, the fund may invest all or a portion of its assets in cash and securities that are highly liquid, including: (a) high quality money market instruments such as short-term U.S. government obligations, commercial paper, repurchase agreements or other cash equivalents: and (b) money market funds. Investments in foreign securities may be denominated in either U.S. dollars or foreign currency and may include debt of foreign corporations and governments, and debt of supranational organizations. To the extent a fund is in a defensive position, its ability to achieve its investment objective will be limited.

Use of Hedging and Other Strategic Transactions. The fund is authorized to use all of the various investment strategies referred to under “Hedging, Derivatives and Other Strategic Transactions.” in the Statement of Additional Information (the “SAI”).

The fund may trade securities actively which could increase transaction costs (thus lowering performance).

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk
	•	Short sales risk

104

Past performance

SHORT-TERM BOND TRUST


Subadviser:		Declaration Management & Research, LLC


*Investment Objective:*		To seek income and capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowing for investment purposes) at the time of investment in a diversified mix of debt securities and instruments. The securities and instruments will have an average credit quality rating of “A” or “AA” and a weighted average effective maturity between one and three years, and no more than 15% of the fund’s net assets will be invested in high yield bonds.

The fund invests in a diversified mix of debt securities and instruments, including but not limited to:


	•	U.S. Treasury and agency securities;
	•	Asset-backed securities and mortgage-backed securities, including mortgage pass-through securities, commercial mortgage back securities and collateralized mortgage offerings;
	•	Corporate bonds, both U.S. and foreign (if dollar-denominated); and
	•	Foreign governmental and agency securities (if dollar denominated).

The fund may invest in asset-backed securities rated, at the time of purchase, lower than A (but not rated lower than B by S&P or Moody’s). Under normal circumstances, no more than 15% of the fund will be invested in asset-backed securities rated lower than A by both rating agencies. The subadviser evaluates specific bonds and bond sectors using a combination of proprietary research and quantitative tools and seeks to identify bonds and bond sectors that are believed to be attractively priced based upon market fundamentals and technical factors. The subadviser opportunistically emphasizes bonds with yields in excess of those of U.S. Treasury securities.

Except as otherwise stated under “Investment Objectives and Strategies — Temporary Defensive Investing,” the fund normally has 10% or lower (usually less) of its total assets in cash and cash equivalents.

The fund may have significant exposure to derivatives (investments whose value is based on indices or other securities), such as forwards, futures, options and swaps. The subadviser actively uses derivatives to manage the average maturity and interest rate sensitivity of the fund. Currency management strategies are primarily used for hedging purposes and to protect against changes in foreign currency exchange rates.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

105

Calendar Year Total Returns for Series NAV:





2.96%	7.98%	8.09%	5.67%	2.76%	1.42%	2.07%	4.55%	3.35%	-18.92%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		3.28% (Quarter ended 9/30/2001) Worst Quarter: -15.15% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Five

Ten

Date of

Year

Inception

Series NAV^A

-18.92%

-1.94%

1.70%

5/1/1994

Barclays Capital 1-3 Year (Unhedged) Aggregate Index

4.62%

3.78%

4.78%

^A The Series NAV shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of the Short-Term Bond Fund of John Hancock Variable Series Trust I in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Short-Term Fund, the fund’s predecessor. These shares were first issued on May 1, 1994.

SPECTRUM INCOME TRUST


Subadviser:		T. Rowe Price Associates, Inc.


*Investment Objective:*		To seek a high level of current income with moderate share price fluctuation.

*Investment Strategies:*		Under normal market conditions, the fund diversifies its assets widely among various fixed income and equity market segments. The fund seeks to maintain broad exposure primarily to domestic and international fixed income markets in an attempt to reduce the impact of markets that are declining and to benefit from good performance in particular market segments over time.

The fund normally invests in investment-grade corporate, high-yield, and foreign and emerging market fixed income securities, income-oriented stocks, short-term securities, asset-backed and mortgage related securities and U.S. government and agency securities. The fund will also seek equity income through investments in dividend-paying stocks. Cash reserves will be invested in money market securities and shares of T. Rowe Price money market funds.

Fixed income securities may be of short-, intermediate- and long-term maturities, and will comprise a range of credit qualities with either fixed or floating interest rates. The fund’s fixed income investments will typically include investment grade corporate securities and asset-backed and mortgage-related securities, bank loan participations and assignments, and there is no limit on the fund’s investments in these securities. The fund’s fixed income investments may include privately negotiated notes or loans, including loan participations and assignments (“bank loans”). These investments will only be made in companies, municipalities or entities that meet the fund’s investment criteria. Direct investments in bank loans may be illiquid and holding a loan could expose the fund to the risks of being a direct lender.

The fund may invest in asset-backed securities rated, at the time of purchase, lower than A (but not rated lower than B by S&P, Moody’s or Fitch). Under normal circumstances, no more than 15% of the asset-backed securities purchased for the fund will be rated less than A- by the three rating agencies. The lowest rating would apply in the case of split-rated asset-backed securities rated by the three rating agencies. Mortgage-related investments could include mortgage dollar rolls and investments in more volatile stripped mortgage securities and collateralized mortgage obligations. The fund may invest a substantial portion (up to 40% of its total assets) in below-investment grade fixed income securities (or if unrated, of equivalent quality as determined by the subadviser), commonly known as “junk bonds.” Junk bonds involve a higher degree of credit risk and price volatility than other, higher-rated fixed income securities. The fund may invest in U.S. government securities and municipal securities (including Treasury Inflation- Protected Securities or “TIPs”), GNMAs, and other agency-related fixed income securities, and there is no limit

106

on the fund’s investment in these securities. The fund may also invest up to 45% of its total assets in foreign government and emerging market fixed income securities (excluding Yankee bonds). Foreign currency forwards, options and futures may be used to protect the fund’s foreign securities from adverse currency movements relative to the U.S. dollar, as well as to gain exposure to currencies and markets expected to increase or decrease in value relative to other securities.

Individual fixed income securities are selected by a team of T. Rowe Price portfolio managers using the firm’s fundamental research and credit analysis. In evaluating fixed income securities, the portfolio managers will consider a variety of factors, including the issuer’s financial condition and operating history, the depth and quality of its management, and its sensitivities to economic conditions. Portfolio managers will also consider the issuer’s debt levels and ability to service its outstanding debt, its access to capital markets and external factors such as the economic and political conditions in the issuer’s country. Other than the specific investment limits described above, there is no minimum or maximum percentage of assets which the subadviser will invest in any particular type of fixed income security. Maturities of the fund’s fixed income investments reflect the subadviser’s outlook for interest rates.

The fund’s equity investments, which will be limited to 40% of total assets, will be selected using a value-oriented investment strategy with a focus on large-cap, dividend-paying common stocks. Preferred stocks and securities convertible into equity securities may also be purchased. The subadviser invests in stocks and other securities that appear to be temporarily undervalued by various measures and may be temporarily out of favor, but have good prospects for capital appreciation and dividend growth. In managing the fund, the subadviser may vary the allocation of the fund’s assets to a particular market segment based on their outlook for, and on the relative valuations of these market segments. When adjusting the allocations to the various markets, the subadviser may also weigh such factors as the outlook for the economy and market conditions, both on a global and local (country) basis, corporate earnings, and the yield advantages of one fixed income sector over another.

The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities. Fixed income securities may be sold to adjust the fund’s average maturity, duration, or credit quality or to shift assets into higher-yielding securities of different sectors.

In pursuing its investment strategy, the subadviser has the discretion to purchase some securities that do not meet the fund’s normal investment criteria, as described above, when it perceives an unusual opportunity for gain. These special situations might arise when the subadviser believes a security could increase in value for a variety of reasons, including a change in management, a debt restructuring or other extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities.

The fund may also hold a certain portion of its assets in money market reserves which can consist of shares of the T. Rowe Price Reserve Investment Fund (or any other internal T. Rowe Price money market fund) as well as U.S. and foreign dollar-denominated money market securities, including repurchase agreements, in the two highest rating categories or equivalent ratings as determined by the subadviser, maturing in one year or less. The fund may invest cash reserves in U.S. dollars and foreign currencies.

The fund’s investment process may, at times, result in higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Loan participations risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

107

Calendar Year Total Returns for Series NAV:





7.90%	5.88%	-9.30%

2006	2007	2008


Best Quarter:		3.52% (Quarter ended 9/30/2006) Worst Quarter: -5.13% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-9.30%

1.65%

10/24/2005

Barclays Capital U.S. Aggregate Bond Index^A

5.24%

5.46%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

STRATEGIC BOND TRUST


Subadviser:		Western Asset Management Company


	•	Sub-Subadviser: Western Asset Management Company Limited


*Investment Objective:*		To seek a high level of total return consistent with preservation of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in fixed income securities.

The fund’s assets may be allocated among the following five sectors of the fixed income market:


	•	U.S. government obligations,
	•	investment grade domestic corporate fixed income securities,
	•	below investment grade or non-investment grade high yield corporate fixed income securities,
	•	mortgage-backed and asset-backed securities; and
	•	investment grade and below investment grade or non-investment grade high yield international fixed income securities.

The fund invests in fixed income securities across a range of credit qualities and may invest a substantial portion of its assets in obligations rated below investment grade by a recognized rating agency, or, if unrated, of equivalent quality as determined by the subadviser. Below investment grade securities are commonly referred to as “junk bonds.”

The subadviser will determine the amount of assets to be allocated to each type of security based on its assessment of the maximum level of total return that can be achieved for the fund by investing in these securities without incurring undue risks to principal value. The allocation decisions are based on the subadviser’s analysis of current economic and market conditions and the relative risks and opportunities presented in these markets.

In making this determination, the subadviser relies in part on quantitative analytical techniques that measure relative risks and opportunities of each type of security. The subadviser also relies on its own assessment of economic and market conditions on both a global and local (country) basis. The subadviser considers economic factors including current and projected levels of growth and inflation, balance of payment status and monetary policy. The allocation of assets to international debt securities is further influenced by current and expected currency relationships and political and sovereign factors. The fund’s assets may not always be allocated to the highest yielding securities if the subadviser believes that such investments would impair the fund’s ability to preserve shareholder capital. The subadviser will continuously review this allocation of assets and make such adjustments as it deems appropriate. The fund does not plan to establish a minimum or a maximum percentage of the assets which it will invest in any particular type of fixed income security.

The types and characteristics of the U.S. government obligations, mortgage-backed and asset-backed securities and investment grade corporate and international fixed income securities purchased by the fund are set forth in the section entitled

108

“Other Instruments” in the SAI. The types and characteristics of the money market securities purchased by the fund are similar to the investment objective to obtain maximum current income consistent with preservation of principal and liquidity. Potential investors should review these other discussions in considering an investment in shares of the fund. The fund may invest without limitation in high yield domestic and foreign fixed income securities and up to 100% of the fund’s net assets may be invested in foreign securities. The subadviser has discretion to select the range of maturities of the various fixed income securities in which the fund invests. Such maturities may vary substantially from time to time depending on economic and market conditions.

The high yield sovereign fixed income securities in which the fund may invest are U.S. dollar-denominated and non-dollar-denominated fixed income securities issued or guaranteed by governments or governmental entities of developing and emerging countries. The subadviser expects that these countries will consist primarily of those countries which, at the time of investment, are represented in the JP Morgan EMBI Global Index or categorized by the World Bank, in its annual categorization, as middle or low-income.

Although the subadviser does not anticipate investing in excess of 75% of the fund’s net assets in domestic and developing country fixed income securities that are rated below investment grade, the fund may invest a greater percentage in such securities when, in the opinion of the subadviser, the yield available from such securities outweighs their additional risks. By investing a portion of the fund’s assets in securities rated below investment grade, as well as through investments in mortgage-backed securities and international debt securities, as described below, the subadviser seeks to provide investors with a higher yield than a high-quality domestic corporate bond fund with less risk than a fund that invests principally in securities rated below investment grade. Certain of the debt securities in which the fund may invest may have, or be considered comparable to securities having, the lowest ratings for non-subordinated debt instruments assigned by Moody’s or S&P (i.e., rated “C” by Moody’s or “CCC” or lower by S&P).

In light of the risks associated with investing in high yield corporate and sovereign debt securities, the subadviser considers various factors in evaluating the credit worthiness of an issue. These factors will typically include:


Corporate Debt Securities		Sovereign Debt Instruments

• issuer’s financial condition		• economic and political conditions within the issuer’s country
• issuer’s sensitivity to economic conditions and trends		• issuer’s external and overall debt levels, and its ability to pay principal and interest when due
• issuer’s operating history		• issuer’s access to capital markets and other sources of funding
• experience and track record of the issuer’s management		• issuer’s debt service payment history

The subadviser also reviews the ratings, if any, assigned to a security by any recognized rating agencies, although its judgment as to the quality of a debt security may differ from that suggested by the rating published by a rating service. The fund’s ability to achieve its investment objective may be more dependent on the subadviser’s credit analysis than would be the case if it invested in higher quality debt securities.

The fund may invest in fixed-and floating-rate loans, which investments generally will be in the form of loan participations and assignments of such loans.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:

Calendar Year Total Returns for Series I:





2.22%	7.38%	6.24%	8.96%	13.11%	6.66%	2.70%	6.97%	-0.07%	-16.08%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		5.94% (Quarter ended 6/30/2003) Worst Quarter: -7.23% (Quarter ended 9/30/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-16.08%		-0.35%		3.51%		2/19/1993
Series II^A		-16.22%		-0.56%		3.38%		1/28/2002
Series NAV^B		-16.06%		-0.30%		3.54%		2/28/2005
Barclays Capital U.S. Aggregate Bond Index		5.24%		4.65%		5.63%

STRATEGIC INCOME TRUST


Subadviser:		MFC Global Investment Management (U.S.), LLC


*Investment Objective:*		To seek a high level of current income.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its total assets in the following types of securities: foreign government and corporate debt securities from developed and emerging markets, U.S. government and agency securities, and domestic high-yield bonds.

The fund may also invest in preferred stock and other types of debt securities.

Although the fund may invest up to 10% of its total assets in securities rated as low as D (in default) by S&P or Moody’s (and their unrated equivalents), it generally intends to keep its average credit quality in the investment-grade range (AAA to BBB). There is no limit on the fund’s average maturity.

The fund may invest in asset-backed securities rated, at the time of purchase, less than A (but not rated lower than B by S&P or Moody’s.) Under normal circumstances, no more than 15% of the fund’s total assets will be invested in asset-backed securities rated less than A by both rating agencies.

In managing the fund, the subadviser allocates assets among the three major types of securities based on analysis of economic factors, such as projected international interest rate movements, industry cycles and political trends. However, the subadviser may invest up to 100% of the fund’s assets in any one sector.

Within each type of security, the subadviser looks for investments that are appropriate for the overall fund in terms of yield, credit quality, structure and industry distribution. In selecting securities, relative yields and risk/reward ratios are the primary considerations.

110

In abnormal circumstances, the fund may temporarily invest extensively in investment-grade short-term securities. In these and other cases, the fund might not achieve its investment objective.

The fund may trade securities actively, which could increase its transaction costs (thus lowering performance).

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Industry or sector investing risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

Calendar Year Total Returns for Series I:





2.13%	4.13%	5.87%	-8.61%

2005	2006	2007	2008


Best Quarter:		2.73% (Quarter ended 9/30/2007) Worst Quarter: -6.39% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-8.61%

2.48%

5/3/2004

Series II

-8.76%

2.27%

5/3/2004

Series NAV^A

-8.57%

2.50%

4/29/2005

Barclays Capital U.S. Aggregate Bond Index^B

5.24%

5.00%

^A Series NAV shares were first offered on April 29, 2005. For periods prior to April 29, 2005, the performance shown reflects the performance of Series I shares. Series I shares have higher expenses than Series NAV shares. Had the performance for periods prior to April 29, 2005 reflected Series NAV expenses, performance would be higher.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

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TOTAL RETURN TRUST


Subadviser:		Pacific Investment Management Company LLC


*Investment Objective:*		To seek maximum total return, consistent with preservation of capital and prudent investment management.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 65% of its total assets in a diversified portfolio of fixed income instruments of varying maturities, which may be represented by forwards or derivatives, such as options, futures contracts, or swap agreements.


	•	securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises;
	•	corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper;
	•	mortgage-backed and other asset-backed securities;
	•	inflation-indexed bonds issued by both governments and corporations;
	•	structured notes, including hybrid or “indexed” securities and event-linked bonds;
	•	loan participations and assignments;
	•	delayed funding loans and revolving credit facilities;
	•	bank certificates of deposit, fixed time deposits and bankers’ acceptances;
	•	debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises;
	•	repurchase agreements and reverse repurchase agreements;
	•	obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and
	•	obligations of international agencies or supranational entities.

The fund invests primarily in investment grade securities, but may invest up to 10% of its total assets in high yield securities (“junk bonds”) rated B or higher by Moody’s or equivalently rated by S&P or Fitch, or, if unrated, determined by the subadviser to be of comparable quality. The fund may also invest up to 30% of its total assets in securities denominated in foreign currencies, and may invest beyond this limit in U.S. dollar denominated securities of foreign issuers. The fund may invest in baskets of foreign currencies (such as the euro) and direct currency. The fund will normally limit its foreign currency exposure (from non-U.S. dollar denominated securities or currencies) to 20% of its total assets. The fund may invest up to 15% of its total assets in securities and instruments that are economically tied to emerging market countries.

The average portfolio duration of the fund normally varies within two years (plus or minus) of the duration of the benchmark index.

The fund is authorized to use all of the various investment strategies referred to under “Additional Information About the Funds’ Principal Risks and Investment Policies — Hedging, derivatives and other strategic transactions risk” including:


	•	purchase and sell options on domestic and foreign securities, securities indexes and currencies,
	•	purchase and sell futures and options on futures,
	•	purchase and sell currency or securities on a forward basis, and
	•	enter into interest rate, index, equity, total return, currency, and credit default swap agreements.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may make short sales of a security, including short sales “against the box.”

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Foreign securities risk

112


	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Loan participations risk
	•	Mortgage-backed and asset-backed securities risk
	•	Short sales risk

Past Performance

Calendar Year Total Returns for Series I:




10.91%	8.28%	9.52%	5.02%	4.96%	2.40%	3.67%	8.57%	2.69%

2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		6.43% (Quarter ended 9/30/2001) Worst Quarter: -3.56% (Quarter ended 9/30/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		2.69%		4.43%		5.63%		5/1/1999
Series II^A		2.53%		4.23%		5.50%		1/28/2002
Series NAV^B		2.76%		4.47%		5.65%		2/28/2005
Barclays Capital U.S. Aggregate Bond Index^C		5.24%		4.65%		5.85%

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

U.S. GOVERNMENT SECURITIES TRUST


Subadviser:		Western Asset Management Company


*Investment Objective:*		To obtain a high level of current income consistent with preservation of capital and maintenance of liquidity.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in debt obligations and mortgage-backed securities issued or guaranteed by the U.S. government, its agencies or instrumentalities and derivative securities such as collateralized mortgage obligations backed by such securities and futures contracts. The fund may invest the balance of its assets in non-U.S. government securities including, but not limited to, fixed rate and adjustable rate mortgage-backed securities, asset-backed securities, corporate debt securities and money market instruments.

113

The fund invests in:


	•	mortgage-backed securities guaranteed by the Government National Mortgage Association that are supported by the full faith and credit of the U.S. government and which are the “modified pass-through” type of mortgage-backed security (“GNMA Certificates”). Such securities entitle the holder to receive all interest and principal payments due whether or not payments are actually made on the underlying mortgages;
	•	U.S. Treasury obligations (including repurchase agreements collateralized by U.S. Treasury obligations) (U.S. Treasury obligations are supported by the full faith and credit of the U.S. government);
	•	obligations issued or guaranteed by agencies or instrumentalities of the U.S. Government which are backed by their own credit and may not be backed by the full faith and credit of the U.S. Government (including repurchase agreements collateralized by these obligations);
	•	mortgage-backed securities guaranteed by agencies or instrumentalities of the U.S. Government which are supported by their own credit but not the full faith and credit of the U.S. Government, such as the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association;
	•	futures contracts or financial instruments and indices; and
	•	collateralized mortgage obligations issued by private issuers for which the underlying mortgage-backed securities serving as collateral are backed (i) by the credit alone of the U.S. Government agency or instrumentality which issues or guarantees the mortgage-backed securities, or (ii) by the full faith and credit of the U.S. Government.

As noted above, the fund may invest not only in U.S. government securities that are backed by the full faith and credit of the U.S. government, such as GNMA Certificates and U.S. Treasury obligations, but also in U.S. Government securities that are backed only by their own credit and not the full faith and credit of the U.S. government (such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation).

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

Calendar Year Total Returns for Series I:





-0.23%	10.87%	7.03%	7.99%	1.73%	2.89%	1.58%	4.39%	3.15%	-1.41%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		4.48% (Quarter ended 9/30/2001) Worst Quarter: -2.31% (Quarter ended 6/30/2008)

114

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-1.41%		2.10%		3.74%		3/18/1988
Series II^A		-1.64%		1.91%		3.62%		1/28/2002
Series NAV^B		-1.44%		2.12%		3.75%		2/28/2005
Citigroup 1-10 Year Treasury Index		11.41%		5.40%		5.67%

U.S. HIGH YIELD BOND TRUST


Subadviser:		Wells Capital Management, Incorporated


*Investment Objective:*		To seek total return with a high level of current income.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in U.S. corporate debt securities that are, at the time of investment, below investment grade, including preferred and other convertible securities in below investment grade debt securities (sometimes referred to as “junk bonds” or high yield securities). The fund also invests in corporate debt securities and may buy preferred and other convertible securities and bank loans.

The subadviser actively manages a diversified portfolio of below investment grade debt securities (often called “junk bonds” or high yield securities). The subadviser does not manage the portfolio to a specific maturity or duration. The subadviser focuses on individual security selection (primarily using a “bottom-up” approach) and seeks to identify high yield securities that appear comparatively undervalued. The subadviser uses its knowledge of various industries to assess the risk/return tradeoff among issues within particular industries, in seeking to identify compelling relative value investments. The subadviser analyzes the issuers’ long-term prospects and focus on characteristics such as management, asset coverage, free cash flow generation, liquidity and business risk. The subadviser’s research and analysis highlights industry drivers, competitive position and operating trends with an emphasis on cash flow. The subadviser also talks to management, and consults industry contacts, debt and equity analysts, and rating agencies.

The subadviser purchases securities for the fund when attractive risk/reward ideas are identified and sells securities when either the securities become overvalued or circumstances change in a way that adversely affects this risk/return profile. Rigorous credit analysis of individual issuers is an integral part of the selection process. The subadviser attempts to invest in high yield securities of issuers which it believes have ample asset coverage for their debt securities in comparison to other high yield security issuers in an effort to minimize default risk and maximize risk-adjusted returns. The strategy is focused on selecting investments that can capture the significant current income and capital appreciation potential of the high yield market while also managing downside risk. The total return sought by the fund consists of income earned on the fund’s investments, together with the appreciation that may result from decreases in interest rates or improving credit fundamentals for a particular industry or issuer.

Under normal circumstances, the subadviser invests:


	•	Up to 15% of total assets in any one industry; and
	•	Up to 5% of total assets in any one issuer.

The subadviser will generally invest in below investment grade debt securities that are rated at least “Caa” by Moody’s or “CCC” by S&P, or that are unrated but deemed by the subadviser to be of comparable quality but may also invest in securities rated below these ratings (or unrated securities of comparable quality). The average credit quality of the fund’s securities is expected to be at least B- as rated by S&P.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

115

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series I:





9.58%	2.87%	-20.86%

2006	2007	2008


Best Quarter:		3.68% (Quarter ended 12/31/2006) Worst Quarter: -15.60% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-20.86%

-2.00%

4/29/2005

Series II

-21.05%

-2.16%

4/29/2005

Series NAV

-20.79%

-1.93%

4/29/2005

Merrill Lynch U.S. High Yield Master II Constrained Index^A

-26.11%

-3.29%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

116

HYBRID FUNDS

BALANCED TRUST


Subadviser:		T. Rowe Price Associates, Inc.


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests in both equity and fixed-income securities. The fund employs growth, value and core approaches to allocate its assets among stocks of small, medium and large-capitalization companies in both the U.S. and foreign countries. The fund may purchase a variety of fixed income securities, including investment grade and below investment grade debt securities (commonly known as “junk bonds”) with maturities that range from short to longer term, as well as cash. Under normal market conditions, 55-75% of the fund will be invested in equity securities and 25-45% of the fund will be invested in fixed-income securities.

The precise mix of equity and fixed-income securities will depend on the subadviser’s outlook for the markets and generally reflect the subadviser’s long-term, strategic asset allocation analysis. The subadviser anticipates that adjustments to the targeted asset allocation will result primarily from changes to its outlook for the global and domestic economies, industry sectors and financial markets, and its assessment of the relative attractiveness of each asset class.

Equity Allocation

The fund will allocate its assets between U.S. and non-U.S. equity securities of small, medium and large-capitalization companies by employing growth, value and core approaches to selecting securities.

The fund may invest in common stocks of large, blue-chip growth companies. These are firms that, in the view of the subadviser, are well established in their industries and have the potential for above-average earnings growth. The subadviser focuses on companies with leading market positions, seasoned management, and strong financial fundamentals.

The fund may also invest in common stocks of large, well-established companies paying above-average dividends by employing a value approach to investing. The subadviser’s in-house research team seeks companies that appear to be undervalued by various measures and may be temporarily out of favor but have good prospects for capital appreciation and dividend growth.

The fund may invest in common stocks of mid and small capitalization companies using both growth and value approaches to investing. Mid capitalization growth stock selection is based on a combination of bottom-up analysis (focusing on selecting stocks based on the individual attributes of a company) and top-down analysis (focusing on industry sectors that are likely to generate the best returns) in an effort to identify companies with superior long-term appreciation prospects. Mid capitalization value stock selection seeks to identify mid capitalization companies whose stock prices do not appear to reflect their underlying values

Stocks of small capitalization companies may include emerging growth companies that offer the possibility of accelerating earnings growth. Based on quantitative models and fundamental research, a portion of the fund’s small capitalization portfolio is constructed using “bottom up” analysis taking into consideration stock characteristics, such as projected earnings and sales growth rates, valuation, use of capital resources, and earnings quality (i.e., the ability of reported earnings to reflect the company’s true earnings, as well as the usefulness of reported earnings to predict future earnings).

The fund may invest in stocks outside of the U.S. and will diversify broadly among developed and emerging countries throughout the world. Up to 40% of the fund’s total allocation to equity securities may be invested in foreign equity securities (in either developed or emerging markets). The subadviser’s team of analysts seeks to identify companies capable of achieving and sustaining above-average, long-term earnings growth. Present or anticipated earnings, cash flow, or book value, and valuation factors often influence the allocations among large-, mid- or small-capitalization companies. Foreign stocks may also be selected using a value approach to investing or by identifying a favorable combination of company fundamentals and valuation, providing exposure to both growth and value approaches to investing.

While the subadviser invests with an awareness of the global economic backdrop and our outlook for industry sectors and individual countries, bottom-up analysis is the focus of our decision-making. Country and sector allocations are driven primarily by individual stock selection and secondarily by top-down analysis. We may limit investments in markets that appear to have poor overall prospects.

The fund may invest in other equity-related securities or instruments, including but not limited to preferred stocks, depositary receipts, convertible securities, rights, and warrants. These equity-related instruments may include equity securities of, or derivatives linked to, emerging market issuers or indexes. The fund may invest in IPOs.

The fund may sell equity securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.

117

Fixed-Income Allocation

The fund’s fixed-income securities may include short, intermediate and long-term investment-grade corporate, U.S. government and agency obligations, mortgage-related and asset-backed securities, non-investment grade bonds (junk bonds), bank loans (loan participations and assignments), collateralized mortgage obligations, and foreign debt securities. Within this broad structure, investment decisions reflect the subadviser’s outlook on interest rates and the economy, industry and issuer conditions, and the prices and yields of the various securities. The fund’s fixed-income securities may also include cash and cash equivalents, and derivatives related to interest rates, currencies and fixed-income securities. Within the fund’s total allocation to fixed-income securities, up to 30% may be invested in non-investment grade holdings, up to 30% may be invested in non-U.S. dollar-denominated foreign debt securities, and up to 30% may be invested in debt obligations of emerging market countries and securities of companies located in emerging markets.

When selecting fixed-income or fixed-income related securities or instruments, the subadviser relies primarily on sector analysis and credit research. Sector analysis involves dividing the whole market into sectors and then studying the performance of each sector individually so that sectors can be compared to each other or to the market as a whole. Credit research focuses on both quantitative and qualitative criteria established by the subadviser such as fundamentals of the issuer, the characteristics of the securities, state of the industry, and prospects for the issuer and industry to evaluate the credit risks associated with fixed-income securities.

The fund may sell fixed-income holdings for a variety of reasons, such as to adjust the portfolio’s average maturity, duration, or credit quality or to shift assets into higher yielding securities or different sectors.

The fund may use derivative instruments as a means of gaining market exposure to either equity or fixed-income. Derivatives may be used to obtain long or short exposure to a particular security, asset class, region, industry, currency, interest rates, commodity (with the prior approval of the Adviser’s Complex Securities Committees), or index, or to other securities, groups of securities, or events. The fund may invest in over-the-counter and exchange-traded derivatives, including but not limited to futures, forward contracts, swaps, options, options on futures, swaptions (rights to enter into swaps), structured notes, and market access products. For purposes of the fund’s investment policies, derivative instruments will be classified as equity- or fixed-income related instruments based upon the characteristics of the derivative instrument and the underlying asset on which the derivative is based.

The fund may invest in a particular equity or fixed-income asset class by purchasing shares of exchange traded funds (ETFs) or other mutual funds that concentrate their investments in that asset class, provided the investment is consistent with the fund’s investment program and policies. Such an investment could allow the fund to obtain the benefits of a more diversified portfolio than might otherwise be available by direct investments in the asset class. Any such investments will subject the fund to the risks of the particular asset class.

The fund holds a certain portion of its assets in money market reserves which can consist of shares of the T. Rowe Price Reserve Investment Fund (or any other internal T. Rowe Price money market fund), as well as U.S.-dollar and foreign currency-denominated money market securities, including repurchase agreements, in the two highest rating categories, maturing in one year or less. The fund may invest reserves in U.S. dollars and foreign currencies.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

* * *

In pursuing its investment objective, the fund’s management has the discretion to purchase some securities that do not meet its normal investment criteria, as described above, when it perceives an unusual opportunity for gain. These special situations might arise when the fund’s management believes a security could increase in value for a variety of reasons, including a change in management, an extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Loan participations risk
	•	Medium and smaller company risk

118


	•	Mortgage-backed and asset-backed securities risk
	•	Real estate securities risk

Past performance

CAPITAL APPRECIATION VALUE TRUST


Subadviser:		T. Rowe Price Associates, Inc.


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests primarily in common stocks of established U.S. companies that have above-average potential for capital growth. Common stocks typically constitute at least 50% of the fund’s total assets. The remaining assets are generally invested in other securities, including convertible securities, corporate and government debt, foreign securities, futures and options. The fund may invest up to 20% of its total assets in foreign securities.

The fund’s common stocks generally fall into one of two categories: the larger category comprises long-term core holdings whose prices when purchased by the fund are considered low in terms of company assets, earnings, or other factors; the smaller category comprises opportunistic investments whose prices the subadviser expects to rise in the short term but not necessarily over the long term. Since the subadviser attempts to prevent losses as well as achieve gains, the subadviser typically uses a value approach in selecting investments. The subadviser’s in-house research team seeks to identify companies that seem undervalued by various measures, such as price/book value, and may be temporarily out of favor but are believed to have good prospects for capital appreciation. The subadviser may establish relatively large positions in companies it finds particularly attractive.

The fund’s approach differs from that of many other funds. In addition, the subadviser searches for the best risk/reward values among all types of securities. The portion of the fund invested in a particular type of security, such as common stocks, results largely from case-by-case investment decisions, and the size of the fund’s cash reserve may reflect the subadviser’s ability to find companies that meet valuation criteria rather than its market outlook.

Debt and convertible securities may be purchased to gain additional exposure to a company or for their income or other features; maturity and quality are not necessarily major considerations in determining whether to purchase a particular security. The fund may also purchase other securities, including bank debt, loan participations and assignments and futures and options.

The fund holds a certain portion of its assets in money market reserves which can consist of shares of the T. Rowe Price Reserve Investment Fund (or any other internal T. Rowe Price money market fund) as well as U.S. dollar and foreign currency-denominated money market securities, including repurchase agreements, in the two highest rating categories, maturing in one year or less.

The fund may sell securities for a variety of reasons such as to secure gains, limit losses or redeploy assets into more promising opportunities.

In pursuing the fund’s investment objective, the subadviser has the discretion to purchase some securities that do not meet its normal investment criteria, as described above, when it perceives an unusual opportunity for gain. These special situations might arise when the subadviser believes a security could increase in value for a variety of reasons including a change in management, an extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk

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	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Loan participations risk

Past performance

CORE ALLOCATION PLUS TRUST


Subadviser:		Wellington Management Company, LLP


*Investment Objective:*		To seek total return, consisting of long-term capital appreciation and current income.

*Investment Strategies:*		Under normal market conditions, the fund invests in equity and fixed income securities of issuers located within and outside the U.S. The fund will allocate its assets between fixed income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term, and equity securities based upon the subadviser’s targeted asset mix, which may change over time.

Under normal circumstances, the targeted asset mix may range between 75%-50% equity instruments and 50%-25% fixed income instruments and will generally reflect the subadviser’s long term, strategic asset allocation analysis. The subadviser anticipates that adjustments to the targeted asset allocation will result primarily from changes to its outlook for the global and domestic economies, industry sectors and financial markets and, to a lesser extent, its opinion of the relative attractiveness of each asset class.

When selecting particular equity or equity-related securities or instruments, the subadviser relies primarily on proprietary fundamental analysis. Fundamental analysis involves the assessment of a company through such factors as its business environment, management, balance sheet, income statement, anticipated earnings, revenues and other related measures of value.

When selecting fixed income or fixed-income related securities or instruments, the subadviser relies primarily on sector analysis and credit research. Sector analysis focuses on the differences in yields among security types, issuers, and industry sectors. Credit research focuses on both quantitative and qualitative criteria established by the subadviser.

The fund may invest in listed and unlisted domestic and foreign equity and equity-related securities or instruments, including, but not limited to common stock, preferred stock, depositary receipts (including American Depository Receipts and Global Depository Receipts), index-related securities (including exchange traded funds (ETFs)), real estate investment structures (including real estate investment trusts (REITs)), convertible securities, preferred stock, convertible preferred stock, rights, warrants, derivatives linked to equity securities or indexes, and other similar equity equivalents. These equity and equity-related instruments may include equity securities of, or derivatives linked to, emerging market issuers or indexes.

The fund may also invest in fixed-income securities, fixed-income related instruments, and cash and cash equivalents, including but not limited to, government, agency, supranational, mortgage-backed, corporate, asset-backed, cash equivalents, and other fixed-income securities, as well as derivatives related to interest rates, currencies and fixed-income securities and instruments. These debt obligations may include non-investment grade and emerging market debt issues.

Derivatives may be used to obtain long or short exposure to a particular security, asset class, region, industry, currency, commodity (with the prior approval of the Adviser’s Complex Securities Committee), or index, or to other securities, groups of securities, or events. Derivatives may be used to transfer value added in one strategy to a market exposure other than the benchmark of that strategy. The fund may invest in over-the-counter and exchange traded derivatives, including but not limited to futures, forward contracts, swaps, options, options on futures, swaptions, structured notes, and market access products. For purposes of the fund’s investment policies, derivative instruments will be classified as equity- or fixed-income related instruments based upon the characteristics of the derivative instrument and the underlying asset to which the derivative is linked.

The fund may invest in IPOs. The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

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The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk
	•	Real estate securities risk

Past Performance

Calendar Year Total Returns for Series I:





				-31.50%

				2008


Best Quarter:		-0.36% (Quarter ended 6/30/2008) Worst Quarter: -15.88% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-31.50%

12/31/2007

Series II

-31.67%

12/31/2007

Series NAV

-31.53%

12/31/2007

Global Securities Market Index^A

-26.86%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

DISCIPLINED DIVERSIFICATION TRUST


Subadviser:		Dimensional Fund Advisors LP


*Investment Objective:*		To seek total return consisting of capital appreciation and current income.

*Investment Strategies:*		Under normal market conditions, the fund invests primarily in equity securities and fixed-income securities of domestic and international issuers, including equities of issuers in emerging markets, in accordance with the following range of allocations:


	Target Allocation	Range of Allocations


Equity Securities:	70%	65% — 75%
Fixed-Income Securities:	30%	25% — 35%

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The fund may invest outside these ranges and may invest defensively during unusual or unsettled market conditions.

Equity securities will include securities of small, medium, and large size companies. The fund will target weights efficiently to achieve a higher exposure to small and value companies relative to the market. Increased exposure to small and value companies may be achieved by decreasing the allocation of the fund’s assets to large growth companies relative to their weight in the universe in which the fund normally invests.

The fund’s fixed-income securities will, under normal market conditions, consist of approximately 60-80% high quality short-term bonds from developed markets around the world, and 20-40% Treasury Inflation-Protected Securities (“TIPS”). TIPS are debt securities issued by the U.S. Treasury whose principal and/or interest payments are adjusted for inflation, unlike debt securities that make fixed principal and interest payments. The non-TIPS securities in which the fund will invest will have a minimum short-term credit rating of A1or better by S&P or Prime 1 by Moody’s or F1 or better by Fitch Ratings Ltd. (“Fitch”). If there is no short-term rating the non-TIPS securities would have a minimum long-term credit rating of AA as rated by S&P or Fitch, Inc. or equivalent rating by Moody’s and would generally mature within five years from the date of settlement.

The fund is eligible to invest in a variety of fixed income securities which, unless otherwise noted, may be issued by domestic or foreign issuers and may be denominated in U.S. dollars or non-U.S. currencies. They include, but are not limited to:


	•	Debt securities issued by the U.S. Treasury which are direct obligations of the U.S. government, including bills, notes and bonds.
	•	U.S. government agency obligations issued or guaranteed by U.S. government-sponsored instrumentalities and federal agencies, which have different levels of credit support.
	•	Nonconvertible corporate debt securities (e.g., bonds and debentures), which are issued by companies whose commercial paper is rated Prime1 by Moody’s or A1 or better by S&P or F1 or better by Fitch and dollar-denominated obligations of foreign issuers issued in the U.S. If the issuer’s commercial paper is unrated, then the debt security would have to be rated at least AA by S&P or Aa2 by Moody’s or AA by Fitch. If there is neither a commercial paper rating nor a rating of the debt security, then the subadviser must determine that the debt security is of comparable quality to equivalent issues of the same issuer rated at least AA by S&P or Fitch or Aa2 by Moody’s.
	•	Obligations of U.S. banks and savings and loan associations and dollar-denominated obligations of U.S. subsidiaries and branches of foreign banks, such as certificates of deposit (including marketable variable rate certificates of deposit) and bankers’ acceptances. Bank certificates of deposit will only be acquired from banks having assets in excess of $1,000,000,000.
	•	Commercial paper rated, at the time of purchase, A1 or better by S&P or Prime1 by Moody’s or F1 or better by Fitch, or, if unrated, issued by a corporation having an outstanding unsecured debt issue rated Aaa by Moody’s or AAA by S&P or AAA by Fitch.
	•	Repurchase Agreements: Instruments through which the fund purchase securities (“underlying securities”) from a bank or a registered U.S. government securities dealer, with an agreement by the seller to repurchase the securities at an agreed price, plus interest at a specified rate.
	•	Bills, notes, bonds and other debt securities issued or guaranteed by foreign governments, or their agencies and instrumentalities.
	•	Debt securities of supranational organizations such as the European Coal and Steel Community, the European Economic Community and the World Bank, which are chartered to promote economic development.
	•	Debt securities of non-U.S. issuers rated AA or better by S&P or Aa2 or better by Moody’s or AA or better by Fitch.
	•	Debt securities of domestic or foreign issuers denominated in U.S. dollars but not trading in the U.S.
	•	The fund may invest in unregistered money market funds affiliated or unaffiliated with Dimensonal. Investments in money market funds may involve a duplication of certain fees and expenses.

The fund will also enter into forward foreign currency contracts solely for the purpose of hedging against fluctuations in currency exchange rates.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk

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	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past performance

GLOBAL ALLOCATION TRUST


Subadviser:		UBS Global Asset Management (Americas) Inc.


*Investment Objective:*		To seek total return, consisting of long-term capital appreciation and current income.

*Investment Strategies:*		Under normal market conditions, the fund invests in equity and fixed income securities of issuers located within and outside the U.S. The fund will allocate its assets between fixed income securities and equity securities.

The fund is a multi-asset fund and invests in each of the major asset classes: U.S. fixed income, U.S. equities, international fixed income and international equities, including emerging markets, based upon the subadviser’s assessment of prevailing market conditions in the U.S. and abroad.

Within the equity portion of the fund, the subadviser selects securities whose fundamental values it believes are greater than their market prices. In this context, the fundamental value of a given security is the subadviser’s assessment of what a security is worth. The subadviser bases its estimates of value upon economic, industry and company analysis, as well as upon a company’s management team, competitive advantage and core competencies. The subadviser then compares its assessment of a security’s value against the prevailing market prices, with the aim of constructing a portfolio of stocks with attractive relative price/value characteristics.

For each security under analysis, the fundamental value estimate is compared to the company’s current market price to ascertain whether a valuation anomaly exists. A stock with a market price below the estimated intrinsic or fundamental value would be considered a candidate for inclusion in the fund. The comparison between price and intrinsic or fundamental value allows comparisons across industries and countries.

Within the equity portion of the fund’s portfolio, the subadvisor also may utilize a growth-oriented strategy when investing in US and non-US securities. In selecting growth equities, the subadvisor seeks to invest in companies that possess a dominant market position and franchise, a major technological edge or a unique competitive advantage, in part by using a proprietary quantitative screening system that ranks stocks using a series of growth, valuation and momentum metrics, including earnings revision trends, expected earnings growth rates, sales acceleration, price earnings multiples and positive stock price momentum. The subadvisor expects that these companies can sustain an above average return on invested capital at a higher level and over a longer period of time than is reflected in the current market prices.

In selecting fixed income securities, the subadviser uses an internally developed valuation model that quantifies return expectations for all major bond markets, domestic and foreign. The model employs a qualitative credit review process that assesses the ways in which macroeconomic forces (such as inflation, risk premiums and interest rates) may affect industry trends. Against the output of this model, the subadviser considers the viability of specific debt securities compared to certain qualitative factors, such as management strength, market position, competitive environment and financial flexibility, as well as certain quantitative factors, such as historical operating results, calculation of credit ratios, and expected future outlook. The fund may invest in both investment grade and high yield (lower-rated) securities (sometimes referred to as “junk bonds”).

The subadviser’s fixed income strategy combines judgments about the absolute value of the fixed income universe and the relative value of issuer sectors, maturity intervals, duration of securities, quality and coupon segments and specific circumstances facing the issuers of fixed income securities. Duration measures a fixed income security’s price sensitivity to interest rates by indicating the approximate change in a fixed income security’s price if interest rates move up or down in one percent (1%) increments. Duration management involves adjusting the sensitivity to interest rates of the holdings within a country. The subadviser manages duration by choosing a maturity mix that provides opportunity for appreciation while also limiting interest rate risks.

The fund’s risk is carefully monitored with consideration given to the risk generated by individual positions, sector, country and currency views.

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The fund may invest in cash or cash equivalent instruments, including shares of an affiliated investment company. The subadviser actively manages the fund. As such, increased portfolio turnover may result in higher costs for brokerage commissions and transaction costs.

Investments in fixed income securities may include debt securities of governments throughout the world (including the U.S.), their agencies and instrumentalities, debt securities of corporations, mortgage-backed securities and asset-backed securities. Investment in equity securities may include common stock, preferred stock, IPOs and ETFs. The fund may invest in certain issuers by investing in other open-end investment companies, including investment companies advised by the subadviser, to the extent permitted by applicable law. In addition, the fund attempts to generate positive returns through sophisticated currency management techniques. These decisions are integrated with analysis of global market and economic conditions.

The fund may, but is not required to, use derivative instruments for risk management purposes or as part of the fund’s investment strategies. Generally, derivatives are financial contracts whose value depends upon, or is derived from, the value of an underlying asset, reference rate, or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, and related indexes. Examples of derivatives include options, futures, forward agreements, swap agreements (including, but not limited to, interest rate and credit default swaps), and credit-linked securities. The fund may use derivatives to earn income and enhance returns, to manage or adjust the risk profile of the fund, to replace more traditional direct investments, or to obtain exposure to certain markets.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Initial public offerings risk
	•	Investment company securities risk
	•	Issuer risk
	•	Liquidity risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

Calendar Year Total Returns for Series I:





-13.38%	-23.21%	26.43%	12.73%	6.20%	13.50%	5.13%	-34.29%

2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		14.38% (Quarter ended 6/30/2003) Worst Quarter: -20.61% (Quarter ended 12/31/2008)

124

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-34.29%		-1.26%		-3.05%		5/1/2000
Series II^A		-34.39%		-1.46%		-3.18%		1/28/2002
Series NAV^B		-34.21%		-1.21%		-3.03%		2/28/2005
Combined Index^C		-26.86%		1.99%		-1.37%
S&P 500 Index^D		-37.00%		-2.19%		-3.77%

^C The Combined Index was added to more accurately reflect the investment objective of the Global Allocation Trust, and is an unmanaged index compiled by UBS Global Asset Management. It was constructed as follows: 40% Russell 3000 Index, 22% MSCI World ex-USA (free) Index, 21% Citigroup Broad Investment Grade (BIG) Bond Index, 9% Citigroup World Government Bond non-US Index, 3% Merrill Lynch High Yield Cash Pay Index, 3% MSCI Emerging Free Markets Index and 2% J.P. Morgan EMBI Global. Effective February 1, 2009, the Combined Index is constructed as follows: 65% MSCI All-Country World Index, 15% Citigroup World Government Bond Ex US Index (WGBI Ex US), 15% Citigroup World Government Bond US Index (WGBI US), 2% JPMorgan Emerging Markets Bond Index Global (EMBI Global) and 3% Merrill Lynch US High Yield Cash Pay Constrained Index.

^D The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

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SPECIALTY FUNDS

FINANCIAL SERVICES TRUST


Subadviser:		Davis Selected Advisers, L.P.


*Investment Objective:*		To seek growth of capital.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in companies that, at the time of investment, are principally engaged in financial services and the fund invests primarily in common stocks of financial services companies.

A company is “principally engaged” in financial services if it owns financial services-related assets constituting at least 50% of the value of its total assets, or if at least 50% of its revenues are derived from its provision of financial services. Companies in the financial services industry include commercial banks, industrial banks, savings institutions, finance companies, diversified financial services companies, investment banking firms, securities brokerage houses, investment advisory companies, leasing companies, insurance companies and companies providing similar services. The fund may also invest in other equity securities and in foreign and fixed income securities.

The subadviser uses the Davis Investment Discipline in managing the fund’s portfolio. The subadviser conducts extensive research to seek to identify companies with durable business models that can be purchased at attractive valuations relative to their intrinsic value. The subadviser emphasizes individual stock selection and believes that the ability to evaluate management is critical. The subadviser routinely visits managers at their places of business in order to gain insight into the relative value of different businesses. Such research, however rigorous, involves predictions and forecasts that are inherently uncertain.

The subadviser has developed the following list of characteristics that it believes help companies to create shareholder value over the long term and manage risk. While few companies possess all of these characteristics at any given time, the subadviser seeks to invest in companies that demonstrate a majority, or an approximate mix of these characteristics, although there is no guarantee that it will be successful in doing so.


	•	Proven track record
	•	Significant alignment of interest in business
	•	Strong balance sheet
	•	Low cost structure
	•	High returns on capital
	•	Non-obsolescent products/services
	•	Dominant or growing market share
	•	Global presence and brand names
	•	Smart application of technology to improve business and lower costs

The subadviser’s goal is to invest in companies for the long term. The subadviser considers selling a company if it believes the stock’s market price exceeds its estimates of intrinsic value, or if the ratio of the risks and rewards of continuing to own the company is no longer attractive.

The fund may engage in active and frequent trading to achieve its principal investment strategies which will increase transaction costs.

The fund concentrates (that is invests at least 25% or more) its investments in securities of companies engaged in the financial services industries, a comparatively narrow segment of the economy, and may therefore experience greater volatility than funds investing in a broader range of industries. Moreover, a fund which concentrates its investments in a particular sector is particularly susceptible to the impact of market, economic, regulatory and other factors affecting that sector.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Industry or sector investing risk
	•	Issuer risk
	•	Non-diversified risk

126

Past Performance

Calendar Year Total Returns for Series I:





-17.88%	33.58%	10.38%	9.78%	23.12%	-6.82%	-44.65%

2002	2003	2004	2005	2006	2007	2008


Best Quarter:		20.96% (Quarter ended 6/30/2003) Worst Quarter: -27.18% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-44.65%		-5.11%		-3.10%		4/30/2001
Series II^A		-44.75%		-5.29%		-3.25%		1/28/2002
Series NAV^B		-44.63%		-5.08%		-3.08%		4/29/2005
Lipper Financial Services Index^C		-47.75%		-8.82%		-4.10%

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

GLOBAL REAL ESTATE TRUST


Subadviser:		Deutsche Investment Management Americas Inc. (“DIMA”)


	•	Sub-Subadviser: RREEF America (“RREEF”) L.L.C.


*Investment Objective:*		To seek a combination of long-term capital appreciation and current income.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of U.S. real estate investment trusts (“REITs”), foreign entities with tax-transparent structures similar to REITs and U.S. and foreign real estate operating companies. Equity securities include common stock, preferred stock and securities convertible into common stock. The fund will be invested in issuers located in at least three different countries, including the U.S.

The fund may also invest its assets in short-term debt securities, notes, bonds, securities of companies not principally engaged in real estate, stock index futures contracts and similar instruments and American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) and Global Depositary Receipts (GDRs).

A company is considered to be a real estate operating company if, in the opinion of RREEF, at least 50% of its revenues or 50% of the market value of its assets at the time its securities are purchased by the fund are attributed to the ownership, construction, management or sale of real estate.

RREEF looks for real estate securities it believes will provide superior returns to the fund, and attempts to focus on companies with the potential for stock price appreciation and a record of paying dividends.

127

To find these issuers, RREEF tracks economic conditions and real estate market performance in major metropolitan areas and analyzes performance of various property types within those regions. To perform this analysis, it uses information from a global network of real estate professionals to evaluate the holdings of real estate companies and REITs in which the fund may invest. Its analysis also includes the companies’ management structure, financial structure and business strategy. RREEF also considers the effect of the real estate securities markets in general when making investment decisions. RREEF does not attempt to time the market.

The fund may realize some short-term gains or losses if RREEF chooses to sell a security because it believes that one or more of the following is true:


	•	A security is not fulfilling its investment purpose;
	•	A security has reached its optimum valuation; or
	•	A particular company or general economic conditions have changed.

RREEF’s U.S. fund management team will select all North and South American investments. Foreign investments will be selected by fund management teams within affiliates of RREEF under common control with Deutsche Bank AG, the indirect parent company of the subadviser. All fund management teams will contribute to the global regional allocation process.

Description of REITs

A REIT invests primarily in income-producing real estate or makes loans to persons involved in the real estate industry.

Some REITs, called equity REITs, buy real estate and pay investors income from the rents received from the real estate owned by the REIT and from any profits on the sale of its properties. Other REITs, called mortgage REITs, lend money to building developers and other real estate companies and pay investors income from the interest paid on those loans. There are also hybrid REITs which engage in both owning real estate and making loans.

If a REIT meets certain requirements, it is not taxed on the income it distributes to its investors.

Based on its recent practices, the subadviser expects that the fund’s assets will be invested primarily in equity REITs. In changing market conditions, the fund may invest in other types of REITs. While a REIT is an entity defined by U.S. tax laws, various countries have created entities similar in terms of tax treatment to REITs.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	High portfolio turnover risk
	•	Industry or sector investing risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Non-diversified risk
	•	Real estate securities risk

Past Performance

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Calendar Year Total Returns for Series NAV:





				-9.88%		-45.64%

				2007		2008


Best Quarter:		5.83% (Quarter ended 3/31/2007) Worst Quarter: -29.97% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-45.64%

-17.48%

4/28/2006

S&P/Citigroup World Property Index^A

-47.61%

-17.13%

EPRA/NAREIT Equity Index^A

-46.08%

-17.74%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

HEALTH SCIENCES TRUST


Subadviser:		T. Rowe Price Associates, Inc.


*Investment Objective:*		To seek long-term capital appreciation.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in common stocks of companies engaged, at the time of investment, in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences (collectively termed “health sciences”).

While the fund may invest in companies of any size, the majority of its assets are expected to be invested in large- and mid-capitalization companies.

The subadviser’s portfolio managers divide the health sciences sector into four main areas: pharmaceuticals, health care services companies, products and devices providers, and biotechnology firms. Their allocation among these four areas will vary depending on the relative potential within each area and the outlook for the overall health sciences sector. While most assets will be invested in U.S. common stocks, the fund may purchase other securities, including foreign securities, futures, and options in keeping with its objective. In addition, the fund writes call and put options primarily as a means of generating additional income. Normally, the fund will own the securities on which it writes these options. The premium income received by writing covered calls can help reduce but not eliminate portfolio volatility.

The fund concentrates its investments (invests more than 25% of its total assets) in securities of companies in the health sciences sector, a comparatively narrow segment of the economy, and therefore may experience greater volatility than funds investing in a broader range of industries.

In managing the fund, the subadviser uses a fundamental, bottom-up analysis that seeks to identify high quality companies and the most compelling investment opportunities. In general, the fund will follow a growth investment strategy, seeking companies whose earnings are expected to grow faster than inflation and the economy in general. When stock valuations seem unusually high, however, a “value” approach, which gives preference to seemingly undervalued companies, may be emphasized.

The fund may invest up to 35% of its total assets in foreign securities (including emerging market securities) and may 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.

129

arise when the fund’s management believes a security could increase in value for a variety of reasons including a change in management, an extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities.

The fund holds a certain portion of its assets in money market reserves which can consist of shares of the T. Rowe Price Reserve Investment Fund (or any other internal T. Rowe Price money market fund) as well as U.S. dollar and foreign currency-denominated money market securities, including repurchase agreements, in the two highest rating categories, maturing in one year or less.

The fund may sell securities for a variety of reasons such as to secure gains, limit losses or redeploy assets into more promising opportunities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series I:





-27.24%	36.22%	15.31%	12.50%	8.51%	17.67%	-29.90%

2002	2003	2004	2005	2006	2007	2008


Best Quarter:		18.13% (Quarter ended 6/30/2003) Worst Quarter: -19.64% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-29.90%		3.03%		2.91%		4/30/2001
Series II^A		-30.06%		2.82%		2.75%		1/28/2002
Series NAV^B		-29.86%		3.07%		2.94%		4/29/2005
Lipper Health/Biotechnology Index^C		-24.13%		1.76%		1.07%

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

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MUTUAL SHARES TRUST


Subadviser:		Franklin Mutual Advisers, LLC


*Investment Objective:*		To seek capital appreciation, which may occasionally be short-term. Income is a secondary objective.

*Investment Strategies:*		Under normal market conditions, the fund invests predominately in equity securities (including convertible securities or securities the subadviser expects to be exchanged for common or preferred stock) of companies of any nation that the subadviser believes are available at market prices less than their value based on certain recognized or objective criteria (intrinsic value).

Following this value-oriented strategy, the fund invests primarily in:


	•	Undervalued Securities. Securities the subadviser believes are trading at a discount to intrinsic value.

And, to a lesser extent, the fund also invests in:


	•	Risk Arbitrage Securities. Securities of companies involved in restructurings (such as mergers, acquisitions, consolidations, liquidations, spinoffs, or tender or exchange offers) or that the subadviser believes are inexpensive relative to an economically equivalent security of the same or another company.
	•	Distressed Companies. Securities of companies that are, or are about to be, involved in reorganizations, financial realigning or bankruptcy.

In pursuit of its value-oriented strategy, the fund is not limited to pre-set maximums or minimums governing the size of the companies in which it may invest. However, as a general rule, the fund invests the equity portion of its portfolio primarily to predominantly in companies with market capitalizations (share price multiplied by the number of shares of common stock outstanding) greater than $5 billion, with a portion to significant amount in smaller companies. The fund may invest up to 35% of its assets in foreign securities including sovereign debt and participations in foreign government debt.

The fund’s investments in distressed companies typically involve the purchase of bank debt, lower-rated or defaulted debt securities, comparable unrated debt securities or other indebtedness (or participations in the indebtedness) of such companies. Such other indebtedness generally represents a specific commercial loan or portion of a loan made to a company by a financial institution such as a bank. Loan participations represent fractional interests in a company’s indebtedness and are generally made available by banks or other institutional investors. By purchasing all or a part of a company’s direct indebtedness, the fund, in effect, steps into the shoes of the lender. If the loan is secured, the fund will have a priority claim to the assets of the company ahead of unsecured creditors and stockholders. The fund generally makes such investments to achieve capital appreciation rather than to seek income. When engaging in an arbitrage strategy, the fund typically buys one security while at the same time selling short another security. The fund generally buys the security that the subadviser believes is either inexpensive relative to the price of the other security or otherwise undervalued, and sells short the security that the subadviser believes is either expensive relative to the price of the other security or otherwise overvalued. In doing so, the fund attempts to profit from a perceived relationship between the values of the two securities. The fund generally engages in an arbitrage strategy in connection with an announced corporate restructuring or other corporate action or event.

The subadviser employs a research driven, fundamental value strategy for the fund. In choosing equity investments, the subadviser focuses on the market price of a company’s securities relative to the subadviser’s own evaluation of the company’s asset value, including an analysis of book value, cash flow potential, long-term earnings and multiples of earnings. Similarly, debt securities and other indebtedness, including loan participations, are generally selected based on the subadviser’s own analysis of the security’s intrinsic value rather than the coupon rate or rating of the security. The subadviser examines each investment separately and there are no set criteria as to specific value parameters, asset size, earnings or industry type.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Arbitrage securities and distressed companies risk
	•	Credit and counterparty risk
	•	Distressed investments risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Loan participations risk
	•	Medium and smaller company risk
	•	Short sales risk

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Past Performance

Calendar Year Total Returns for Series NAV:





				-37.86%

				2008


Best Quarter:		-5.95% (Quarter ended 6/30/2008) Worst Quarter: -21.42% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-37.86%

-26.77%

4/30/2007

S&P 500 Index^A

-37.00%

-23.98%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

NATURAL RESOURCES TRUST


Subadviser:		Wellington Management Company, LLP


*Investment Objective:*		To seek long-term total return.

*Investment Strategies:*		Under normal market conditions, the fund will invest at least 80% of its net assets (plus any borrowings for investment purposes) in equity and equity-related securities of natural resource-related companies worldwide, including emerging markets. Natural resource-related companies include companies that own or develop energy, metals, forest products and other natural resources, or supply goods and services to such companies.

The fund seeks to invest in companies that are expected to benefit from rising demand for natural resources and natural resource-based products and services. The fund invests in four major sectors: 1) energy, 2) metals and mining, 3) forest products and 4) other natural resource-based companies, which are described below.

Energy. The energy sector includes companies engaged in exploration, extraction, servicing, processing, distribution and transportation of oil, natural gas and other energy sources.

Metals and Mining. The metals and mining sector includes companies engaged in exploration, mining, processing, fabrication, marketing or distribution of precious and non-precious metals and minerals.

Forest Products. The forest products sector includes timber, pulp and paper product companies.

Other Natural Resources-Based Companies. Other natural resources sectors consist of companies engaged in producing, processing and distributing agricultural products, fertilizer, and miscellaneous raw materials.

The fund’s “normal” allocation across the natural resources sectors is approximately:


	•	60% — Energy and energy related
	•	30% — Metals and mining
	•	10% — Forest products, miscellaneous commodities companies, and non-ferrous metals.

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The “normal” sector allocation reflects the subadviser’s view on availability and relative attractiveness of investment opportunities within the natural resources area. The fund’s sector allocation might differ significantly from this “normal” allocation at any specific point in time.

The subadviser uses a value-based approach to invest in a broad range of natural resources sectors. The subadviser utilizes a moderate rotation among sectors in conjunction with bottom-up stock selection. Under normal market conditions the fund is fully invested.

Natural resources companies often operate in countries that are different from the country in which their securities trade. Country allocation is primarily a result of the sector and security selection; however, a key element of the subadviser’s analysis is understanding the economic and political dynamics of each of these countries. The fund may invest without limitation in foreign securities, including emerging markets. The fund utilizes currency hedging to protect the value of the fund’s assets when the subadviser deems it advisable to do so.

The subadviser utilizes fundamental research to identify companies with the best growth prospects and relative values. A large number of companies worldwide in the relevant sub-sectors are monitored and stocks are added or deleted from the fund on the basis of relative attractiveness. The subadviser uses a variety of tools such as income statement and balance sheet analysis, cash flow projections and asset value calculations to analyze companies. Particularly in the oil and gas industry, specific accounting issues play an important role.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Industry or sector investing risk
	•	Issuer risk
	•	Liquidity risk
	•	Non-diversified risk

Past Performance

Calendar Year Total Returns for Series I:





24.32%	46.77%	22.30%	40.68%	-51.61%

2004	2005	2006	2007	2008


Best Quarter:		25.72% (Quarter ended 9/30/2005) Worst Quarter: -36.61% (Quarter ended 9/30/2008)

133

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-51.61%		8.72%		14.84%		5/5/2003
Series II		-51.71%		8.49%		14.60%		5/5/2003
Series NAV^A		-51.60%		8.76%		14.88%		2/28/2005
Lipper Natural Resources Index^B		-49.00%		10.16%		13.67%
Combined Index^B,C		-43.73%		7.41%		13.34%

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

^C The Combined Index is comprised of 60% MSCI World Energy Index, 30% MSCI World Metals & Mining Index and 10% MSCI World Paper & Forest Products Index.

REAL ESTATE EQUITY TRUST


Subadviser:		T. Rowe Price Associates, Inc.


*Investment Objective:*		To seek long-term growth through a combination of capital appreciation and current income.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in the equity securities of real estate companies. The definition of real estate companies is broad and includes those that derive at least 50% of revenues or profits from, or commit at least 50% of assets to, real estate activities.

The fund is likely to maintain a substantial portion of assets in real estate investment trusts (“REITs”). REITs are pooled investment vehicles that typically invest directly in real estate, in mortgages and loans collateralized by real estate, or in a combination of the two. “Equity” REITs invest primarily in real estate that produces income from rentals. “Mortgage” REITs invest primarily in mortgages and derive their income from interest payments. The fund generally invests in equity REITs. Other investments in the real estate industry may include real estate operating companies, brokers, developers, and builders of residential, commercial, and industrial properties; property management firms, finance, mortgage, and mortgage servicing firms; construction supply and equipment manufacturing companies; and firms dependent on real estate holdings for revenues and profits, including lodging, leisure, timber, mining, and agriculture companies.

The types of properties owned, and sometimes managed, by REITs include: office buildings, apartments and condominiums, retail properties, industrial and commercial sites, hotels and resorts, health care facilities, manufactured housing, self-storage facilities, leisure properties and special use facilities.

REITs usually specialize in a particular type of property and may concentrate their investments in particular geographical areas. For this reason and others, a fund investing in REITs provides investors with an efficient, low-cost means of diversifying among various types of property in different regions.

The fund will not own real estate directly and will have no restrictions on the size of companies selected for investment. Up to 20% of the fund’s net assets may be invested in companies deriving a substantial portion of revenues or profits from servicing real estate firms or in companies unrelated to the real estate business.

Stock selection is based on fundamental, bottom-up analysis that generally seeks to identify high-quality companies with both good appreciation prospect and income-producing potential. Factors considered by the subadviser in selecting real estate companies include one or more of the following: relative valuation; free cash flow; undervalued assets; quality and experience of management; type of real estate owned; and the nature of a company’s real estate activities.

While most assets will be invested in U.S. common stocks, other securities may also be purchased, including foreign stocks (up to 25% of total assets), convertible securities, futures, and options, in keeping with the objectives of the fund. The fund may invest in debt securities of any type, including municipal securities, without regard to quality or rating. The fund may purchase up to 10% of its total assets in any type of non-investment grade debt securities (or “junk bond”) including those in default. Fund investments in convertible securities are not subject to this limit. Below investment grade bonds or junk bonds can be more volatile

134

and have greater risk of default than investment grade bonds. The fund’s fixed income investments may include privately negotiated notes or loans, including loan participations and assignments (“bank loans”). These investments in bank loans will only be made in companies, municipalities or entities that meet the fund’s investment criteria. Direct investments may be illiquid and holding a loan could expose the fund to the risks of being a direct lender. Since the fund invests primarily in equity securities, the risks associated with fixed income securities will not affect the fund as much as they would a fund that invests more of its assets in fixed income securities.

The fund holds a certain portion of its assets in money market reserves which can consist of shares of the T. Rowe Price Investment Fund (or any other T. Rowe Price money market fund) as well as U.S. dollar and foreign currency-denominated money market securities, including repurchase agreements, in the two highest rating categories, maturing in one year or less. The fund may invest it cash reserves in U.S. dollars and foreign currencies.

The fund may sell securities for a variety of reasons, such as to secure gains, limit losses, or redeploy assets into more promising opportunities.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Issuer risk
	•	Liquidity risk
	•	Loan participations risk
	•	Medium and smaller company risk
	•	Real estate securities risk

Past Performance

Calendar Year Total Returns for Series NAV:





				-18.58%		-41.69%

				2007		2008


Best Quarter:		3.34% (Quarter ended 9/30/2008) Worst Quarter: -41.09% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series NAV

-41.69%

-18.57%

4/28/2006

DJ Wilshire REIT Index^A

-39.83%

-17.13%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

135

REAL ESTATE SECURITIES TRUST


Subadviser:		Deutsche Investment Management Americas Inc. (“DIMA”)


	•	Sub-Subadviser: RREEF America (“RREEF”) L.L.C.


*Investment Objective:*		To seek to achieve a combination of long-term capital appreciation and current income.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of real estate investment trusts (“REITs”) and real estate companies. Equity securities include common stock, preferred stock and securities convertible into common stock.

A company is considered to be a real estate company if, in the opinion of RREEF, at least 50% of its revenues or 50% of the market value of its assets at the time its securities are purchased by the fund are attributed to the ownership, construction, management or sale of real estate.

To find these issuers, RREEF tracks economic conditions and real estate market performance in major metropolitan areas and analyzes performance of various property types within those regions. To perform this analysis, it uses information from a nationwide network of real estate professionals to evaluate the holdings of real estate companies and REITs in which the fund may invest. Its analysis also includes the companies’ management structure, financial structure and business strategy. The goal of these analyses is to determine which of the issuers RREEF believes will be the most profitable to the fund. RREEF also considers the effect of the real estate securities markets in general when making investment decisions. RREEF does not attempt to time the market.

A REIT invests primarily in income-producing real estate or makes loans to persons involved in the real estate industry.

If a REIT meets certain requirements, it is not taxed on the income it distributes to its investors.

The fund may realize some short-term gains or losses if RREEF chooses to sell a security because it believes that one or more of the following is true:


	•	A security is not fulfilling its investment purpose;
	•	A security has reached its optimum valuation; or
	•	A particular company or general economic conditions have changed.

Based on its recent practices, RREEF expects that the fund’s assets will be invested primarily in equity REITs. In changing market conditions, the fund may invest in other types of REITs.

When RREEF believes that it is prudent, the fund may invest a portion of its assets in other types of securities. These securities may include convertible securities, short-term securities, bonds, notes, securities of companies not principally engaged in the real estate industry, non-leveraged stock index futures contracts and other similar securities. (Stock index futures contracts, can help the fund’s cash assets remain liquid while performing more like stocks).

The fund may invest up to 10% of its total assets in securities of foreign real estate companies.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Non-diversified risk
	•	Real estate securities risk

136

Past Performance

Calendar Year Total Returns for Series I:





-8.00%	25.71%	3.15%	2.58%	39.15%	32.04%	11.85%	38.10%	-15.61%	-39.42%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		16.06% (Quarter ended 12/31/2004) Worst Quarter: -39.92% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-39.42%		0.84%		5.91%		4/30/1987
Series II^A		-39.58%		0.63%		5.78%		1/28/2002
Series NAV^B		-39.39%		0.88%		5.93%		2/28/2005
Morgan Stanley REIT Index		-40.87%		-0.29%		6.67%

SCIENCE & TECHNOLOGY TRUST


Subadvisers:		T. Rowe Price Associates, Inc. (“T. Rowe Price”) and RCM Capital Management LLC (“RCM”)


*Investment Objective:*		To seek long-term growth of capital. Current income is incidental to the fund’s objective.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in the common stocks of companies expected to benefit from the development, advancement, and/or use of science and technology. For purposes of satisfying this requirement, common stock may include equity linked notes and derivatives relating to common stocks, such as options on equity linked notes.

The fund employs a multi-manager approach with two subadvisers, each of which employs its own investment approach and independently manages its portion of the fund. The fund will be rebalanced quarterly so that each subadviser manages the following portion of the fund:

50%* T. Rowe Price

50%* RCM

*Percentages are approximate. Since the fund is only rebalanced quarterly, the actual portion of the fund managed by each subadviser will vary during each calendar quarter.

This allocation methodology may change in the future.

In managing its portion of the fund, RCM may enter into short sales including short sales against the box.

137

Some industries likely to be represented in the fund include:


	•	computers including hardware, software and electronic components
	•	telecommunications
	•	media and information services
	•	environmental services
	•	e-commerce
	•	life sciences and health care, including pharmaceuticals, medical devices, and biotechnology
	•	chemicals and synthetic materials
	•	defense and aerospace

While most of the fund’s assets are invested in U.S. common stocks, the fund may also purchase other types of securities, including U.S. and non-U.S. dollar denominated foreign securities, convertible stocks and bonds, and warrants in keeping with its objectives.

Stock selection for the fund generally reflects a growth approach based on an assessment of a company’s fundamental prospects for above-average earnings, rather than on a company’s size. As a result, fund holdings can range from securities of small companies developing new technologies to securities of blue chip firms with established track records of developing and marketing technological advances. The fund may also invest in companies that are expected to benefit from technological advances even if they are not directly involved in research and development. The fund may invest in suitable technology companies through IPOs.

The fund holds a certain portion of its assets in money market reserves which can consist of shares of the T. Rowe Price Reserve Investment Fund (or any other internal T. Rowe Price money market fund) as well as U.S. dollar and foreign currency-denominated money market securities, including repurchase agreements, in the two highest rating categories, maturing in one year or less. The fund may invest reserves in U.S. dollars and foreign currencies.

The fund may sell securities for a variety of reasons such as to secure gains, limit losses or redeploy assets into more promising opportunities.

The fund may invest up to 10% of its total assets in hybrid instruments. Hybrid instruments are a type of high-risk derivative which can combine the characteristics of securities, futures and options. Such securities may bear interest or pay dividends at below market (or even relatively nominal) rates. The SAI contains a more complete description of such instruments and the risk associated therewith.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

In pursuing the fund’s investment objective, each subadviser has the discretion to purchase some securities that do not meet its normal investment criteria, as described above, when they perceive an unusual opportunity for gain. These special situations might arise when a subadviser believes a security could increase in value for a variety of reasons including a change in management, an extraordinary corporate event, or a temporary imbalance in the supply of or demand for the securities.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Non-diversified risk

Past Performance

138

Calendar Year Total Returns for Series I:





99.49%	-34.06%	-41.25%	-40.76%	50.39%	0.87%	2.08%	5.52%	19.57%	-44.44%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		41.72% (Quarter ended 12/31/1999) Worst Quarter: -40.43% (Quarter ended 9/30/2001)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-44.44%		-6.31%		-6.75%		1/1/1997
Series II^A		-44.60%		-6.50%		-6.86%		1/28/2002
Series NAV^B		-44.42%		-6.27%		-6.73%		4/29/2005
Lipper Science and Technology Index		-44.10%		-5.23%		-4.06%

UTILITIES TRUST


Subadviser:		Massachusetts Financial Services Company


*Investment Objective:*		To seek capital growth and current income (income above that available from the fund invested entirely in equity securities).

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowing for investment purposes) in securities of companies in the utilities industry. Securities in the utilities industry may include equity and debt securities of domestic and foreign companies (including emerging markets).

The subadviser considers a company to be in the utilities industry if, at the time of investment, the subadviser determines that a substantial portion (i.e., at least 50%) of the company’s assets or revenues are derived from one or more utilities. Companies in the utilities industry include: (i) companies engaged in the manufacture, production, generation, transmission, sale or distribution of electric, gas or other types of energy, water or other sanitary services; and (ii) companies engaged in telecommunications, including telephone, cellular, telegraph, satellite, microwave, cable television and other communications media (but not engaged in public broadcasting).

The fund invests primarily in equity securities, including common stocks and related securities, such as preferred stocks, convertible securities and depositary receipts, but may also invest in corporate bonds and other debt instruments. The subadviser primarily invests the fund’s investments in debt instruments in investment grade debt instruments, but may invest up to 20% of the fund’s net assets in lower rated bonds, commonly known as “junk bonds.” The fund may invest in companies of any size.

The subadviser uses a bottom-up investment approach in buying and selling investments for the fund. Investments are selected primarily based on fundamental analysis of issuers or instruments in light of market, economic, political, and regulatory conditions. Factors considered for equity securities may include analysis of earnings, cash flows, competitive position, and management ability. Quantitative analysis of these and other factors may also be considered. Factors considered for debt instruments may include the instrument’s credit quality, collateral characteristics and indenture provisions and the issuer’s management ability, capital structure, leverage, and ability to meet its current obligations. Quantitative analysis of the structure of a debt instrument and its features may also be considered.

139

The fund may invest up to 40% of its net assets in foreign securities (including emerging markets securities, Brady bonds and depositary receipts) such as:


	•	Equity securities of foreign companies in the utilities industry,
	•	Fixed income securities of foreign companies in the utilities industry,
	•	Fixed income securities issued by foreign governments.

The fund may have exposure to foreign currencies through its investments in foreign 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.

The fund may use derivatives for different purposes, including to earn income and enhance returns, to increase or decrease exposure to a particular market, to manage or adjust the risk profile of the fund, or as alternatives to direct investments.

The fund’s investment process may, at times, result in a higher than average portfolio turnover ratio and increased trading expenses.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	High portfolio turnover risk
	•	Industry or sector investing risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk
	•	Non-diversified risk

Past Performance

Calendar Year Total Returns for Series I:





-23.46%	34.53%	29.42%	16.82%	31.00%	27.40%	-38.64%

2002	2003	2004	2005	2006	2007	2008


Best Quarter:		19.87% (Quarter ended 6/30/2003) Worst Quarter: -24.50% (Quarter ended 9/30/2008)

140

FUNDS OF FUNDS

ABSOLUTE RETURN TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To seek maximum real return consistent with preservation of capital and prudent investment management.

*Investment Strategies:*		The fund operates as a fund of funds and invests in a number of funds and other investment companies (collectively, “Underlying Funds”).

In addition to investing in exchange traded funds, the fund may also invest in the securities of other investment companies and may make direct investments in other types of investments, see “Other Permitted Investments by the Funds of Funds.”

Under normal market conditions, the subadviser attempts to achieve an average annual total rate of return for the fund that meets or exceeds the Consumer Price Index for All Urban Consumers plus 6% (before fees) over a long-term time horizon (approximately five to eight years) while attempting to maintain a low probability of negative returns in any 12-month time period. The Adviser and the subadviser do not represent or guarantee that the fund will meet this total return goal or achieve positive returns every year.

The subadviser allocates the assets of the fund among the Underlying Funds and selects the percentage level to be maintained in specific Underlying Funds. The subadviser may from time to time adjust the percent of assets invested in any specific Underlying Fund held by the fund.

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund. However, the fund invests its assets in the Underlying Funds, each of which generally has diversified holdings.

The fund may invest in various Underlying Funds that as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large-capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of the Underlying Funds has its own investment strategy that, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the Underlying Funds focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed-income Underlying Funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Convertible securities risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

This section normally shows how the fund’s total return has varied from year to year, along with a broad-based securities market index for reference. Because the fund has less than one calendar year of performance as of the date of this Prospectus, there is no past performance to report.

142

AMERICAN DIVERSIFIED GROWTH & INCOME TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To seek long term growth of capital and income.

*Investment Strategies:*		The fund invests in other funds and other investment companies (collectively, “Underlying Funds”) as well as other types of investments as described below. Under normal market conditions, the fund will generally invest between 70% and 80% of its assets in equity securities, which include securities held by the Underlying Funds, and between 20% and 30% of its assets in fixed income securities, which include securities held by the Underlying Funds.

The fund operates as a fund of funds and currently primarily invests in ten Underlying Funds of the American Funds Insurance Series: Bond Fund, Growth Fund, Growth-Income Fund, International Fund, Asset Allocation Fund, Blue Chip Income and Growth Fund, Global Growth Fund, Global Small Capitalization Fund, High-Income Bond Fund, and New World Fund, as well as other Underlying Funds as described below. When purchasing shares of the American Funds Insurance Series, the fund only purchases Class 1 shares (which are not subject to Rule 12b-1 fees).

The fund is authorized to invest without limitation in other Underlying Funds including other funds of the American Funds Insurance Series and in other types of investments as described below. The fund may purchase any Underlying Fund except other JHT funds of funds and the following JHT feeder funds: the American Asset Allocation Trust, American Blue Chip Income and Growth Trust, American Bond Trust, American Global Growth Trust, American Global Small Capitalization Trust, American Growth Trust, American Growth-Income Trust, American High-Income Bond Trust, American International Trust and American New World Trust. When purchasing shares of other JHT Funds, the fund only purchases NAV shares (which are not subject to Rule 12b-1 fees).

The Underlying Funds as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large capitalization stocks, domestic and foreign securities (including emerging market securities). Each of the funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the funds in which the fund invests focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed-income funds collectively hold various types of debt instruments such as corporate bonds, government issued, domestic and international securities.

In addition to investing in exchange traded funds (“ETFs”), the fund may also invest in the securities of other investment companies and may make direct investments in other types of investments, see “Other Permitted Investments by the Funds of Funds.”

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

143

Past performance

AMERICAN FUNDAMENTAL HOLDINGS TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To seek long term growth of capital.

*Investment Strategies:*		The fund invests in other funds and other investment companies (collectively, “Underlying Funds”) as well as other types of investments as described below.

The fund operates as a fund of funds and currently invests primarily in four Underlying Funds of the American Funds Insurance Series: Bond Fund, Growth Fund, Growth-Income Fund, and International Fund. The fund is permitted to invest in six other Underlying Funds of the American Funds Insurance Series: Asset Allocation Fund, Blue Chip Income and Growth Fund, Global Growth Fund, Global Small Capitalization Fund, High-Income Bond Fund, and New World Fund as well as other Underlying Funds. When purchasing shares of the American Funds Insurance Series, the fund only purchases Class 1 shares (which are not subject to Rule 12b-1 fees).

The fund is authorized to invest without limitation in other Underlying Funds and in other types of investments. The fund may purchase any Underlying Funds except other JHT funds of funds and the following JHT feeder funds: the American Asset Allocation Trust, American Blue Chip Income and Growth Trust, American Bond Trust, American Global Growth Trust, American Global Small Capitalization Trust, American Growth Trust, American Growth-Income Trust, American High-Income Bond Trust, American International Trust and American New World Trust. When purchasing shares of other JHT Funds, the fund only purchases NAV shares (which are not subject to Rule 12b-1 fees).

The Underlying Funds as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large-capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of these funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of these funds focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed-income funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

The fund may invest in exchange traded funds (“ETFs”). The fund may also invest in the securities of other investment companies and may make direct investments in other types of investments. See “Other Permitted Investments by the Funds of Funds.”

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk
	•	Short sales risk

144

Past Performance

Calendar Year Total Returns for Series I:





				-30.92%

				2008


Best Quarter:		-0.50% (Quarter ended 6/30/2008) Worst Quarter: -16.17% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-30.92%

-29.02%

10/30/2007

Series II

-30.97%

-29.07%

10/30/2007

Series III

-30.61%

-28.71%

10/30/2007

Combined Index^A,B

-24.06%

-21.72%

^A The Combined Index represents 65% of the Standard & poor’s 500 Index and 35% of the Barclays Capital U.S. Aggregate Bond Index.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

AMERICAN GLOBAL DIVERSIFICATION TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To seek long term growth of capital.

*Investment Strategies:*		The fund invests in other funds and other investment companies (collectively, “Underlying Funds”) as well as other types of investments as described below. Under normal market conditions, the fund will invest a significant portion of its assets in securities, which include securities held by the Underlying Funds, that are located outside of the U.S.

The fund operates as a fund of funds and currently invests primarily in five Underlying Funds of the American Funds Insurance Series: Bond Fund, Global Growth Fund, Global Small Capitalization Fund, High-Income Bond Fund, and New World Fund. The fund is permitted to invest in five other Underlying Funds of the American Funds Insurance Series: Asset Allocation Fund, Growth Fund, International Fund, Growth-Income Fund, and Blue Chip Income and Growth Fund as well as other Underlying Funds as described below. When purchasing shares of the American Funds Insurance Series, the fund only purchases Class 1 shares (which are not subject to Rule 12b-1 fees).

The fund is authorized to invest without limitation in other Underlying Funds and in other types of investments. The fund may purchase any Underlying Funds except other JHT funds of funds and the following JHT feeder funds: American Asset Allocation Trust, American Blue Chip Income and Growth Trust, American Bond Trust, American Global Growth Trust, American Global Small Capitalization Trust, American Growth Trust, American Growth-Income Trust, American High-Income Bond Trust, American International Trust and American New World Trust. When purchasing shares of other JHT Funds the fund only purchases NAV shares (which are not subject to Rule 12b-1 fees).

145

growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the funds in which the fund invests focus their investment strategy on fixed-income securities, which may include investment grade and belowinvestment grade debt securities with maturities that range from short to longer term. The fixed-income funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Short sales risk

Past Performance

Calendar Year Total Returns for Series I:





				-34.72%

				2008


Best Quarter:		-0.88% (Quarter ended 6/30/2008) Worst Quarter: -17.95% (Quarter ended 12/31/2008)

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Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

-34.72%

-32.43%

10/30/2007

Series II

-34.85%

-32.57%

10/30/2007

Series III

-34.44%

-32.20%

10/30/2007

Combined Index^A,B

-28.67%

-25.54%

^A The Combined Index represents 70% of the MSCI World Index and 30% of the Barclays Capital U.S. Aggregate Bond Index.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

CORE ALLOCATION TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.))”


*Investment Objective:*		To seek long term growth of capital.

*Investment Strategies:*		The fund invests in other funds and other investment companies (collectively, “Underlying Funds”) as well as other types of investments as described below. The fund operates as a fund of funds. The fund may invest a substantial portion of its assets in the Core Allocation Plus Trust, a fund of JHT, but is authorized to invest without limitation in other Underlying Funds and in other types of investments as described below.

The fund may purchase any Underlying Fund except other JHT funds of funds and the following JHT feeder funds: the American Asset Allocation Trust, American Blue Chip Income and Growth Trust, American Bond Trust, American Global Growth Trust, American Global Small Capitalization Trust, American Growth Trust, American Growth-Income Trust, American High-Income Bond Trust, American International Trust and American New World Trust. When purchasing shares of other JHT funds, the fund only purchases NAV shares (which are not subject to Rule 12b-1 fees).

The Underlying Funds as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of the Underlying Funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the Underlying Funds in which the fund invests focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities (“commonly known as “junk bonds”) with maturities that range from short to longer term. The fixed-income Underlying Funds collectively hold various types of debt instruments such as corporate bonds, government issued, domestic and international securities.

The fund may invest in exchange traded funds (ETFs) and in the securities of other investment companies and make direct investments in other types of investments. See “Other Permitted Investments by the Funds of Funds” below.

The investment performance of the fund will reflect both its subadviser’s allocation decisions with respect to Underlying Funds and the investments and investment decisions made by the Underlying Funds’ subadvisers.

The fund anticipates that the fund’s allocation through the Underlying Funds to equity, fixed-income, and foreign securities will generally be within the following ranges, however, the fund reserves the right to invest outside these ranges at any time:

equity securities 50% to 75%

fixed-income securities 25% to 50%

foreign securities 0% to 100%

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Derivatives risk

147


	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past performance

CORE BALANCED TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.))”


*Investment Objective:*		To seek long term growth of capital.

*Investment Strategies:*		The fund invests in other funds and other investment companies (collectively, “Underlying Funds”) as well as other types of investments as described below. The fund operates as a fund of funds. The fund may invest a substantial portion of its assets in the Balanced Trust, a fund of JHT, but is authorized to invest without limitation in other Underlying Funds and in other types of investments as described below.

The Underlying Funds as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of the Underlying Funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the Underlying Funds in which the fund invests focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities (commonly known as “junk bonds”) with maturities that range from short to longer term. The fixed-income Underlying Funds collectively hold various types of debt instruments such as corporate bonds, government issued, domestic and international securities.

The fund may invest in exchange traded funds (“ETFs”) and in the securities of other investment companies and make direct investments in other types of investments. See “Other Permitted Investments by the Funds of Funds” below.

equity securities 55% to 75%

fixed-income securities 25% to 45%

foreign securities 0% to 100%

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

148

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past performance

CORE DISCIPLINED DIVERSIFICATION TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.))”


*Investment Objective:*		To seek long term growth of capital.

*Investment Strategies:*		The fund invests in other funds and other investment companies (collectively, “Underlying Funds”) as well as other types of investments as described below. The fund operates as a fund of funds. The fund may invest a substantial portion of its assets in the Disciplined Diversification Trust, a fund of JHT but is authorized to invest without limitation in other Underlying Funds and in other types of investments as described below.

The Underlying Funds as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of the Underlying Funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the Underlying Funds in which the fund invests focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities (commonly known as “junk bonds”) with maturities that range from short to longer term. The fixed-income Underlying Funds collectively hold various types of debt instruments such as corporate bonds, government issued, domestic and international securities.

equity securities 60% to 80%

149

fixed-income securities 20% to 40%

foreign securities 0% to 100%

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past performance

CORE FUNDAMENTAL HOLDINGS TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.))”


*Investment Objective:*		To seek long term growth of capital.

*Investment Strategies:*		The fund invests in other funds and other investment companies (collectively, “Underlying Funds”) as well as other types of investments as described below.

The fund operates as a fund of funds. The fund may invest a substantial portion of its assets in Underlying Funds that are series of the American Funds Insurance Series but is authorized to invest without limitation in other Underlying Funds and in other types of investments as described below.

The Underlying Funds as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of the Underlying Funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the Underlying Funds in which the fund invests focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities (commonly known as “junk bonds”) with maturities that range from short to longer term. The fixed-income Underlying Funds collectively hold various types of debt instruments such as corporate bonds, government issued, domestic and international securities.

The fund may invest in exchange traded funds (ETFs) and in the securities of other investment companies and make direct investments in other types of investments, see “Other Permitted Investments by the Funds of Funds” below.

150

equity securities 50% to 75%

fixed-income securities 25% to 50%

foreign securities 0% to 40%

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past performance

CORE GLOBAL DIVERSIFICATION TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.))”


*Investment Objective:*		To seek long term growth of capital.

*Investment Strategies:*		The fund invests in other funds and other investment companies (collectively, “Underlying Funds”) as well as other types of investments as described below. Under normal market conditions, the fund will invest a significant portion of its assets, directly or indirectly through Underlying Funds, in securities that are located outside the U.S.

151

derivatives such as options on securities and futures contracts. Certain of the Underlying Funds in which the fund invests focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities (“commonly known as “junk bonds”) with maturities that range from short to longer term. The fixed-income Underlying Funds collectively hold various types of debt instruments such as corporate bonds, government issued, domestic and international securities.

equity securities 50% to 75%

fixed-income securities 25% to 50%

foreign securities 40% or more

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past performance

CORE STRATEGY TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		Seeks long term growth of capital. Current income is also a consideration.

*Investment Strategies:*		Under normal market conditions, the fund operates as a fund of funds and invests in a number of the other index funds of JHT (“Underlying Funds”). The fund invests approximately 70% of its total assets in Underlying Funds which invest primarily in equity securities and approximately 30% of its total assets in Underlying Funds which invest primarily in fixed income securities.

The Underlying Funds eligible for purchase by the fund are the 500 Index Trust, the Mid Cap Index Trust, the Small Cap Index Trust, the International Equity Index Trust A and the Bond Index Trust A. The Underlying Funds are grouped according to whether they invest primarily in fixed income securities or equity securities. The Underlying Fund investing primarily in fixed income securities is the Bond Index Trust A. All other Underlying Funds invest primarily in equities securities.

152

The fund may invest in various Underlying Funds that as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large-capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of the Underlying Funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the Underlying Funds in which the fund invests focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed-income Underlying Funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

Variations in the target percentage allocations between the two types of Underlying Funds (fixed income and equity) are permitted up to 10% in either direction. For example, based on its investment allocation of approximately 30% of assets in fixed income securities and 70% of assets in equity securities, the fund may have a fixed income/equity allocation of 80%/20% or 60%/40%. Variations beyond the permissible deviation range of 10% are not permitted except that, in light of market or economic conditions, the subadviser may determine that the normal percentage limitations should be exceeded to protect the fund or to achieve the fund’s objective.

The fund is monitored daily. To maintain target allocations in the Underlying Funds, daily cash flow for the fund will be directed to the Underlying Fund that most deviates from target. Quarterly, the subadviser may also rebalance the fund’s Underlying Funds to maintain target allocations. The subadviser may from time to time adjust the percent of assets invested in any specific Underlying Fund held by the fund. Such adjustments may be made to increase or decrease the fund’s holdings of particular asset classes, such as common stocks of foreign issuers, or to adjust portfolio quality or the duration of fixed income securities. Adjustments may also be made to increase or reduce the percent of the fund’s assets subject to the management of a particular Underlying Fund subadviser. In addition, changes may be made to reflect fundamental changes in the investment environment.

The investment performance of the fund will reflect both its subadviser’s allocation decisions with respect to Underlying Funds and the investment decisions made by the Underlying Funds’ subadvisers. The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the Underlying Funds in which it invests.

The fund purchases only NAV shares of the Underlying Funds. (NAV shares are not subject to any Rule 12b-1 fees).

Use of Hedging and Other Strategic Transactions

The fund is not authorized to use any of the various investment strategies referred to under “Hedging, derivatives and other strategic transactions risk.”

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk

Past Performance

153

Calendar Year Total Returns for Series II:





				6.55%		-26.47%

				2007		2008


Best Quarter:		4.00% (Quarter ended 6/30/2007) Worst Quarter: -14.86% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series II

-26.47%

-5.17%

2/10/2006

Combined Index^A,B

-26.01%

-4.90%

^A The Combined Index is made up of 70% of the S&P 500 and 30% of the Barclays Capital U.S. Aggregate Bond Index.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

FRANKLIN TEMPLETON FOUNDING ALLOCATION TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To seek long-term growth of capital.

*Investment Strategies:*		The fund operates as a fund of funds and invests in other funds and in other investment companies (collectively, “Underlying Funds”) as well as other types of investments as described below.

The fund currently invests primarily in three JHT Underlying Funds: Global Trust, Income Trust and Mutual Shares Trust. However, it is also authorized to invest without limitation in other Underlying Funds and in other types of investments as described below.

The fund may purchase any funds except other JHT funds of funds and the JHT American Feeder Funds. When purchasing shares of other JHT funds, the fund only purchases NAV shares (which are not subject to Rule 12b-1 fees).

The fund may invest in other types of investments, described under “Other Permitted Investments by the Funds of Funds”.

The fund is monitored daily. To maintain target allocations in the Underlying Funds, daily cash flow for the fund will be directed to its Underlying Funds that most deviate from its target allocation. Quarterly, the subadviser may also rebalance the fund’s Underlying Funds to maintain target allocations.

Subject to the limitations described above, the fund may at any time invest any percentage of its assets in any of the different investments described above. The subadviser may from time to time adjust the percentage of assets invested in any specific investment held by the fund. Such adjustments may be made, for example, to increase or decrease the fund’s holdings of particular asset classes, to adjust portfolio quality or the duration of fixed income securities or to increase or reduce the percent of the fund’s assets subject to the management of a particular Underlying Fund subadviser. In addition, changes may be made to reflect fundamental changes in the investment environment.

The investment performance of the fund will reflect both its subadviser’s allocation decisions with respect to its investments and the investment decisions made by the adviser or subadviser to an investment company or similar entity in which the fund invests.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

154

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Derivatives risk
	•	Fund of funds risk
	•	Investment company securities risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series II:





				-35.55%

				2008


Best Quarter:		-2.64% (Quarter ended 6/30/2008) Worst Quarter: -18.01% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series II

-35.55%

-24.54%

4/30/2007

Combined Index^A,B

-26.01%

-15.61%

^A The Combined Index represents 70% of the Standard & Poor’s 500 Index and 30% of the Barclays Capital U.S. Aggregate Bond Index.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

LIFECYCLE 2010 TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek high total return until the fund’s target retirement date.

*Investment Strategies:*		Under normal market conditions, the fund invests substantially all of its assets in underlying funds using an asset allocation strategy designed for investors expected to retire in 2010.

155

Over time, the asset allocation strategy becomes increasingly conservative. After December 31st of the designated retirement year of the fund, the fund’s investment goal and strategy and its related investment policies and restrictions will become similar to those of the Lifecycle Retirement fund reflecting that the fund’s investors have entered the target retirement stage.

Within the prescribed percentage allocation, the subadviser selects the percentage level to be maintained in specific underlying funds. The subadviser may from time to time change the allocation in specific underlying funds or rebalance the underlying funds. To maintain target allocation in the underlying funds, daily cash flows for the fund will be directed to its underlying funds that most deviate from target.

The investment performance of the fund will reflect both its subadviser’s allocation decisions with respect to underlying funds and investments and the investment decisions made by the underlying funds’ subadvisers.

In addition to investing in exchange traded funds (ETFs), the fund may also invest in the securities of other investment companies and may make direct investments in other types of investments, see “Other Permitted Investments by the Funds of Funds.”

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund. However, the fund invests its assets in the underlying funds, each of which generally has diversified holdings.

The fund may invest in various underlying funds that as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large-capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities, science and technology stocks. Each of the underlying funds has its own investment strategy that, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the underlying funds focus their investment strategy on fixed income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed income funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Target allocation risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

156

LIFECYCLE 2015 TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek high total return until the fund’s target retirement date.

*Investment Strategies:*		Under normal market conditions, the fund invests substantially all of its assets in underlying funds using an asset allocation strategy designed for investors expected to retire in 2015.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Target allocation risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

157

Past performance

LIFECYCLE 2020 TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek high total return until the fund’s target retirement date.

*Investment Strategies:*		Under normal market conditions, the fund invests substantially all of its assets in underlying funds using an asset allocation strategy designed for investors expected to retire in 2020.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Target allocation risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk

158


	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

LIFECYCLE 2025 TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek high total return until the fund’s target retirement date.

*Investment Strategies:*		Under normal market conditions, the fund invests substantially all of its assets in underlying funds using an asset allocation strategy designed for investors expected to retire in 2025.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Target allocation risk

159

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

LIFECYCLE 2030 TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek high total return until the fund’s target retirement date.

*Investment Strategies:*		Under normal market conditions, the fund invests substantially all of its assets in underlying funds using an asset allocation strategy designed for investors expected to retire in 2030.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

160

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Target allocation risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

LIFECYCLE 2035 TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek high total return until the fund’s target retirement date.

*Investment Strategies:*		Under normal market conditions, the fund invests substantially all of its assets in underlying funds using an asset allocation strategy designed for investors expected to retire in 2035.

161

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Target allocation risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

LIFECYCLE 2040 TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek high total return until the fund’s target retirement date.

*Investment Strategies:*		Under normal market conditions, the fund invests substantially all of its assets in underlying funds using an asset allocation strategy designed for investors expected to retire in 2040.

162

and sector holdings such as utilities, science and technology stocks. Each of the underlying funds has its own investment strategy that, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the underlying funds focus their investment strategy on fixed income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed income funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Target allocation risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

LIFECYCLE 2045 TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek high total return until the fund’s target retirement date.

*Investment Strategies:*		Under normal market conditions, the fund invests substantially all of its assets in underlying funds using an asset allocation strategy designed for investors expected to retire in 2045.

163

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Target allocation risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

This section normally shows how the fund’s total return has varied from year to year, along with a broad-based securities market index for reference. Because the fund has less than one calendar year of performance as of the date of this Prospectus, there is no past performance to report.

LIFECYCLE 2050 TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek high total return until the fund’s target retirement date.

*Investment Strategies:*		Under normal market conditions, the fund invests substantially all of its assets in underlying funds using an asset allocation strategy designed for investors expected to retire in 2050.

164

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Target allocation risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

165

LIFECYCLE RETIREMENT TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

Deutsche Investment Management Americas Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek maximum real return, consistent with the preservation of capital and prudent investment management.

*Investment Strategies:*		Under normal market conditions, the fund invests in various underlying funds that as a group hold a wide range of equity type securities in their portfolios.

In employing its investment strategies for the fund, the subadviser attempts to achieve a total rate of return that will support an inflation-adjusted average annual withdrawal rate of 6% of initial investment (before fees) over a long-term time horizon (approximately 30 years) while attempting to maintain a low probability of negative returns in any 12-month time period. The adviser and subadviser do not represent or guarantee that the fund will meet this total return goal or achieve positive returns every year.

In addition to investing in underlying funds, including exchange traded funds (ETFs), the fund may also invest in the securities of other investment companies and may make direct investments in other types of investments, see “Other Permitted Investments by the Funds of Funds.”

Within the prescribed percentage allocation, the subadviser selects the percentage level to be maintained in specific underlying funds. The subadviser may change the allocation in specific underlying funds or rebalance the underlying funds from time to time. To maintain target allocation in the underlying funds, daily cash flows for the fund will be directed to its underlying funds that most deviate from target.

The fund may invest in various underlying funds that as a group hold a wide range of equity type securities in their portfolios. These include small-, mid- and large-capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of the underlying funds has its own investment strategy that, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the underlying funds in which the fund invests focus their investment strategy on fixed income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed income funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Derivatives risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk
	•	Retirement target allocation risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Commodity risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Industry or sector investing risk
	•	Initial public offerings risk
	•	Issuer risk

166


	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk

Past performance

LIFESTYLE AGGRESSIVE TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)


	•	Deutsche Investment Management Americas, Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek long-term growth of capital. Current income is not a consideration.

*Investment Strategies:*		The fund operates as a fund of funds and, except as otherwise described below, normally invests approximately 100% of its assets in underlying funds that invest primarily in equity securities.

Variations in the target percentage allocation between underlying funds that invest primarily in equity securities and underlying funds that invest primarily in fixed-income securities are permitted up to 10%. Thus, based on its target percentage allocation of approximately 100% of assets in equity underlying funds, the fund may have an equity/fixed-income underlying fund allocation of 90%/10%. Although variations beyond the 10% range are generally not permitted, the subadviser may determine in light of market or economic conditions that the normal percentage limitations should be exceeded to protect the fund or to achieve its goal.

The fund may invest in various underlying funds that as a group hold a wide range of equity type securities in their funds. These include small-, mid- and large-capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of the underlying funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of the underlying funds in which the fund invests focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed-income underlying funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

The fund may invest in exchange traded funds (ETFs). The fund may also invest in the securities of other investment companies and may make direct investments in other types of investments. See “Other Permitted Investments by the Funds of Funds.”

The fund is non-diversified, which means that it may invest its assets in a smaller number of issuers than a diversified fund. However, the fund invests its assets in underlying funds, most of which generally has diversified holdings.

For defensive purposes in abnormal market conditions, to meet redemption requests, or make anticipated cash payments, the fund may temporarily invest extensively in cash and cash equivalents. In taking these measures, the fund might not achieve its investment goal.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk

167

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Industry or sector risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk
	•	Non-diversified risk

Past Performance

Calendar Year Total Returns for Series I:





14.55%	-5.12%	-13.83%	-20.71%	34.91%	16.06%	10.64%	15.46%	8.55%	-41.99%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		18.07% (Quarter ended 6/30/2003) Worst Quarter: -24.12% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-41.99%		-1.37%		-0.67%		1/7/1997
Series II^A		-42.10%		-1.52%		-0.75%		1/28/2002
Series NAV^B		-41.94%		-1.33%		-0.65%		4/29/2005
S&P 500 Index		-37.00%		-2.19%		-1.38%

^B NAV shares were first offered on April 29, 2005. For periods prior to April 29, 2005, performance shown is that of Series I shares. Series I shares have higher expenses than NAV shares. Had the performance reflected NAV share expenses, performance would be higher.

LIFESTYLE BALANCED TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)


	•	Deutsche Investment Management Americas, Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the Fund.


*Investment Objective:*		To seek a balance between a high level of current income and growth of capital, with a greater emphasis on growth of capital.

*Investment Strategies:*		The fund operates as a fund of funds and, except as otherwise described below, normally invests approximately 40% of its assets in underlying funds that invest primarily in fixed income securities and approximately 60% in underlying funds that invest primarily in equity securities.

168

Thus, based on its target percentage allocation of approximately 60% of assets in equity underlying funds and 40% in fixed-income underlying funds, the fund may have an equity/fixed-income underlying funds allocation ranging between 70%/30% and 50%/50%. Although variations beyond the 10% range are generally not permitted, the subadviser may determine in light of market or economic conditions that the normal percentage limitations should be exceeded to protect the fund or to achieve its goal.

The fund may invest in various underlying funds that as a group hold a wide range of equity type securities in their funds. These include small-, mid- and large-capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of these underlying funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of these underlying funds focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed-income underlying funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

In addition to investing in exchange traded funds (ETFs), the fund may also invest in the securities of other investment companies and may make direct investments in other types of investments. See “Other Permitted Investments by the Funds of Funds.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Industry or sector risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk
	•	Non-diversified risk

Past Performance

169

Calendar Year Total Returns for Series I:





12.36%	2.34%	-4.85%	-9.95%	23.97%	13.49%	6.88%	12.73%	6.47%	-31.30%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		11.62% (Quarter ended 6/30/2003) Worst Quarter: -17.72% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-31.30%		0.01%		2.02%		1/7/1997
Series II^A		-31.45%		-0.16%		1.94%		1/28/2002
Series NAV^B		-31.28%		0.04%		2.04%		4/29/2005
S&P 500 Index		-37.00%		-2.19%		-1.38%
Combined Index^C		-22.06%		0.71%		1.69%

^C The Combined Index consists of 60% of the S&P 500 Index and 40% of the Barclays Capital U.S. Aggregate Bond Index.

LIFESTYLE CONSERVATIVE TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)


	•	Deutsche Investment Management Americas, Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek a high level of current income with some consideration given to growth of capital.

*Investment Strategies:*		The fund operates as a fund of funds and, except as otherwise described below, normally invests approximately 80% of its assets in underlying funds that invest primarily in fixed income securities and approximately 20% in underlying funds that invest primarily in equity securities.

Variations in the target percentage allocation between underlying funds, that invest primarily in equity securities and underlying funds, that invest primarily in fixed-income securities are permitted up to 10% in either direction. Thus, based on its target percentage allocation of approximately 20% of assets in equity underlying funds and 80% in fixed-income underlying funds, the fund may have an equity/fixed income underlying fund allocation ranging between 10%/90% and 30%/70%. Although variations beyond the 10% range are generally not permitted, the subadviser may determine in light of market or economic conditions that the normal percentage limitations should be exceeded to protect the fund or to achieve its goal.

170

stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of these underlying funds focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed-income underlying funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Industry or sector risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk
	•	Non-diversified risk

Past Performance

Calendar Year Total Returns for Series I:





4.18%	7.54%	3.28%	1.80%	11.47%	8.59%	2.88%	8.44%	5.38%	-15.57%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		5.64% (Quarter ended 6/30/2003) Worst Quarter: -8.32% (Quarter ended 12/31/2008)

171

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-15.57%		1.51%		3.53%		1/7/1997
Series II^A		-15.67%		1.36%		3.45%		1/28/2002
Series NAV^B		-15.43%		1.57%		3.56%		4/29/2005
Barclays Capital U.S. Aggregate Bond Index		5.24%		4.65%		5.63%
Combined Index^C		-4.56%		3.40%		4.41%

^C The Combined Index consists of 20% of the S&P 500 Index and 80% of the Barclays Capital U.S. Aggregate Bond Index.

LIFESTYLE GROWTH TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)


	•	Deutsche Investment Management Americas, Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek long-term growth of capital. Current income is also a consideration.

*Investment Strategies:*		The fund operates as a fund of funds and, except as otherwise described below, normally invests approximately 20% of its assets in underlying funds that invest primarily in fixed income securities and approximately 80% in underlying funds that invest primarily in equity securities.

Variations in the target percentage allocation between underlying funds that invest primarily in equity securities and underlying funds that invest primarily in fixed-income securities are permitted up to 10% in either direction. Thus, based on its target percentage allocation of approximately 80% of assets in equity underlying funds and 20% in fixed-income underlying funds, the fund may have an equity/fixed income underlying fund allocation ranging between 90%/10% and 70%/30%. Although variations beyond the 10% range are generally not permitted, the subadviser may determine in light of market or economic conditions that the normal percentage limitations should be exceeded to protect the fund or to achieve its goal.

The fund may invest in various underlying funds that as a group hold a wide range of equity type securities in their funds. These include small-, mid- and large-capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of these underlying funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of these underlying funds focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed-income underlying funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

172

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Industry or sector risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk
	•	Non-diversified risk

Past Performance

Calendar Year Total Returns for Series I:





16.50%	-3.18%	-9.16%	-15.84%	29.55%	14.59%	8.66%	13.50%	7.44%	-36.56%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		14.90% (Quarter ended 6/30/2003) Worst Quarter: -20.75% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-36.56%		-0.74%		0.74%		1/7/1997
Series II^A		-36.67%		-0.89%		0.65%		1/28/2002
Series NAV^B		-36.53%		-0.70%		0.76%		4/29/2005
S&P 500 Index		-37.00%		-2.19%		-1.38%
Combined Index^C		-29.83%		-0.71%		0.19%

173

^C The Combined Index consists of 80% of the S&P 500 Index and 20% of the Barclays Capital U.S. Aggregate Bond Index.

LIFESTYLE MODERATE TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)


	•	Deutsche Investment Management Americas, Inc. provides subadvisory consulting services to MFC Global (U.S.A.) in its management of the fund.


*Investment Objective:*		To seek a balance between a high level of current income and growth of capital, with a greater emphasis on income.

*Investment Strategies:*		The fund operates as a fund of funds and, except as otherwise described below, normally invests approximately 60% of its assets in underlying funds that invest primarily in fixed income securities and approximately 40% in underlying funds that invest primarily in equity securities.

Variations in the target percentage allocation between underlying funds that invest primarily in equity securities and underlying funds that invest primarily in fixed-income securities are permitted up to 10% in either direction. Thus, based on its target percentage allocation of approximately 40% of assets in equity underlying funds and 60% in fixed-income underlying funds, the fund may have an equity/fixed income underlying fund allocation ranging between 50%/50% and 30%/70%. Although variations beyond the 10% range are generally not permitted, the subadviser may determine in light of market or economic conditions that the normal percentage limitations should be exceeded to protect the fund or to achieve its goal.

Within the prescribed percentage allocation, the subadviser selects the percentage level to be maintained in specific underlying funds. The subadviser may from time to time change this allocation in specific underlying funds or rebalance the underlying funds. To maintain target allocation in the underlying funds, daily cash flows for the fund will be directed to its underlying funds that most deviate from target.

The fund may invest in various underlying funds that as a group hold a wide range of equity type securities in their funds. These include small-, mid- and large-capitalization stocks, domestic and foreign securities (including emerging market securities) and sector holdings such as utilities and science and technology stocks. Each of these underlying funds has its own investment strategy which, for example, may focus on growth stocks or value stocks or may employ a strategy combining growth and income stocks and/or may invest in derivatives such as options on securities and futures contracts. Certain of these underlying funds focus their investment strategy on fixed-income securities, which may include investment grade and below investment grade debt securities with maturities that range from short to longer term. The fixed-income underlying funds collectively hold various types of debt instruments such as corporate bonds and mortgage backed, government issued, domestic and international securities.

The fund bears its own expenses and, in addition, indirectly bears its proportionate share of the expenses of the underlying funds in which it invests.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund of Funds

The principal risks of investing in the Fund of Funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Exchange traded funds risk
	•	Fund of funds risk
	•	Investment company securities risk
	•	Non-diversified risk

Principal Risks of Investing in the Underlying Funds

The principal risks of the Fund of Funds investing in the underlying funds, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Convertible securities risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Fixed-income securities risk

174


	•	Foreign securities risk
	•	Industry or sector risk
	•	Initial public offerings risk
	•	Issuer risk
	•	Medium and smaller company risk
	•	Mortgage-backed and asset-backed securities risk
	•	Non-diversified risk

Past Performance

Calendar Year Total Returns for Series I:





7.84%	3.92%	-1.09%	-4.07%	17.83%	11.04%	4.15%	10.42%	5.29%	-24.23%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		8.71% (Quarter ended 6/30/2003) Worst Quarter: -13.28% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I		-24.23%		0.37%		2.47%		1/7/1997
Series II^A		-24.36%		0.23%		2.39%		1/28/2002
Series NAV^B		-24.16%		0.42%		2.49%		4/29/2005
Barclays Capital U.S. Aggregate Bond Index		5.24%		4.65%		5.63%
Combined Index^C		-13.65%		2.08%		3.09%

^C The Combined Index consists of 40% of the S&P 500 Index and 60% of the Barclays Capital U.S. Aggregate Bond Index.

175

INDEX FUNDS

500 INDEX TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To approximate the aggregate total return of a broad-based U.S. domestic equity market index.

*Investment Strategies:*		Under normal market conditions, the fund seeks to approximate the aggregate total return of a broad-based U.S. domestic equity market index. To pursue this goal, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) at the time of investment in (a) the common stocks that are included in the S&P 500 Index and (b) securities (which may or may not be included in the S&P 500 Index) that the subadviser believes as a group will behave in a manner similar to the index. The subadviser may determine that the fund’s investments in certain instruments, such as index futures, total return swaps and exchanged traded funds (“ETFs”) have similar economic characteristics as securities that are in the S&P 500 Index. As of February 28, 2009, the market capitalizations of companies included in the S&P 500 Index ranged from $224 million to $337.87 billion.

An index is an unmanaged group of securities whose overall performance is used as an investment benchmark. Indexes may track broad investment markets, such as the global equity market, or more narrow investment markets, such as the U.S. small cap equity market. In contrast to actively managed funds, which seek to outperform their respective benchmark indexes through research and analysis, index funds are passively-managed funds that seek to mirror the performance of their target indexes, minimizing performance differences over time. The fund attempts to match the performance of the S&P 500 Index by: (a) holding all, or a representative sample, of the securities that comprise that index and/or (b) by holding securities (which may or may not be included in the index) that the subadviser believes as a group will behave in a manner similar to the index. However, an index fund has operating expenses and transaction costs, while a market index does not. Therefore, the fund, while it attempts to track its target index closely, typically will be unable to match the performance of the index exactly. The composition of an index changes from time to time, and the subadviser will reflect those changes in the composition of the fund’s portfolio as soon as practicable.

An investment in the fund involves risks similar to the risks of investing directly in the equity securities included in the S&P 500 Index.

Use of Hedging and Other Strategic Transactions

The fund may invest in futures contracts and Depositary Receipts. The fund may invest in derivatives (investments whose value is based on securities, indexes or currencies). A more complete description of these investment strategies appears under “Hedging and Other Strategic Transactions” in the SAI.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk

Past Performance

176

Calendar Year Total Returns for Series I:





-12.37%	-22.53%	28.01%	10.26%	4.29%	15.26%	4.90%	-37.21%

2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		15.32% (Quarter ended 6/30/2003) Worst Quarter: -22.00% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-37.21%		-2.68%		-4.25%		5/1/2000
Series II^A		-37.40%		-2.88%		-4.41%		1/28/2002
Series NAV^B		-37.26%		-2.92%		-4.39%		10/31/2005
S&P 500 Index^C		-37.00%		-2.19%		-3.77%

^B Series NAV shares were first offered on October 31, 2005. For periods prior to October 31, 2005, the performance shown reflects the performance of Series I shares. Series I shares have higher expenses than series NAV shares. Had the performance for periods prior to October 31, 2005 reflected series NAV expenses, performance would be higher.

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

500 INDEX TRUST B

(NAV shares only)


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		To approximate the aggregate total return of a broad-based U.S. domestic equity market index.

*Investment Strategies:*		Under normal market conditions, the fund seeks to approximate the aggregate total return of a broad-based U.S. domestic equity market index. To pursue this goal, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) at the time of investment in (a) the common stocks that are included in the S&P 500 Index and (b) securities (which may or may not be included in the S&P 500 Index) that the subadviser believes as a group will behave in a manner similar to the index. The subadviser may determine that the fund’s investments in certain instruments, such as index futures, total return swaps and exchanged traded funds (“ETFs”) have similar economic characteristics as securities that are in the S&P 500 Index. As of February 28, 2009, the market capitalizations of companies included in the S&P 500 Index ranged from $224 million to $337.87 billion.

An index is an unmanaged group of securities whose overall performance is used as an investment benchmark. Indexes may track broad investment markets, such as the global equity market, or more narrow investment markets, such as the U.S. small cap equity market. In contrast to actively managed funds, which seek to outperform their respective benchmark indexes through research and analysis, index funds are passively managed funds that seek to mirror the performance of their target indexes, minimizing performance differences over time. The fund attempts to match the performance of the S&P 500 Index by: (a) holding all, or a representative sample, of the securities that comprise that index and/or (b) by holding securities (which may or may not be included in the index) that the subadviser believes as a group will behave in a manner similar to the index. However, an index fund has operating expenses and transaction costs, while a market index does not. Therefore, the fund, while it attempts to track its target index closely, typically will be unable to match the performance of the index exactly. The composition of an index changes from time to time, and the subadviser will reflect those changes in the composition of the fund’s portfolio as soon as practicable.

177

An investment in the fund involves risks similar to the risks of investing directly in the equity securities included in the S&P 500 Index.

Use of Hedging and Other Strategic Transactions

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk

Past Performance

Calendar Year Total Returns for Series NAV:





21.08%	-9.15%	-11.98%	-22.31%	28.42%	10.70%	4.65%	15.56%	5.25%	-37.19%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		15.34% (Quarter ended 6/30/2003) Worst Quarter: -22.11% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Five

Ten

Date of

Year

Inception

Series NAV^A

-37.19%

-2.41%

-1.55%

5/1/1996

S&P 500 Index

-37.00%

-2.19%

-1.38%

^A The Series NAV shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of the Equity Index Fund of John Hancock Variable Series Trust I in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Equity Index Fund, the fund’s predecessor. These shares were first issued on May 1, 1996.

178

INTERNATIONAL EQUITY INDEX TRUST A

(Series I and Series II shares are available for sale) (NAV Shares are available for sale only to the Lifestyle Trusts, the Core Strategy Trust, the Absolute Return Trust and other JHT fund of funds)


Subadviser:		SSgA Funds Management, Inc.


*Investment Objective:*		To seek to track the performance of a broad-based equity index of foreign companies primarily in developed countries and, to a lesser extent, in emerging markets.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its assets in securities listed in the Morgan Stanley Capital International (“MSCI”) All Country World Excluding U.S. Index or American Depository Receipts (ADRs) or Global Depository Receipts (GDRs) representing such securities. As of February 28, 2009, the market capitalization range of the Index was $199 million to $176 billion.

The fund is an index fund and differs from an actively-managed fund. Actively-managed funds seek to outperform their benchmark indices through research and analysis. Over time, their performance may differ significantly from their benchmark indices. Index funds are passively managed funds that seek to mirror the risk and return profile of market indices, minimizing performance differences over time. An index is an unmanaged group of securities whose overall performance is used as an investment benchmark. Indices may track broad investment markets, such as the global equity market, or more narrow investment markets, such as the U.S. small cap equity market. However, an index fund has operating expenses and transaction costs, while a market index does not. Therefore, the fund, while it attempts to track their target index closely, typically will be unable to match the performance of the index exactly.

The fund uses “sampling” methodology to track the total return performance of the MSCI All Country World Index ex USA (“MSCI ACWI ex-USA Index”). This means that the fund does not intend to purchase all of the securities in the MSCI ACWI ex-USA Index, but rather intends to hold a representative sample of the securities in the Index in an effort to achieve the fund’s investment objective. The quantity of holdings in the fund will be based on a number of factors, including asset size of the fund. Although the Adviser generally expects the fund to hold less than the total number of securities in the MSCI ACWI ex-USA Index, it reserves the right to hold as many securities as it believes necessary to achieve the fund’s investment objective.

The fund is normally fully invested. The subadviser invests in stock index futures to maintain market exposure and manage cash flow. Although it may employ foreign currency hedging techniques, it normally maintains the currency exposure of the underlying equity investments.

The fund may purchase other types of securities that are not primary investment vehicles, for example, ADRs, GDRs, European Depositary Receipts (EDRs), certain exchange traded funds (ETFs), cash equivalents, and certain derivatives (investments whose value is based on indices or other securities). As an example of how derivatives may be used, the International Equity Index Trusts may invest in stock index futures to manage cash flow.

The fund may also be significantly affected by recent market developments, as described under “Additional Information about the Funds’ Principal Risks and Investment Policies.”

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk
	•	Large company risk
	•	Medium and smaller company risk
	•	Non-diversified risk

Past Performance

179

Calendar Year Total Returns for Series I:





16.20%	25.93%	15.37%	-44.52%

2005	2006	2007	2008


Best Quarter:		11.68% (Quarter ended 9/30/2005) Worst Quarter: -22.37% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Since		Date of
	Year		Inception		Inception

Series I^A		-44.52%		2.25%		5/3/2004
Series II^A		-44.62%		2.05%		5/3/2004
Series NAV^B		-44.48%		-9.08%		2/10/2006
MSCI AC World EX U.S. Index (gross of foreign withholding taxes)^C,D		-45.25%		2.86%
MSCI AC World EX U.S. Index (net of foreign withholding taxes)^D,E		-45.53%		2.40%

^A The Series I and Series II shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of Series I and Series II of the International Equity Index Fund of John Hancock Variable Series Trust I in exchange for Series I and Series II shares of the International Equity Index Trust A pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the performance of the Series I or Series II shares of the John Hancock Variable Series Trusts Fund, the fund’s predecessor. The performance of the Series I and Series II shares of the John Hancock Variable Series Trusts Fund includes the actual performance of those shares from the date they commenced operations, May 3, 2004.

^B Series NAV shares were first issued on February 10, 2006. For periods prior to February 10, 2006, the performance shown reflects the performance of Series I shares. Series I shares have higher expenses than NAV shares. Had the performance reflected NAV shares expenses, performance would be higher.

^C MSCI AC World Ex U.S. Index is an unmanaged free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets excluding the United States. Prior to June 30, 2008, the Fund compared its performance to the MSCI AC World Ex U.S. Index (gross of foreign withholding taxes). The gross dividends version of the index approximates the maximum possible dividend reinvestment. The amount reinvested is the entire dividend distributed to individuals resident in the country of the company, but does not include tax credits.

^D The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

^E Effective June 30, 2008, the Fund’s performance is compared to a different version of the index, the MSCI AC World Ex U.S. Index (net of foreign withholding taxes), which provides a more accurate comparison because the Fund is subject to foreign withholding taxes. The net dividends version of the index approximates the minimum possible dividend reinvestment. The dividend is reinvested after deduction of withholding tax, applying the rate to non-resident individuals who do not benefit from double taxation treaties. Withholding tax rates applicable to Luxembourg holding companies are used, as Luxembourg applies the highest rates.

180

INTERNATIONAL EQUITY INDEX TRUST B

(NAV Shares Only)


Subadviser:		SSgA Funds Management, Inc.


*Investment Objective:*		To seek to track the performance of a broad-based equity index of foreign companies primarily in developed countries and, to a lesser extent, in emerging markets.

*Investment Strategies:*		Under normal market conditions, the Fund invests at least 80% of its assets in securities listed in the Morgan Stanley Capital International (“MSCI”) All Country World Excluding U.S. Index or American Depository Receipts (ADRs) or Global Depository Receipts (GDRs) representing such securities.As of February 28, 2009, the market capitalization range of the Index was $199 million to $176 billion.

The fund uses “sampling” methodology to track the total return performance of the MSCI All Country World Index ex USA (“MSCI ACWI ex-USA Index”). This means that the fund does not intend to purchase all of the securities in the MSCI ACWI ex-USA Index, but rather intends to hold a representative sample of the securities in the Index in an effort to achieve the fund’s investment objective. The quantity of holdings in the fund will be based on a number of factors, including asset size of the fund. Although the adviser generally expects the fund to hold less than the total number of securities in the MSCI ACWI ex-USA Index, it reserves the right to hold as many securities as it believes necessary to achieve the fund’s investment objective.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Equity securities risk
	•	Exchange traded funds risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk
	•	Large company risk
	•	Medium and smaller company risk
	•	Non-diversified risk

Past Performance

181

Calendar Year Total Returns for Series NAV:





30.87%	-17.42%	-20.30%	-15.18%	41.99%	20.24%	16.58%	27.41%	15.76%	-44.36%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		20.47% (Quarter ended 6/30/2003) Worst Quarter: -22.28% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series NAV^A		-44.36%		2.84%		1.78%		5/2/1988
MSCI AC World EX U.S. Index (gross of foreign withholding taxes)^B		-45.25%		2.99%		2.27%
MSCI AC World EX U.S. Index (net of foreign withholding taxes)^C		-45.53%		2.56%		1.90%

^A The Series NAV shares of the fund were first issued on March 25, 2004 in connection with JHT’s acquisition on that date of all the assets of the NAV shares of the International Equity Index Fund of John Hancock Variable Series Trust I in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to March 25, 2004 reflects the actual performance of the NAV shares of the John Hancock Variable Series Trusts International Equity Index Fund, the fund’s predecessor. These shares were first issued on May 2, 1988.

^B MSCI AC World Ex U.S. Index is an unmanaged free float-adjusted market capitalization index that is designed to measure equity market performance in the global developed and emerging markets excluding the United States. Prior to June 30, 2008, the Fund compared its performance to the MSCI AC World Ex U.S. Index (gross of foreign withholding taxes). The gross dividends version of the index approximates the maximum possible dividend reinvestment. The amount reinvested is the entire dividend distributed to individuals resident in the country of the company, but does not include tax credits.

^C Effective June 30, 2008, the Fund’s performance is compared to a different version of the index, the MSCI AC World Ex U.S. Index (net of foreign withholding taxes), which provides a more accurate comparison because the Fund is subject to foreign withholding taxes. The net dividends version of the index approximates the minimum possible dividend reinvestment. The dividend is reinvested after deduction of withholding tax, applying the rate to non-resident individuals who do not benefit from double taxation treaties. Withholding tax rates applicable to Luxembourg holding companies are used, as Luxembourg applies the highest rates.

INTERNATIONAL INDEX TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.))”


*Investment Objective:*		To seek to track the performance of a broad-based equity index of foreign companies primarily in developed countries and, to a lesser extent, in emerging markets.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its assets in one or more of the following: (a) securities listed in the MSCI EAFE Index (the “Index”), a large capitalization international stock index that is independently maintained and published by Morgan Stanley Capital International;* (b) securities (which may or may not be included in the Index) that the subadviser believes as a group will behave in a manner similar to the Index; and (c) future contracts based on the Index (“stock index futures) to maintain exposure to the Index. As of February 28, 2009, the market capitalization range of the Index was $199 million to $126 billion.

*“MSCI^®” is a trademark of Morgan Stanley & Co. Incorporated (“Morgan Stanley”). The Fund is not sponsored, endorsed, managed, advised, sold or promoted by Morgan Stanley, and Morgan Stanley does not make any representation regarding the advisability of investing in the fund.

182

The fund differs from an actively managed fund. Actively managed funds seek to outperform their respective indices through research and analysis. Over time, their performance may differ significantly from their respective indices. Index funds are passively managed funds that seek to mirror the performance of their target indices, minimizing performance differences over time.

The fund attempts to match the performance of the Index by: (a) holding all, or a representative sample, of the securities that comprise that Index, (b) by holding securities (which may or may not be included in the Index) that the subadviser believes as a group will behave in a manner similar to the Index and/or (c) holding stock index futures to maintain exposure to the Index. However, the fund has operating expenses and transaction costs, while a market index does not. Therefore, the fund, while it attempts to track its Index closely, typically will be unable to match the performance of the Index exactly. The composition of the Index changes from time to time. The subadviser will reflect those changes in the compositions of the fund’s portfolios as soon as practicable.

The fund is normally fully invested. The subadviser may invest in stock index futures to manage cash flow. Although the fund may employ foreign currency hedging techniques, it normally maintains the currency exposure of the underlying equity investments.

The fund may purchase other types of securities that are not primary investment vehicles, for example, American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), European Depositary Receipts (EDRs), certain exchange traded funds (ETFs), cash equivalents, and certain derivatives (investments whose value is based on indices or other securities). As an example of how derivatives may be used, the fund may invest in stock index futures to manage cash flow.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk

Past performance

MID CAP INDEX TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		Seeks to approximate the aggregate total return of a mid cap U.S. domestic equity market index.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) at the time of investment in (a) the common stocks that are included in the S&P 400 Mid Cap Index and (b) securities (which may or may not be included in the S&P Mid Cap 400 Index) that the subadviser believes as a group will behave in a manner similar to the index. As of February 28, 2009, the market capitalizations of companies included in the S&P 400 Mid Cap Index ranged from $42 million to $4.6 billion.

An index is an unmanaged group of securities whose overall performance is used as an investment benchmark. Indexes may track broad investment markets, such as the global equity market, or more narrow investment markets, such as the U.S. small cap equity market. In contrast to actively managed funds, which seek to outperform their respective benchmark indexes through research and analysis, index funds are passively managed funds that seek to mirror the performance of their target indexes, minimizing performance differences over time. The fund attempts to match the performance of the S&P 400 Mid Cap Index by: (a) holding all, or a representative sample, of the securities that comprise that index and/or (b) by holding securities (which may or may not be included in the index) that the subadviser believes as a group will behave in a manner similar to the index. However, the fund has operating expenses and transaction costs, while a market index does not. Therefore, the fund, while it attempts to track its target index closely, typically will be unable to match the performance of the target index exactly. The composition of an index changes from time to time, and the subadviser will reflect those changes in the composition of the fund’s portfolio as soon as practicable.

183

The fund may invest in futures contracts and Depository Receipts. The fund may invest in derivatives (investments whose value is based on securities, indexes or currencies). A more complete description of these investment strategies appears under “Hedging and Other Strategic Transactions” in the prospectus and SAI.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





-1.73%	-15.16%	34.57%	15.83%	12.02%	9.72%	7.57%	-36.45%

2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		17.71% (Quarter ended 12/31/2001) Worst Quarter: -25.65% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-36.45%		-0.54%		1.83%		5/1/2000
Series II^A		-36.56%		-0.73%		1.69%		1/28/2002
Series NAV^B		-36.39%		-0.50%		1.85%		4/29/2005
S&P MidCap 400 Index^C		-36.23%		-0.08%		2.52%

^B NAV shares were first offered on April 29, 2005. Performance shown is that of Series I shares. Series I shares have higher expenses than NAV shares. Had the performance reflected NAV share expenses, performance would be higher.

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

SMALL CAP INDEX TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		Seeks to approximate the aggregate total return of a small cap U.S. domestic equity market index.

*Investment Strategies:*		Under normal market conditions, the Fund invests at least 80% of its net assets (plus any borrowings for investment purposes) at the time of investment in (a) the common stocks that are included in the Russell 2000 Index and (b) securities (which may or may not be included in the Russell 2000 Index) that the subadviser believes as a group will behave in a manner similar to the index. As of February 28, 2009, the market capitalizations of companies included in the Russell 2000 Index ranged from $3.2 million to $3.7 billion.

184

An index is an unmanaged group of securities whose overall performance is used as an investment benchmark. Indexes may track broad investment markets, such as the global equity market, or more narrow investment markets, such as the U.S. small cap equity market. In contrast to actively managed funds, which seek to outperform their respective benchmark indexes through research and analysis, index funds are passively managed funds that seek to mirror the performance of their target indexes, minimizing performance differences over time. The Fund attempts to match the performance of the Russell 2000 Index by: (a) holding all, or a representative sample, of the securities that comprise that index and/or (b) by holding securities (which may or may not be included in the index) that the subadviser believes as a group will behave in a manner similar to the index. However, the Fund has operating expenses and transaction costs, while a market index does not. Therefore, the Fund, while it attempts to track its target index closely, typically will be unable to match the performance of the target index exactly. The composition of an index changes from time to time, and the subadviser will reflect those changes in the composition of the Fund’s portfolio as soon as practicable.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





1.50%	-21.47%	45.79%	17.33%	3.89%	17.61%	-2.16%	-33.71%

2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		22.77% (Quarter ended 6/30/2003) Worst Quarter: -26.09% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I		-33.71%		-1.45%		0.13%		5/1/2000
Series II^A		-33.83%		-1.63%		-0.01%		1/28/2002
Series NAV^B		-33.70%		-1.41%		0.15%		4/29/2005
Russell 2000 Index^C		-33.79%		-0.93%		0.85%

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

185

TOTAL BOND MARKET TRUST A

(Series I, Series II and NAV shares)


Subadviser:		Declaration Management & Research LLC


*Investment Objective:*		To seek to track the performance of the Barclays Capital U.S. Aggregate Bond Index (which represents the U.S. investment grade bond market).

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowing for investment purposes) in securities listed in the Barclays Capital U.S. Aggregate Bond Index.

The fund is an index fund which differs from actively managed funds. Actively managed funds seek to outperform their respective indices through research and analysis. Over time, their performance may differ significantly from their respective indices. The fund is a passively managed fund that seeks to mirror the performance of its target index, minimizing performance differences over time.

An index is an unmanaged group of securities whose overall performance is used as an investment benchmark. Indices may track broad investment markets, such as the global equity market, or more narrow investment markets, such as the U.S. small cap equity market. The fund attempts to match the performance of the Barclays Capital U.S. Aggregate Bond Index by holding a representative sample of the securities that comprise the Barclays Index. However, an index fund has operating expenses and transaction costs, while a market index does not. Therefore, the fund, while it attempts to track its target index closely, typically will be unable to match the performance of the target index exactly.

The fund is an intermediate term bond fund of high and medium credit quality that seek to track the performance of the Barclays Index, which broadly represents the U.S. investment grade bond market.

The subadviser employs a passive management strategy using quantitative techniques to select individual securities that provide a representative sample of the securities in the Barclays Index.

The Barclays Index consists of dollar denominated, fixed rate, investment grade debt securities with maturities generally greater than one year and outstanding par values of at least $200 million, including:


	•	U.S. Treasury and agency securities;
	•	Asset-backed and mortgage-backed securities, including mortgage pass-through securities and commercial mortgage- backed securities (“CMBS”) and collateralized mortgage offerings (“CMOs”);
	•	Corporate bonds, both U.S. and foreign (if dollar denominated); and
	•	Foreign government and agency securities (if dollar denominated).

The subadviser selects securities to match, as closely as practicable, the Barclays Index’s duration, cash flow, sector, credit quality, callability and other key performance characteristics.

The Barclays Index composition may change from time to time. The subadviser will reflect those changes as soon as practicable.

The fund may purchase other types of securities that are not primary investment vehicles. These would include, for example, certain derivatives (investments whose value is based on indexes or other securities).

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

186

Calendar Year Total Returns for Series I:




				6.59%		5.82%

				2007		2008


Best Quarter:		4.75% (Quarter ended 12/31/2008) Worst Quarter: -1.05% (Quarter ended 6/30/2008)

Average Annual Total Returns For Period Ended 12/31/2008

One

Since

Date of

Year

Inception

Series I

5.82%

5.56%

2/10/2006

Series II

5.52%

6.18%

5/3/2007

Series NAV

5.86%

5.66%

2/10/2006

Barclays Capital U.S. Aggregate Bond Index^A

5.24%

5.81%

^A The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

TOTAL BOND MARKET TRUST B

(NAV Shares Only)


Subadviser:		Declaration Management & Research LLC


*Investment Objective:*		To seek to track the performance of the Barclays Capital U.S. Aggregate Bond Index (which represents the U.S. investment grade bond market).

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowing for investment purposes) in securities listed in the Barclays Capital U.S. Aggregate Bond Index.

The fund is an intermediate term bond fund of high and medium credit quality that seek to track the performance of the Barclays Index, which broadly represents the U.S. investment grade bond market.

The subadviser employs a passive management strategy using quantitative techniques to select individual securities that provide a representative sample of the securities in the Barclays Index.


	•	U.S. Treasury and agency securities;
	•	Asset-backed and mortgage-backed securities, including mortgage pass-through securities and commercial mortgage- backed securities (“CMBS”) and collateralized mortgage offerings (“CMOs”);

187


	•	Corporate bonds, both U.S. and foreign (if dollar denominated); and
	•	Foreign government and agency securities (if dollar denominated).

The subadviser selects securities to match, as closely as practicable, the Barclays Index’s duration, cash flow, sector, credit quality, callability and other key performance characteristics.

The Barclays Index composition may change from time to time. The subadviser will reflect those changes as soon as practicable.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk
	•	Mortgage-backed and asset-backed securities risk

Past Performance

Calendar Year Total Returns for Series NAV:





-2.57%	11.81%	7.76%	9.95%	3.60%	4.05%	2.39%	4.07%	7.13%	5.79%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		4.81% (Quarter ended 9/30/2002) Worst Quarter: -2.52% (Quarter ended 6/30/2004)

Average Annual Total Returns For Period Ended 12/31/2008

One

Five

Ten

Date of

Year

Inception

Series NAV^A

5.79%

4.67%

5.33%

5/1/1998

Barclays Capital U.S. Aggregate Bond Index^B

5.24%

4.65%

5.63%

^A The Series NAV shares of the fund were first issued on April 29, 2005 in connection with JHT’s acquisition on that date of all the assets of the Bond Index Fund of John Hancock Variable Series Trust I in exchange for Series NAV shares pursuant to an agreement and plan of reorganization. Performance presented for periods prior to April 29, 2005 reflects the actual performance of the sole class of shares of the John Hancock Variable Series Trusts Bond Index Fund, the fund’s predecessor. These shares were first issued on May 1, 1998.

^B The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

188

TOTAL STOCK MARKET INDEX TRUST


Subadviser:		MFC Global Investment Management (U.S.A.) Limited


*Investment Objective:*		Seeks to approximate the aggregate total return of a broad U.S. domestic equity market index.

*Investment Strategies:*		Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) at the time of investment in (a) the common stocks that are included in the Wilshire 5000 Total Market Index and (b) securities (which may or may not be included in the Wilshire 5000 Total Market Index) that the subadviser believes as a group will behave in a manner similar to the index. As of February 28, 2009, the market capitalizations of companies included in the Wilshire 5000 Total Market Index ranged from less than $1 million to $345 billion.

An index is an unmanaged group of securities whose overall performance is used as an investment benchmark. Indexes may track broad investment markets, such as the global equity market, or more narrow investment markets, such as the U.S. small cap equity market. In contrast to actively managed funds, which seek to outperform their respective benchmark indexes through research and analysis, index funds are passively managed funds that seek to mirror the performance of their target indexes, minimizing performance differences over time. The fund attempts to match the performance of the Wilshire 5000 Total Market Index by: (a) holding all, or a representative sample, of the securities that comprise that index and/or (b) by holding securities (which may or may not be included in the index) that the subadviser believes as a group will behave in a manner similar to the index. However, the fund has operating expenses and transaction costs, while a market index does not. Therefore, the fund, while it attempts to track its target index closely, typically will be unable to match the performance of the index exactly. The composition of an index changes from time to time, and the subadviser will reflect those changes in the composition of the fund’s portfolio as soon as practicable.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Credit and counterparty risk
	•	Equity securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Index management risk
	•	Issuer risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series I:





-11.41%	-21.29%	30.54%	11.74%	5.69%	15.29%	5.18%	-37.20%

2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		16.26% (Quarter ended 6/30/2003) Worst Quarter: -22.82% (Quarter ended 12/31/2008)

189

AMERICAN FEEDER FUNDS

AMERICAN ASSET ALLOCATION TRUST
AMERICAN BLUE CHIP INCOME AND GROWTH TRUST
AMERICAN BOND TRUST
AMERICAN GLOBAL GROWTH TRUST
AMERICAN GLOBAL SMALL CAPITALIZATION TRUST
AMERICAN GROWTH TRUST
AMERICAN GROWTH-INCOME TRUST
AMERICAN HIGH-INCOME BOND TRUST
AMERICAN INTERNATIONAL TRUST
AMERICAN NEW WORLD TRUST

Master-Feeder Structure

Each of the American Asset Allocation Trust, American Blue Chip Income and Growth Trust, American Bond Trust, American Global Growth Trust, American Global Small Capitalization Trust, American Growth Trust, American Growth-Income Trust, American High-Income Bond Trust, American International Trust and American New World Trust (the “JHT Feeder Funds”), operates as a “feeder fund.” A “feeder fund” is a fund that does not buy investment securities directly; instead, each invests in a “master fund” which in turn purchases investment securities. Each JHT Feeder Fund has the same investment objective and limitations as its master fund. Each master fund is a series of American Funds Insurance Series (“American Funds Master Funds”). Each JHT Feeder Fund’s master fund is listed below:


JHT Feeder Fund		American Funds Master Fund

American Asset Allocation Trust		Asset Allocation Fund (Class 1 shares)
American Blue Chip Income and Growth Trust		Blue Chip Income and Growth Fund (Class 1 shares)*
American Bond Trust		Bond Fund (Class 1 shares)
American Global Growth Trust		Global Growth Fund (Class 1 shares)
American Global Small Capitalization Trust		Global Small Capitalization Fund (Class 1 shares)
American Growth Trust		Growth Fund (Class 1 shares)*
American Growth-Income Trust		Growth-Income Fund (Class 1 shares)*
American High-Income Bond Trust		High-Income Bond Fund (Class 1 shares)*
American International Trust		International Fund (Class 1 shares)*
American New World Trust		New World Fund (Class 1 shares)

*Prior to April 28, 2008, the American Blue Chip Income and Growth Trust, the American Growth Trust, the American Growth-Income Trust, the American High-Income Bond Trust and the American International Trust invested in Class 2 shares of the corresponding American Funds Master Fund, which are subject to a 0.25% Rule 12b-1 fee. Effective April 28, 2008 each of these JHT Feeder Funds commenced investing in Class 1 shares of the corresponding American Funds Master Fund, which are not subject to a Rule 12b-1 fee and increased the Rule 12b-1 fee for each class of shares of the JHT Feeder Fund by 0.25% to the following rates: 0.75% for Series II shares, 0.60% for Series I shares and 0.25% for Series III shares.

The prospectus for the American Funds Master Funds is delivered together with this Prospectus.

Series I shares of the JHT Feeder Funds are only available for sale to separate accounts that are used to support variable life insurance policies issued by certain insurance companies affiliated with the Adviser.

Investment Objectives and Strategies

Each JHT Feeder Fund has a stated investment objective which is the same as the objective of the American Funds Master Fund in which it invests. Each American Funds Master Fund pursues this objective through separate investment strategies or policies. There can be no assurance that JHT Feeder Fund or the American Funds Master Fund will achieve its investment objective. The differences in objectives and policies among the American Funds Master Funds can be expected to affect the return of the relevant JHT Feeder Fund and the degree of market and financial risk to which each JHT Feeder Fund is subject. Additional information about JHT Feeder Funds’ and American Funds Master Fund’s investment policies is set forth below under “Additional Information About Each JHT Feeder Fund’s and each American Funds Master Fund’s Investments — Additional Investment Policies.” The investment objective of each JHT Feeder Fund is nonfundamental (i.e., the objective may be changed without the approval of shareholders).

More complete descriptions of certain other instruments in which the JHT Feeder Funds may invest are set forth in the SAI.

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Portfolio Turnover. Portfolio changes of the American Funds Master Funds will be made without regard to the length of time particular investments may have been held. Unless otherwise noted in the following descriptions, each American Funds Master Fund anticipates that its annual portfolio turnover rate will not exceed 100%. A high portfolio turnover rate generally involves correspondingly greater brokerage commission expenses, which must be borne directly by the American Funds Master Fund. The portfolio turnover rate of each American Funds Master Fund may vary from year to year, as well as within a year.

Additional Information About Each JHT Feeder Fund’s and Each American Funds Master Fund’s Investments

Master-Feeder Structure

Each master fund may have other shareholders, each of whom will pay their proportionate share of the master fund’s expenses. A large shareholder of a master fund could have more voting power than a JHT Feeder Fund on matters of a master fund submitted to shareholder vote. In addition, a large redemption by another shareholder of the master fund may increase the proportionate share of the costs of the master fund borne by the remaining shareholders of the master fund, including JHT Feeder Fund.

Each JHT Feeder Fund has the right to withdraw its entire investment from its corresponding master fund without shareholder approval if the Board determines that it is in the best interest of the JHT Feeder Fund and its shareholders to do so. At the time of such withdrawal, the Board would have to consider what action should be taken with respect to the JHT Feeder fund which may include: (a) investing all of the assets of the JHT Feeder Fund in another master fund, (b) electing to have another adviser manage the assets directly (either as an adviser to the JHT Feeder Fund or as a subadviser to the JHT Feeder Fund with John Hancock Investment Management Services, LLC as the adviser) or (c) taking other appropriate action. A withdrawal by a JHT Feeder Fund of its investment in the corresponding master fund could result in a distribution in kind of portfolio securities (as opposed to a cash distribution) to the JHT Feeder Fund. Should such a distribution occur, the JHT Feeder Fund could incur brokerage fees or other transaction costs in converting such securities to cash in order to pay redemptions. In addition, a distribution in kind to a JHT Feeder Fund could result in a less diversified portfolio of investments and could affect adversely the liquidity of JHT Feeder Fund.

Because each JHT Feeder Fund invests substantially all of its assets in a master fund, each JHT Feeder Fund will bear the fees and expenses of both the JHT Feeder Fund and the master fund. Therefore, JHT Feeder Fund fees and expenses may be higher than those of a fund which invests directly in securities.

Repurchase Agreements

Each of the JHT Feeder Funds may enter into repurchase agreements. Information regarding repurchase agreements is set forth under “Additional Information about the Funds’ Principal Investment Policies — Repurchase Agreements.”

Additional Investment Policies

Additional investment policies of the master funds are set forth in the statement of additional information of the master fund which is available upon request.

Advisory Arrangements

Because the JHT Feeder Funds are feeder funds, they do not have an investment adviser. See the master funds’ prospectus for a description of the master funds’ advisory arrangements.

Capital Research and Management Company (“CRMC”), an experienced investment management organization founded in 1931, serves as investment adviser to each American Funds Master Fund and to other mutual funds, including the American Funds. CRMC, a wholly owned subsidiary of The Capital Group Companies, Inc., is headquartered at 333 South Hope Street, Los Angeles, CA 90071. CRMC manages the investment portfolio and business affairs of each American Funds Master Fund.

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The total management fee paid by each master fund, as a percentage of average net assets, for the fiscal year ended December 31, 2008 is as follows:


Asset Allocation Fund			0.31%^*
Blue Chip Income and Growth Fund			0.41%*
Bond Fund			0.40%*
Global Growth Fund			0.53%*
Global Small Capitalization Fund			0.70%*
Growth Fund			0.32%*
Growth-Income Fund			0.26%*
High-Income Bond Fund			0.47%*
International Fund			0.49%*
New World Fund			0.76%*

^* CRMC waived a portion of its management fee from September 1, 2004 through December 31, 2008. The fee shown does not reflect the waiver. Please see the financial highlights table in the American Funds prospectus or annual report for further information.

AMERICAN ASSET ALLOCATION TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to provide high total return (including income and capital gains) consistent with preservation of capital over the long term.

*Investment Strategies:*		The fund invests all of its assets in Class 1 shares of the master fund, the Asset Allocation Fund, a series of American Funds Insurance Series. The master fund invests in a diversified portfolio of common stocks and other equity securities, bonds and other intermediate and long-term debt securities, and money market instruments (debt securities maturing in one year or less). In addition, the master fund may invest up to 25% of its debt assets in lower quality debt securities (rated Ba1 or below by Moody’s and BB+ or below by S&P or unrated but determined to be of equivalent quality). Such securities are sometimes referred to as “junk bonds.” The master fund is designed for investors seeking above-average total return.

Under normal market conditions, the master fund’s investment adviser expects (but is not required) to maintain an investment mix falling within the following ranges: 40% — 80% in equity securities, 20% — 50% in debt securities and 0% — 40% in money market instruments. The proportion of equities, debt and money market securities held by the master fund will vary with market conditions and the investment adviser’s assessment of their relative attractiveness as investment opportunities. The master fund may invest up to 15% of its assets in equity securities of issuers domiciled outside the U.S. and not included in S&P’s 500 Composite Index, and up to 5% of its assets in debt securities of non-U.S. issuers.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

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Calendar Year Total Returns for Series II^B:





6.45%	3.84%	0.02%	-12.85%	21.24%	7.69%	8.64%	14.10%	5.99%	-29.83%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		12.04% (Quarter ended 6/30/2003) Worst Quarter: -16.41% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I^A		-29.79%		0.36%		2.13%		4/28/2008
Series II^B		-29.83%		-0.14%		1.49%		5/1/2007
Series III^C		-29.17%		0.54%		2.22%		1/2/2008
Combined Index^D		-22.06%		0.71%		1.69%

^A Series I shares were first offered on April 28, 2008. For periods prior to this date, the performance shown is the performance of the Series II shares of the Asset Allocation Trust, including, for periods prior to their inception, the performance of the Class I shares of the Asset Allocation Fund, a series of Amercan Funds Insurance Series and the master fund in which the American Asset Allocation Trust invests, adjusted to reflect Series II shares expenses. Series I shares have lower expenses than Series II shares. Had the performance shown for periods prior to April 28, 2008 reflected Series I expenses, performance would be higher.

^B Series II shares were first offered on May 1, 2007. For periods prior to this date, the performance shown reflects the performance of Class 1 shares of the Asset Allocation Fund, a series of American Funds Insurance Series and the master fund in which the American Asset Allocation Trust invests. The performance of the Class 1 shares of the Asset Allocation Fund has been adjusted to reflect the 0.75% Rule 12b-1 fee of Series II shares of the American Asset Allocation Trust. The Class 1 shares of the Asset Allocation Fund were first issued on August 1, 1989.

^C Series III shares were first offered January 2, 2008. For periods prior to January 2, 2008, the performance shown is the performance of the Series II shares of the Asset Allocation Trust, including, for periods prior to their inception, the performance of the Class 1 shares of the Asset Allocation Fund, a series of American Funds Insurance Series and the master fund in which the American Asset Allocation Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III shares expenses, performance would be higher.

^D The combined Index represents 60% of the Standard & Poor’s 500 Index and 40% of the Barclays Capital U.S. Aggregate Bond Index.

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AMERICAN BLUE CHIP INCOME AND GROWTH TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to produce income exceeding the average yield on U.S. stocks generally (as represented by the average yield on the Standard & Poor’s 500 Composite Index) and to provide an opportunity for growth of principal consistent with sound common stock investing.

*Investment Strategies:*		The fund invests all of its assets in Class 1 shares of the master fund, the Blue Chip Income and Growth Fund, a series of American Funds Insurance Series. The master fund invests primarily in common stocks of larger U.S.-based companies with market capitalizations of $4 billion and above. The master fund may also invest up to 10% of its assets in common stocks of larger, non-U.S. companies, so long as they are listed or traded in the U.S. The master fund will invest, under normal market conditions, at least 90% of equity assets in the stock of companies that pay regular dividends, and in business for five or more years (including predecessor companies), and whose debt securities are rated at least investment grade. The fund is designed for investors seeking both income and capital appreciation.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series II^B:





-23.46%	30.02%	9.13%	6.66%	16.79%	1.48%	-36.76%

2002	2003	2004	2005	2006	2007	2008


Best Quarter:		16.95% (Quarter ended 6/30/2003) Worst Quarter: -21.34% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series I^A		-36.72%		-2.56%		-2.48%		7/9/2003
Series II^B		-36.76%		-2.69%		-2.62%		5/5/2003
Series III^C		-35.51%		-2.31%		-2.25%		1/2/2008
S&P 500 Index^D		-37.00%		-2.19%		-2.13%

^A Series I shares were first offered on July 9, 2003. For periods prior to this date, the performance shown is the performance of the Series II shares of the American Blue Chip Income and Growth Trust, including, for periods prior to the inception of the Series II shares, the performance of the Class 2 shares of the Blue Chip Income and Growth Fund, a series of American Funds Insurance Series and the master fund in which the American Blue Chip Income and Growth Trust invests, adjusted to reflect Series II share expenses. Series I shares have lower expenses than Series II shares. Had the performance shown for periods prior to July 9, 2003 reflected Series I share expenses, performance would be higher.

195

^B Series II shares were first offered on May 5, 2003. For periods prior to this date, the performance shown reflects the performance of Class 2 shares of the Blue Chip Income and Growth Fund, a series of American Funds Insurance Series and the master fund in which the American Blue Chip Income and Growth Trust invests. The performance of the Class 2 shares of the Blue Chip Income and Growth Fund has been adjusted to reflect the 0.50% Rule 12b-1 fee of Series II shares of the American Blue Chip Income and Growth Trust. The Class 2 shares of the Blue Chip Income and Growth Fund were first issued on July 5, 2001.

^C For periods prior to January 2, 2008, the performance shown is the performance of the Series II shares of the American Blue Chip Income and Growth Trust, including, for periods prior to their inception, the performance of the Class 2 shares of the Blue Chip Income and Growth Fund, a series of American Funds Insurance Series and the master fund in which the American Blue Chip Income and Growth Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III share expenses, performance would be higher.

^D The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

AMERICAN BOND TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to maximize current income and preserve capital.

*Investment Strategies:*		The fund invests all of its assets in Class 1 shares of the master fund, the Bond Fund, a series of American Funds Insurance Series. The fund will invest at least 65% of its assets in investment-grade debt securities (including cash and cash equivalents) and may invest up to 35% of its assets in debt securities (rated Ba1 or below by Moody’s Investor Service and BB+ or below by Standard & Poor’s Corporation or unrated but determined by the fund’s investment advisr to be of equivalent quality). Such securities are sometimes referred to as “junk bonds.” The fund may invest in debt securities of issuers domiciled outside the United States. The fund may also invest up to 20% of its assets in preferred stocks, including convertible and noncovertible preferred stocks. The fund is designed for investors seeking income and more price stability than stocks, and capital preservation over the long term.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I^A		-9.72%		1.11%		3.56%		11/2/2005
Series II^B		-9.82%		0.98%		3.41%		7/29/2005
Series III^C		-9.76%		1.23%		3.93%		1/2/2008
Barclays Capital Aggregate Bond Index		5.24%		4.65%		5.63%

^A Series I shares were first offered on November 2, 2005. For periods prior to this date, the performance shown is the performance of the Series II shares of the American Bond Trust, including, for periods prior to the inception of the Series II shares, the performance of the Class 2 shares of the Bond Fund, a series of American Funds Insurance Series and the master fund in which the American Bond Trust invests, adjusted to reflect Series II share expenses. Series I shares have lower expenses than Series II shares. Had the performance shown for periods prior to November 2, 2005 reflected Series I share expenses, performance would be higher

^B Series II shares were first offered on July 29, 2005. For periods prior to this date, the performance shown reflects the performance of Class 2 shares of the Bond Fund, a series of American Funds Insurance Series and the master fund in which the American Bond Trust invests. The performance of the Class 2 shares of the Bond Fund has been adjusted to reflect the 0.50% Rule 12b-1 fee of Series II shares of the American Bond Trust. The Class 2 shares of the Bond Fund were first issued on January 2, 1996.

^C Series III shares were first offered on January 2, 2008. For periods prior to this date, the performance shown is the performance of the Series II shares of the American Bond Trust, including, for periods prior to their inception, the performance of the Class 2 shares of the Bond Fund, a series of American Funds Insurance Series and the master fund in which the American Bond Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III share expenses, performance would be higher.

AMERICAN GLOBAL GROWTH TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to make the shareholders’ investment grow over time.

*Investment Strategies:*		The fund invests all of its assets in Class 1 shares of the master fund, the Global Growth Fund, a series of American Funds Insurance Series. The Global Growth Fund invests primarily in common stocks of companies (including small and medium sized companies) located around the world. The Global Growth Fund is designed for investors seeking capital appreciation through stocks. Investors in the Global Growth Fund should have a long-term perspective and, for example be able to tolerate potentially sharp, short-term declines in value.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

197

Calendar Year Total Returns for Series II^A:





68.77%	-19.32%	-14.63%	-15.10%	34.62%	12.95%	13.52%	19.84%	14.21%	-38.68%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		40.81% (Quarter ended 12/31/1999) Worst Quarter: -20.54% (Quarter ended 9/30/2001)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series II^A		-38.68%		1.48%		3.64%		5/1/2007
Series III^B		-38.21%		2.14%		4.37%		1/2/2008
MSCI World Index		-42.08%		-2.35%		-2.20%
Lipper Global Fund Index		-38.77%		0.42%		1.23%

^A Series II shares were first offered on May 1, 2007. For periods prior to this date, the performance shown reflects the performance of Class 1 shares of the Global Growth Fund, a series of American Funds Insurance Series and the master fund in which the American Global Growth Trust invests. The performance of the Class 1 shares of the Global Growth Fund has been adjusted to reflect the 0.75% Rule 12b-1 fee of Series II shares of the American Global Growth Trust. The Class 1 shares of the Global Growth Fund were first issued on April 30, 1997.

^B Series III shares were first offered on January 2, 2008. For periods prior to this date, the performance shown is the performance of the Series II shares of the Global Growth Trust, including, for periods prior to their inception, the performance of the Class 1 shares of the Global Growth Fund, a series of American Funds Insurance Series and the master fund in which the American Global Growth Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III share expenses, performance would be higher.

AMERICAN GLOBAL SMALL CAPITALIZATION TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to make the shareholders’ investment grow over time.

*Investment Strategies:*		The fund invests all of its assets in Class 1 shares of the master fund, the Global Small Capitalization Fund, a series of American Funds Insurance Series. The Global Small Capitalization Fund invests primarily in stocks of smaller companies located around the world. Normally, the Global Small Capitalization Fund invests at least 80% of its assets in equity securities of companies with small market capitalizations, measured at the time of purchase.

The Global Small Capitalization Fund holdings of small capitalization stocks may fall below the 80% threshold due to subsequent market action. The adviser currently defines “small market capitalization” companies to be companies with market capitalizations of $3.5 billion or less. The adviser has periodically reevaluated and adjusted this definition and may continue to do so in the future. The Global Small Capitalization Fund is designed for investors seeking capital appreciation through stocks. Investors in the Global Small Capitalization Fund should have a long-term perspective and for example, be able to tolerate potentially sharp, short-term declines in value.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk

198


	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series II^A:





90.38%	-16.97%	-13.28%	-19.44%	52.78%	20.23%	24.73%	23.44%	20.69%	-53.79%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		28.73% (Quarter ended 12/31/1999) Worst Quarter: -31.38% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series II^A		-53.79%		0.64%		5.71%		5/1/2007
Series III^B		-53.39%		1.31%		6.46%		1/2/2008
S&P/Citigroup Global ex US <2 Billion Index^C		-49.15%		3.19%		5.95%

^A Series II shares were first offered on May 1, 2007. For periods prior to this date, the performance shown reflects the performance of Class 1 shares of the Global Small Capitalization Fund, a series of American Funds Insurance Series and the master fund in which the American Global Small Capitalization Trust invests. The performance of the Class 1 shares of the Global Small Capitalization Fund has been adjusted to reflect the 0.75% Rule 12b-1 fee of Series II shares of the American Global Small Capitalization Trust. The Class 1 shares of the Global Small Capitalization Fund were first issued on April 30, 1998.

^B Series III shares were first offered on January 2, 2008. For periods prior to this date, the performance shown is the performance of the Series II shares of the Global Small Capitalization Trust, including, for periods prior to their inception, the performance of the Class 1 shares of the Global Small Capitalization Fund, a series of American Funds Insurance Series and the master fund in which the American Global Small Capitalization Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III share expenses, performance would be higher.

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

AMERICAN GROWTH TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to make the shareholders’ investment grow.

*Investment Strategies:*		The fund invests all of its assets in Class 1 shares of the master fund, the Growth Fund, a series of American Funds Insurance Series. The Growth Fund invests primarily in common stocks of companies that appear to offer superior opportunities for growth of capital. The Growth Fund may also invest up to 15% of its assets in equity securities of issuers domiciled outside the U.S. and Canada.

In seeking to pursue its investment objective, the Growth Fund may invest in the securities of issuers representing a broad range of market capitalizations. The Growth Fund is designed for investors seeking capital appreciation through stocks. Investors in the Growth Fund should have a long-term perspective for example, be able to tolerate potentially sharp, short-term declines in value.

199

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series II^B:





56.50%	3.95%	-18.56%	-24.83%	36.16%	11.91%	15.59%	9.64%	11.73%	-44.28%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		30.56% (Quarter ended 12/31/1999) Worst Quarter: -27.27% (Quarter ended 9/30/2001)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I^A		-44.20%		-2.30%		1.97%		7/9/2003
Series II^B		-44.28%		-2.46%		1.82%		5/5/2003
Series III^C		-43.75%		-2.27%		2.13%		1/2/2008
S&P 500 Index		-37.00%		-2.19%		-1.38%

^A Series I shares were first offered on July 9, 2003. For periods prior to this date, the performance shown is the performance of the Series II shares of the American Growth Trust, including, for periods prior to the inception of the Series II shares, the performance of the Class 2 shares of the Growth Fund, a series of American Funds Insurance Series and the master fund in which the American Growth Trust invests, adjusted to reflect Series II share expenses. Series I shares have lower expenses than Series II shares. Had the performance shown for periods prior to July 9, 2003 reflected Series I share expenses, performance would be higher.

^B Series II shares were first offered on May 5, 2003. For periods prior to this date, the performance shown reflects the performance of Class 2 shares of the Growth Fund, a series of American Funds Insurance Series and the master fund in which the American Growth Trust invests. The performance of the Class 2 shares of the Growth Fund has been adjusted to reflect the 0.50% Rule 12b-1 fee of Series II shares of the American Growth Trust. The Class 2 shares of the Growth Fund were first issued on February 8, 1984.

^C Series III shares were first offered on January 2, 2008. For periods prior to this date, the performance shown is the performance of the Series II shares of the American Growth Trust, including, for periods prior to their inception, the performance of the Class 2 shares of the Growth Fund, a series of American Funds Insurance Series and the master fund in which the American Growth Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III share expenses, performance would be higher.

200

AMERICAN GROWTH-INCOME TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to make the shareholders’ investments grow and to provide the shareholder with income over time.

*Investment Strategies:*		The Fund invests all of its assets in Class 1 shares of the master fund, the Growth-Income Fund, a series of American Funds Insurance Series. The Growth-Income Fund invests primarily in common stocks or other securities which demonstrate the potential for appreciation and/or dividends. The Growth-Income Fund may invest up to 15% of its assets, at the time of purchase, in securities of issuers domiciled outside the U.S. and not included in the Standard & Poor’s 500 Composite Index. The Growth-Income Fund is designed for investors seeking both capital appreciation and income.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series II^B:





10.64%	7.41%	2.05%	-18.75%	31.75%	9.83%	5.29%	14.62%	4.48%	-38.17%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		16.83% (Quarter ended 6/30/2003) Worst Quarter: -22.05% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I^A		-38.08%		-2.92%		1.22%		7/9/2003
Series II^B		-38.17%		-3.06%		1.06%		5/5/2003
Series III^C		-37.18%		-2.75%		1.44%		1/2/2008
S&P 500 Index		-37.00%		-2.19%		-1.38%

^A Series I shares were first offered on July 9, 2003. For periods prior to this date, the performance shown is the performance of the Series II shares of the American Growth-Income Trust, including, for periods prior to the inception of the Series II shares, the performance of the Class 2 shares of the Growth-Income Fund, a series of American Funds Insurance Series and the master fund in which the American Growth-Income Trust invests, adjusted to reflect Series II share expenses. Series I shares have lower expenses than Series II shares. Had the performance shown for periods prior to July 9, 2003 reflected Series I share expenses, performance would be higher.

^B Series II shares were first offered on May 5, 2003. For periods prior to this date, the performance shown reflects the performance of Class 2 shares of the Growth-Income Fund, a series of American Funds Insurance Series and the master fund in which the American Growth-Income Trust invests. The performance of the Class 2 shares of the Growth-Income Fund has been adjusted to

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reflect the 0.50% Rule 12b-1 fee of Series II shares of the American Growth-Income Trust. The Class 2 shares of the Growth-Income Fund were first issued on February 8, 1984.

^C Series III shares were first offered on January 2, 2008. For periods prior to this date, the performance shown is the performance of the Series II shares of the American Growth-Income Trust, including, for periods prior to their inception, the performance of the Class 2 shares of the Growth-Income Fund, a series of American Funds Insurance Series and the master fund in which the American Growth-Income Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III share expenses, performance would be higher.

AMERICAN HIGH-INCOME BOND TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to provide a high level of current income and, secondarily, capital appreciation.

*Investment Strategies:*		The fund invests all of its assets in Class 1 shares of the master fund, the High-Income Bond Fund, a series of American Funds Insurance Series. The High-Income Bond Fund invests at least 65% of its assets in higher yielding and generally lower quality debt securities (rated Ba1 or below by Moody’s or BB+ or below by S&P or unrated but determined to be of equivalent quality). Such securities are sometimes referred to as “junk bonds.”

The High-Income Bond Fund may also invest up to 25% of its assets in securities of non-U.S. issuers. Normally, the High-Income Bond Fund invests at least 80% of its assets in bonds and other debt securities (this policy is subject to change upon 60 days’ notice to shareholders). The High-Income Bond Fund may also invest up to 20% of its assets in equity securities that provide an opportunity for capital appreciation.

The High-Income Bond Fund is designed for investors seeking a high level of current income and who are able to tolerate greater credit risk and price fluctuations than funds investing in higher quality bonds.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series II^A:





5.01%	-3.78%	7.21%	-2.25%	28.83%	9.01%	1.69%	10.06%	0.69%	-24.39%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		10.62% (Quarter ended 12/31/2002) Worst Quarter: -16.26% (Quarter ended 12/31/2008)

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Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series II^A		-24.39%		-1.46%		2.40%		5/1/2007
Series III^B		-23.93%		-0.85%		3.10%		1/2/2008
Merrill U.S. High Yield Master II Index		-26.39%		-0.86%		2.04%

^A Series II shares were first offered on May 1, 2007. For periods prior to this date, the performance shown reflects the performance of Class 1 shares of the High-Income Bond Fund, a series of American Funds Insurance Series and the master fund in which the American High-Income Bond Trust invests. The performance of the Class 1 shares of the High-Income Bond Fund has been adjusted to reflect the 0.75% Rule 12b-1 fee of Series II shares of the American High-Income Bond Trust. The Class 1 shares of the High-Income Bond Fund were first issued on February 8, 1984

^B Series III shares were first offered on January 2, 2008. For periods prior to this date, the performance shown is the performance of the Series II shares of the High-Income Bond Trust, including, for periods prior to their inception, the performance of the Class 1 shares of the High-Income Bond Fund, a series of American Funds Insurance Series and the master fund in which the American High-Income Bond Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III share expenses, performance would be higher.

AMERICAN INTERNATIONAL TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to make the shareholders’ investment grow.

*Investment Strategies:*		The Fund invests all of its assets in Class 1 shares of the master fund, the International Fund, a series of American Funds Insurance Series. The International Fund invests primarily in common stocks of companies located outside the United States. The International Fund is designed for investors seeking capital appreciation through stocks. Investors in the fund should have a long-term perspective and be able to tolerate potentially wide price fluctuations.

Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk

Past Performance

Calendar Year Total Returns for Series II^B:





75.11%	-22.46%	-20.29%	-15.27%	34.11%	18.74%	20.87%	18.32%	19.41%	-42.47%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		42.16% (Quarter ended 12/31/1999) Worst Quarter: -20.99% (Quarter ended 12/31/2008)

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Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Ten		Date of
	Year		Year		Year		Inception

Series I^A		-42.37%		3.29%		3.84%		7/9/2003
Series II^B		-42.47%		3.13%		3.68%		5/5/2003
Series III^C		-41.97%		3.31%		3.99%		1/2/2008
MSCI EAFE Index		-43.06%		2.10%		1.18%

^A Series I shares were first offered on July 9, 2003. For periods prior to this date, the performance shown is the performance of the Series II shares of the American International Trust, including, for periods prior to the inception of the Series II shares, the performance of the Class 2 shares of the International Fund, a series of American Funds Insurance Series and the master fund in which the American International Trust invests, adjusted to reflect Series II share expenses. Series I shares have lower expenses than Series II shares. Had the performance shown for periods prior to July 9, 2003 reflected Series I share expenses, performance would be higher.

^B Series II shares were first offered on May 5, 2003. For periods prior to this date, the performance shown reflects the performance of Class 2 shares of the International Fund, a series of American Funds Insurance Series and the master fund in which the American International Trust invests. The performance of the Class 2 shares of the International Fund has been adjusted to reflect the 0.50% Rule 12b-1 fee of Series II shares of the American International Trust. The Class 2 shares of the International Fund were first issued on May 1, 1990.

^C Series III shares were first offered on January 2, 2008. For periods prior to this date, the performance shown is the performance of the Series II shares of the American International Trust, including, for periods prior to their inception, the performance of the Class 2 shares of the International Fund, a series of American Funds Insurance Series and the master fund in which the American International Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III share expenses, performance would be higher.

AMERICAN NEW WORLD TRUST


Adviser to Master Fund:		Capital Research and Management Company


*Investment Objective:*		To seek to make the shareholders’ investment grow over time.

*Investment Strategies:*		The fund invests all of its assets in Class 1 shares of the master fund, the New World Fund, a series of American Funds Insurance Series. The New World Fund invests primarily in stocks of companies with significant exposure to countries with developing economies and/or markets.

The New World Fund may also invest in debt securities of issuers, including issuers of lower rated bonds, with exposure to these countries. The New World Fund is designed for investors seeking capital appreciation. Investors in the New World Fund should have a long-term perspective and for example, be able to tolerate potentially sharp, short-term declines in value.

The New World Fund may invest in equity securities of any company, regardless of where it is based, if the New World Fund’s investment adviser determines that a significant portion of the company’s assets or revenues (generally 20% or more) is attributable to developing countries. Under normal market conditions, the New World Fund will invest at least 35% of its assets in equity and debt securities of issuers primarily based in what the subadviser deems qualified countries that have developing economies and/or markets. In addition, the New World Fund may invest up to 25% of its assets in nonconvertible debt securities of issuers, including issuers of lower rated bonds (“junk bonds”) and government bonds, primarily based in qualified countries or that have a significant portion of their assets or revenues attributable to developing countries. The New World Fund may also, to a limited extent, invest in securities of issuers based in nonqualified developing countries.

In determining whether a country is qualified, the New World Fund will consider such factors as the country’s per capita gross domestic product; the percentage of the country’s economy that is industrialized; market capital as a percentage of gross domestic product; the overall regulatory environment; the presence of government regulation limiting or banning foreign ownership; and restrictions on repatriation of initial capital, dividends, interest and/or capital gains. The New World Fund’s investment adviser will maintain a list of qualified countries and securities in which the fund may invest. Qualified developing countries in which the fund may invest currently include, but are not limited to, Argentina, Bahrain, Brazil, Bulgaria, Chile, China, Colombia, Croatia, Czech Republic, Dominican Republic, Egypt, Hungary, India, Israel, Jordan, Kazakhstan, Lebanon, Malaysia, Malta, Mexico, Morocco, Oman, Panama, Peru, the Philippines, Poland, Russian Federation, South Africa, Thailand, Turkey, Ukraine, United Arab Emirates and Venezuela.

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Principal Risks of Investing in the Fund

The principal risks of investing in the fund, which could adversely affect its NAV and performance, include:


	•	Active management risk
	•	Credit and counterparty risk
	•	Equity securities risk
	•	Fixed-income securities risk
	•	Foreign securities risk
	•	Hedging, derivatives and other strategic transactions risk
	•	Issuer risk
	•	Liquidity risk
	•	Medium and smaller company risk

Past Performance

Calendar Year Total Returns for Series II^A:





-13.10%	-4.71%	-6.16%	38.52%	18.18%	20.21%	31.90%	31.39%	-42.66%

2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		15.44% (Quarter ended 6/30/2003) Worst Quarter: -22.35% (Quarter ended 12/31/2008)

Average Annual Total Returns For Period Ended 12/31/2008


	One		Five		Since		Date of
	Year		Year		Inception		Inception

Series II^A		-42.66%		7.14%		6.31%		5/1/2007
Series III^B		-42.16%		7.86%		7.07%		1/2/2008
MSCI AC World Index^C		-42.20%		-0.06%		-1.11%

^A Series II shares were first offered on May 1, 2007. For periods prior to this date, the performance shown reflects the performance of Class 1 shares of the New World Fund, a series of American Funds Insurance Series and the master fund in which the American New World Trust invests. The performance of the Class 1 shares of the New World Fund has been adjusted to reflect the 0.75% Rule 12b-1 fee of Series II shares of the American New World Trust. The Class 1 shares of the New World Fund were first issued on June 17, 1999.

^B Series III shares were first offered on January 2, 2008. For periods prior to this date, the performance shown is the performance of the Series II shares of the New World Trust, including, for periods prior to their inception, the performance of the Class 1 shares of the New World Fund, a series of American Funds Insurance Series and the master fund in which the American New World Trust invests, adjusted to reflect Series II share expenses. Series III shares have lower expenses than Series II shares. Had the performance shown for periods prior to January 2, 2008 reflected Series III share expenses, performance would be higher.

^C The return for the Index under “Since Inception” may be calculated from the month end closest to the inception date of the fund.

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OTHER PERMITTED INVESTMENTS BY THE FUNDS OF FUNDS

Certain funds of funds may directly:


	•	Purchase U.S. government securities and short-term paper.
	•	Purchase shares of other registered open-end investment companies (and registered unit investment trusts) within the same “group of investment companies” as that term is defined in Section 12 of the Investment Company Act of 1940, as amended (“1940 Act”), subject to the limits set forth under the 1940 Act and rules thereunder.
	•	Purchase shares of other registered open-end investment companies (and registered unit investment trusts) where the adviser is not the same as, or affiliated with, the Adviser, including exchange traded funds (“ETFs”), subject to the limits set forth under the 1940 Act and rules thereunder.
	•	Purchase securities of registered closed-end investment companies.
	•	Invest in foreign and domestic equity securities that may include common and preferred stocks of large, medium and small capitalization companies in both developed (including the U.S.) and emerging markets.
	•	Invest in foreign and domestic fixed income securities that may include debt securities of governments throughout the world (including the U.S.), their agencies and instrumentalities, debt securities of corporations and supranationals, inflation protected securities, convertible bonds, mortgage-backed securities, asset-backed securities and collateralized debt securities. Investments in fixed income securities may include securities of issuers in both developed (including the U.S.) and emerging markets and may include fixed income securities rated below investment grade (sometimes referred to as “junk bonds”).
	•	Invest up to 15% of its net assets in illiquid securities, including securities issued by limited partnerships and other pooled investment vehicles, including hedge funds.
	•	Make short sales of securities (borrow and sell securities not owned by the fund), either to realize appreciation when a security that the fund does not own declines in value or as a hedge against potential declines in the value of a fund security.
	•	With the prior approval of the Adviser’s Complex Securities Committee, invest in qualified publicly traded partnerships, including qualified publicly traded partnerships that invest principally in commodities or commodity-linked derivatives.*
	•	With the prior approval of the Adviser’s Complex Securities Committee, purchase and sell commodities and enter into swap contracts and other commodity-linked derivative instruments including those linked to physical commodities.*

A fund of funds may use various investment strategies such as hedging and other related transactions. For example, a fund of funds may use derivative instruments (such as options, futures and swaps) for hedging purposes, including hedging various market risks and managing the effective maturity or duration of debt instruments held by a fund of funds. In addition, these strategies may be used to gain exposure to a particular securities market. A fund of funds also may with prior approval of the Adviser’s Complex Securities Committee, purchase and sell commodities and may enter into swap contracts and other commodity-linked derivative instruments including those linked to physical commodities. Please refer to “Hedging and Other Strategic Transactions Risks” in the SAI.

*Because of uncertainties under federal tax laws as to whether income from commodity-linked derivative instruments and certain other instruments would constitute “qualifying income” to a regulated investment company, a fund of funds is not permitted to invest in such instruments unless the subadviser obtains prior written approval from the Adviser’s Complex Securities Committee. See “Additional Information Concerning Taxes” in the SAI.

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ADDITIONAL INFORMATION ABOUT THE FUNDS OF FUNDS’
PRINCIPAL RISKS AND INVESTMENT POLICIES

Active management risk

A fund is subject to management risk because it relies on the subadviser’s ability to pursue the fund’s objective. The subadviser will apply investment techniques and risk analyses in making investment decisions for the fund, but there can be no guarantee that these will produce the desired results. The fund generally does not attempt to time the market and instead generally stays fully invested in the relevant asset class, such as domestic equities or foreign equities. Notwithstanding its benchmark, the fund may buy securities not included in its benchmark or hold securities in very different proportions than its benchmark. To the extent the fund invests in those securities, its performance depends on the ability of the subadviser to choose securities that perform better than securities that are included in the benchmark.

Commodity risk

Commodity investments involve the risk of volatile market price fluctuations of commodities resulting from fluctuating demand, supply disruption, speculation and other factors.

Derivatives risk

A fund’s use of certain derivative instruments (such as options, futures and swaps) could produce disproportionate gains or losses. Derivatives are generally considered more risky than direct investments and, in a down market, could become harder to value or sell at a fair price.

Exchange traded funds risk (“ETFs”)

These are a type of investment company bought and sold on a securities exchange. An ETF represents a fixed portfolio of securities designed to track a particular market index. A fund could purchase an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees which increase their costs.

Fund of funds risk

A fund’s ability to achieve its investment objective will depend largely on the ability of the subadviser to select the appropriate mix of Underlying Funds. In addition, achieving the fund’s objective will depend on the performance of the Underlying Funds which depends on the Underlying Funds’ ability to meet their investment objectives. There can be no assurance that either the fund or the Underlying Funds will achieve their investment objectives. A fund is subject to the same risks as the Underlying Funds in which it invests. Each fund invests in Underlying Funds that invest in fixed-income securities (including in some cases high yield securities) and equity securities, including foreign securities, and engage in hedging and other strategic transactions. To the extent a fund invests in these securities directly or engages in hedging and other strategic transactions, the fund will be subject to the same risks. As a fund’s asset mix becomes more conservative, the fund becomes more susceptible to risks associated with fixed-income securities.

Investment company securities risk

A fund may invest in securities of other investment companies. The total return on such investments will be reduced by the operating expenses and fees of such other investment companies, including advisory fees. Investments in closed-end funds may involve the payment of substantial premiums above the value of such investment companies’ portfolio securities.

Non-diversified risk

Overall risk can be reduced by investing in securities from a diversified pool of issuers, while overall risk is increased by investing in securities of a small number of issuers. Certain funds are not “diversified” within the meaning of the 1940 Act. This means they are allowed to invest in the securities of a relatively small number of issuers resulting in a greater susceptibility to associated risks. As a result, credit, market and other risks associated with a fund’s investment strategies or techniques may be more pronounced for these funds than for funds that are “diversified.”

Target allocation risk

The Lifecycle Trusts have target allocations between equity and fixed income securities. When this fund has a greater asset mix of equity securities it will be less conservative and have more equity securities risk exposure. These risks are explained under

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ADDITIONAL INFORMATION ABOUT
THE FUNDS’ PRINCIPAL RISKS AND INVESTMENT POLICIES

Risks of Investing in Certain Types of Securities

Recent Events

Recent events in the financial sector have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. These events have included, but are not limited to, the U.S. government’s placement of Fannie Mae and Freddie Mac under conservatorship (see “Investment Policies — U.S. Government and Government Agency Obligations — U.S. Instrumentality Obligations”), the bankruptcy filing of Lehman Brothers, the sale of Merrill Lynch to Bank of America, the U.S. Government support of American International Group and Citigroup, the sale of Wachovia to Wells Fargo, reports of credit and liquidity issues involving certain money market mutual funds, and emergency measures by the U.S. and foreign governments banning short-selling. Both domestic and foreign equity markets have been experiencing increased volatility and turmoil, with issuers that have exposure to the real estate, mortgage and credit markets particularly affected, and it is uncertain whether or for how long these conditions will continue.

In addition to the recent unprecedented volatility in financial markets, the reduced liquidity in credit and fixed-income markets may adversely affect many issuers worldwide. This reduced liquidity may result in less money being available to purchase raw materials, goods and services from emerging markets, which may, in turn, bring down the prices of these economic staples. It may also result in emerging market issuers having more difficulty obtaining financing, which may, in turn, cause a decline in their stock prices. These events and possible continuing market volatility may have an adverse effect on the funds.

Active management risk

Funds that are not index funds are actively managed by their subadvisers. The performance of a fund that is actively managed will reflect in part the ability of its portfolio manager(s) to make investment decisions that are suited to achieving a fund’s investment objective. If the subadvisers’ investment strategies do not perform as expected, the funds could underperform other mutual funds with similar investment objectives or lose money.

Arbitrage securities and distressed companies risk

A merger or other restructuring, or a tender or exchange offer, proposed or pending at the time a fund invests in risk arbitrage securities may not be completed on the terms contemplated, resulting in losses to the fund. Debt obligations of distressed companies typically are unrated, lower-rated, in default or close to default. Also, securities of distressed companies are generally more likely to become worthless than the securities of more financially stable companies.

Convertible securities risk

Convertible securities generally offer lower interest or dividend yields than non-convertible fixed-income securities of similar credit quality because of the potential for capital appreciation. The market values of convertible securities tend to decline as interest rates increase and, conversely, to increase as interest rates decline. However, a convertible security’s market value also tends to reflect the market price of common stock of the issuing company, particularly when that stock price is greater than the convertible security’s “conversion price.” The conversion price is defined as the predetermined price or exchange ratio at which the convertible security can be converted or exchanged for the underlying common stock. As the market price of the underlying common stock declines below the conversion price, the price of the convertible security tends to be increasingly influenced more by the yield of the convertible security, Thus, it may not decline in price to the same extent as the underlying common stock. In the event of a liquidation of the issuing company, convertible securities generally entail less risk than its common stock. However, convertible securities fall below debt obligations of the same issuer in order of preference or priority in the event of a liquidation and typically are unrated or rated lower than such debt obligations.

Credit and counterparty risk

This is the risk that the issuer or guarantor of a fixed-income security, the counterparty to an OTC derivatives contract (see “Hedging, derivatives and other strategic transactions risk”) or a borrower of a fund’s securities, will be unable or unwilling to make timely principal, interest or settlement payments, or otherwise honor its obligations. Credit risk associated with investments in fixed-income securities relates to the ability of the issuer to make scheduled payments of principal and interest on an obligation. The funds that invest in fixed-income securities are subject to varying degrees of risk that the issuers of the securities will have their credit ratings downgraded or will default, potentially reducing the fund’s share price and income level. Nearly all fixed-income

209

securities are subject to some credit risk, which may vary depending upon whether the issuers of the securities are corporations or domestic or foreign governments or their sub-divisions or instrumentalities. U.S. government securities are subject to varying degrees of credit risk depending upon whether the securities are supported by the full faith and credit of the United States, supported by the ability to borrow from the U.S. Treasury, supported only by the credit of the issuing U.S. government agency, instrumentality, corporation or otherwise supported by the United States. For example, issuers of many types of U.S. government securities (e.g., the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Banks (“FHLBs”), although chartered or sponsored by Congress, are not funded by Congressional appropriations, and their fixed-income securities, including asset-backed and mortgage-backed securities, are neither guaranteed nor insured by the U.S. government. As a result, these securities are subject to more credit risk than U.S. government securities that are supported by the full faith and credit of the United States (e.g., U.S. Treasury bonds). When a fixed-income security is not rated, a subadviser may have to assess the risk of the security itself. Asset-backed securities, whose principal and interest payments are supported by pools of other assets, such as credit card receivables and automobile loans, are subject to further risks, including the risk that the obligors of the underlying assets default on payment of those assets.

Funds that invest in below investment-grade securities (also called junk bonds), which are fixed-income securities rated lower than “Baa” by Moody’s or “BBB” by Standard & Poor’s (“S&P”), or determined by a subadviser to be of comparable quality to securities so rated, are subject to increased credit risk. The sovereign debt of many foreign governments, including their sub-divisions and instrumentalities, falls into this category. Below investment-grade securities offer the potential for higher investment returns than higher-rated securities, but they carry greater credit risk: their issuers’ continuing ability to meet principal and interest payments is considered speculative and they are more susceptible to real or perceived adverse economic and competitive industry conditions and may be less liquid than higher-rated securities.

In addition, a fund is exposed to credit risk to the extent it makes use of OTC derivatives (such as forward foreign currency contracts and/or swap contracts) and engages to a significant extent in the lending of fund securities or the use of repurchase agreements. OTC derivatives transactions can only be closed out with the other party to the transaction. If the counterparty defaults, a fund will have contractual remedies, but there is no assurance that the counterparty will be able to meet its contractual obligations or that, in the event of default, a fund will succeed in enforcing them. A fund, therefore, assumes the risk that it may be unable to obtain payments owed to it under OTC derivatives contracts or that those payments may be delayed or made only after the fund has incurred the costs of litigation. While a subadviser intends to monitor the creditworthiness of contract counterparties, there can be no assurance that the counterparty will be in a position to meet its obligations, especially during unusually adverse market conditions.

Distressed investments risk

Distressed investments include loans, loan participations, bonds, notes and non-performing and sub-performing mortgage loans, many of which are not publicly traded and which may involve a substantial degree of risk. In certain periods, there may be little or no liquidity in the markets for these securities or instruments. In addition, the prices of such securities or instruments may be subject to periods of abrupt and erratic market movements and above-average price volatility. It may be more difficult to value such securities and the spread between the bid and asked prices of such securities may be greater than normally expected. If the subadviser’s evaluation of the risks and anticipated outcome of an investment in a distressed security should prove incorrect, a fund investing in such securities may lose a substantial portion or all of its investment or it may be required to accept cash or securities with a value less than the fund’s original investment.

Equity securities risk

Equity securities include common, preferred and convertible preferred stocks and securities the values of which are tied to the price of stocks, such as rights, warrants and convertible debt securities. Common and preferred stocks represent equity ownership in a company. Stock markets are volatile. The price of equity securities will fluctuate and can decline and reduce the value of a fund investing in equities. The price of equity securities fluctuates based on changes in a company’s financial condition and overall market and economic conditions. The value of equity securities purchased by a fund could decline if the financial condition of the companies in which the funds are invested in decline or if overall market and economic conditions deteriorate. Even funds that invest in high quality or “blue chip” equity securities or securities of established companies with large market capitalizations (which generally have strong financial characteristics) can be negatively impacted by poor overall market and economic conditions. Companies with large market capitalizations may also have less growth potential than smaller companies and may be able to react less quickly to changes in the marketplace.

The funds may maintain substantial exposure to equities and generally do not attempt to time the market. Because of this exposure, the possibility that stock market prices in general will decline over short or extended periods subjects the funds to unpredictable declines in the value of their investments, as well as periods of poor performance.

Value Investing Risk. Certain equity securities (generally referred to as “value securities”) are purchased primarily because they are selling at prices below what a subadviser believes to be their fundamental value and not necessarily because the issuing companies are expected to experience significant earnings growth. The funds bear the risk that the companies that issued these

210

securities may not overcome the adverse business developments or other factors causing their securities to be perceived by the subadvisers to be under-priced or that the market may never come to recognize their fundamental value. A value stock may not increase in price, as anticipated by the subadviser investing in such securities, if other investors fail to recognize the company’s value and bid up the price or invest in markets favoring faster growing companies. A fund’s strategy of investing in value stocks also carries the risk that in certain markets value stocks will underperform growth stocks.

Growth Investing Risk. Certain equity securities (generally referred to as “growth securities”) are purchased primarily because a subadviser believes that these securities will experience relatively rapid earnings growth. Growth securities typically trade at higher multiples of current earnings than other securities. Growth securities are often more sensitive to market fluctuations than other securities because their market prices are highly sensitive to future earnings expectations. At times when it appears that these expectations may not be met, growth stock prices typically fall.

Exchange traded funds (ETFs) risk

Fixed-income securities risk

Fixed-income securities are generally subject to two principal types of risks: (a) interest rate risk and (b) credit quality risk.

Interest Rate Risk. Fixed-income securities are affected by changes in interest rates. When interest rates decline, the market value of the fixed-income securities generally can be expected to rise. Conversely, when interest rates rise, the market value of fixed-income securities generally can be expected to decline. The longer the duration or maturity of a fixed-income security, the more susceptible it is to interest rate risk.

Credit Quality Risk. Fixed-income securities are subject to the risk that the issuer of the security will not repay all or a portion of the principal borrowed and will not make all interest payments. If the credit quality of a fixed-income security deteriorates after a fund has purchased the security, the market value of the security may decrease and lead to a decrease in the value of the fund’s investments. Funds that may invest in lower rated fixed-income securities commonly referred to as “junk” securities are riskier than funds that may invest in higher rated fixed-income securities. Additional information on the risks of investing in investment grade fixed-income securities in the lowest rating category and lower rated fixed-income securities is set forth below.

Investment Grade Fixed-Income Securities in the Lowest Rating Category Risk. Investment grade fixed-income securities in the lowest rating category (rated “Baa” by Moody’s or “BBB” by S&P and comparable unrated securities) involve a higher degree of risk than fixed-income securities in the higher rating categories. While such securities are considered investment grade quality and are deemed to have adequate capacity for payment of principal and interest, such securities lack outstanding investment characteristics and have speculative characteristics as well. For example, changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher grade securities.

Lower Rated Fixed-Income Securities Risk and High Yield Securities Risk. Lower rated fixed- income securities are defined as securities rated below investment grade (rated “Ba” and below by Moody’s and “BB” and below by S&P) (also called junk bonds). The general risks of investing in these securities are as follows:


	•	Risk to Principal and Income. Investing in lower rated fixed-income securities is considered speculative. While these securities generally provide greater income potential than investments in higher rated securities, there is a greater risk that principal and interest payments will not be made. Issuers of these securities may even go into default or become bankrupt.
	•	Price Volatility. The price of lower rated fixed-income securities may be more volatile than securities in the higher rating categories. This volatility may increase during periods of economic uncertainty or change. The price of these securities is affected more than higher rated fixed-income securities by the market’s perception of their credit quality, especially during times of adverse publicity. In the past, economic downturns or an increase in interest rates have, at times, caused more defaults by issuers of these securities and may do so in the future. Economic downturns and increases in interest rates have an even greater affect on highly leveraged issuers of these securities.
	•	Liquidity. The market for lower rated fixed-income securities may have more limited trading than the market for investment grade fixed-income securities. Therefore, it may be more difficult to sell these securities and these securities may have to be sold at prices below their market value in order to meet redemption requests or to respond to changes in market conditions.
	•	Dependence on Subadviser’s Own Credit Analysis. While a subadviser may rely on ratings by established credit rating agencies, it will also supplement such ratings with its own independent review of the credit quality of the issuer. Therefore, the assessment of the credit risk of lower rated fixed-income securities is more dependent on the subadviser’s evaluation than the assessment of the credit risk of higher rated securities.

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Additional Risks Regarding Lower Rated Corporate Fixed-Income Securities. Lower rated corporate debt securities (and comparable unrated securities) tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated corporate fixed-income securities. Issuers of lower rated corporate debt securities may also be highly leveraged, increasing the risk that principal and income will not be repaid.

Additional Risks Regarding Lower Rated Foreign Government Fixed-Income Securities. Lower rated foreign government fixed-income securities are subject to the risks of investing in emerging market countries described under “Foreign securities risk.” In addition, the ability and willingness of a foreign government to make payments on debt when due may be affected by the prevailing economic and political conditions within the country. Emerging market countries may experience high inflation, interest rates and unemployment as well as exchange rate trade difficulties and political uncertainty or instability. These factors increase the risk that a foreign government will not make payments when due.

Prepayment of principal. Many types of debt securities, including floating rate loans, are subject to prepayment risk. Prepayment risk occurs when the issuer of a security can repay principal prior to the security’s maturity. Securities subject to prepayment risk can offer less potential for gains when the credit quality of the issuer improves.

Foreign securities risk

Funds that invest in securities traded principally in securities markets outside the United States are subject to additional and more varied risks, as the value of foreign securities may change more rapidly and extremely than the value of U.S. securities. The securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Additionally, issuers of foreign securities may not be subject to the same degree of regulation as U.S. issuers. Reporting, accounting and auditing standards of foreign countries differ, in some cases significantly, from U.S. standards. There are generally higher commission rates on foreign portfolio transactions, transfer taxes, higher custodial costs and the possibility that foreign taxes will be charged on dividends and interest payable on foreign securities. Also, for lesser developed countries, nationalization, expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations (which may include suspension of the ability to transfer currency from a country), political changes or diplomatic developments could adversely affect a fund’s investments. In the event of nationalization, expropriation or other confiscation, a fund could lose its entire investment in a foreign security. All funds that invest in foreign securities are subject to these risks. Some of the foreign risks are also applicable to the other funds because they may invest a material portion of their assets in securities of foreign issuers traded in the U.S. In addition, funds that invest a significant portion of their assets in the securities of issuers based in countries with “emerging market” economies are subject to greater levels of foreign investment risk than funds investing primarily in more developed foreign markets, since emerging market securities may present market, credit, currency, liquidity, legal, political and other risks greater than, or in addition to, risks of investing in developed foreign countries. These risks include: high currency exchange rate fluctuations; increased risk of default (including both government and private issuers); greater social, economic, and political uncertainty and instability (including the risk of war); more substantial governmental involvement in the economy; less governmental supervision and regulation of the securities markets and participants in those markets; controls on foreign investment and limitations on repatriation of invested capital and on a fund’s ability to exchange local currencies for U.S. dollars; unavailability of currency hedging techniques in certain emerging market countries; the fact that companies in emerging market countries may be newly organized and may be smaller and less seasoned; the difference in, or lack of, auditing and financial reporting standards, which may result in unavailability of material information about issuers; different clearance and settlement procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such transactions; difficulties in obtaining and/or enforcing legal judgments in foreign jurisdictions; and significantly smaller market capitalizations of emerging market issuers.

Currency Risk. Currency risk is the risk that fluctuations in exchange rates may adversely affect the U.S. dollar value of a fund’s investments. Currency risk includes both the risk that currencies in which a fund’s investments are traded, or currencies in which a fund has taken an active investment position, will decline in value relative to the U.S. dollar and, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly for a number of reasons, including the forces of supply and demand in the foreign exchange markets, actual or perceived changes in interest rates, and intervention (or the failure to intervene) by U.S. or foreign governments or central banks, or by currency controls or political developments in the U.S. or abroad. Certain funds may engage in proxy hedging of currencies by entering into derivative transactions with respect to a currency whose value is expected to correlate to the value of a currency the fund owns or wants to own. This presents the risk that the two currencies may not move in relation to one another as expected. In that case, the fund could lose money on its investment and also lose money on the position designed to act as a proxy hedge. Certain funds may also take active currency positions and may cross-hedge currency exposure represented by their securities into another foreign currency. This may result in a fund’s currency exposure being substantially different than that suggested by its securities investments. All funds with foreign currency holdings and/or that invest or trade in securities denominated in foreign currencies or related derivative instruments may be adversely affected by changes in foreign currency exchange rates. Derivative foreign currency transactions (such as futures, forwards and swaps) may also involve leveraging risk, in addition to currency risk. Leverage may disproportionately increase a fund’s portfolio losses and reduce opportunities for gain when interest rates, stock prices or currency rates are changing.

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Hedging, derivatives and other strategic transactions risk

The ability of a fund to utilize hedging and other strategic transactions successfully will depend in part on its subadviser’s ability to predict pertinent market movements, and market risk, counterparty risk, credit risk, interest risk, and other risk factors, none of which can be assured. The skills required to successfully utilize hedging and other strategic transactions are different from those needed to select a fund’s securities. Even if the subadviser only uses hedging and other strategic transactions in a fund primarily for hedging purposes or to gain exposure to a particular securities market, if the transaction is not successful it could result in a significant loss to a fund. These transactions may also increase the volatility of a fund and may involve a small investment of cash relative to the magnitude of the risks assumed, thereby magnifying the impact of any resulting gain or loss. For example, the potential loss from the use of futures can exceed a fund’s initial investment in such contracts. In addition, these transactions could result in a loss to a fund if the counterparty to the transaction does not perform as promised.

A fund may invest in derivatives, which are financial contracts with a value that depends on, or is derived from, the value of underlying assets, reference rates or indexes. Derivatives may relate to stocks, bonds, interest rates, currencies or currency exchange rates and related indexes. Funds may use derivatives for many purposes, including for hedging, and as a substitute for direct investment in securities or other assets. Funds also may use derivatives as a way to adjust efficiently the exposure of the funds to various securities, markets and currencies without the funds actually having to sell existing investments and make new investments. This generally will be done when the adjustment is expected to be relatively temporary or in anticipation of effecting the sale of fund assets and making new investments over time. For a description of the various derivative instruments the funds may utilize, refer to the SAI.

The use of derivative instruments may involve risks different from, or potentially greater than, the risks associated with investing directly in securities and other more traditional assets. In particular, the use of derivative instruments exposes a fund to the risk that the counterparty to an OTC derivatives contract will be unable or unwilling to make timely settlement payments or otherwise to honor its obligations. OTC derivatives transactions typically can only be closed out with the other party to the transaction, although either party may engage in an offsetting transaction that puts that party in the same economic position as if it had closed out the transaction with the counterparty or may obtain the other party’s consent to assign the transaction to a third party. If the counterparty defaults, the fund will have contractual remedies, but there is no assurance that the counterparty will meet its contractual obligations or that, in the event of default, the fund will succeed in enforcing them. For example, because the contract for each OTC derivatives transaction is individually negotiated with a specific counterparty, a fund is subject to the risk that a counterparty may interpret contractual terms (e.g., the definition of default) differently than the fund when the fund seeks to enforce its contractual rights. If that occurs, the cost and unpredictability of the legal proceedings required for the fund to enforce its contractual rights may lead it to decide not to pursue its claims against the counterparty. The fund, therefore, assumes the risk that it may be unable to obtain payments owed to it under OTC derivatives contracts or that those payments may be delayed or made only after the fund has incurred the costs of litigation. While a subadviser intends to monitor the creditworthiness of counterparties, there can be no assurance that a counterparty will meet its obligations, especially during unusually adverse market conditions. To the extent a fund contracts with a limited number of counterparties, the fund’s risk will be concentrated and events that affect the creditworthiness of any of those counterparties may have a pronounced effect on the fund. Derivatives also are subject to a number of risks described elsewhere in this section, including market risk and liquidity risk. Since the value of derivatives is calculated and derived from the value of other assets, instruments or references, there is a risk that they will be improperly valued. Derivatives also involve the risk that changes in their value may not correlate perfectly with the assets rates, or indexes they are designed to hedge or closely track. Suitable derivative transactions may not be available in all circumstances. In addition, a subadviser may determine not to use derivatives to hedge or otherwise reduce risk exposure.

A detailed discussion of various hedging and other strategic transactions, including applicable regulations of the Commodity Futures Trading Commission and the requirement to segregate assets with respect to these transactions, appears in the SAI. To the extent a fund utilizes hedging and other strategic transactions, it will be subject to the same risks.

High portfolio turnover risk

A high level of portfolio turnover may have a negative impact on performance by increasing transaction costs, which must be borne directly by a fund, and brokerage commissions and generating greater tax liabilities for shareholders. The portfolio turnover rate of a fund may vary from year to year, as well as within a year.

Index management risk

Certain factors may cause a fund that is an index fund to track its target index less closely. For example, a subadviser may select securities that are not fully representative of the index, and the fund’s transaction expenses, and the size and timing of its cash flows, may result in the fund’s performance being different than that of its index. Moreover, the fund will generally reflect the performance of its target index even when the index does not perform well.

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Industry or sector investing risk

When a fund’s investments are concentrated in a particular industry or sector of the economy, they are not as diversified as the investments of most mutual funds and are far less diversified than the broad securities markets. This means that concentrated funds tend to be more volatile than other mutual funds, and the values of their investments tend to go up and down more rapidly. In addition, a fund which invests in a particular industry or sector is particularly susceptible to the impact of market, economic, regulatory and other factors affecting that industry or sector.

Banking Risk. Commercial banks (including “money center” regional and community banks), savings and loan associations and holding companies of the foregoing are especially subject to adverse effects of volatile interest rates, concentrations of loans in particular industries (such as real estate or energy) and significant competition. The profitability of these businesses is to a significant degree dependent upon the availability and cost of capital funds. Banks, thrifts and their holding companies are especially subject to the adverse effects of economic recession. Economic conditions in the real estate market may have a particularly strong effect on certain banks and savings associations. Commercial banks and savings associations are subject to extensive federal and, in many instances, state regulation. Neither such extensive regulation nor the federal insurance of deposits ensures the solvency or profitability of companies in this industry, and there is no assurance against losses in securities issued by such companies.

Financial Services Industry Risk. A fund investing principally in securities of companies in the financial services industry is particularly vulnerable to events affecting that industry. Companies in the financial services industry include commercial and industrial banks, savings and loan associations and their holding companies, consumer and industrial finance companies, diversified financial services companies, investment banking, securities brokerage and investment advisory companies, leasing companies and insurance companies.

These companies compete with banks and thrifts to provide traditional financial service products, in addition to their traditional services, such as brokerage and investment advice. In addition, all financial service companies face shrinking profit margins due to new competitors, the cost of new technology and the pressure to compete globally.

Insurance companies are engaged in underwriting, selling, distributing or placing of property and casualty, life or health insurance. Insurance company profits are affected by many factors, including interest rate movements, the imposition of premium rate caps, competition and pressure to compete globally. Property and casualty insurance profits may also be affected by weather castatrophes and other disasters. Life and health insurance profits may be affected by mortality rates. Already extensively regulated, insurance companies’ profits may also be adversely affected by increased government regulations or tax law changes.

Health Sciences Risk. Companies in this sector are subject to the additional risks of increased competition within the health care industry, changes in legislation or government regulations, reductions in government funding, the uncertainty of governmental approval of a particular product, product liability or other litigation, patent expirations and the obsolescence of popular products. The prices of the securities of health sciences companies may fluctuate widely due to government regulation and approval of their products and services, which may have a significant effect on their price and availability. In addition, the types of products or services produced or provided by these companies may quickly become obsolete. Moreover, liability for products that are later alleged to be harmful or unsafe may be substantial and may have a significant impact on a company’s market value or share price.

Insurance Risk. Insurance companies are particularly subject to government regulation and rate setting, potential anti-trust and tax law changes, and industry-wide pricing and competition cycles. Property and casualty insurance companies may also be affected by weather and other catastrophes. Life and health insurance companies may be affected by mortality and morbidity rates, including the effects of epidemics. Individual insurance companies may be exposed to reserve inadequacies, problems in investment portfolios (for example, due to real estate or “junk” bond holdings) and failures of reinsurance carriers.

Other Financial Services Companies Risk. Many of the investment considerations discussed in connection with banks and insurance also apply to financial services companies. These companies are all subject to extensive regulation, rapid business changes, volatile performance dependent upon the availability and cost of capital and prevailing interest rates and significant competition. General economic conditions significantly affect these companies. Credit and other losses resulting from the financial difficulty of borrowers or other third parties have a potentially adverse effect on companies in this industry. Investment banking, securities brokerage and investment advisory companies are particularly subject to government regulation and the risks inherent in securities trading and underwriting activities.

Telecommunications Risk. Companies in the telecommunications sector are subject to the additional risks of rapid obsolescence, lack of standardization or compatibility with existing technologies, an unfavorable regulatory environment, and a dependency on patent and copyright protection. The prices of the securities of companies in the telecommunications sector may fluctuate widely due to both federal and state regulations governing rates of return and services that may be offered, fierce competition for market share, and competitive challenges in the U.S. from foreign competitors engaged in strategic joint ventures with U.S. companies, and in foreign markets from both U.S. and foreign competitors. In addition, recent industry consolidation trends may lead to increased regulation of telecommunications companies in their primary markets.

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Technology Related Risk. A fund investing in technology companies, including companies engaged in Internet-related activities, is subject to the risk of short product cycles and rapid obsolescence of products and services and competition from new and existing companies. The realization of any one of these risks may result in significant earnings loss and price volatility. Some technology companies also have limited operating histories and are subject to the risks of a small or unseasoned company described under “Medium and smaller company risk.”

Utilities Risk. Issuers in the utilities sector are subject to many risks, including the following: increases in fuel and other operating costs; restrictions on operations, increased costs and delays as a result of environmental and safety regulations; coping with the impact of energy conservation and other factors reducing the demand for services; technological innovations that may render existing plants, equipment or products obsolete; the potential impact of natural or man-made disasters; difficulty in obtaining adequate returns on invested capital; difficulty in obtaining approval of rate increases; the high cost of obtaining financing, particularly during periods of inflation; increased competitions resulting from deregulation, overcapacity, and pricing pressures; and the negative impact of regulation. Because utility companies are faced with the same obstacles, issues and regulatory burdens, their securities may react similarly and more in unison to these or other market conditions.

Initial public offerings (IPOs) risk

Certain funds may invest a portion of their assets in shares of IPOs. IPOs may have a magnified impact on the performance of a fund with a small asset base. The impact of IPOs on a fund’s performance likely will decrease as the fund’s asset size increases, which could reduce the fund’s returns. IPOs may not be consistently available to a fund for investing, particularly as the fund’s asset base grows. IPO shares frequently are volatile in price due to the absence of a prior public market, the small number of shares available for trading and limited information about the issuer. Therefore, a fund may hold IPO shares for a very short period of time. This may increase the turnover of a fund and may lead to increased expenses for a fund, such as commissions and transaction costs. In addition, IPO shares can experience an immediate drop in value if the demand for the securities does not continue to support the offering price.

Investment company securities risk

Issuer risk

An issuer of a security purchased by a fund may perform poorly, and, therefore, the value of its stocks and bonds may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures, or other factors.

Large company risk

Larger more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes. Many larger companies also may not be able to attain the high growth rate of successful smaller companies, especially during extended periods of economic expansion.

Liquidity risk

A fund is exposed to liquidity risk when trading volume, lack of a market maker, or legal restrictions impair the fund’s ability to sell particular securities or close derivative positions at an advantageous price. Funds with principal investment strategies that involve investments in securities of companies with smaller market capitalizations, foreign securities, derivatives, or securities with substantial market and/or credit risk tend to have the greatest exposure to liquidity risk. Exposure to liquidity risk may be heightened for funds which invest in emerging markets and related derivatives that are not widely traded and that may be subject to purchase and sale restrictions.

Loan participations risk

A fund’s ability to receive payments of principal and interest and other amounts in connection with loans (whether through participations, assignments or otherwise) will depend primarily on the financial condition of the borrower. The failure by a fund to receive scheduled interest or principal payments on a loan or a loan participation, because of a default, bankruptcy or any other reason, would adversely affect the income of the fund and would likely reduce the value of its assets. Even with secured loans, there is no assurance that the collateral securing the loan will be sufficient to protect a fund against losses in value or a decline in income in the event of a borrower’s non-payment of principal or interest, and in the event of a bankruptcy of a borrower, the fund could experience delays or limitations in its ability to realize the benefits of any collateral securing the loan. Furthermore, the value of any such collateral may decline and may be difficult to liquidate. Because a significant percent of loans and loan participations are not

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generally rated by independent credit rating agencies, a decision by a fund to invest in a particular loan or loan participation could depend exclusively on the subadviser’s credit analysis of the borrower, and in the case of a loan participation, the intermediary. A fund may have limited rights to enforce the terms of an underlying loan.

Medium and smaller company risk

Market risk and liquidity risk may be pronounced for securities of companies with medium sized market capitalizations and are particularly pronounced for securities of companies with smaller market capitalizations. These companies may have limited product lines, markets, or financial resources or they may depend on a few key employees. The securities of companies with medium and smaller market capitalizations may trade less frequently and in lesser volume than more widely held securities and their value may fluctuate more sharply than the more widely-held securities. Medium and smaller companies may also trade in the OTC market or on a regional exchange, or may otherwise have limited liquidity. Investments in less seasoned companies with medium and smaller market capitalizations may present greater opportunities for growth and capital appreciation, but also involve greater risks than customarily are associated with more established companies with larger market capitalizations. These risks apply to all funds that invest in the securities of companies with smaller market capitalizations, each of which primarily makes investments in companies with smaller or medium sized market capitalizations.

Mortgage-backed and asset-backed securities risk

Mortgage-Backed Securities. Mortgage-backed securities represent participating interests in pools of residential mortgage loans, some of which are guaranteed by the U.S. Government, its agencies or instrumentalities. However, the guarantee of these types of securities relates to the principal and interest payments and not the market value of such securities. In addition, the guarantee only relates to the mortgage-backed securities held by a fund and not the purchase of shares of the fund.

Mortgage-backed securities are issued by lenders such as mortgage banks, commercial banks, and savings and loan associations. Such securities differ from conventional debt securities which provide for the periodic payment of interest in fixed amounts (usually semiannually) with principal payments at maturity or on specified dates. Mortgage-backed securities provide periodic payments which are, in effect, a “pass-through” of the interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans. A mortgage-backed security will mature when all the mortgages in the pool mature or are prepaid. Therefore, mortgage-backed securities do not have a fixed maturity, and their expected maturities may vary when interest rates raise or fall.

When interest rates fall, homeowners are more likely to prepay their mortgage loans. An increased rate of prepayments on the fund’s mortgage-backed securities will result in an unforeseen loss of interest income to the fund as the fund may be required to reinvest assets at a lower interest rate. Because prepayments increase when interest rates fall, the prices of mortgaged-backed securities do not increase as much as other fixed-income securities when interest rates fall.

When interest rates rise, homeowners are less likely to prepay their mortgages loans. A decreased rate of prepayments lengthens the expected maturity of a mortgage-backed security. Therefore, the prices of mortgage-backed securities may decrease more than prices of other fixed-income securities when interest rates rise.

The yield of mortgage-backed securities is based on the average life of the underlying pool of mortgage loans. The actual life of any particular pool may be shortened by unscheduled or early payments of principal and interest. Principal prepayments may result from the sale of the underlying property or the refinancing or foreclosure of underlying mortgages. The occurrence of prepayments is affected by a wide range of economic, demographic and social factors and, accordingly, it is not possible to accurately predict the average life of a particular pool. The actual prepayment experience of a pool of mortgage loans may cause the yield realized by the fund to differ from the yield calculated on the basis of the average life of the pool. In addition, if the fund purchases mortgage-backed securities at a premium, the premium may be lost in the event of early prepayment which may result in a loss to the fund.

Prepayments tend to increase during periods of falling interest rates, while during periods of rising interest rates prepayments are likely to decline. Monthly interest payments received by a fund have a compounding effect which will increase the yield to shareholders as compared to debt obligations that pay interest semiannually. Because of the reinvestment of prepayments of principal at current rates, mortgage-backed securities may be less effective than Treasury bonds of similar maturity at maintaining yields during periods of declining interest rates. Also, although the value of debt securities may increase as interest rates decline, the value of these pass-through type of securities may not increase as much due to their prepayment feature.

Collateralized Mortgage Obligations. A fund may invest in mortgage-backed securities called collateralized mortgage obligations (“CMOs”). CMOs are issued in separate classes with different stated maturities. As the mortgage pool experiences prepayments, the pool pays off investors in classes with shorter maturities first. By investing in CMOs, a fund may manage the prepayment risk of mortgage-backed securities. However, prepayments may cause the actual maturity of a CMO to be substantially shorter than its stated maturity.

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CMOs generally are bonds or certificates issued in multiple classes that are collateralized by or represent an interest in mortgages. CMOs may be issued by single-purpose, stand-alone finance subsidiaries or trusts of financial institutions, government agencies, investment banks or other similar institutions. Each class of CMOs, often referred to as a “tranche,” may be issued with a specific fixed coupon rate (which may be zero) or a floating coupon rate. Each class of CMOs also has a stated maturity or final distribution date. Principal prepayments on the underlying mortgages may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates. Interest is paid or accrued on CMOs on a monthly, quarterly or semiannual basis.

The principal of and interest on the underlying mortgages may be allocated among the several classes of a series of a CMO in many ways. The general goal sought to be achieved in allocating cash flows on the underlying mortgages to the various classes of a series of CMOs is to create tranches on which the expected cash flows have a higher degree of predictability than the underlying mortgages. In creating such tranches, other tranches may be subordinated to the interests of these tranches and receive payments only after the obligations of the more senior tranches have been satisfied. As a general matter, the more predictable the cash flow is on a CMO tranche, the lower the anticipated yield will be on that tranche at the time of issuance. As part of the process of creating more predictable cash flows on most of the tranches in a series of CMOs, one or more tranches generally must be created that absorb most of the volatility in the cash flows on the underlying mortgages. The yields on these tranches are relatively higher than on tranches with more predictable cash flows. Because of the uncertainty of the cash flows on these tranches, and the sensitivity of these transactions to changes in prepayment rates on the underlying mortgages, the market prices of and yields on these tranches tend to be highly volatile. The market prices of and yields on tranches with longer terms to maturity also tend to be more volatile than tranches with shorter terms to maturity due to these same factors. To the extent the mortgages underlying a series of a CMO are so-called “subprime mortgages” (mortgages granted to borrowers whose credit history is not sufficient to obtain a conventional mortgage), the risk of default is higher, which increases the risk that one or more tranches of a CMO will not receive its predicted cash flows.

Asset-Backed Securities. Asset-backed securities include interests in pools of debt securities, commercial or consumer loans, or other receivables. The value of these securities depends on many factors, including changes in interest rates, the availability of information concerning the pool and its structure, the credit quality of the underlying assets, the market’s perception of the servicer of the pool, and any credit enhancement provided. In addition, asset-backed securities have prepayment risks similar to mortgage-backed securities.

Non-diversified risk

Real estate securities risk

Investing in securities of companies in the real estate industry subjects a fund to the risks associated with the direct ownership of real estate. These risks include:


	•	Declines in the value of real estate;
	•	Risks related to general and local economic conditions;
	•	Possible lack of availability of mortgage funds;
	•	Overbuilding;
	•	Extended vacancies of properties;
	•	Increased competition;
	•	Increases in property taxes and operating expenses;
	•	Changes in zoning laws;
	•	Losses due to costs resulting from the clean-up of environmental problems;
	•	Liability to third parties for damages resulting from environmental problems;
	•	Casualty or condemnation losses;
	•	Limitations on rents;
	•	Changes in neighborhood values and the appeal of properties to tenants; and
	•	Changes in interest rates.

Investments in mortgage-backed securities composed of subprime mortgages may be subject to a higher degree of credit risk, valuation risk and liquidity risk. Therefore, for a fund investing a substantial amount of its assets in securities of companies in the real estate industry, the value of the fund’s shares may change at different rates compared to the value of shares of a fund with investments in a mix of different industries.

Securities of companies in the real estate industry include equity real estate investment trusts (“REITs”) and mortgage REITs. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skills and generally may not be diversified. Equity and mortgage REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidations. In addition, equity and mortgage REITs could possibly fail to qualify for tax free pass-through of income under the Internal Revenue Code of 1986, as amended (the “Code”), or to maintain their exemptions from registration

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under the 1940 Act. The above factors may also adversely affect a borrower’s or a lessee’s ability to meet its obligations to a REIT. In the event of a default by a borrower or lessee, a REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments.

In addition, even the larger REITs in the industry tend to be small to medium-sized companies in relation to the equity markets as a whole. See “Medium and smaller company risk” for a discussion of the risks associated with investments in these companies. Moreover, shares of REITs may trade less frequently and, therefore, are subject to more erratic price movements, than securities of larger issuers.

Securities lending risk

A fund’s loans of portfolio securities may not exceed 331/3% of the value of the fund’s total assets, measured at the time of the most recent loan. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in collateral in the event of default or insolvency of the borrower.

Short sales risk

Certain funds may make short sales of securities. This means a fund may sell a security that it does not own in anticipation of a decline in the market value of the security. This transaction is commonly known as a “naked” short sale. A fund generally borrows the security to deliver to the buyer in a short sale. The fund must then buy the security at its market price when the borrowed security must be returned to the lender. Short sales involve costs and risk. The fund must pay the lender interest on the security it borrows, and the fund will lose money if the price of the security increases between the time of the short sale and the date when the fund replaces the borrowed security. A fund may also make short sales “against the box.” In a short sale against the box, at the time of sale, the fund owns or has the right to acquire the identical security, or one equivalent in kind or amount, at no additional cost.

Until a fund closes its short position or replaces a borrowed security, a fund will (i) segregate with its custodian cash or other liquid assets at such a level that the amount segregated plus the amount deposited with the lender as collateral will equal the current market value of the security sold short or (ii) otherwise cover its short position.

Additional Information About the Funds’ Principal Investment Policies

Subject to certain restrictions and except as noted below, a fund may use the following investment strategies and purchase the following types of securities.

Foreign Repurchase Agreements

A fund may enter into foreign repurchase agreements. Foreign repurchase agreements may be less well secured than U.S. repurchase agreements, and may be denominated in foreign currencies. They also may involve greater risk of loss if the counterparty defaults. Some counterparties in these transactions may be less creditworthy than those in U.S. markets.

Illiquid Securities

A fund is precluded from investing in excess of 15% of its net assets (or 10% in the case of each of Money Market Trust and Money Market Trust B) in securities that are not readily marketable. Investment in illiquid securities involves the risk that, because of the lack of consistent market demand for such securities, a fund may be forced to sell them at a discount from the last offer price.

Indexed/Structured Securities

Funds may invest in indexed/structured securities. These securities are typically short- to intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest rates, equity securities, indices, commodity prices or other financial indicators. Such securities may be positively or negatively indexed (i.e., their value may increase or decrease if the reference index or instrument appreciates). Indexed/structured securities may have return characteristics similar to direct investments in the underlying instruments. A fund bears the market risk of an investment in the underlying instruments, as well as the credit risk of the issuer.

Lending of Fund Securities

A fund may lend its securities so long as such loans do not represent more than 331/3% of the fund’s total assets. As collateral for the loaned securities, the borrower gives the lending portfolio collateral equal to at least 100% of the value of the loaned securities. The collateral may consist of cash, cash equivalents or securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The borrower must also agree to increase the collateral if the value of the loaned securities increases. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower of the securities fail financially.

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Loan Participations

The funds may invest in fixed-and floating-rate loans, which investments generally will be in the form of loan participations and assignments of such loans. Participations and assignments involve special types of risks, including credit risk, interest rate risk, liquidity risk, and the risks of being a lender. Investments in loan participations and assignments present the possibility that a fund could be held liable as a co-lender under emerging legal theories of lender liability. If a fund purchases a participation, it may only be able to enforce its rights through the lender and may assume the credit risk of the lender in addition to the borrower.

Mortgage Dollar Rolls

The funds may enter into mortgage dollar rolls. Under a mortgage dollar roll, a fund sells mortgage-backed securities for delivery in the future (generally within 30 days) and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date.

At the time a fund enters into a mortgage dollar roll, it will maintain on its records liquid assets such as cash or U.S. government securities equal in value to its obligations in respect of dollar rolls, and accordingly, such dollar rolls will not be considered borrowings.

The funds may only enter into covered rolls. A “covered roll” is a specific type of dollar roll for which there is an offsetting cash or cash equivalent security position that matures on or before the forward settlement date of the dollar roll transaction. Dollar roll transactions involve the risk that the market value of the securities sold by the funds may decline below the repurchase price of those securities. While a mortgage dollar roll may be considered a form of leveraging, and may, therefore, increase fluctuations in a fund’s NAV per share, the funds will cover the transaction as described above.

Repurchase Agreements

The funds may enter into repurchase agreements. Repurchase agreements involve the acquisition by a fund of debt securities subject to an agreement to resell them at an agreed-upon price. The arrangement is in economic effect a loan collateralized by securities. The fund’s risk in a repurchase transaction is limited to the ability of the seller to pay the agreed-upon sum on the delivery date. In the event of bankruptcy or other default by the seller, the instrument purchased may decline in value, interest payable on the instrument may be lost and there may be possible delays and expense in liquidating the instrument. Securities subject to repurchase agreements will be valued every business day and additional collateral will be requested if necessary so that the value of the collateral is at least equal to the value of the repurchased obligation, including the interest accrued thereon. Repurchases agreements maturing in more than seven days are deemed to be illiquid.

Reverse Repurchase Agreements

The funds may enter into “reverse” repurchase agreements. Under a reverse repurchase agreement, a fund may sell a debt security and agree to repurchase it at an agreed upon time and at an agreed upon price. The funds will maintain on their records liquid assets such as cash, Treasury bills or other U.S. government securities having an aggregate value equal to the amount of such commitment to repurchase including accrued interest, until payment is made. While a reverse repurchase agreement may be considered a form of leveraging and may, therefore, increase fluctuations in a fund’s NAV per share, the funds will cover the transaction as described above.

U.S. Government Securities

The funds may invest in U.S. government securities issued or guaranteed by the U.S. government or by an agency or instrumentality of the U.S. government. Not all U.S. government securities are backed by the full faith and credit of the United States. Some are supported only by the credit of the issuing agency or instrumentality, which depends entirely on its own resources to repay the debt. U.S. government securities that are backed by the full faith and credit of the United States include U.S. Treasuries and mortgage-backed securities guaranteed by the Government National Mortgage Association. Securities that are only supported by the credit of the issuing agency or instrumentality include Fannie Mae, FHLBs and Freddie Mac. See “Credit and counterparty risk” for additional information on Fannie Mae and Freddie Mac securities.

Warrants

The funds may, subject to certain restrictions, purchase warrants, including warrants traded independently of the underlying securities. Warrants are rights to purchase securities at specific prices valid for a specific period of time. Their prices do not necessarily move parallel to the prices of the underlying securities, and warrant holders receive no dividends and have no voting rights or rights with respect to the assets of an issuer. Warrants cease to have value if not exercised prior to their expiration dates.

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When-Issued/Delayed-Delivery/Forward Commitment Securities

A fund may purchase or sell debt or equity securities on a “when-issued,” delayed-delivery or “forward commitment” basis. These terms mean that the fund will purchase or sell securities at a future date beyond customary settlement (typically trade date plus 30 days or longer) at a stated price and/or yield. At the time delivery is made, the value of when-issued, delayed-delivery or forward commitment securities may be more or less than the transaction price, and the yields then available in the market may be higher or lower than those obtained in the transaction.

These investment strategies and securities are described further in the SAI.

MANAGEMENT OF JHT

Advisory Arrangements

John Hancock Investment Management Services, LLC (the “Adviser”) is the adviser to JHT. The Adviser is a Delaware limited liability company whose principal offices are located at 601 Congress Street, Boston, Massachusetts 02210. The Adviser is registered as an investment adviser under the Advisers Act. The ultimate controlling parent of the Adviser is Manulife Financial Corporation (“MFC”), a publicly traded company based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial.

The Adviser administers the business and affairs of JHT. The Adviser also selects, contracts with and compensates subadvisers to manage the investment and reinvestment of the assets of all funds. The Adviser does not itself manage any portfolio assets but has ultimate responsibility to oversee the subadvisers. In this connection, the Adviser (i) monitors the compliance of the subadvisers with the investment objectives and related policies of each fund, (ii) reviews the performance of the subadvisers and (iii) reports periodically on such performance to the Board of Trustees.

A discussion regarding the basis for the Board of Trustees’ approval of the advisory agreement for the funds is available in the funds’ semi-annual report to shareholders for the period ended June 30, 2008.

JHT has received an order from the SEC permitting the Adviser to appoint a subadviser or change the terms of a subadvisory agreement pursuant to an agreement that is not approved by shareholders. JHT, therefore, is able to change subadvisers or the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. This order does not, however, permit the Adviser to appoint a subadviser that is an affiliate of the Adviser or JHT (other than by reason of serving as subadviser to a fund) (an “Affiliated Subadviser”) or to change a subadvisory fee of an Affiliated Subadviser without the approval of shareholders.

As compensation for its services, the Adviser receives a fee from JHT computed separately for each fund.

Under the advisory agreement the amount of the advisory fee for most funds is determined by applying the daily equivalent of an annual fee rate to the net assets of the fund. The annual fee rate is calculated each day by applying the annual percentage rates in the tables in Appendix A to the applicable portions of Aggregate Net Assets shown in the tables and dividing the sum of the amounts so determined by Aggregate Net Assets. The term Aggregate Net Assets includes the net assets of the fund as well as of one or more other funds managed by the same subadviser as indicated in the notes to the tables, but only for the period during which the subadviser for the fund also serves as the subadviser for the other funds.

Under the advisory agreement the advisory fee is accrued and paid daily and is calculated for each day by multiplying the daily equivalent of the annual percentage rate for a fund by the value of the net assets of the fund at the close of business on the previous business day of JHT.

The table presented in Appendix A is a schedule of the management fees each fund currently is obligated to pay the Adviser, either as an annual percentage of the current value of the fund’s net assets or as a percentage of Aggregate Net Assets, as applicable. For information on the advisory fee for the master fund for each of the JHT Feeder Funds please refer to the master fund prospectus (the American Funds Insurance Series prospectus) which accompanies this Prospectus as well as the disclosure regarding the American Funds set forth above under “Fees and Expenses for Each Fund.”

Subadvisory Arrangements and Management Biographies

The Adviser has entered into subadvisory agreements with the subadvisers to the funds. Under these agreements, the subadvisers manage the assets of the funds, subject to the supervision of the Adviser and the Trustees of JHT. Each subadviser formulates a continuous investment program for each fund it subadvises, consistent with the fund’s investment goal and strategy as described above. Each subadviser regularly reports to the Adviser and the Trustees of JHT with respect to the implementation of such programs.

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Subadvisory Fees. Each subadviser is compensated by the Adviser, subject to Board approval, and not by the fund or funds that it subadvises.

Pursuant to an order received from the SEC, the Adviser is permitted to appoint a new subadviser for a fund or change the terms of a subadvisory agreement without obtaining shareholder approval. As a result, a fund is able from time to time to change fund subadvisers or the fees paid to subadvisers without the expense and delays associated with holding a shareholders’ meeting. The SEC order does not, however, permit the Adviser to appoint a subadviser that is an affiliate of the Adviser or a fund (other than by reason of serving as a subadviser) or change the subadvisory fee of an affiliated subadviser without shareholder approval. A discussion regarding the basis for the Board of Trustees’ approval of each subadvisory agreement is available in the funds’ semi-annual report to shareholders for the period endend June 30, 2008.

Set forth below is information about the subadvisers and the portfolio managers for the funds, including a brief summary of the portfolio managers’ business careers over the past five years. The SAI includes additional details about the funds’ portfolio managers, including information about their compensation, accounts they manage other than the funds and their ownership of fund securities.

American Century Investment Management, Inc. (“American Century”)

American Century has been managing mutual funds since 1958. Its headquarters are located at 4500 Main Street, Kansas City, Missouri 64111.


Fund		Portfolio Managers

Vista Trust		Glenn A. Fogle
		Bradley J. Eixmann


	•	Bradley J. Eixmann. Portfolio Manager; joined American Century in 2002; a portfolio manager since 2007. Mr. Eixmann has managed Vista Trust since February 2007.
	•	Glenn A. Fogle. Senior Vice President and Senior Portfolio Manager; joined American Century in 1990; a portfolio manager since 1993. Mr. Fogle has managed Vista Trust since October 2005.

BlackRock Investment Management, LLC (“BlackRock”)

BlackRock, 800 Scudders Mill Road, Plainsboro, New Jersey 08536, is an indirect, wholly-owned subsidiary of BlackRock, Inc. BlackRock is a registered investment adviser and a commodity pool operator organized in 1999. BlackRock and its affiliates had approximately $1.31 trillion in investment company and other portfolio assets under management as of December 31, 2008.


Fund		Portfolio Manager

Large Cap Value Trust		Robert C. Doll, Jr., CFA
		Daniel Hanson, CFA


	•	Robert C. Doll Jr., CFA. Vice Chairman and Global Chief Investment Officer for Equities of BlackRock, Inc. since 2006; Member of the Executive, Operating and Leadership Committees of BlackRock, Inc. and head of its U.S. Large Cap Series equity team; President of Merrill Lynch Investment Managers, L.P. (“MLIM”) and its affiliate, Fund Asset Management, L.P. (“FAM”), from 2001 to 2006; President and a member of the Board of the funds advised by MLIM and its affiliates from 2005 to 2006. Mr. Doll has managed Large Cap Value Trust since October 14, 2005.
	•	Daniel Hanson, CFA. Managing Director of BlackRock, Inc. since 2009; Director of BlackRock from 2007 to 2009; Member of MLIM’s Large Cap Series Team from 2003 to 2006.

Capital Guardian Trust Company (“CGTC”)

CGTC is located at 333 South Hope Street, Los Angeles, California 90071. CGTC is a wholly-owned subsidiary of Capital Group International, Inc. which itself is a wholly-owned subsidiary of The Capital Group Companies, Inc. CGTC has been providing investment management services since 1968.

CGTC uses a multiple portfolio manager system in managing a portfolio’s assets. Under this approach, the portfolio of a fund is divided into segments managed by individual managers. Each manager’s role is to decide how their respective segment will be invested by selecting securities within the limits provided by the portfolio’s objectives and policies. CGTC’s investment committee oversees this process. In addition, CGTC’s investment analysts also may make investment decisions with respect to a portion of a fund’s portfolio. Certain portfolio managers may also have investment analyst responsibilities with respect to specific research coverage.


Fund		Portfolio Manager

Overseas Equity Trust		Multi-Manager System 2

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Multi-Manager System 2:
Portfolio Manager	Length of Service
Title, Company Affiliation	with CGTC or an Affiliate	Business Experience During the Past 5 Years

David I. Fisher Chairman of the Board, CGTC	39 years	Portfolio Manager selecting equity securities
Victor D. Kohn Director,CGTC	23 years	Portfolio Manager selecting equity securities
Richard N. Havas Senior Vice President, Capital International, Inc., an affiliate of CGTC	22 years	Portfolio Manager selecting equity securities
Nancy J. Kyle Director and Vice Chairman, CGTC	18 years	Portfolio Manager selecting equity securities
Lionel M. Sauvage Senior Vice President, CGTC	21 years	Portfolio Manager selecting equity securities
Roger Mortimer Vice President, CGTC	4 years	Portfolio Manager selecting equity securities

Capital Research Management Company (“CRMC”)

CRMC is located at 333 South Hope Street, Los Angeles, California 90071. CRMC is a wholly-owned subsidiary of The Capital Group Companies, Inc. which itself is a wholly-owned subsidiary of The Capital Group Companies, Inc. CRMC has been providing investment management services since 1931.

CRMC manages equity assets through two investment divisions, Capital World Investors and Capital Research Global Investors, and manages fixed-income assets through its Fixed Income division. Capital World Investors and Capital Research Global Investors make investment decisions on an independent basis.

CRMC uses a system of multiple portfolio counselors in managing mutual fund assets. Under this approach, the portfolio of a fund is divided into segments managed by individual counselors. Counselors decide how their respective segments will be invested, within the limits provided by a fund’s objective(s) and policies and by CRMC’s investment committee. In addition, CRMC’s investment analysts make investment decisions with respect to a portion of a fund’s portfolio.

The primary individual portfolio counselors for each of the funds are:


		Primary Title with Investment
Portfolio Counselor		Adviser (or Affiliate)
for the Series/Title	Portfolio Counselor	and Investment Experience	Portfolio Counselor’s Role in
(If Applicable)	Experience in the Fund(s)	During Past Five Years	Management of the Fund(s)

James K. Dunton Vice Chairman of the Board	Growth-Income Trust — 25 years (since the fund’s inception) Blue Chip Income and Growth Trust —8 years (since the fund’s inception)	Senior Vice President — Capital Research Global Investors Investment professional for 47 years, all with CRMC or affiliate	Serves as an equity portfolio counselor for Growth-Income Trust and Blue Chip Income and Growth Trust


Donald D. O’Neal President and Trustee	Growth-Income Trust — 4 years	Senior Vice President — Capital Research Global Investors Investment professional for 24 years, all with CRMC or affiliate	Serves as an equity portfolio counselor for Growth-Income Trust


Alan N. Berro Senior Vice President	Asset Allocation Trust — 9 years	Senior Vice President — Capital World Investors Investment professional for 23 years in total; 18 years with CRMC or affiliate	Serves as an equity portfolio counselor for Asset Allocation Trust

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		Primary Title with Investment
Portfolio Counselor		Adviser (or Affiliate)
for the Series/Title	Portfolio Counselor	and Investment Experience	Portfolio Counselor’s Role in
(If Applicable)	Experience in the Fund(s)	During Past Five Years	Management of the Fund(s)

Abner D. Goldstine Senior Vice President	High-Income Bond Trust — 11 years	Senior Vice President — Fixed Income, CRMC Investment professional for 57 years in total; 42 years with CRMC or affiliate	Serves as a fixed-income portfolio counselor for Bond Trust and High-Income Bond Trust


Claudia P. Huntington Senior Vice President	Growth-Income Trust — 16 years (plus 5 years of prior experience as an investment analyst for the fund)	Senior Vice President — Capital Research Global Investors Investment professional for 36 years in total; 34 years with CRMC or affiliate	Serves as an equity portfolio counselor for Growth-Income Trust


Carl M. Kawaja Vice President	New World Trust — 10 years (since the fund’s inception)	Senior Vice President — Capital World Investors Investment professional for 21 years in total; 18 years with Capital Research and Management Company or affiliate	Serves as an equity portfolio counselor for New World Trust


Sung Lee Vice President	International Trust — 4 years	Senior Vice President — Capital Research Global Investors Investment professional for 15 years, all with CRMC or affiliate	Serves as a non-equity portfolio counselor for International Trust


Robert W. Lovelace Vice President	Global Growth Trust — 12 years (since the fund’s inception) New World Trust — 10 years (since the fund’s inception)	Senior Vice Presidents — Capital World Investors Investment professional for 24 years, all with CRMC or affiliate	Serves as an equity portfolio counselor for Global Growth Trust and New World Trust


C. Ross Sappenfield Vice President	Growth-Income Trust — 10 years Blue Chip Income and Growth Trust — 8 years (since the fund’s inception)	Senior Vice President — Capital Research Global Investors Investment professional for 17 years, all with CRMC or affiliate	Serves as an equity portfolio counselor for Growth-Income Trust and Blue Chip Income and Growth Trust


Susan M. Tolson Vice President	High-Income Bond Trust — 14 years (plus 2 years of prior experience as an investment analyst for the fund) Asset Allocation Trust — 9 years	Senior Vice President — Fixed Income, CRMC Investment professional for 21 years in total; 19 years with CRMC or affiliate	Serves as a fixed-income portfolio counselor for High-Income Bond Trust and Asset Allocation Trust

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		Primary Title with Investment
Portfolio Counselor		Adviser (or Affiliate)
for the Series/Title	Portfolio Counselor	and Investment Experience	Portfolio Counselor’s Role in
(If Applicable)	Experience in the Fund(s)	During Past Five Years	Management of the Fund(s)

David C. Barclay	High-Income Bond Trust — 16 years New World Trust — 10 years (since the fund’s inception) Bond Trust — 11 years	Senior Vice President — Fixed Income, CRMC Investment professional for 28 years in total; 21 years with Capital Research and Management Company or affiliate	Serves as a fixed-income portfolio counselor for High-Income Bond Trust, New World Trust and Bond Trust


Donnalisa Barnum	Growth Trust — 6 years	Senior Vice President — Capital World Investors Investment professional for 27 years in total; 22 years with CRMC or affiliate	Serves as an equity portfolio counselor for Growth Trust


Christopher D. Buchbinder	Blue Chip Income and Growth Trust — 2 years	Senior Vice President, Capital Research Global Investors Investment professional for 14 years all with CRMC or affiliate	Serves as an equity portfolio counselor for Blue Chip Income and Growth Trust


Gordon Crawford	Global Small Capitalization Trust — 11 years (since the fund’s inception)	Senior Vice President — Capital Research Global Investors Investment professional for 38 years, all with CRMC or affiliate	Serves as an equity portfolio counselor for Global Small Capitalization Trust and Growth Trust


Mark H. Dalzell	Bond Trust — 4 years	Senior Vice President – Fixed Income, CRMC Investment professional for 31 years in total; 21 years with CRMC or affiliate	Serves as a fixed-income portfolio counselor for Bond Trust


Mark E. Denning	Global Small Capitalization Trust — 11 years (since the fund’s inception)	Senior Vice President — Capital Research Global Investors Investment professional for 27 years, all with CRMC or affiliate	Serves as an equity portfolio counselor (primarily non-U.S.) for Global Small Capitalization Trust


J. Blair Frank	Global Small Capitalization Trust — 6 years Growth-Income Trust — 3 years	Senior Vice President — Capital Research Global Investors Investment professional for 16 years in total; 15 years with CRMC or affiliate	Serves as an equity portfolio counselor for Global Small Capitalization Trust and Growth — Income Trust


Nicholas J. Grace	Global Growth Trust — 7 years (plus 4 years of prior experience as an investment analyst for the fund)	Senior Vice President — Capital World Investors Investment professional for 19 years in total; 15 years with CRMC or affiliate	Serves as an equity portfolio counselor for Global Growth Trust

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		Primary Title with Investment
Portfolio Counselor		Adviser (or Affiliate)
for the Series/Title	Portfolio Counselor	and Investment Experience	Portfolio Counselor’s Role in
(If Applicable)	Experience in the Fund(s)	During Past Five Years	Management of the Fund(s)

Alwyn W. Heong	International Trust — 13 years	Senior Vice President — Capital Research Global Investors Investment professional for 21years in total; 17 years with CRMC or affiliate	Serves as a non-U.S. equity portfolio counselor for International Trust


David A. Hoag	Bond Trust — 2 years	Senior Vice President – CRMC Investment professional for 21 years in total; 18 years with CRMC or affiliate	Serves as a fixed-income portfolio counselor for Bond Trust


Thomas H. Hogh	Global Bond Trust – 2 years	Senior Vice President — CRMC Investment professional for 22 years in total; 19 years with CRMC or affiliate	Serves as a fixed-income portfolio counselor for Bond Trust


Gregg E. Ireland	Growth Trust — 3 years	Senior Vice President — Capital World Investors Investment professional for 37 years, all with CRMC or affiliate	Serves as an equity portfolio counselor for Growth Trust


Michael T. Kerr	Growth Trust — 4 years	Senior Vice President — Capital World Investors Investment professional for 25 years in total; 23 years with CRMC or affiliate	Serves as an equity portfolio counselor for Growth Trust


James B. Lovelace	Blue Chip Income and Growth Trust — 2 years	Senior Vice President, Capital Research Global Investors. Investment professional for 27 years all with CRMC or affiliate	Serves as an equity portfolio counselor for Blue Chip Income and Growth Trust


Jesper Lyckeus	International Trust — 2 years (plus 8 years of prior experience as an investment analyst for the fund)	Senior Vice President — Capital Research Global Investors Investment professional for 14 years in total; 13 years with CRMC or affiliate	Serves as a non-U.S. equity portfolio counselor for International Trust


Gregory D. Johnson	Growth Trust — 2 years	Senior Vice President — Capital World Investors Investment professional for 15 years, all with CRMC or affiliate	Serves as an equity portfolio counselor for Growth Trust

225


		Primary Title with Investment
Portfolio Counselor		Adviser (or Affiliate)
for the Series/Title	Portfolio Counselor	and Investment Experience	Portfolio Counselor’s Role in
(If Applicable)	Experience in the Fund(s)	During Past Five Years	Management of the Fund(s)

Harold H. La	Global Small Capitalization Trust — 1 year	Vice President — Capital Research Global Investors Investment professional for 11 years in total; 10 years with CRMC or affiliate	Serves as an equity portfolio counselor for Global Small Capitalization Trust


Jefferey T. Lager	Asset Allocation Trust — 2 years	Senior Vice President — Capital World Investors Investment professional for 14 years in total; 13 years with CRMC or affiliate	Serves as an equity portfolio counselor for Asset Allocation Trust


Marcus B. Linden	High Income Bond Trust — 2 years	Senior Vice President — Fixed Income, Capital Research Company Investment professional for 14 years in total; 13 years with CRMC or affiliate	Serves as an equity portfolio counselor for High Income Bond Trust


Ronald B. Morrow	Growth Trust — 6 years (plus 6 years of prior experience as an investment analyst for the fund)	Senior Vice President — Fixed Income, CRMC Investment professional for 40 years in total; 11 years with CRMC or affiliate	Serves as an equity portfolio counselor for Growth Trust


James R. Mulally	Asset Allocation Trust — 3 years Bond Trust — 1 year	Senior Vice President, Fixed-Income, CRMC Investment professional for 33 years in total; 29 years with CRMC or affiliate	Serves as a fixed-income portfolio counselor for Asset Allocation Trust and Bond Trust


Eugene P. Stein	Asset Allocation Trust — 1 year	Senior Vice President, Capital World Investors Investment professional for 38 years in total; 37 years with CRMC or affiliate	Serves as an equity portfolio counselor for Asset Allocation Trust


Christopher M. Thomsen	International Trust — 3 years	Senior Vice President, Capital Research Global Investors Investment professional for 12 years, all with CRMC or affiliate	Serves as an equity portfolio counselor for Intenational Trust


Steven T. Watson	Global Growth Trust — 7 years (plus 4 years of prior experience as an investment analyst for the fund)	Senior Vice President — Capital World Investors Investment professional for 22 years in total; 19 years with CRMC or affiliate	Serves as an equity portfolio counselor for Global Growth Trust and Global Growth and Income Trust

226


		Primary Title with Investment
Portfolio Counselor		Adviser (or Affiliate)
for the Series/Title	Portfolio Counselor	and Investment Experience	Portfolio Counselor’s Role in
(If Applicable)	Experience in the Fund(s)	During Past Five Years	Management of the Fund(s)

Paul A. White	Global Growth Trust — 5 years (plus 5 years of prior experience as an investment analyst for the fund)	Senior Vice President — Capital World Investors 21 years in total; 10 years with CRMC	Serves as an equity portfolio counselor for Global Growth Trust


Dylan J. Yolles	Growth-Income Trust — 3 years	Senior Vice President — Capital Research Global Investors Investment professional for 12 years in total; 9 years with CRMC or affiliate	Serves as an equity portfolio counselor for Growth — Income Trust

Additional information regarding the portfolio managers’ compensation, management of other accounts, and ownership of securities in The American Funds Insurance Series can be found in the SAI.

Columbia Management Advisors, LLC (“Columbia Management”)

Columbia Management is located at 100 Federal Street, Boston, MA 02210, and serves as investment adviser to over 100 Columbia Funds mutual fund portfolios. As of December 31, 2008, Columbia Management had assets under management of approximately $367.2 billion. Columbia Management is a registered investment advisor and an indirect, wholly owned subsidiary of Bank of America. Its management experience covers all major asset classes, including equity securities, fixed income securities and money market instruments. In addition to serving as investment adviser to mutual funds, Columbia Management acts as an investment manager for individuals, corporations, retirement plans, private investment companies and financial intermediaries. In rendering investment advisory services, Columbia Management may use the portfolio management and research resources of Columbia Management Pte Ltd., an affiliate of Columbia Management. Columbia Management may also use the research and other expertise of other affiliates and third parties in managing the fund.


Fund		Portfolio Managers

Value & Restructuring Trust		David J. Williams
		Guy W. Pope
		J. Nicholas Smith


	•	David J. Williams, CFA. Managing Director of the subadviser; associated with the subadviser or its predecessors as an investment professional since 1987.
	•	Guy W. Pope, CFA. Director of the subadviser; associated with the subadviser or its predecessors as an investment professional since 1993.
	•	J. Nicholas Smith, CFA. Senior Vice President of the subadviser; associated with the subadviser or its predecessors as an investment professional since 2005.

Davis Selected Advisers, L.P. (“Davis”)

Davis was organized in 1969 and serves as the investment adviser for all of the Davis Funds, other mutual funds and other institutional clients. The sole general partner of Davis is Davis Investments, LLC, which is controlled by Christopher C. Davis. Davis is located at 2949 East Elvira Road, Suite 101, Tucson, Arizona 85756.


Fund		Portfolio Managers

Financial Services Trust		Kenneth Charles Feinberg
		Charles Cavanaugh
Fundamental Value Trust		Christopher C. Davis
		Kenneth Charles Feinberg


	•	Charles Cavanaugh. Co-Portfolio Manager of Financial Services Trust since May 2007; co-manages other equity funds advised by Davis Advisors and serves as a research analyst; joined Davis Advisors in March 2001.
	•	Christopher C. Davis. Chairman; a Director, President or Vice President of each of the Davis Funds; a portfolio manager with Davis since 1995. Mr. Davis has managed Fundamental Value Trust since October 2005.
	•	Kenneth Charles Feinberg. Co-Portfolio Manager; joined Davis in 1992; has co-managed other equity funds advised by Davis and also served as a research analyst. Mr. Feinberg has managed Fundamental Value Trust since October 2005.

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Declaration Management & Research LLC (“Declaration”)

Declaration is a Delaware limited liability company located at 1800 Tysons Boulevard, Suite 200, McLean, Virginia 22102-4858. Declaration is an indirect wholly owned subsidiary of John Hancock Life Insurance Company (“JHLICO”). JHLICO is located at 200 Clarendon Street, Boston, Massachusetts 02117 and is an indirect wholly owned subsidiary of MFC based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial.


Fund		Portfolio Managers

Active Bond Trust		Peter Farley
		James E. Shallcross
Short-Term Bond Trust		Peter Farley
		James E. Shallcross
Total Bond Market Trust A		Peter Farley
		James E. Shallcross
Total Bond Market Trust B		Peter Farley
		James E. Shallcross


	•	Peter Farley, CFA. Mr. Farley joined Declaration in 1996 and is a Senior Vice President. He manages Active Core portfolios, Corporate CDO products and oversees CMBS/CRE CDO Trading and Research. Mr. Farley is a member of Declaration’s Investment Committee. Mr. Farley has managed Active Bond Trust and Total Bond Market Trust since October 2005 and October 2006, respectively.
	•	James E. Shallcross. Mr. Shallcross joined Declaration in 1991 and is an Executive Vice President and the Director of Portfolio Management. He oversees the management of all portfolios, supervises the investment staff and is a member of Declaration’s Investment Committee. Mr. Shallcross has managed Active Bond Trust and Total Bond Market Trust since October 2005 and October 2006, respectively.

Deutsche Investment Management Americas Inc. (“DIMA”)

RREEF America L.L.C. (“RREEF”)

DIMA, located at 345 Park Avenue, New York, New York 10154, is an indirect wholly-owned subsidiary of Deutsche Bank AG, an international commercial and investment banking group. Deutsche Bank AG is a major banking institution that is engaged in a wide range of financial services, including investment management, mutual fund, retail, private and commercial banking, investment banking and insurance. DIMA provides a full range of investment advisory services to retail and institutional clients.

RREEF, located at 875 N. Michigan Ave, 41st Floor, Chicago, IL 60611, is an indirect wholly-owned subsidiary of Deutsche Bank AG. RREEF has provided real estate investment management services to institutional investors since 1975.


Fund		Portfolio Managers

All Cap Core Trust		Julie Abbett
		James B. Francis
		Robert Wang
Global Real Estate Trust		John F. Robertson
		Daniel Ekins
		John Hammond
		William Leung
		John W. Vojticek
Real Estate Securities Trust		Jerry W. Ehlinger
		John F. Robertson
		John W. Vojticek
		Asad Kazim

DIMA provides consulting services to MFC Global (U.S.A.) in its management of the Lifestyle Trusts and Lifecycle Trusts.


	•	Julie Abbett. Director and Senior Portfolio Manager for Global Quantitative Equity; joined DIMA in 2000; previously a consultant with equity trading services for BARRA, Inc. and a product developer at FactSet Research. Mr. Abbett has managed All Cap Core Trust since inception.
	•	James B. Francis, CFA. Director and lead Portfolio Manager for Active Quantitative Equity; joined DIMA in 2008 after 20 years of experience as senior quantitative global equity portfolio manager at State Street Global Advisors, and most recently, Northern Trust Global Investments. Mr. Francis has managed All Cap Core Trust since 2008.
	•	Jerry W. Ehlinger, CFA. Managing Director and Portfolio Manager at RREEF where he oversees investments in the company’s public securities business. Before joining RREEF in 2004, Mr. Ehlinger was employed at Heitman Real Estate

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		Investment Management for four years as a Senior Vice President and Portfolio Manager where he oversaw REIT assets of more than $2 billion. Mr. Ehlinger has managed Real Estate Securities Trust since inception.


	•	Daniel Ekins. Managing Director, Portfolio Manager, Head of Asia Pacific Real Estate Securities. Mr. Ekins is the lead portfolio manager for Australian real estate securities portfolios based in Singapore and has investment oversight for RREEF’s broader Asia Pacific real estate securities investment activities. Mr. Ekins has over 22 years experience in the analysis and management of property investments. Mr. Ekins has managed Global Real Estate Trust since inception.
	•	John Hammond. Managing Director, Portfolio Manager, Head of European Real Estate Securities. Mr. Hammond, Head of European Real Estate Securities, is based in London within RREEF (Deutsche Asset Management). Mr. Hammond joined RREEF in May 2004. He is co-chairman of the EPRA European Index Committee. He started his career with Hillier Parker (now CBRE) as a research analyst forecasting real estate market performance and providing investment strategy information. Mr. Hammond has managed Global Real Estate Trust since inception.
	•	Asad Kazim. Director, Portfolio Manager, Real Estate Securities. He joined RREEF in March of 2002 as a Securities Analyst in the Securities Group. Prior to joining RREEF, Mr. Kazim spent approximately two years as a Financial Analyst at Clarion CRA Securities in Radnor, Pennsylvania. Mr. Kazim has managed Real Estate Securities Trust since inception.
	•	William Leung Director, Portfolio Manager, Real Estate Securities. Mr. Leung is responsible for real estate securities research across the Asian region. He joined Deutsche Asset Management in December 2000 after three years with Merrill Lynch and one year at UBS Warburg primarily focusing on equity research in Hong Kong and China. Mr. Leung has managed Global Real Estate Trust since inception.
	•	John F. Robertson, CFA. Chief Executive Officer of the global real estate securities business and is a member of the RREEF Alternative Investments Executive Committee. He also has broad oversight over all sectors of the real estate securities market and leads RREEF’s global real estate securities portfolio management activities as chair of its Global Property Asset Allocation Committee. He joined RREEF in June 1997 after six years of industry experience. Mr. Robertson has managed Global Real Estate Trust and Real Estate Securities Trust since inception.
	•	John W. Vojticek. Head of the Americas Portfolio Management team having oversight of all sectors of the Americas real estate securities market. Mr. Vojticek joined RREEF in June 1996 after 8 years of experience in the real estate securities area as a trader, analyst and portfolio manager. Mr. Vojticek has managed Global Real Estate Trust and Real Estate Securities Trust since inception.
	•	Robert Wang. Managing Director and Global Head of Quantitative Strategies — Joined DIMA in 1995 as senior fixed-income portfolio manager after 13 years of experience at J.P. Morgan and Co. trading fixed-income, derivatives and foreign exchange products. Mr. Wang has managed All Cap Core Trust since inception.

Dimensional Fund Advisors LP (“Dimensional”)

Dimensional was organized in May 1981 as “Dimensional Fund Advisors, Inc.,” a Delaware corporation, and in November 2006, it converted its legal name and organizational form to “Dimensional Fund Advisors LP,” a Delaware limited partnership. Dimensional is engaged in the business of providing investment management services. Dimensional is located at 6300 Bee Cave Road, Building One, Austin, TX, 78746. Since its organization, Dimensional has provided investment management services primarily to institutional investors and mutual funds.

Dimensional uses a team approach. The investment team includes the Investment Committee of Dimensional, portfolio managers and trading personnel. The Investment Committee is composed primarily of certain officers and directors of Dimensional who are appointed annually. Investment strategies for funds managed by Dimensional are set by the Investment Committee, which meets on a regular basis and also as needed to consider investment issues. The Investment Committee also sets and reviews all investment related policies and procedures and approves any changes in regards to approved countries, security types and brokers.

In accordance with the team approach, the portfolio managers and portfolio traders implement the policies and procedures established by the Investment Committee. The portfolio managers and portfolio traders also make daily investment decisions regarding fund management including running buy and sell programs based on the parameters established by the Investment Committee. Stephen A. Clark coordinates the efforts of all portfolio managers with respect to certain domestic equity and mixed allocation portfolios. Karen E. Umland coordinates the efforts of all portfolio managers with respect to international equity portfolios. For this reason, Dimensional has identified Mr. Clark and Ms. Umland as primarily responsible for coordinating the day-to-day management of the funds as set forth below.


Fund		Portfolio Managers

Disciplined Diversification Trust		Stephen A. Clark
Emerging Markets Value Trust		Karen E. Umland
International Small Company Trust		Karen E. Umland
Small Cap Opportunities Trust		Stephen A. Clark


	•	Stephen A. Clark. Vice President, Head of Portfolio Management; joined Dimensional in 2001. Mr. Clark has managed Small Cap Opportunties Trust since December 2008.

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	•	Karen E. Umland. Senior Portfolio Manager and Vice President of Dimensional and a member of Dimensional’s Investment Committee. She joined Dimensional in 1993 and has been responsible as portfolio manager for management of the international equity funds at Dimensional since 1998. Ms. Umland has managed Emerging Markets Value Trust since April 2007 and International Small Company Trust since April 2006.

Franklin Advisers, Inc.

Franklin Advisers is located at One Franklin Parkway, San Mateo, California 94403. Franklin Advisers is a direct wholly owned subsidiary of Franklin Resources, Inc.


Fund		Portfolio Managers

Income Trust		Edward D. Perks, CFA
		Charles B. Johnson


	•	Edward D. Perks. Senior vice president and director of Global Core/Hybrid Portfolio Management for Franklin Advisers. Mr. Perks is co-lead portfolio manager for the fund. Mr. Perks joined Franklin Templeton Investments in 1992.
	•	Charles B. Johnson. Chairman of Franklin Resources, Inc. He joined Franklin Templeton Investments in 1957.

Franklin Mutual Advisers (“Franklin Mutual”)

Franklin Mutual is located at 101 John F. Kennedy Parkway, Short Hills, New Jersey 07078. Franklin Mutual is an indirect wholly owned subsidiary of Franklin Resources, Inc.


Fund		Portfolio Manager

Mutual Shares Trust		Peter Langerman
		F. David Segal, CFA
		Deborah A. Turner, CFA


	•	Peter Langerman is President, Chief Executive Officer of Franklin Mutual. Mr. Langerman rejoined Franklin Templeton Investments in 2005. He has been co-portfolio manager of the fund since its inception. He joined Franklin Templeton Investments in 1996, serving in various capacities, including President and Chief Executive Officer of Franklin Mutual before leaving in 2002 and serving as director of New Jersey’s Division of Investment, overseeing employee pension funds. Between 1986 and 1996, Mr. Langerman was employed at Heine Securities Corporation.
	•	F. David Segal has been co-portfolio manager of the fund since its inception. Prior to joining Franklin Templeton Investments in 2002, he was an analyst in the Structured Finance Group of MetLife for the period 1999-2002.
	•	Deborah A. Turner has been the assistant portfolio manager of the fund since its inception. She has been with Franklin Templeton Investments since 1996. Between 1993-1996, Ms. Turner was employed at Heine Securities Corporation.

Franklin Templeton Investments Corp.

Franklin Templeton Investments Corporation is located at 200 King Street West, Suite 1500, Toronto, Ontario, Canada M5H3T4. Franklin Templeton Investments Corporation is a wholly owned subsidiary of Franklin Resources, Inc.


Fund		Portfolio Manager

International Small Cap Trust		Bradley A. Radin, CFA


	•	Bradley A. Radin, CFA. Executive Vice President; joined Templeton in 1995. Mr. Radin has managed the fund since April 2008.

Frontier Capital Management Company (“Frontier”)

Frontier is a Massachusetts limited liability company having offices at 99 Summer Street, Boston, Massachusetts 02210. Frontier is an investment management firm which provides investment services to institutional clients. Affiliated Managers Group, Inc. (“AMG”), a Boston-based asset management holding company, holds a majority interest in Frontier. Shares of AMG are listed on the New York Stock Exchange (Symbol: AMG).

A team of investment research analysts at Frontier selects investments for the fund. The portfolio managers listed below oversee this team and provide day-to-day management of the fund.


Fund		Portfolio Manager

Smaller Company Growth Trust		Michael A. Cavarretta
		Christopher J. Scarpa


	•	Michael A. Cavarretta (since 2008). Portfolio Manager; President of Frontier; employed in the investment area of Frontier since 1998.

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	•	Christopher J. Scarpa (since 2008). Portfolio Manager; President of Frontier; employed in the investment area of Frontier since 2001.

Grantham, Mayo, Van Otterloo & Co. LLC (“GMO”)

GMO, with offices at 40 Rowes Wharf, Boston, Massachusetts 02110, is a private company founded in 1977 that provides investment advisory services to, among others, the GMO Funds. As of February 28, 2009, GMO managed on a worldwide basis approximately $75 billion for institutional investors such as pension plans, endowments and foundations.


Fund		Portfolio Managers

Growth Trust		Quantitative Equity Division
Growth Opportunities Trust		Quantitative Equity Division
International Growth Trust		Quantitative Equity Division
Intrinsic Value Trust		Quantitative Equity Division
U.S. Multi-Sector Trust		Quantitative Equity Division
Value Opportunities Trust		Quantitative Equity Division
International Core Trust		Quantitative Equity Division

Quantitative Equity Division. Day-to-day management of the fund is the responsibility of the Division. The Division’s members work collaboratively to manage the fund, and no one person is primarily responsible for day-to-day management. The senior member of the Division responsible for managing the implementation and monitoring the overall portfolio management of the funds are:


	•	Dr. Thomas Hancock. Co-Director of the Division; joined GMO in 1995 and has been responsible for overseeing the portfolio management of GMO’s international developed market and global quantitative equity portfolios since 1998.
	•	Sam Wilderman. Co-Director of the Division: joined GMO in 1996 and has been responsible for overseeing the portfolio management of GMO’s U.S. quantitative equity portfolios since 2005.

The senior members allocate responsibility for portions of the fund to various members of the Division, oversee the implementation of trades on behalf of the fund, review the overall composition of the fund’s portfolios, and monitor cash flows.

Invesco Aim Capital Management, Inc. (“Invesco Aim”)

Invesco Aim is an indirect wholly owned subsidiary of Invesco Aim Management Group Inc., whose principal business address is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Invesco Aim Management Group, Inc. is a holding company engaged in the financial services business and is a wholly owned subsidiary of Invesco Ltd. Invesco Ltd. and its subsidiaries are an independent investment management group engaged in institutional investment management and retail mutual fund businesses in the United States, Europe and the Pacific Region. Invesco Aim, and/or its affiliates is the investment adviser for mutual funds, separately managed accounts, such as corporate and municipal pension plans, charitable institutions and private individuals. As of September 30, 2008, Invesco Aim managed approximately $149 billon and Invesco Ltd. managed $410 billion.


Fund		Portfolio Managers

All Cap Growth Trust		Robert Lloyd
		Ryan Amerman
Small Company Growth Trust		Juliet Ellis
		Juan Hartsfield
		Clay Manley
Small Cap Opportunities Trust		Juliet Ellis
		Juan Hartsfield


	•	Ryan Amerman. Portfolio manager, who has been responsible for the All Cap Growth Trust since 2008 and has been associated with Invesco Aim and/or its affiliates since 1996.
	•	Juliet Ellis. Senior Portfolio Manager (lead manager), who has been responsible for Small Cap Opportunities Trust since 2008 and Small Company Growth Trust since 2005 and has been with Invesco Aim and/or its affiliates since 2004; formerly a Managing Director of JPMorgan Fleming Asset Management.
	•	Juan Hartsfield. Portfolio Manager who has been responsible for Small Cap Opportunities Trust since 2008 and Small Company Growth Trust since 2005 and has been associated with Invesco Aim and/or its affiliates since 2004; formerly a co-portfolio manager in the JPMorgan Fleming Asset Management.
	•	Robert Lloyd. Senior Portfolio Manager (lead manager), who has been responsible for the All Cap Growth Trust since 2006 and has been associated with Invesco Aim and/or its affiliates since 2000.
	•	Clay Manley. Portfolio Manager, who has been responsible for the Small Company Growth Trust since 2008 and has been associated with Invesco Aim and/or its affiliates since 2001.

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Jennison Associates LLC (“Jennison”)

Jennison, 466 Lexington Avenue, New York, New York 10017, is a Delaware limited liability company and has been in the investment advisory business since 1969 (includes its predecessor, Jennison Associates Capital Corp.). Jennison is a direct, wholly-owned subsidiary of Prudential Investment Management, Inc., which is a direct, wholly-owned subsidiary of Prudential Asset Management Holding Company LLC, which is a direct, wholly-owned subsidiary of Prudential Financial, Inc. As of December 31, 2008, Jennison managed in excess of $62 billion in assets.


Fund		Portfolio Managers

Capital Appreciation Trust		Michael A. Del Balso
		Kathleen A. McCarragher
		Spiros Segalas


	•	Michael A. Del Balso. Joined Jennison in May 1972 and is a Managing Director of Jennison. He is also Jennison’s Director of Research for Growth Equity. He has managed the fund since November 2000.
	•	Kathleen A. McCarragher. Joined Jennison in May 1998 and is a Director and Managing Director of Jennison. She is also Jennison’s Head of Growth Equity. Prior to joining Jennison, she was employed at Weiss, Peck & Greer L.L.C. for six years as a Managing Director and the Director of Large Cap Growth Equities. She has managed the fund since November 2000.
	•	Spiros “Sig” Segalas. Mr. Segalas was a founding member of Jennison in 1969 and is currently a Director, President and Chief Investment Officer of Jennison. He has managed the fund since November 2000.

Mr. Del Balso generally has final authority over all aspects of the fund’s investment portfolio, including but not limited to, purchases and sales of individual securities, portfolio construction, risk assessment, and management of cash flows.

The portfolio managers for the fund are supported by other Jennison portfolio managers, research analysts and investment professionals. Jennison typically follows a team approach in providing such support to the portfolio managers. The teams are generally organized along product strategies (e.g., large cap growth, large cap value) and meet regularly to review the portfolio holdings and discuss security purchase and sales activity of all accounts in the particular product strategy. Team members provide research support, make securities recommendations and support the portfolio managers in all activities. Members of the team may change from time to time.

Lord, Abbett & Co. LLC (“Lord Abbett”)

Lord Abbett was founded in 1929 and manages one of America’s oldest mutual fund complexes. Lord Abbett is located at 90 Hudson Street, Jersey City, New Jersey 07302-3973.


Fund		Portfolio Managers

All Cap Value Trust		Robert P. Fetch
		Deepak Khanna


	•	Robert P. Fetch. Partner and Director; joined Lord Abbett in 1995. Mr. Fetch has managed All Cap Value Trust since inception.
	•	Deepak Khanna. Portfolio Manager; returned to Lord Abbett in 2007; previously a Managing Director at Jennison Associates (2005-2007); previously served as a senior research analyst at Lord Abbett (2000-2005). Mr. Khanna has managed All Cap Value Trust since 2008.

Marsico Capital Management, LLC (“MCM”)

MCM is located at 1200 17th Street, Suite 1600, Denver, Colorado 80202. MCM was organized in September 1997 as a registered investment adviser and is an independently-owned investment management firm. MCM provides investment services to mutual funds and private accounts. Thomas F. Marsico is the founder and Chief Executive Officer of MCM.


Fund		Portfolio Manager

International Opportunities Trust		James G. Gendelman


	•	James G. Gendelman. Portfolio Manager; joined Marsico in 2000; previously Vice President of International Sales for Goldman, Sachs & Co. Mr. Gendelman has managed the fund since October 2005.

Massachusetts Financial Services Company (“MFS”)

MFS is America’s oldest mutual fund organization. MFS and its predecessor organizations have a history of money management dating from 1924 and the founding of the first mutual fund, Massachusetts Investors Trust. MFS is an indirect, majority owned subsidiary of Sun Life Financial Inc. MFS is located at 500 Boylston Street, Boston, Massachusetts 02116.

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Fund		Portfolio Managers

Utilities Trust		Robert D. Persons
		Maura A. Shaughnessy


	•	Robert D. Persons. Investment Officer of MFS, focusing primarily on debt securities; joined MFS in 2000.
	•	Maura A. Shaughnessy. Investment Officer of MFS, focusing primarily on equities; joined MFS in 1991.

MFC Global Investment Management (U.S.), LLC (“MFC Global (U.S.)”)

MFC Global (U.S.), a Delaware limited liability company located at 101 Huntington Avenue, Boston, Massachusetts, was founded in 1979. It is a wholly-owned subsidiary of John Hancock Financial Services, Inc. (“JHFS”) and an affiliate of the Adviser. JHFS is a subsidiary of MFC based in Toronto, Canada. MFC is the holding company of the Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial.


Fund		Portfolio Managers

Active Bond Trust		Barry H. Evans
		Howard C. Greene
		Jeffrey N. Given
Strategic Income Trust		Daniel S. Janis, III
		John F. Iles
		Barry H. Evans
High Income Trust		Arthur N. Calavritinos
		John F. Iles
		Joseph E. Rizzo
Short-Term Government Income Trust		Howard C. Greene
		Jeffrey N. Given
Small Cap Intrinsic Value Trust		Timothy M. Malloy
		Roger C. Hamilton


	•	Arthur N. Calavritinos. Senior Vice President; joined MFC Global (U.S.) in 1988.
	•	Barry H. Evans. President, joined MFC Global (U.S.) in 1986. He is the Chief Investment Officer for Global Fixed Income, and Country Head, U.S., as well as a member of the Senior Investment Policy Committee. Prior to joining MFC Global (U.S.), he was a Senior Vice President and Chief Fixed-Income Officer of John Hancock. He joined John Hancock in 1986.
	•	Jeffrey N. Given. Vice President; joined MFC Global (U.S.) in 1993.
	•	Howard C. Greene. Senior Vice President; joined MFC Global (U.S.) in 2002; previously a Vice President of Sun Life Financial Services Company of Canada.
	•	Roger C. Hamilton. Senior Vice President, joined MFC Global (U.S.) in December, 1994; previously, he was a senior portfolio manager at Transamerica Fund Management Company, which was acquired by the firm in 1994.
	•	John F. Iles. Vice President, joined MFC Global (U.S.) in December, 1999, previously a Vice President at John Hancock. He joined John Hancock in 1999.
	•	Daniel S. Janis, III. Vice President; joined MFC Global (U.S.) in 1999; previously a senior risk manager at BankBoston (1997 to 1999).
	•	Timothy M. Malloy. Senior Vice President, MFC Global (U.S.) (since 2004); Investment Analyst, Thomas Weisel Partners (2000-2004).
	•	Joseph E. Rizzo. Assistant Vice President, joined MFC Global (U.S.) in January 2006. Previously, he was a bond trader at John Hancock Financial Services, and worked in high yield sales at Lehman Brothers.

MFC Global Investment Management (U.S.A.) Limited (“MFC Global (U.S.A.)”)

MFC Global (U.S.A.) is a corporation subject to the laws of Canada. Its principal business at the present time is to provide investment management services to the portfolios of the fund for which it is the subadviser as well as other portfolios advised by the Adviser. MFC Global (U.S.A.) is an indirect, wholly-owned subsidiary of MFC based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, including Elliott & Page Limited and Manulife Asset Management (Hong Kong) Limited (“MAMHK”), collectively known as Manulife Financial. The address of MFC Global (U.S.A.) is 200 Bloor Street East, Toronto, Ontario, Canada M4W 1E5. In rendering investment advisory services to Pacific Rim Trust, MFC Global (U.S.A.) may use the portfolio management, research and other resources of MAMHK, an affiliate of MFC Global (U.S.A.).


Fund		Portfolio Managers

500 Index Trust		Carson Jen
		Narayan Ramani

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Fund		Portfolio Managers

500 Index Trust B		Carson Jen
		Narayan Ramani
Absolute Return Trust		Barry Evans
		Steve Orlich
		Demetrius Schetakis
		Mark Scheer
		Scott Warlow
American Diversified Growth and Income Trust		Steve Orlich
		Scott Warlow
American Fundamental Holdings Trust		Steve Orlich
		Scott Warlow
American Global Diversification Trust		Steve Orlich
		Scott Warlow
Core Allocation Trust		Carson Jen
		Narayan Ramani
		Steve Orlich
		Scott Warlow
Core Balanced Trust		Carson Jen
		Narayan Ramani
		Steve Orlich
		Scott Warlow
Core Disciplined Diversification Trust		Carson Jen
		Narayan Ramani
		Steve Orlich
		Scott Warlow
Core Fundamental Holdings Trust		Carson Jen
		Narayan Ramani
		Steve Orlich
		Scott Warlow
Core Global Diversification Trust		Carson Jen
		Narayan Ramani
		Steve Orlich
		Scott Warlow
Core Strategy Trust		Steve Orlich
Franklin Templeton Founding Allocation Trust		Steve Orlich
Internaional Index Trust		Carson Jen
		Narayan Ramani
		Steve Orlich
		Scott Warlow
Lifecycle 2010 Trust		Steve Orlich
		Scott Warlow
Lifecycle 2015 Trust		Steve Orlich
		Scott Warlow
Lifecycle 2020 Trust		Steve Orlich
		Scott Warlow
Lifecycle 2025 Trust		Steve Orlich
		Scott Warlow
Lifecycle 2030 Trust		Steve Orlich
		Scott Warlow
Lifecycle 2035 Trust		Steve Orlich
		Scott Warlow
Lifecycle 2040 Trust		Steve Orlich
		Scott Warlow
Lifecycle 2045 Trust		Steve Orlich
		Scott Warlow
Lifecycle 2050 Trust		Steve Orlich
		Scott Warlow

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Fund		Portfolio Managers

Lifecycle Retirment Trust		Barry Evans
		Steve Orlich
		Demetruis Schetakis
		Mark Scheer
		Scott Warlow
Lifestyle Aggressive Trust		Steve Orlich
		Scott Warlow
Lifestyle Balanced Trust		Steve Orlich
		Scott Warlow
Lifestyle Conservative Trust		Steve Orlich
		Scott Warlow
Lifestyle Growth Trust		Steve Orlich
		Scott Warlow
Lifestyle Moderate Trust		Steve Orlich
		Scott Warlow
Mid Cap Index Trust		Carson Jen
		Narayan Ramani
Money Market Trust		Maralyn Kobayashi
		Faisal Rahman
Money Market Trust B		Maralyn Kobayashi
		Faisal Rahman
Optimized All Cap Trust		Harpreet Singh
		Chris Hensen
		Brett Hryb
		Noman Ali
		Rhonda Chang
		Tina Hsiao
Optimized Value Trust		Noman Ali
		Rhonda Chang
		Chris Hensen
		Brett Hryb
		Harpreet Singh
		Tina Hsiao
Pacific Rim Trust		Tahnoon Pasha
		Matthew Lee
Short Term Governement Income Trust		Barry H. Evans, CFA
		Howard C. Green, CFA
		Jeffrey N. Given, CFA
Small Cap Index Trust		Carson Jen
		Narayan Ramani
Smaller Company GrowthTrust		Carson Jen
		Narayan Ramani
Total Stock Market Index Trust		Carson Jen
		Narayan Ramani


	•	Noman Ali. (Co-portfolio manager since inception) Assistant Vice President and Portfolio Manager, U.S. Equity, at Manulife Financial; joined MFC Global (U.S.A.) in 1999.
	•	Rhonda Chang. (Co-portfolio manager since inception) Vice President and Senior Portfolio Manager; joined MFC Global (U.S.A.) in 1994 as research analyst with the U.S. equity team; formerly an investment analyst with AIG Global Investors.
	•	Barry Evans. Portfolio manager of the fund since inception; President and Chief Fixed Income Officer of MFC Global (U.S.), joined MFC Global (U.S.) in 1986.
	•	Tina Hsiao. Senior Investment Analyst at MFC Global Investment Management (Canada); responsible for the research and analysis of U.S. securities; member of the U.S. Equity team, which is responsible for large-cap, mid-cap, and small-cap equity mandates for clients worldwide; joined MFC Global in 2003.
	•	Chris Hensen. (Co-portfolio manager since inception) Assistant Vice President and a Portfolio Manager of U.S. Equities; joined MFC Global (U.S.A.) in 1995.
	•	Brett Hryb. (Co-portfolio manager since inception) Assistant Vice President and a Portfolio Manager of U.S. Equities; joined MFC Global (U.S.A.) in 1993.

235


	•	Carson Jen. (Co-portfolio manager since inception) Vice President and Senior Portfolio Manager, Index Funds, at MFC Global Investment Management; joined MFC Global (U.S.A.) in 1997.
	•	Maralyn Kobayashi. (Co-portfolio manager since inception) Vice President and Senior Portfolio Manager of Money Market Trust; joined MFC Global (U.S.A.) in 1981.
	•	Matthew Lee. Regional Head of Greater China Equities for MFC Global Investment Management (Asia); joined MFC Global in 2008.
	•	Tahnoon Pasha. (Co-portfolio manager since inception) Vice President and Head of Investments, Equities of Manulife Asset Management (Hong Kong) Limited, the asset management company of Manulife in Hong Kong. He is responsible for managing Hong Kong based equity assets and overseeing the equity desks of the other eight investment offices across the region.
	•	Faisal Rahman CFA. (Co-portfolio manager since inception) Portfolio Manager joined MFC Global (U.S.A.) in 2001.
	•	Narayan Ramani. (Co-portfolio manager since inception) Assistant Vice President and Senior Portfolio Manager, Index Funds at MFC Global Investment Management; joined MFC Global (U.S.A.) in 1998.
	•	Mark Scheer. Co-portfolio manager of the fund since inception; Senior Vice President and Managing Director, North American Equities, joined MFC Global (U.S.) in 1998.
	•	Jim Schetakis. (Co-portfolio manager since inception) Vice President and Senior Portfolio Manager, Asset Allocation Portfolios; joined MFC Global in June 2007 and has worked in the investment field since 1985.
	•	Harpreet Singh. (Co-portfolio manager since inception) Vice President and Senior Portfolio Manager of U.S. Equities; joined MFC Global (U.S.A.) in 2000; previously a quantitative analyst at Standish, Ayer & Wood Inc.
	•	Steve Orlich (since May 2006). Vice President and Senior Portfolio Manager, Asset Allocation at MFC Global Investment Management. He joined MFC Global in 1998. He is an associate of the Society of Actuaries and has a M.A. in Theoretical Mathematics. Mr. Orlich has managed the Lifecycle Portfolios since their inception.
	•	Scott Warlow. (Co-portfolio manager since inception) Assistant Vice President and Portfolio Manager, Asset Allocation Portfolios; joined MFC in 2002. He is responsible for strategic asset allocations, style analysis of fund managers, and developing methods and models for tactical asset allocation.

Morgan Stanley Investment Management Inc., doing business as Van Kampen (“Van Kampen”)

Morgan Stanley Investment Management Inc. (“MSIM”), which does business in certain instances using the name “Van Kampen,” has its principal offices at 522 Fifth Avenue, New York, NY 10036. MSIM conducts a worldwide portfolio management business and provides a broad range of portfolio management services to customers in the U.S. and abroad. Morgan Stanley is the direct parent of MSIM.


Fund		Portfolio Managers

Value Trust		Thomas Copper (Lead Manager)
		John Mazanec
		Thomas Bastian
		Mary Jayne Maly
		James Roeder
		Sergio Marcheli
		Mark Laskin


	•	Thomas Copper. Portfolio Manager; joined Van Kampen in 1986. Mr. Copper has managed the fund since 2004.
	•	John Mazanec. Portfolio Manager; joined Van Kampen in 2008; previously a portfolio manager at Wasatch Advisors from April 2001 to May 2008. Mr. Mazanec has managed the fund since 2008.
	•	Thomas Bastian. Portfolio Manager; joined Van Kampen in 2003.
	•	Mary Jayne Maly. Portfolio Manager; joined Van Kampen in 1992. Ms. Maly has managed the fund since 2008.
	•	James Roeder. Portfolio Manager; joined Van Kampen in 1999. Mr. Roeder has managed the fund since inception.
	•	Sergio Marcheli. Portfolio Manager; joined Van Kampen in 2003; previously a portfolio specialist at Van Kampen. Mr. Marcheli has managed the fund since inception.
	•	Mark Laskin. Portfolio Manager; joined Van Kampen in 2000. Mr. Laskin has managed the fund since 2007.

Pacific Investment Management Company LLC (“PIMCO”)

PIMCO, located at 840 Newport Center Drive, Newport Beach, California 92660, is an investment counseling firm founded in 1971. PIMCO is a Delaware limited liability company and a majority-owned subsidiary of Allianz Global Investors of America L.P., (“AGI LP”). Allianz SE is the indirect majority owner of AGI LP. Allianz SE is a European-based, multinational insurance and financial services holding company.


Fund		Portfolio Managers

Total Return Trust		William H. Gross
Global Bond Trust		Scott Mather

236


Fund		Portfolio Managers

Real Return Bond Trust		Mihir Worah


	•	William H. Gross, CFA. Mr. Gross is a founder and Managing Director of PIMCO and has been associated with PIMCO for more than thirty years. He is the author of numerous articles on the bond market and has frequently appeared in national publications and media.
	•	Scott Mather. Mr. Mather has served as a portfolio manager of the fund since April 2008. He is a Managing Director, member of PIMCO’s Investment Committee and head of global portfolio management. He joined PIMCO in 1998.
	•	Mihir Worah. Mr. Worah, an Executive Vice President, is a Portfolio Manager and member of the government and derivatives desk. He joined PIMCO in 2001 as a member of the analytics team.

Perimeter Capital Management LLC

Perimeter Capital Management is a Delaware Corporation formed in 2006 located at Five Concourse Parkway, Suite 2725, Atlanta, Georgia 30328. Perimeter is a majority employee-owned, registered investment adviser, which provides investment services to institutional clients and mutual funds.


Fund		Portfolio Managers

Smaller Company Growth Trust		Mark D. Garfinkel, CFA
		James N. Behre


	•	Mark D. Garfinkel, CFA. (portfolio manager since 2008). Mr. Garfinkel is the lead portfolio manager and is a founding partner of Perimeter. Prior to the formation of Perimeter in June 2006, Mr. Garfinkel spent 8 years managing Trusco Capital Management’s small cap growth discipline.
	•	James N. Behre. (portfolio manager since 2008). Mr. Behre is a founding partner of Perimeter and a member of the management team. Prior to the formation of Perimeter in June 2006. Mr. Behre worked with Mr. Garfinkel at Trusco Capital Management as the lead analyst of the firm’s small-cap growth investment process.

Rainier Investment Management (“Rainier”)

Rainier is located at 601 Union Street, Suite 2801, Seattle, Washington 98101. Rainier is owned and operated by twelve principals.

The fund is managed by a team of portfolio managers. Each member of the team shares an equal amount of day-to-day management responsibility for the fund.


Fund		Portfolio Managers

Growth Equity Trust		Daniel Brewer
		Mark Broughton
		Stacie Cowell
		Mark Dawson
		Andrea Durbin
		James Margard
		Peter Musser


	•	Daniel Brewer. Senior Portfolio Manager with Rainier since at least 2002.
	•	Mark Broughton. Senior Portfolio Manager with Rainier since at least 2002.
	•	Stacie Cowell. Senior Portfolio Manager with Rainier since 2006, Senior Vice President and Lead Portfolio Manager with Invesco Funds Group (1996 to 2004) and an analyst Kennedy Capital Management (2005).
	•	Mark Dawson. Senior Portfolio Manager with Rainier since at least 2002.
	•	Andrea Durbin. Senior Portfolio Manager with Rainier since at least 2002.
	•	James Margard. Chief Investment Officer with Rainier since at least 2002.
	•	Peter Musser. Senior Portfolio Manager with Rainier since at least 2002.

RCM Capital Management LLC (“RCM”)

RCM is located at Four Embarcadero Center, San Francisco, California 94111. Established in 1998, and the successor to the business of its prior holding company, Dresdner RCM Global Investors US Holdings LLC, RCM provides advisory services to mutual funds and institutional accounts. RCM was originally formed as Rosenberg Capital Management in 1970. RCM was formerly known as Dresdner RCM Global Investors LLC. RCM is wholly owned by RCM US Holdings LLC (“US Holdings”). US Holdings is a Delaware limited liability company that is wholly owned by Allianz Global Investors AG (“AGI”). AGI, in turn, is owned by Allianz SE.

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Fund		Portfolio Managers

Emerging Small Company Trust		Thomas J. Ross
		Louise M. Laufersweiler
Science & Technology Trust		Walter C. Price
		Huachen Chen


	•	Huachen Chen (portfolio manager since 1984). Senior Portfolio Manager and Co-Portfolio Manager. Mr. Chen joined RCM in 1984 as an analyst and became a principal in 1994. Mr. Chen has managed the fund since October 6, 2006.
	•	Louise M. Laufersweiler, CFA (portfolio manager since May 2006). Director, Deputy Chief Investment Officer and Senior Portfolio Manager of RCM. She has senior portfolio management responsibilities for both mid-cap and small-cap equity strategies and is Chief Investment Officer for RCM Mid-Cap and Deputy Chief Investment Officer for RCM U.S. Small Cap. Ms. Laufersweiler has managed the fund since April 28, 2006. Ms. Laufersweiler joined RCM in 1982.
	•	Walter C. Price (portfolio manager since 2006). Managing Director, Senior Analyst and Co-Portfolio Manager. Mr. Price joined RCM in 1974 as a senior securities analyst in technology and became a principal in 1978. Mr. Price has managed the fund since October 6, 2006.
	•	Thomas J. Ross (portfolio manager since May 2006). Director, Chief Investment Officer and Senior Portfolio Manager of RCM. Mr. Ross has senior portfolio management responsibilities for both the U.S. and International Small Cap strategies. Prior to joining RCM in 2001, he was a senior analyst and portfolio manager with Dresdner Bank’s DIT-Deutscher Investment Trust subsidiary in Frankfurt, Germany for 10 years, managing a variety of global portfolios. He has over 22 years’ experience encompassing equity research and portfolio management.

RiverSource Investments, LLC (“RiverSource Investments”)

RiverSource Investments, located at 200 Ameriprise Financial Center, Minneapolis, Minnesota, 55474, is a wholly owned subsidiary of Ameriprise Financial, Inc. (“Ameriprise Financial”). Ameriprise Financial is a financial planning and financial services company that has been offering services for clients’ asset accumulation and income management and protection needs for over 110 years. RiverSource Investments manages investments for itself, the RiverSource Funds and other affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management and institutional trust and custody, as well as other investments products.


Fund		Portfolio Managers

Mid Cap Value Equity Trust		Steve Schroll
		Laton Spahr
		Warren Spitz
		Paul Stocking


	•	Steve Schroll, Portfolio Manager; joined RiverSource Investments in 1998 as a Senior Security Analyst. Mr. Schroll has managed the fund since April 2006.
	•	Laton Spahr, CFA, Portfolio Manager; joined RiverSource Investments in 2001 as a Security Analyst; previously worked as a Sector Analyst for Holland Capital Management from 2000 to 2001. Mr. Spahr has managed the fund since April 2006.
	•	Warren Spitz, Senior Portfolio Manager; joined RiverSource Investments in 2000. Mr. Spitz has managed the fund since April 2006.
	•	Paul Stocking, Portfolio Manager, joined RiverSource Investments in 1995 as a Senior Equity Analyst. Mr. Stocking has managed the fund since April 2006.

SSgA Funds Management, Inc. (“SSgA FM”)

SSgA FM is located at One Lincoln Street, Boston, Massachusetts 02111. SSgA FM is an SEC registered investment adviser and is a wholly owned subsidiary of State Street Corporation, a public held bank holding company. As of December 31, 2008, SSgA FM had over $118 billion in assets under management. SSgA FM and other State Street advisory affiliates make up State Street Global Advisors (“SSgA”), the investment management arm of State Street Corporation. With over $1.44 trillion under management as of December 31, 2008, SSgA provides complete global investment management services from offices in North America, South America, Europe, Asia, Australia and the Middle East.


Fund		Portfolio Managers

International Equity Index Trust A		Thomas Coleman
		Karl Schneider
International Equity Index Trust B		Thomas Coleman
		Karl Schneider


	•	Thomas Coleman. Principal; joined SSgA FM in 1998. Mr. Coleman has managed the fund since June 2005. Mr. Coleman is a Vice President of State Street Global Advisors and a Portfolio Manager in the Global Structured Products investment

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		team. Within this team, Tom is responsible for the management of several international strategies, including MSCI Emerging and ACWI as well as IFC Emerging Markets, along with domestic strategies benchmarked to Russell and Standard & Poors indices. Prior to assuming his current role in April 2004, Tom managed the International Structured Products Group Operations Team. Tom holds a BS in Finance and Accounting from Boston College and an MBA from Babson College. He also earned the Chartered Financial Analyst designation and is a member of the Boston Security Analysts Society.


	•	Karl Schneider. Principal; joined SSgA FM in 1997. Mr. Schneider has managed the fund since December 2007. Mr. Schneider is a Vice President of State Street Global Advisors and a Senior Portfolio Manager within the Global Structured Products group. He joined State Street in 1996 and currently manages several of the firm’s commingled US index strategies, other separately managed domestic and international funds, as well as several synthetic beta strategies, including commodities and hedge fund beta. Additionally, he is also part of the portfolio management team for the SSgA S&P 500 Index Mutual Fund and the SSgA IAM Shares Mutual Fund.

Prior to joining the Global Structured Products Group, Karl worked as a portfolio manager in SSgA’s Currency Management group, managing both active currency selection and traditional passive hedging overlay portfolios. Prior to this, he worked as an analyst in State Street’s Process Engineering division where he both assisted and led a number of internal consulting engagements aimed at improving operational efficiencies within the custody bank.

Karl holds a BS in Finance and Investments from Babson College and also an MS in Finance from the Carroll School of Management at Boston College. Additionally, he holds a Series 3 license from the National Futures Association.

Templeton Global Advisors Limited (“Templeton Global”)

Templeton Global is located at Box N-7759, Lyford Cay, Nassau, Bahamas and has been in the business of providing investment advisory services since 1954. As of November 30, 2008, Templeton Global and its affiliates managed over $404.6 billion in assets. Templeton Global is an indirect wholly owned subsidiary of Franklin Resources, Inc.


Fund		Portfolio Managers

Global Trust		Cindy Sweeting, CFA
		Tucker Scott, CFA
		Lisa Myers, CFA


	•	Cindy Sweeting, CFA. Lead Portfolio Manager; President and Chairman; joined Templeton Global in 1997.
	•	Tucker Scott, CFA. Executive Vice President; joined Templeton Global in 1996.
	•	Lisa Myers, CFA. Executive Vice President; joined Templeton Global in 1996.

Templeton Investment Counsel, LLC (“Templeton”)
Templeton Global Advisors Limited serves as sub-subadviser

Templeton is located at 500 East Broward Blvd., Suite 2100, Ft. Lauderdale, Florida 33394, and has been in the business of providing investment advisory services since 1954. As of November 30, 2008, Templeton and its affiliates managed over $404.6 billion in assets. Templeton is an indirect wholly owned subsidiary of Franklin Resources, Inc.


Fund		Portfolio Managers

International Value Trust		Tucker Scott, CFA
		Cindy Sweeting, CFA
		Peter Nori, CFA
		Neil Devlin, CFA


	•	Tucker Scott, CFA. Lead Portfolio Manager, Executive Vice President; joined Templeton Global in 1996. Mr. Scott has managed the fund since inception.
	•	Cindy Sweeting, CFA. President and Chairman; joined Templeton in 1997. Ms. Sweeting has managed the fund since inception.
	•	Peter Nori, CFA. Executive Vice President; joined Templeton in 1994; previously worked at Franklin since 1987. Mr. Nori has managed the fund since December 2006.
	•	Neil Devlin, CFA. Senior Vice President; joined Templeton in 2006; previously worked at Boston Partners since 2000. Mr. Devlin has managed the fund since December 2006.

T. Rowe Price Associates, Inc. (“T. Rowe Price”)

T. Rowe Price, 100 East Pratt Street, Baltimore, Maryland 21202, was founded in 1937. As of December 31, 2008, T. Rowe Price and its affiliates managed over $276.3 billion for over ten million individual and institutional investor accounts.

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Fund		Portfolio Managers

Balanced Trust		Ned Notzon
		Kim DeDominicis
		Charles Shriver
Blue Chip Growth Trust		Larry J. Puglia
Capital Appreciation Value Trust		David R. Giroux
Equity-Income Trust		Brian C. Rogers
Health Sciences Trust		Kris H. Jenner
Real Estate Equity Trust		David Lee
Science & Technology Trust		Ken Allen
Small Company Value Trust		Preston G. Athey
Spectrum Income Trust		Team*
Mid Value Trust		David J. Wallack


	•	Ken Allen. Vice President; joined T. Rowe Price in 2000. Mr. Allen has managed Science Technology Trust since January 2009.
	•	Preston G. Athey. Vice President; joined T. Rowe Price in 1978. Mr. Athey has managed Small Company Value Trust since October 2005.
	•	Kim DeDominicis. Vice President; joined T. Rowe Price in 2003.
	•	David R. Giroux. Vice President; joined T. Rowe Price in 1998.
	•	Kris H. Jenner. Vice President; joined T. Rowe Price in 1997; previously a post-doctoral fellow at the Brigham and Women’s Hospital, Harvard Medical School (1995 — 1997).
	•	David Lee. Vice President; joined T. Rowe Price in 1993. Mr. Lee has managed Real Estate Equity Trust since April 2006.
	•	Ned Notzon. Vice President; joined T. Rowe Price in 1989.
	•	Larry J. Puglia. Vice President; joined T. Rowe Price in 1990. Mr. Puglia has managed Blue Chip Growth Trust since October 2005.
	•	Brian C. Rogers. Vice President; joined T. Rowe Price in 1982. Mr. Rogers has managed Equity-Income Trust since October 2005.
	•	Charles Shriver. Vice President; joined T. Rowe Price in 1991.
	•	David J. Wallack. Vice President; joined T. Rowe Price in 1990. Mr. Wallack has managed Small Cap Trust since January 2009.

*Team. The Spectrum Income Trust is managed by an investment advisory committee that has day-to-day responsibility in managing the fund’s portfolio and developing and executing the fund’s investment program. The Team (Notzon, Schackelford, Vaselkiv, Kelson and Rogers) has managed the Spectrum Income Trust since October 2005 and (McCormick since May 2008.)

Edmund M. Notzon III is Chairman of the Spectrum Income Trust Investment Advisory Committee and is responsible for implementing and monitoring the fund’s overall investment strategy, as well as the allocation of the fund’s assets. Mr. Notzon joined T. Rowe Price in 1989 and is a Vice President and Senior Portfolio Manager.

The Committee members with the most significant responsibilities for managing the fund’s assets are:


	•	Daniel O. Shackelford. Vice President and chairman of the T. Rowe Price Fixed Income Strategy Committee; joined T. Rowe Price in 1999; responsible for the fund’s investment grade bond investments.
	•	Mark J. Vaselkiv. Vice President and a Portfolio Manager in the Fixed Income Group, heading taxable high-yield bond management; joined T. Rowe Price in 1988; responsible for the fund’s investments in high-yield debt securities.
	•	Ian Kelson. Vice President of T. Rowe Price International; responsible for the fund’s high-quality international bond investments joined T. Rowe Price in 2000; prior thereto was head of fixed income for Morgan Grenfell/DIMA.
	•	Brian C. Rogers. Chief Investment Officer; joined T. Rowe Price in 1982; responsible for the fund’s dividend-paying common stock and value stock investments.
	•	Andrew McCormick. Prior to joining T. Rowe Price in 2008, Mr. McCormick was the Chief Investment Officer at IMPAC Mortgage Holdings and a Senior Portfolio Manager at Avenue Capital Group. From 2001 to 2005, Mr. McCormick was a Senior Vice President of Portfolio Transactions at Fannie Mae.

UBS Global Asset Management (Americas) Inc. (“UBS”)

UBS, One North Wacker Drive, Chicago, Illinois 60606, is an indirect wholly owned asset management subsidiary of UBS AG and a member of the UBS Global Asset Management Division. UBS AG, with headquarters in Zurich, Switzerland, is an internationally diversified organization with operations in many areas of the financial services industry.


Fund		Portfolio Managers

Global Allocation Trust		Curt Custard

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Fund		Portfolio Managers

Large Cap Trust		Thomas Cole
		John Leonard
		Thomas Digenan
		Scott Hazen

Thomas Cole, John Leonard, Thomas Digenan and Scott Hazen are the members of the North American Equities investment management team primarily responsible for the day-to-day management of the Large Cap Trust. Mr. Cole as the head of the investment management team leads the portfolio construction process and reviews the overall composition of the fund’s portfolio to ensure compliance with its stated investment objectives and strategies. Mr. Leonard, Mr. Digenan and Mr. Hazen work closely with Mr. Cole on portfolio construction and ensuring that fund investment objectives are met.

Curt Custard is the lead portfolio manager for the Global Allocation Trust. Mr. Custard has access to certain members of the fixed-income and equities investment management teams, each of whom is allocated a specified portion of the portfolio over which he or she has independent responsibility for research, security selection, and portfolio construction. The team members also have access to additional portfolio managers and analysts within the various asset classes and markets in which the funds invest. Mr. Custard, as senior portfolio manager for the funds, has responsibility for allocating each portfolio among the various managers and analysts, occasionally implementing trades on behalf of analysts on the team, reviewing the overall composition of each portfolio to ensure its compliance with its stated investment objectives and strategies.


	•	Thomas M. Cole, CFA. Mr. Cole is Head of North American Equities, Research Director for North American Equities, and a Managing Director at UBS. Mr. Cole has been an investment professional with UBS since 1985 and a portfolio manager of the fund since its inception.
	•	Curt Custard. Mr. Custard is a Managing Director and has been Head of Global Investment Solutions at UBS Global Asset Management since March 2008. Mr. Custard is also a member of the UBS Global Asset Management Executive Committee. Prior to joining UBS Global Asset Management, Mr. Custard was global head of multi-asset solutions at Schroders since 2004. Prior to this, Mr. Custard was chief investment officer of the multi-asset and balanced business of Allianz Global Investors in London since 2000. Mr. Custard has been a portfolio manager of the fund since April 2009.
	•	Thomas J. Digenan, CFA, CPA. Mr. Digenan has been a North American Equity Strategist at UBS since 2001 and is a Managing Director of UBS. Mr. Digenan has been a portfolio manager of the fund since its inception.
	•	Scott C. Hazen, CFA. Mr. Hazen has been a North American Equity Strategist at UBS since 2004 and is an Executive Director of UBS. From 1992 until 2004, Mr. Hazen was a Client Service and Relationship Management professional with UBS and has been a portfolio manager of the fund since its inception.
	•	John C. Leonard, CFA. Mr. Leonard is Global Head of Equities and a Member of the UBS Group Managing Board. Mr. Leonard has been an investment professional with UBS since 1991 and a portfolio manager of the fund since its inception.

Wellington Management Company, LLP (“Wellington Management”)

Wellington Management is a Massachusetts limited liability partnership with principal offices at 75 State Street, Boston, Massachusetts 02109. Wellington Management is a professional investment counseling firm which provides investment services to investment companies, employee benefit plans, endowments, foundations and other institutions. Wellington Management and its predecessor organizations have provided investment advisory services for over 70 years. As of February 28, 2009 Wellington Management had investment management authority with respect to approximately $378 billion* in assets.


Fund		Portfolio Managers

Alpha Opportunities Trust		Kent M. Stahl, CFA
		Gregg R. Thomas, CFA
Core Allocation Plus Trust		Scott M. Elliott (team)
		Evan S. Grace
		Rick A. Wurster
Investment Quality Bond Trust		Thomas L. Pappas, CFA
		Christopher L. Gootkind, CFA
		Christopher A. Jones, CFA
Mid Cap Intersection Trust		Mammen Chally, CFA
Mid Cap Stock Trust		Michael T. Carmen, CFA
		Mario E. Abularach, CFA
Natural Resources Trust		Karl E. Bandtel
		James A. Bevilacqua
Small Cap Growth Trust		Steven C. Angeli, CFA
		Mario E. Abularach, CFA
		Stephen Mortimer

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Fund		Portfolio Managers

Small Cap Value Trust		Timothy J. McCormack, CFA
		Shaun F. Pedersen


	•	Mario E. Abularach, CFA. Vice President and Equity Research Analyst; joined Wellington Management as an investment professional in 2001. Has been involved in portfolio management and securities analysis for Mid Cap Stock Trust since its inception in 2005 and Small Cap Growth Trust since 2008.
	•	Steven C. Angeli, CFA. Senior Vice President and Equity Portfolio Manager; joined Wellington Management as an investment professional in 1994. Has served as Portfolio Manager for the fund since its inception.
	•	Karl E. Bandtel. Senior Vice President and Equity Portfolio Manager; joined Wellington Management as an investment professional in 1990. Has been involved in portfolio management and securities analysis for the fund since its inception.
	•	James A. Bevilacqua. Senior Vice President and Equity Portfolio Manager; joined Wellington Management as an investment professional in 1994. Has served as Portfolio Manager for the fund since its inception.
	•	Michael T. Carmen, CFA. Senior Vice President and Equity Portfolio Manager; joined Wellington Management as an investment professional in 1999. Has served as Portfolio Manager for the fund since its inception.
	•	Mammen Chally, CFA. Vice President and Equity Portfolio Manager; joined Wellington Management in 1994 and has been an investment professional since 1996. Has served as Portfolio Manager of the fund since May 2008.
	•	Scott M. Elliott. Senior Vice President and Director, Asset Allocation Strategies of Wellington Management, has been involved in portfolio management and securities analysis for the fund since its inception. Mr. Elliott joined Wellington Management as an investment professional in 1994.
	•	Christopher L. Gootkind, CFA. Vice President and Fixed Income Portfolio Manager; joined Wellington Management as an investment professional in 2000. Has been involved in portfolio management and securities analysis for the fund since 2006.
	•	Evan S. Grace, CFA. Vice President and Director, Asset Allocation Research of Wellington Management, has served as the Portfolio Manager for the fund since its inception. Mr. Grace joined Wellington Management as an investment professional in 2003.
	•	Christopher A. Jones, CFA. Vice President and Fixed Income Portfolio Manager; joined Wellington Management as an investment professional in 1994. Has been involved in portfolio management and securities analysis for the fund since 2007.
	•	Timothy J. McCormack, CFA. Senior Vice President and Equity Portfolio Manager of Wellington Management, has served as the portfolio manager of the Small Cap Value Trust since July 2008. Mr. McCormack has been involved in portfolio management and securities analysis for the Small Cap Value Trust since its inception. Mr. McCormack joined Wellington Management as an investment professional in 2000.
	•	Stephen Mortimer. Vice President and Equity Portfolio Manager; joined Wellington Management as an investment professional in 2001. Has been involved in portfolio management and securities analysis for the fund since its inception.
	•	Thomas L. Pappas, CFA. Senior Vice President and Fixed Income Portfolio Manager; joined Wellington Management as an investment professional in 1987. Has served as Portfolio Manager for the fund since its inception.
	•	Shaun F. Pedersen. Vice President and Equity Portfolio Manager of Wellington Management, has served as the portfolio manager of the Small Cap Value Trust since July 2008. Mr. McCormack has been involved in portfolio management and securities analysis for the fund since its inception. Mr. Pedersen joined Wellington Management as an investment professional in 2004.
	•	Kent M. Stahl, CFA. A Senior Vice President and Director of Investments and Risk Management of Wellington Management. Mr. Stahl has served as portfolio manager of the fund since its inception. He joined Wellington Management as an investment professional in 1998.
	•	Gregg R. Thomas, CFA. A Vice President and Manager of Investments and Risk Management of Wellington Management. Mr. Thomas joined the firm in 2001 and has been an investment professional since 2004. He has managed the fund since its inception.
	•	Rick A. Wurster. Vice President, Asset Allocation Strategist and Business Manager of Wellington Management, has been involved in portfolio management and securities analysis for the fund since its inception. Mr. Wurster joined Wellington Management as an investment professional in 2006. Prior to joining Wellington Management, Mr. Wurster was a consultant with McKinsey & Company (2000-2006).

* The firm-wide asset totals do not include agency MBS pass-through accounts managed for the Federal Reserve.

Wells Capital Management, Incorporated (“WellsCap”)

WellsCap, located at 525 Market St., San Francisco, California, is an indirect, wholly-owned subsidiary of Wells Fargo & Company. It was created to succeed to the mutual fund advisory responsibilities of Wells Fargo Bank and is an affiliate of Wells Fargo Bank. Wells Fargo Bank, which was founded in 1852, is the oldest bank in the western U.S. and is one of the largest banks in the U.S.

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Fund		Portfolio Managers

Core Bond Trust		William Stevens
		Thomas O’Connor
		Lynne Royer
		Troy Ludgood
U.S. High Yield Bond Trust		Phil Susser
		Niklas Nordenfelt


	•	William Stevens. Senior Portfolio Manager of the Montgomery Fixed Income team at Wells Capital Management; joined Wells Capital Management in 2003; previously founded the Fixed Income team of Montgomery Asset Management in 1992.
	•	Thomas O’Connor, CFA. Senior Portfolio Manager of the Montgomery Fixed Income team at Wells Capital Management; joined Wells Capital Management in 2003; joined Montgomery Asset Management and the team in 2000; previously Thomas was a senior portfolio manager in charge of agency mortgages at Vanderbilt Capital Advisors (formerly ARM Capital Advisors).
	•	Lynne Royer. Senior Portfolio Manager of the Montgomery Fixed Income team at Wells Capital Management; joined Wells Capital Management in 2003; joined Montgomery Asset Management and the team in 1996; previously Ms. Royer was a lending officer with Morgan Guaranty Trust Company (J.P. Morgan) in New York.
	•	Troy Ludgood. Senior Portfolio Manager of the Montgomery Fixed Income team at Wells Capital Management; joined Wells Capital Management in 2004; previously, he was a trader at Lehman Brothers, responsible for corporate, emerging markets, and non-dollar sovereign bonds.
	•	Phil Susser. Senior Portfolio Manager and Co-Manager of the Sutter High Yield Fixed Income team at Wells Capital Management; joined Sutter as a research analyst in 2001; previously worked at Deutsche Bank Securities Inc. as an associate research analyst.
	•	Niklas Nordenfelt, CFA. Senior Portfolio Manager and Co-Manager of the Sutter High Yield Fixed Income team at Wells Capital Management; he joined Sutter as an investment strategist in 2003; previously worked at Barclays Global Investors, where he was a principal, working on their international and emerging markets equity strategies.

Western Asset Management Company (“Western Asset”)
Western Asset Management Company Limited serves as sub-subadviser*

Western Asset, headquartered at 385 East Colorado Boulevard, Pasadena, California,91101 is one of the world’s leading investment management firms. Its sole business is managing fixed-income portfolios, an activity the Firm has pursued for over 38 years. From offices in Pasadena, New York, Sao Paulo, London, Singapore, Hong Kong, Tokyo and Melbourne, Western Asset’s 1,046 employees perform investment services for a wide variety of global clients. The Firm’s clients include charitable, corporate, health care, insurance, mutual fund, public and union organizations, and client portfolios range across an equally wide variety of mandates, from money market to emerging markets. Western Asset’s current client base totals 675, representing 47 countries, 1,361 accounts, and over $513.3 billion in assets under management.


Fund		Portfolio Managers

Floating Rate Income Trust		Steven A. Walsh
		S. Kenneth Leech
		Michael C. Buchanan
		Timothy J. Settel
High Yield Trust		Steven A. Walsh
		S. Kenneth Leech
		Michael C. Buchanan
		Keith J. Gardner
Strategic Bond Trust*		Steven A. Walsh
		S. Kenneth Leech
		Michael C. Buchanan
		Keith J. Gardner
		Mark S. Lindbloom
U.S. Government Securities Trust		Steven A. Walsh
		S. Kenneth Leech
		Mark S. Lindbloom
		Frederick R. Marki


	•	Steven A. Walsh. Chief Investment Officer of Western Asset since September 2008, previously served as Western Asset’s Deputy Chief Investment Officer; joined Western Asset in 1991. Prior to Western Asset, Mr. Walsh worked at Security Pacific Investment Managers, Inc. Portfolio Manager, 1989-1991, and Atlantic Richfield Company Portfolio Manager,

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		1981-1988. Mr. Walsh has managed High Yield Trust, Strategic Bond Trust and U.S. Government Securities Trust since March 2006. Mr. Walsh has managed Floating Rate Income Trust since inception.


	•	S. Kenneth Leech. Chief Investment Officer Emeritus of Western Asset since September 2008, previously served as Western Asset’s Chief Investment Officer; joined Western Asset in 1990. Prior to Western Asset, Mr. Leech worked at Greenwich Capital Markets Portfolio Manager, 1988-1990; The First Boston Corporation Fixed Income Manager, 1980-1988, and National Bank of Detroit Portfolio Manager, 1977-1980. Mr. Leech has managed High Yield Trust, Strategic Bond Trust and U.S. Government Securities Trust since March 2006. Mr. Leech has managed Floating Rate Income Trust since inception.
	•	Michael C. Buchanan. (co-portfolio manager since inception) Portfolio Manager, joined Western Asset in 2005. Prior to Western Asset, Mr. Buchanan worked for Credit Suisse Asset Management Managing Director, Head of U.S. Credit Products, 2003-2005; Janus Capital Management Executive Vice President, Portfolio Manager, 2003; BlackRock Financial Management Managing Director, Head of High Yield Trading, 1998-2003, and Conseco Capital Management Vice President, Portfolio Manager, 1990-1998. Mr. Buchanan has managed High Yield Trust and Strategic Bond Trust since March 2006. Mr. Buchanan has managed Floating Rate Income Trust since inception
	•	Keith J. Gardner. Portfolio Manager/ Research Analyst, joined Western Asset in 1994. Prior to Western Asset, Mr. Gardner worked for Legg Mason, Inc. Portfolio Manager, 1992-1994; T. Rowe Price Associates, Inc. Portfolio Manager, 1985-1992, and Salomon Brothers, Inc. Research Analyst, 1983-1985. Mr. Gardner has managed High Yield Trust and Strategic Bond Trust since March 2006.
	•	Mark S. Lindbloom. Portfolio Manager, joined Western Asset in 2006. Prior to Western Asset, Mr. Lindbloom worked for Citigroup Asset Management Portfolio Manager, 1986-2005; Brown Brothers Harriman & Co. Portfolio Manager, 1981-1986, and The New York Life Insurance Company Analyst, 1979-1981. Mr. Lindbloom has managed Strategic Bond Trust and U.S. Government Securities Trust since March 2006.
	•	Frederick R. Marki. Frederick R. Marki. Senior Portfolio Manager, joined Western Asset in 2005. Prior to Western Asset, Mr. Marki worked for Citigroup Asset Management Senior Portfolio Manager, 1991-2005; UBS Portfolio Manager, 1989-1991; Merrill Lynch Vice President, 1985-1989, and Federal Reserve Bank Assistant Economist, 1983-1985. Mr. Marki has managed U.S. Government Securities Trust since March 2006.
	•	Timothy J. Settel. (co-portfolio manager since inception) Western Asset — Portfolio Manager/ Research Analyst, 2001-present. Mr. Settel has managed Floating Rate Income Trust since inception.

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MULTICLASS PRICING; RULE 12B-1 PLANS

Multiple Classes of Shares

Each class of shares is the same except for differences in class expenses, including different Rule 12b-1 fees for Series I shares, Series II shares and Series III shares, and voting rights.

The expenses of each fund are borne by its Series I, Series II, Series III and NAV shares (as applicable) based on the net assets of the fund attributable to shares of each class. Notwithstanding the foregoing, “class expenses” are allocated to each class. “Class expenses” for each fund include the Rule 12b-1 fees (if any) paid with respect to a class and other expenses which the Adviser to each fund determines are properly allocable to a particular class. The Adviser will make such allocations in such manner and using such methodology as it determines to be reasonably appropriate. The Adviser’s determination is subject to ratification or approval by the Board. The kinds of expenses that the Adviser may determine are properly allocable to a particular class include the following: (i) printing and postage expenses related to preparing and distributing to the shareholders of a specific class (or owners of contracts funded by shares of such class) materials such as shareholder reports, prospectuses and proxies; (ii) professional fees relating solely to such class; (iii) Trustees’ fees, including independent counsel fees, relating specifically to one class; and (iv) expenses associated with meetings of shareholders of a particular class.

All shares of each fund have equal voting rights and are voted in the aggregate, and not by class, except that shares of each class have exclusive voting rights on any matter submitted to shareholders that relates solely to the arrangement of that class and have separate voting rights when any matter is submitted to shareholders in which the interests of one class differ from the interests of any other class or when voting by class is otherwise required by law.

Rule 12b-1 Plans of Each Class

NAV shares are not subject to a Rule 12b-1 fee.

Series I shares of each fund are subject to a Rule 12b-1 fee of 0.05% of Series I share average daily net assets except as follows:


	•	Each JHT Feeder Fund, the American Fundamental Holdings Trust, the American Global Diversification Trust and the American Diversified Growth & Income Trust are subject to a Rule 12b-1 fee of 0.60% of Series I share average daily net assets. The Core Fundamental Holdings Trust and the Core Global Diversification Trust are subject to a Rule 12b-1 fee of 0.35% of Series I share average daily net assets.

Series II shares of each fund are subject to a Rule 12b-1 fee of up to 0.25% of Series II share average daily net assets except as follows:


	•	Each JHT Feeder Fund, the American Fundamental Holdings Trust, the American Global Diversification Trust and the American Diversified Growth & Income Trust is subject to a Rule 12b-1 fee of 0.75% of Series II share average daily net assets. The Core Fundamental Holdings Trust and the Core Global Diversification Trust are subject to a Rule 12b-1 fee of 0.55% of Series II share average daily net assets.

Series III shares of each fund are subject to a Rule 12b-1 fee of 0.25% of Series III share average daily net assets except the Core Fundamental Holdings Trust and the Core Global Divesification Trust are subject to a Rule 12b-1 fee of 0.15% of Series III share average daily net asset.

Rule 12b-1 fees will be paid to the JHT’s Distributor, John Hancock Distributors, LLC, or any successor thereto (the “Distributor”). The Distributor pays American Funds Distributors, Inc. (“AFD”) a marketing expense allowance for AFD’s marketing assistance equal to the sum of (a) 0.16% of any new or subsequent purchase payments allocated to a JHT Feeder Fund through variable annuity and variable life contracts issued or administered by certain insurance companies affiliated with the Adviser and (b) 0.16% of the portion of any new or subsequent purchase payments allocated to a JHT fund of funds that is invested in an American Fund Insurance Serieis fund.

To the extent consistent with applicable laws, regulations and rules, the Distributor may use Rule 12b-1 fees:

(i) for any expenses relating to the distribution of the shares of the class,

(ii) for any expenses relating to shareholder or administrative services for holders of the shares of the class (or owners of contracts funded in insurance company separate accounts that invest in the shares of the class) and

(iii) for the payment of “service fees” that come within Rule 2830(d)(5) of the Conduct Rules of the Financial Industry Regulatory Authority.

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may make of the Rule 12b-1 fees it receives. Currently, all such payments are made to insurance companies affiliated with JHT’s investment adviser and Distributor. However, payments may be made to nonaffiliated insurance companies in the future.

Rule 12b-1 fees are paid out of a fund’s assets on an ongoing basis. Therefore, these fees will increase the cost of an investment in a fund and may, over time, be greater than other types of sales charges.

GENERAL INFORMATION

Taxes

The following is a summary of some important tax issues that affect JHT and the funds. The summary is based on current tax laws which may be changed by legislative, judicial or administrative action (possibly with retroactive effect). You should not consider this to be a detailed description of the tax treatment of JHT or the funds. More information about taxes is located in the SAI under the heading — “Additional Information Concerning Taxes”. YOU ARE URGED TO CONSULT YOUR TAX ADVISER REGARDING SPECIFIC QUESTIONS AS TO FEDERAL, STATE AND LOCAL INCOME TAXES AND THEIR IMPACT ON YOUR PERSONAL TAX LIABILITY.

Qualification as a Regulated Investment Company; Diversification Requirements Applicable to Insurance Company Separate Accounts

JHT intends to take the steps necessary to qualify each fund as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) and believes that each fund will so qualify. As a result of qualifying as a regulated investment company, each fund will not be subject to U.S. Federal income tax on its net investment income and net capital gain that it distributes to its shareholders in each taxable year provided that it distributes to its shareholders at least 90% of its net investment income and 90% of its net tax exempt interest income for such taxable year. Net investment income is defined as investment company taxable income, as that term is defined in the Code, determined without regard to the deduction for dividends paid and excluding net capital gains. Net capital gain is defined as the excess of its net realized long-term capital gain over its net realized short-term capital loss. Each fund is subject to a nondeductible 4% excise tax calculated as a percentage of certain undistributed amounts of ordinary income and capital gain net income. To the extent possible, each fund intends to make sufficient distributions to avoid the application of both corporate income and excise taxes.

Because JHT complies with the ownership restrictions of Treas. Reg. Section 1.817-5(f), Rev. Rul. 81-225, Rev. Rul. 2003-91, and Rev. Rul. 2003-92 (no direct ownership by the public), JHT expects each insurance company separate account to be treated as owning (as a separate investment) its proportionate share of each asset of any fund in which it invests, provided that the fund qualifies as a regulated investment company. Therefore, each fund intends to meet the additional diversification requirements that are applicable to insurance company separate accounts under Subchapter L of the Code. These requirements generally provide that no more than 55% of the value of the assets of a fund may be represented by any one investment; no more than 70% by any two investments; no more than 80% by any three investments; and no more than 90% by any four investments. For these purposes, all securities of the same issuer are treated as a single investment and each United States government agency or instrumentality is treated as a separate issuer.

If a fund failed to qualify as a regulated investment company, owners of contracts based on the portfolio:


	•	would be treated as owning shares of the fund (rather than their proportionate share of the assets of such portfolio) for purposes of the diversification requirements under Subchapter L of the Code, and as a result might be taxed currently on the investment earnings under their contracts and thereby lose the benefit of tax deferral, and
	•	the fund would incur regular corporate federal income tax on its taxable income for that year and be subject to certain distribution requirements upon requalification.

In addition, if a fund failed to comply with the diversification requirements of the regulations under Subchapter L of the Code, owners of contracts based on the portfolio might be taxed on the investment earnings under their contracts and thereby lose the benefit of tax deferral. Accordingly, compliance with the above rules is carefully monitored by the Adviser and the subadvisers and it is intended that each fund will comply with these rules as they exist or as they may be modified from time to time. Compliance with the tax requirements described above may result in a reduction in the return under a fund, since to comply with the above rules, the investments utilized (and the time at which such investments are entered into and closed out) may be different from what the subadvisers might otherwise believe to be desirable.

Tax-Qualified and Non-Qualified Contracts

Certain of MFC’s life insurance subsidiaries (the “Insurance Companies”) are taxed as life insurance companies. Under current tax law rules, they include the investment income (exclusive of capital gains) of the separate accounts in their taxable income and take deductions for investment income credited to their “policyholder reserves.” They are also required to capitalize and amortize certain costs instead of deducting those costs when they are incurred. The Insurance Companies do not currently

246

charge the separate accounts for any resulting income tax costs, other than a “DAC tax charge” they impose against certain life insurance separate accounts to compensate them for the finance costs attributable to the acceleration of their income tax liabilities by reason of a “DAC tax adjustment.” They also claim certain tax credits or deductions relating to foreign taxes paid and dividends received by the funds. These benefits can be material. They do not pass these benefits through to the separate accounts, principally because: (i) the deductions and credits are allowed to the Insurance Companies and not the contract holders under applicable tax law; and (ii) the deductions and credits do not represent investment return on the separate account assets that is passed through to contract holders.

The Insurance Companies’ contracts permit the Insurance Companies to deduct a charge for any taxes they incur that are attributable to the operation or existence of the contracts or the separate accounts. Currently, the Insurance Companies do not anticipate making any specific charge for such taxes other than the DAC tax charge and state and local premium taxes. If the level of the current taxes increases, however, or is expected to increase in the future, the Insurance Companies reserve the right to make a charge in the future.

Holders of variable annuity contracts or variable life insurance policies should consult the prospectuses of their respective contracts or policies for information on the federal income tax consequences to such holders. In addition, variable contract owners may wish to consult with their own tax advisors as to the tax consequences of investments in JHT, including the application of state and local taxes.

Foreign Investments

When investing in foreign securities or currencies, a fund may incur withholding or other taxes to foreign governments. Foreign tax withholding from dividends and interest, if any, is generally imposed at a rate between 10% and 35%. The investment yield of any fund that invests in foreign securities or currencies will be reduced by these foreign taxes. The foreign tax credit, if any, allowable with respect to such foreign taxes will not benefit owners of variable annuity or variable life insurance contracts who allocate investments to a fund of JHT.

Tax Implications for Insurance Contracts With Investments Allocated to JHT

For information regarding the tax implications for the purchaser of a variable annuity or life insurance contract who allocates investments to a fund of JHT, please refer to the prospectus for the contract.

The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations currently in effect. It is not intended to be a complete explanation or a substitute for consultation with individual tax advisors. The Code and Regulations are subject to change, possibly with retroactive effect. See “Additional Information Concerning Taxes” in the SAI for additional information on taxes.

Dividends

JHT intends to declare as dividends substantially all of the net investment income, if any, of each fund. Dividends from the net investment income and the net capital gain, if any, for each fund except the Money Market Trust and Money Market Trust B, will be declared not less frequently than annually and reinvested in additional full and fractional shares of that fund or paid in cash. Dividends from net investment income and net capital gain, if any, for the Money Market Trust and Money Market Trust B will be declared and reinvested, or paid in cash, daily.

Purchase and Redemption of Shares

Shares of each fund of JHT are offered continuously, without sales charge, at a price equal to their NAV. The distributor of the shares of JHT is John Hancock Distributors LLC. Shares of each fund of JHT are sold and redeemed at their NAV next computed after a purchase payment or redemption request is received by the shareholder from the contract owner or after any other purchase or redemption order is received by JHT. Depending upon the NAV at that time, the amount paid upon redemption may be more or less than the cost of the shares redeemed. Payment for shares redeemed will generally be made within seven days after receipt of a proper notice of redemption. However, JHT may suspend the right of redemption or postpone the date of payment beyond seven days during any period when:


	•	trading on the New York Stock Exchange (“NYSE”) is restricted, as determined by the SEC, or the NYSE is closed for other than weekends and holidays;
	•	an emergency exists, as determined by the SEC, as a result of which disposal by JHT of securities owned by it is not reasonably practicable or it is not reasonably practicable for JHT fairly to determine the value of its net assets; or
	•	the SEC by order so permits for the protection of security holders of JHT.

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Calculation of NAV

The NAV of the shares of each fund is determined once daily as of the close of day-time trading of the NYSE, Monday through Friday, except that no determination is required on:

(i) days on which changes in the value of such fund’s portfolio securities will not materially affect the current NAV of the shares of the fund,

(ii) days during which no shares of such fund are tendered for redemption and no order to purchase or sell such shares is received by JHT, or

(iii) the following business holidays or the days on which such holidays are observed by the NYSE: New Year’s Day, Martin Luther King, Jr.’s Birthday, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

The NAVs per share of all funds, except the Money Market Trusts, are computed by:

(i) adding the sum of the value of the securities held by each fund plus any cash or other assets it holds,

(ii) subtracting all its liabilities, and

(iii) dividing the result by the total number of shares outstanding of that fund at such time.

Valuation of Securities

Securities held by a fund (except securities held by the Money Market Trusts, shares of other open-end investment companies held by a fund of funds, and debt instruments with remaining maturities of 60 days or less) are valued at their market value if market quotations are readily available. Otherwise, fund portfolio securities are valued at fair value as determined in good faith by the Trustees. The Trustees have delegated the responsibility to fair value securities to JHT’s Pricing Committee, and actual calculation of fair value may be made by persons acting pursuant to the direction of the Trustees. Shares of other open-end investment companies held by a fund are valued at NAV. Securities held by the Money Market Trusts and debt instruments with remaining maturities of 60 days or less are valued at amortized cost.

Generally, trading (i) in non-U.S. securities; (ii) U.S. government securities; and (iii) money market instruments is substantially completed each day at various times prior to the close of trading of the NYSE. The values of such securities used in computing a fund’s NAV are generally determined as of such times. If market quotations or official closing prices are not readily available or do not accurately reflect fair value for a security or if a security’s value has been materially affected by events occurring after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), that security may be valued by another method that the Trustees or their designee believe accurately reflects its fair value.

In deciding whether to make a fair value adjustment to the price of a security, the Trustees or their designee may review a variety of factors, including:

in the case of foreign securities:


	•	developments in foreign markets,
	•	the performance of U.S. securities markets,
	•	the performance of instruments trading in U.S. markets that represent foreign securities and baskets of foreign securities, and
	•	the fact that JHT is calculating its NAV for its portfolios when a particular foreign market is closed.

In view of these factors, it is likely that funds investing significant amount of assets in securities in foreign markets will be fair valued more frequently than funds investing significant amount of assets in frequently traded, U.S. exchange listed securities of large capitalization U.S. issuers.

in the case of fixed income securities:


	•	actions by the Federal Reserve Open Market Committee and other significant trends in U.S. fixed-income markets.

in the case of all securities:


	•	political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded,
	•	announcements concerning matters such as trading suspensions, acquisitions, recapitalizations, or litigation developments, a natural disaster affecting the issuer’s operations or regulatory changes or market developments affecting the issuer’s industry, and
	•	events affecting the securities markets in general (such as market disruptions or closings and significant fluctuations in U.S. and/or foreign markets).

Fair value pricing of securities is intended to help ensure that a fund’s NAV reflects the value of the fund’s portfolio securities as of the close of the NYSE (as opposed to a value that is no longer accurate as of such close), thus limiting the opportunity for

248

aggressive traders to purchase shares of the fund at deflated prices reflecting stale security valuations and promptly sell such shares at a gain. However, a security’s valuation may differ depending on the method used for determining value, and no assurance can be given that fair value pricing of securities will successfully eliminate all potential opportunities for such trading gains. The use of fair value pricing has the effect of valuing a security based upon the price the fund might reasonably expect to receive if it sold that security but does not guarantee that the security can be sold at the fair value price. Further, because of the inherent uncertainty and subjective nature of fair valuation, a fair valuation price may differ significantly from the value that would have been used had a ready market for the investment existed, and these differences could be material. With respect to any portion of a fund’s assets that is invested in other open-end investment companies, that portion of the fund’s NAV is calculated based on the NAV of that investment company. The prospectus for the other investment company explains the circumstances and effects of fair value pricing for that other investment company.

If a fund has portfolio securities that are primarily listed on foreign exchanges that trade on weekends or other days when the fund does not price its shares, the NAV of the fund’s shares may change on days when shareholders will not be able to purchase or redeem the fund’s shares.

Disruptive Short Term Trading

None of the funds is designed for short-term trading (frequent purchases and redemption of shares) or market timing activities, which may increase portfolio transaction costs, disrupt management of a fund (affecting a subadviser’s ability to effectively manage a fund in accordance with its investment objective and policies) and dilute the interest in a fund held for long-term investment (“Disruptive Short-Term Trading”).

The Board of Trustees has adopted procedures to deter Disruptive Short-Term Trading and JHT seeks to deter and prevent such trading through several methods:

First, to the extent that there is a delay between a change in the value of a fund’s holdings, and the time when that change is reflected in the NAV of the fund’s shares, the fund is exposed to the risk that investors may seek to exploit this delay by purchasing or redeeming shares at NAVs that do not reflect appropriate fair value prices. JHT seeks to deter and prevent this activity, sometimes referred to as “market timing” or “stale price arbitrage,” by the appropriate use of “fair value” pricing of the funds’ portfolio securities. See “Purchases and Redemption of Shares” above for further information on fair value pricing.

Second, management of JHT will monitor purchases and redemptions of JHT shares either directly or through procedures adopted by the affiliated insurance companies that use JHT as their underlying investment vehicle. If management of JHT becomes aware of short-term trading that it believes, in its sole discretion, is having or may potentially have the effect of materially increasing portfolio transaction costs, significantly disrupting portfolio management or significantly diluting the interest in a fund held for long-term investment i.e. Disruptive Short-Term Trading, JHT may impose restrictions on such trading as described below.

Pursuant to Rule 22c-2 under the 1940 Act, JHT and each insurance company that uses JHT as an underlying investment vehicle have entered into information sharing agreements under which the insurance companies are obligated to: (i) adopt, and enforce during the term of the agreement, a short-term trading policy the terms of which are acceptable to JHT; (ii) furnish JHT, upon its request, with information regarding contract holder trading activities in shares of JHT; and (iii) enforce its short-term trading policy with respect to contract holders identified by JHT as having engaged in Disruptive Short-Term Trading. Further, when requested information regarding contract holder trading activities is in the possession of a financial intermediary rather than the insurance company, the agreement obligates the insurance company to undertake to obtain such information from the financial intermediary or, if directed by JHT, to cease to accept trading instructions from the financial intermediary for the contract holder.

Investors in JHT should note that insurance companies have legal and technological limitations on their ability to impose restrictions on Disruptive Short-Term Trading that the ability to restrict Disruptive Short-Term Trading and the restrictions on Trading may vary among insurance companies and by insurance product. Investors should also note that insurance company separate accounts and omnibus or other nominee accounts, in which purchases and sales of fund shares by multiple investors are aggregated for presentation to a fund on a net basis, inherently make it more difficult for JHT to identify short-term transactions in a fund and the investor who is effecting the transaction. Therefore, no assurance can be given that JHT will be able to impose uniform restrictions on all insurance companies and all insurance products or that it will be able to successfully impose restrictions on all Disruptive Short-Term Trading. If JHT is unsuccessful in restricting Disruptive Short-Term Trading, the affected funds may incur higher brokerage costs, may maintain higher cash levels (limiting their ability to achieve their investment objective and affecting the subadviser’s ability to effectively manage them) and may be exposed to dilution with respect to interests held for long-term investment.

Market timers may target funds with the following types of investments:

1. Funds with significant investments in foreign securities traded on markets that close before the fund determines its NAV.

2. Funds with significant investments in high yield securities that are infrequently traded; and

249

3. Funds with significant investments in small cap securities.

Market timers may also target funds with other types of investments for frequent trading of shares.

Policy Regarding Disclosure of Fund Portfolio Holdings

The SAI contains a description of JHT’s policies and procedures regarding disclosure of JHT portfolio holdings. (See “Procedures Regarding Disclosure of Trust Portfolio Holdings”)

Each of the funds of funds invests in shares of other funds. The holdings of each fund of funds in other funds will be posted to the website listed below within 30 days after each calendar quarter end and within 30 days after any material changes are made to the holdings of a fund of funds. In addition, the ten largest holdings of each fund will be posted to the website listed below 30 days after each calendar quarter end. The information described above will remain on the website until the date JHT files its Form N-CSR or Form N-Q with the SEC for the period that includes the date as of which the website information is current. JHT’s Form N-CSR and Form N-Q will contain each fund’s entire portfolio holdings as of the applicable calendar quarter end.

www.johnhancockannuities.com/Marketing/Portfolio/PortfolioIndexPage.aspx

Purchasers of Shares of JHT

Shares of JHT may be sold to insurance company separate accounts for both variable annuity and variable life insurance contracts. Due to differences in tax treatments and other considerations, the interests of various contract owners participating in JHT. The Board of Trustees of JHT will monitor events in order to identify the existence of any material irreconcilable conflicts and determine what action, if any, should be taken in response to any such conflict.

Broker Compensation and Revenue Sharing Arrangements

Insurance companies and their SEC registered separate accounts may use JHT as an underlying investment medium for their variable annuity contracts and variable life insurance policies (“Variable Products”). Distributors of such variable products pay compensation to authorized broker-dealers for the sale of the contracts and policies. These distributors may also pay additional compensation to, and enter into revenue sharing arrangements with, certain authorized broker-dealers. For a description of these compensation and revenue sharing arrangements, see the prospectuses and statements of additional information of the Variable Products. The compensation paid to broker-dealers and the revenue sharing arrangements may be derived, in whole or in part, through 12b-1 distribution fees or through the Adviser’s profit on the advisory fee.

John Hancock Life Insurance Company (U.S.A.) and John Hancock Life Insurance Company of New York (the “John Hancock Insurance Companies”) and certain of their separate accounts that are exempt from SEC registration may use Series I shares of JHT as an underlying investment medium for exempt group annuity contracts (“Group Contracts”) issued to certain qualified retirement plans (the “Plans”). John Hancock Insurance Companies and their affiliates pay compensation to broker-dealers and insurance agents for the sale of the Group Contracts and also pay compensation to third party administrators (“TPAs”) for the services they provide in connection with the administration of the Plans. To the extent the Insurance Companies and their affiliates pay additional compensation to, and enter into revenue sharing arrangements with, certain broker-dealers, agents or TPAs, JHT understands that the John Hancock Insurance Companies disclose such compensation and arrangements to the Plans. JHT also understands that, in the case of Group Contracts issued by John Hancock Insurance Companies, any such compensation or amounts paid under revenue sharing arrangements may be derived, in whole or in part, through 12b-1 distribution fees or through the Adviser’s profit on the advisory fee.

250

JOHN HANCOCK TRUST

FINANCIAL HIGHLIGHTS

 

The financial highlights table below for each fund is intended to help investors understand the financial performance of the fund for the past five years (or since inception in the case of a fund in operation for less than five years.) Certain information reflects financial results for a single share of a fund. The total returns presented in the table represent the rate that an investor would have earned (or lost) on an investment in a particular fund (assuming reinvestment of all dividends and distributions). The total return information shown in the Financial Highlights tables does not reflect the fees and expenses of any separate account which may use JHT as its underlying investment medium or of any variable insurance contract that may be funded in such a separate account. If these fees and expenses were included, the total return figures for all periods shown would be reduced.

The financial statements of JHT as of December 31, 2008, have been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm. The report of PricewaterhouseCoopers LLP is included, along with JHT’s financial statements, in JHT’s annual report which has been incorporated by reference into the SAI and is available upon request.


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net		From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized		capital		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain		paid-in		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)		($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
500 Index Trust
Series I
12-31-2008		12.64		0.19	¹		(4.88	)		(4.69	)		(0.08	)		—		—		(0.08	)		7.87		(37.21	)^2,3		0.54	⁴		0.54			1.78			795		4
12-31-2007		12.33		0.18	¹		0.42			0.60			(0.29	)		—		—		(0.29	)		12.64		4.90	^2,3		0.54	⁴		0.54			1.44			1,317		5
12-31-2006		10.80		0.16	¹		1.48			1.64			(0.11	)		—		—		(0.11	)		12.33		15.26	^2,3		0.54	⁴		0.54			1.44			1,323		15
12-31-2005		10.52		0.14	¹		0.30			0.44			(0.16	)		—		—		(0.16	)		10.80		4.29	²		0.56			0.56			1.31			1,097		11
12-31-2004		9.63		0.14	¹		0.84			0.98			(0.09	)		—		—		(0.09	)		10.52		10.26	²		0.56			0.56			1.47			1,115		4
Series II
12-31-2008		12.59		0.17	¹		(4.87	)		(4.70	)		(0.05	)		—		—		(0.05	)		7.84		(37.40	)^2,3		0.74	⁴		0.74			1.57			49		4
12-31-2007		12.26		0.16	¹		0.41			0.57			(0.24	)		—		—		(0.24	)		12.59		4.73	^2,3		0.74	⁴		0.74			1.24			95		5
12-31-2006		10.74		0.14	¹		1.47			1.61			(0.09	)		—		—		(0.09	)		12.26		15.06	^2,3		0.74	⁴		0.74			1.23			114		15
12-31-2005		10.46		0.11	¹		0.31			0.42			(0.14	)		—		—		(0.14	)		10.74		4.12	²		0.76			0.76			1.11			129		11
12-31-2004		9.59		0.13	¹		0.82			0.95			(0.08	)		—		—		(0.08	)		10.46		10.00	²		0.76			0.76			1.29			146		4
Series NAV
12-31-2008		12.47		0.20	¹		(4.84	)		(4.64	)		(0.08	)		—		—		(0.08	)		7.75		(37.26	)^2,3		0.49	⁴		0.49			2.22			3,210		4
12-31-2007		12.16		0.19	¹		0.42			0.61			(0.30	)		—		—		(0.30	)		12.47		5.03	^2,3		0.49	⁴		0.49			1.53			370		5
12-31-2006		10.80		0.15	¹		1.32			1.47			(0.11	)		—		—		(0.11	)		12.16		13.70	^2,3		0.52	⁴		0.51			1.35			38		15
12-31-2005		10.28		0.03	¹		0.49			0.52			—			—		—		—			10.80		5.06	⁵		0.52	⁶		0.52	⁶		1.80	⁶		256		11

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Not annualized.

^6.Annualized.

251

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																	Ratio
																																	of net
																												Ratio			Ratio		investment
	Net asset		Net			Net realized																	Net asset					of gross			of net		income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses		(loss) to		Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of		Total			to average			to average		average		end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period		return			net assets			net assets		net assets		period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)		(%)		(in millions)		(%)
500 Index Trust B
Series NAV
12-31-2008		18.51		0.32	¹		(7.15	)		(6.83	)		(0.34	)		(0.10	)		—		(0.44	)		11.24		(37.19	)^2,3		0.50	⁴		0.25		2.05		698		7
12-31-2007		18.13		0.32	¹		0.62			0.94			(0.56	)		—			—		(0.56	)		18.51		5.25	^2,3		0.49	⁴		0.25		1.72		1,215		13
12-31-2006		15.87		0.29	¹		2.16			2.45			(0.19	)		—			—		(0.19	)		18.13		15.56	^2,3,5		0.49	⁴		0.25		1.72		1,160		6
12-31-2005⁶		15.42		0.25	¹		0.46			0.71			(0.07	)		(0.19	)		—		(0.26	)		15.87		4.65	^2,3		0.43	⁴		0.24		1.65		1,110		13	⁷
12-31-2004⁸		14.18		0.27			1.23			1.50			(0.26	)		—			—		(0.26	)		15.42		10.70	²		0.22			0.22		1.85		842		14

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^6.Effective 4-29-05, shareholders of the former John Hancock Variable Series Trust I (“VST”) Equity Index Fund Series I became owners of an equal number of full and fractional Series NAV shares of the 500 Index Trust B. Additionally, the accounting and performance history of the former VST Equity Index Fund Series I was redesignated as that of Series NAV shares of 500 Index Trust B.

^7.Excludes merger activity.

^8.Audited by previous Independent Registered Public Accounting Firm.

252

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Active Bond Trust
Series I
12-31-2008		9.40		0.49	¹		(1.47	)		(0.98	)		(0.51	)		—			—		(0.51	)		7.91		(10.54	)^2,3		0.69	⁴		0.69			5.36			79		100	⁵
12-31-2007		9.88		0.51	¹		(0.12	)		0.39			(0.87	)		—			—		(0.87	)		9.40		4.05	^2,3		0.68	⁴		0.68			5.26			117		140	⁵
12-31-2006		9.73		0.44	¹		(0.02	)		0.42			(0.27	)		—			—		(0.27	)		9.88		4.42	^2,3,6		0.69	⁴		0.69			4.53			139		207
12-31-2005⁷		9.60		0.29	¹		(0.14	)		0.15			—			(0.02	)		—		(0.02	)		9.73		1.59	^2,8		0.72	⁹		0.72	⁹		4.33	⁹		166		305	¹⁰
Series II
12-31-2008		9.40		0.47	¹		(1.47	)		(1.00	)		(0.49	)		—			—		(0.49	)		7.91		(10.76	)^2,3		0.89	⁴		0.89			5.15			315		100	⁵
12-31-2007		9.87		0.49	¹		(0.13	)		0.36			(0.83	)		—			—		(0.83	)		9.40		3.78	^2,3		0.88	⁴		0.88			5.06			559		140	⁵
12-31-2006		9.72		0.41	¹		(0.01	)		0.40			(0.25	)		—			—		(0.25	)		9.87		4.21	^2,3,6		0.89	⁴		0.89			4.28			553		207
12-31-2005⁷		9.60		0.28	¹		(0.14	)		0.14			—			(0.02	)		—		(0.02	)		9.72		1.49	^2,8		0.92	⁹		0.92	⁹		4.25	⁹		559		305	¹⁰
Series NAV
12-31-2008		9.40		0.49	¹		(1.47	)		(0.98	)		(0.51	)		—			—		(0.51	)		7.91		(10.48	)^2,3		0.64	⁴		0.64			5.44			1,685		100	⁵
12-31-2007		9.89		0.52	¹		(0.13	)		0.39			(0.88	)		—			—		(0.88	)		9.40		4.03	^2,3		0.63	⁴		0.63			5.31			1,871		140	⁵
12-31-2006		9.73		0.40	¹		0.03			0.43			(0.27	)		—			—		(0.27	)		9.89		4.54	^2,3,6		0.64	⁴		0.64			4.18			1,774		207
12-31-2005¹²		9.63		0.43	¹		(0.19	)		0.24			(0.12	)		(0.02	)		—		(0.14	)		9.73		2.54	²		0.70			0.70			4.41			1,220		305	¹⁰
12-31-2004¹¹		9.64		0.34			0.11			0.45			(0.34	)		(0.12	)		—		(0.46	)		9.63		4.75	²		0.70			0.70			3.56			1,002		444

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 255% for 12-31-08 and 284% for 12-31-07. Prior years exclude the effect of TBA transactions.

^6.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^7.Series I and Series II shares began operations on 4-29-05.

^8.Not annualized.

^9.Annualized.

^10.Excludes merger activity.

^11.Audited by previous Independent Registered Public Accounting Firm.

^12.Effective 4-29-05, shareholders of the former John Hancock Variable Series Trust I (“VST”) Active Bond Fund Series NAV became owners of an equal number of full and fractional Series NAV shares of the Active Bond Trust. Additionally, the accounting and performance history of the former VST Active Bond Fund Series NAV was redesignated as that of Series NAV shares of Active Bond Trust.

253

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net		Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized		return		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain		of capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)		($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
All Cap Core Trust
Series I
12-31-2008		19.83		0.19	¹		(8.04	)		(7.85	)		(0.29	)		—		—		(0.29	)		11.69		(39.63	)^2,3		0.87	⁴		0.86			1.11			83			239
12-31-2007		19.60		0.23	¹		0.29			0.52			(0.29	)		—		—		(0.29	)		19.83		2.66	^2,3,5		0.86	⁴		0.86			1.12			172			257
12-31-2006		17.20		0.20	¹		2.33			2.53			(0.13	)		—		—		(0.13	)		19.60		14.75	^2,3		0.88	⁴		0.88			1.08			213			240
12-31-2005		15.89		0.11	¹		1.32			1.43			(0.12	)		—		—		(0.12	)		17.20		9.08	²		0.92			0.92			0.70			228			317
12-31-2004		13.72		0.11	¹		2.12			2.23			(0.06	)		—		—		(0.06	)		15.89		16.33	²		0.92			0.92			0.75			257			257
Series II
12-31-2008		19.77		0.16	¹		(8.01	)		(7.85	)		(0.25	)		—		—		(0.25	)		11.67		(39.75	)^2,3		1.07	⁴		1.06			0.91			8			239
12-31-2007		19.52		0.19	¹		0.28			0.47			(0.22	)		—		—		(0.22	)		19.77		2.41	^2,3,5		1.06	⁴		1.06			0.92			19			257
12-31-2006		17.13		0.16	¹		2.32			2.48			(0.09	)		—		—		(0.09	)		19.52		14.54	^2,3		1.08	⁴		1.08			0.87			11			240
12-31-2005		15.83		0.08	¹		1.32			1.40			(0.10	)		—		—		(0.10	)		17.13		8.89	²		1.12			1.12			0.50			11			317
12-31-2004		13.69		0.08	¹		2.11			2.19			(0.05	)		—		—		(0.05	)		15.83		16.06	²		1.12			1.12			0.56			13			257
Series NAV
12-31-2008		19.84		0.20	¹		(8.05	)		(7.85	)		(0.30	)		—		—		(0.30	)		11.69		(39.61	)^2,3		0.82	⁴		0.81			1.15			299			239
12-31-2007		19.62		0.24	¹		0.29			0.53			(0.31	)		—		—		(0.31	)		19.84		2.70	^2,3,5		0.81	⁴		0.81			1.17			763			257
12-31-2006		17.22		0.24	¹		2.29			2.53			(0.13	)		—		—		(0.13	)		19.62		14.77	^2,3		0.83	⁴		0.83			1.32			385			240
12-31-2005⁶		15.22		0.10	¹		1.90			2.00			—			—		—		—			17.22		13.14	⁷		0.88	⁸		0.88	⁸		0.83	⁸		—	⁹		317

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007

All Cap Core Series I	$	0.02		2.56%
All Cap Core Series II		0.02		2.31%
All Cap Core Series NAV		0.01		2.65%

^6.Series NAV shares began operations on 4-29-05.

^7.Not annualized.

^8.Annualized.

^9.Less than $500,000.

254

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net		Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized		return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain		of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)		($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
All Cap Growth Trust
Series I
12-31-2008		19.97		0.04	¹		(8.42	)		(8.38	)		(0.05	)		—		—		(0.05	)		11.54		(41.94	)^2,3		1.00	⁴		1.00			0.23			94		111
12-31-2007		17.83		—	^1,7		2.15			2.15			(0.01	)		—		—		(0.01	)		19.97		12.06	^2,3,5		0.95	⁴		0.95			—	⁶		209		74
12-31-2006		16.73		—	^1,7		1.10			1.10			—			—		—		—			17.83		6.58	³		0.95	⁴		0.95			0.03			246		117
12-31-2005		15.35		—	^1,7		1.38			1.38			—			—		—		—			16.73		8.99			1.00			1.00			(0.02	)		288		99
12-31-2004		14.41		—	^1,7		0.94			0.94			—			—		—		—			15.35		6.52			1.00			1.00			(0.01	)		475		77
Series II
12-31-2008		19.76		—	^1,7		(8.31	)		(8.31	)		(0.02	)		—		—		(0.02	)		11.43		(42.06	)^2,3		1.20	⁴		1.20			0.02			12		111
12-31-2007		17.67		(0.04	)¹		2.13			2.09			—			—		—		—			19.76		11.83	^3,5		1.15	⁴		1.15			(0.21	)		28		74
12-31-2006		16.62		(0.03	)¹		1.08			1.05			—			—		—		—			17.67		6.32	³		1.15	⁴		1.15			(0.17	)		30		117
12-31-2005		15.28		(0.04	)¹		1.38			1.34			—			—		—		—			16.62		8.77			1.20			1.20			(0.24	)		34		99
12-31-2004		14.37		(0.02	)¹		0.93			0.91			—			—		—		—			15.28		6.33			1.20			1.20			(0.11	)		150		77
Series NAV
12-31-2008		19.99		0.04	¹		(8.42	)		(8.38	)		(0.06	)		—		—		(0.06	)		11.55		(41.91	)^2,3		0.95	⁴		0.95			0.25			1		111
12-31-2007		17.86		0.01	¹		2.15			2.16			(0.03	)		—		—		(0.03	)		19.99		12.08	^2,3,5		0.90	⁴		0.90			0.04			143		74
12-31-2006		16.75		0.01	¹		1.10			1.11			—			—		—		—			17.86		6.63	³		0.90	⁴		0.90			0.08			121		117
12-31-2005⁸		15.20		—	^1,7		1.55			1.55			—			—		—		—			16.75		10.20	⁹		0.91	¹⁰		0.91	¹⁰		0.04	¹⁰		69		99

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007

All Cap Growth Series I	$	0.05		11.77%
All Cap Growth Series II		0.04		11.60%
All Cap Growth Series NAV		0.04		11.85%

^6.Less than 0.01%.

^7.Less than $0.01 per share.

^8.Series NAV shares began operations on 2-28-05.

^9.Not annualized.

^10.Annualized.

255

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
All Cap Value Trust
Series I
12-31-2008		8.16		0.05	¹		(2.35	)		(2.30	)		(0.06	)		(0.18	)		—		(0.24	)		5.62		(28.78	)²		0.99	⁵		0.99			0.72			36		77
12-31-2007		13.03		0.09	¹		0.92			1.01			(0.24	)		(5.64	)		—		(5.88	)		8.16		8.33	^2,3,4		0.95	⁵		0.95			0.68			63		63
12-31-2006		14.70		0.11	¹		1.68			1.79			(0.15	)		(3.31	)		—		(3.46	)		13.03		13.71	^2,3		0.92	⁵		0.92			0.86			68		57
12-31-2005		14.54		0.11	¹		0.67			0.78			(0.08	)		(0.54	)		—		(0.62	)		14.70		5.71	²		0.94			0.94			0.78			70		78
12-31-2004		12.58		0.12	¹		1.88			2.00			(0.04	)		—			—		(0.04	)		14.54		15.96	²		0.95			0.95			0.94			204		43
Series II
12-31-2008		8.14		0.04	¹		(2.35	)		(2.31	)		(0.04	)		(0.18	)		—		(0.22	)		5.61		(28.95	)²		1.19	⁵		1.19			0.53			30		77
12-31-2007		12.99		0.06	¹		0.92			0.98			(0.19	)		(5.64	)		—		(5.83	)		8.14		8.17	^2,3,4		1.15	⁵		1.15			0.49			53		63
12-31-2006		14.66		0.09	¹		1.67			1.76			(0.12	)		(3.31	)		—		(3.43	)		12.99		13.53	^2,3		1.12	⁵		1.12			0.66			66		57
12-31-2005		14.48		0.09	¹		0.65			0.74			(0.02	)		(0.54	)		—		(0.56	)		14.66		5.42	²		1.14			1.14			0.61			66		78
12-31-2004		12.54		0.11	¹		1.87			1.98			(0.04	)		—			—		(0.04	)		14.48		15.79	²		1.15			1.15			0.81			192		43
Series NAV
12-31-2008		8.14		0.06	¹		(2.36	)		(2.30	)		(0.06	)		(0.18	)		—		(0.24	)		5.60		(28.79	)^2,6		0.94	⁵		0.94			0.79			12		77
12-31-2007		12.99		0.12	¹		0.92			1.04			(0.25	)		(5.64	)		—		(5.89	)		8.14		8.67	^2,3,4		0.85	⁵		0.85			0.86			17		63
12-31-2006		14.66		0.12	¹		1.68			1.80			(0.16	)		(3.31	)		—		(3.47	)		12.99		13.82	^2,3		0.87	⁵		0.87			0.93			232		57
12-31-2005⁷		14.55		0.08	¹		0.69			0.77			(0.12	)		(0.54	)		—		(0.66	)		14.66		5.68	^2,6		0.87	⁸		0.87	⁸		0.68	⁸		127		78

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007

All Cap Value Series I	$	0.01		8.20%
All Cap Value Series II		0.02		7.91%
All Cap Value Series NAV		0.01		8.54%

^5.Does not take into consideration expense reductions during the periods shown.

^6.Not annualized.

^7.Series NAV shares began operations on 2-28-05.

^8.Annualized.

256

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

of capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Alpha Opportunities Trust

Series NAV

12-31-2008¹

12.50

0.02

(1.63

)

(1.61

)

—

10.89

(12.85

)^4,5

1.06

^6,7

1.06

⁷

0.70

⁷

280

⁵

^1.Series NAV shares began operations on 10-7-08.

^2.Based on the average of the shares outstanding.

^3.Less than $0.01 per share.

^4.Assumes dividend reinvestment.

^5.Not annualized.

^6.Does not take into consideration expense reductions during the periods shown.

^7.Annualized.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
American Asset Allocation Trust
Series I
12-31-2008¹		12.00		0.60	^2,3		(3.90	)		(3.30	)		(0.25	)		(0.01	)		—		(0.26	)		8.44		(27.39	)^4,5,6		0.64	^7,9,10		0.63	^7,10		9.72	^3,7		2		1
Series II
12-31-2008		12.39		0.32	^2,3		(4.02	)		(3.70	)		(0.23	)		(0.01	)		—		(0.24	)		8.45		(29.83	)^4,6		0.79	^9,10		0.78	¹⁰		3.07	³		832		1
12-31-2007¹¹		12.50		0.48	^2,3		(0.32	)		0.16			(0.22	)		(0.05	)		—		(0.27	)		12.39		1.28	^4,5		0.79	^7,8,10		0.79	^7,10		5.57	^3,7		511		—	⁵
Series III
12-31-2008⁸		12.34		0.78	^2,3		(4.39	)		(3.61	)		(0.28	)		(0.01	)		—		(0.29	)		8.44		(29.17	)^4,5,6		0.29	^7,9,10		0.28	^7,10		8.21	^3,7		34		1

^1.Series I shares began operations on 4-28-08.

^2.Based on the average of the shares outstanding.

^3.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^4.Assumes dividend reinvestment.

^5.Not annualized.

^6.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^7.Annualized.

^8.Series III shares began operations on 1-2-08.

^9.Does not take into consideration expense reductions during the periods shown.

^10.Ratios do not include expense indirectly incurred from underlying funds whose expense ratios can vary between 0.25% – 0.73% and 0.33% – 0.89%, based on the mix of underlying funds held by the portfolio for 2008 and 2007, respectively.

^11.Series II shares began operations on 5-1-07.

257

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
American Blue Chip Income and Growth Trust
Series I
12-31-2008		14.88		0.24	^1,5		(5.60	)		(5.36	)		(0.41	)		(0.26	)		—		(0.67	)		8.85		(36.72	)⁴		0.58	⁸		0.58	⁸		2.02	¹		18		131
12-31-2007		18.29		0.40	^1,5		(0.12	)³		0.28			(0.31	)		(3.38	)		—		(3.69	)		14.88		1.65	⁴		0.38	⁸		0.38	⁸		2.24	¹		19		12
12-31-2006		16.00		0.13	^1,5		2.54			2.67			(0.09	)		(0.29	)		—		(0.38	)		18.29		16.99	⁴		0.39	²		0.39	²		0.79	¹		17		15
12-31-2005		16.90		0.09	^1,5		0.89			0.98			(0.05	)		(1.83	)		—		(1.88	)		16.00		6.76	⁴		0.39	²		0.39	²		0.60	¹		7		10
12-31-2004		15.46		0.04	^1,5		1.40			1.44			—			—			—		—			16.90		9.31			0.39	²		0.39	²		0.29	¹		3		54
Series II
12-31-2008		14.87		0.17	^1,5		(5.54	)		(5.37	)		(0.38	)		(0.26	)		—		(0.64	)		8.86		(36.76	)⁴		0.71	⁸		0.71	⁸		1.39	¹		76		131
12-31-2007		18.26		0.33	^1,5		(0.08	)³		0.25			(0.26	)		(3.38	)		—		(3.64	)		14.87		1.48	⁴		0.53	⁸		0.53	⁸		1.85	¹		156		12
12-31-2006		15.98		0.11	^1,5		2.53			2.64			(0.07	)		(0.29	)		—		(0.36	)		18.26		16.79	⁴		0.54	²		0.54	²		0.63	¹		198		15
12-31-2005		16.85		0.07	^1,5		0.90			0.97			(0.01	)		(1.83	)		—		(1.84	)		15.98		6.66	⁴		0.53	²		0.53	²		0.47	¹		185		10
12-31-2004		15.44		0.01	^1,5		1.40			1.41			—			—			—		—			16.85		9.13			0.54	²		0.54	²		0.05	¹		180		54
Series III
12-31-2008⁷		14.66		0.73	^1,5		(5.84	)		(5.11	)		(0.45	)		(0.26	)		—		(0.71	)		8.84		(35.51	)⁴		0.33	⁸		0.33	⁸		7.12	¹		15		131

^1.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^2.Does not include expenses of the investment companies in which the Portfolio invests.

^3.The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.

^4.Assumes dividend reinvestment.

^5.Based on the average of the shares outstanding.

^6.Annualized.

^7.Series III shares began operation on 1-2-08.

^8.Ratios do not include expense indirectly incurred from underlying funds whose expense ratios can vary between 0.25% – 0.73% and 0.33% – 0.89%, based on the mix of underlying funds held by the portfolio for 2008 and 2007, respectively.

258

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			of capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
American Bond Trust
Series I
12-31-2008		13.13		0.68	^1,2		(1.91	)		(1.23	)		(1.18	)		(0.02	)		—		(1.20	)		10.70		(9.72	)⁴		0.55	⁶		0.55	⁶		5.57	²		9			121
12-31-2007		13.32		1.04	^1,2		(0.65	)		0.39			(0.58	)		—	³		—		(0.58	)		13.13		2.96	⁴		0.37	⁶		0.37	⁶		7.85	²		10			4
12-31-2006		12.50		0.35	^1,2		0.47			0.82			—			—			—		—			13.32		6.56			0.38	⁵		0.38	⁵		2.73	²		2			1
12-31-2005⁷		12.36		(0.01	)^1,2		0.15			0.14			—			—			—		—			12.50		1.13	⁸		0.40	^5,9		0.40	^5,9		(0.40	)^2,9		—	¹⁰		2
Series II
12-31-2008		13.12		0.58	^1,2		(1.83	)		(1.25	)		(1.15	)		(0.02	)		—		(1.17	)		10.70		(9.82	)⁴		0.70	⁶		0.70	⁶		4.67	²		665			121
12-31-2007		13.30		1.06	^1,2		(0.70	)		0.36			(0.54	)		—	³		—		(0.54	)		13.12		2.76	⁴		0.52	⁶		0.52	⁶		7.97	²		996			4
12-31-2006		12.49		0.41	^1,2		0.40			0.81			—			—			—		—			13.30		6.49			0.53	⁵		0.53	⁵		3.24	²		550			1
12-31-2005⁷		12.50		(0.02	)^1,2		0.01			(0.01	)		—			—			—		—			12.49		(0.08	)⁸		0.55	^5,9		0.55	^5,9		(0.55	)^2,9		148			2
Series III
12-31-2008¹¹		13.19		1.89	^1,2		(3.14	)		(1.25	)		(1.22	)		(0.02	)		—		(1.24	)		10.70		(9.76	)^4,8		0.30	^6,9		0.30	^6,9		16.52	^2,9		19			121

^1.Based on the average of the shares outstanding.

^2.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^3.Less than $0.01 per share.

^4.Assumes dividend reinvestment.

^5.Does not include expenses of the investment companies in which the Portfolio invests.

^6.Ratios do not include expense indirectly incurred from underlying funds whose expense ratios can vary between 0.25% – 0.73% and 0.33% – 0.89%, based on the mix of underlying funds held by the portfolio for 2008 and 2007, respectively.

^7.Series I and Series II shares began operations on 11-2-05 and 7-29-05, respectively.

^8.Not annualized.

^9.Annualized.

^10.Less than $500,000.

^11.Series III shares began operation on 1-2-08.

259

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

American Diversified Growth & Income Trust

Series I

12-31-2008¹

12.50

0.23

^2,8

(3.79

)

(3.56

)

(0.23

)

—

(0.23

)

8.71

(28.43

)^3,4,10

5.68

^5,6,7

0.66

^5,6

4.41^6,8

—

⁹

Series II

12-31-2008¹

12.50

0.22

^2,8

(3.79

)

(3.57

)

(0.22

)

—

(0.22

)

8.71

(28.49

)^3,4,10

5.83

^5,6,7

0.82

^5,6

4.26^6,8

Series III

12-31-2008¹

12.50

0.25

^2,8

(3.79

)

(3.54

)

(0.25

)

—

(0.25

)

8.71

(28.27

)^3,4,10

5.33

^5,6,7

0.31

^5,6

4.77^6,8

—

⁹

Series NAV

12-31-2008¹

12.50

0.26

^2,8

(3.80

)

(3.54

)

(0.26

)

—

(0.26

)

8.70

(28.24

)^3,4,10

5.09

^5,6,7

0.06

^5,6

5.02^6,8

—

⁹

^1.Series I, Series II, Series III and Series NAV shares began operations on 7-1-08.

^2.Based on the average of the shares outstanding.

^3.Not annualized.

^4.Assumes dividend reinvestment.

^5.Ratios do not include expense indirectly incurred from underlying funds whose expense ratios can vary between 0.25% – 0.73% and 0.33% – 0.89%, based on the mix of underlying funds held by the portfolio for 2008 and 2007, respectively.

^6.Annualized.

^7.Does not take into consideration expense reductions during the periods shown.

^8.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^9.Less than $500,000.

^10.Total returns would have been lower had certain expenses not been reduced during the period shown.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
American Fundamental Holdings Trust
Series I
12-31-2008		11.91		0.26	^1,4		(3.96	)		(3.70	)		(0.27	)		(0.33	)		—		(0.60	)		7.61		(30.92	)^2,5		0.69	^8,9		0.64	⁹		2.50	⁴		—	¹⁰		1
12-31-2007³		12.50		0.24	^1,4		(0.62	)		(0.38	)		(0.21	)		—			—		(0.21	)		11.91		(3.05	)^2,5,6		3.26	^7,8,9		1.04	^7,8,9		12.00	^4,7		—	¹⁰		—	⁶
Series II
12-31-2008		11.91		0.48	^1,4		(4.18	)		(3.70	)		(0.26	)		(0.33	)		—		(0.59	)		7.62		(30.97	)^2,5		0.84	^8,9		0.79	⁹		4.98	⁴		600			1
12-31-2007³		12.50		0.51	^1,4		(0.90	)		(0.39	)		(0.20	)		—			—		(0.20	)		11.91		(3.08	)^2,5,6		1.25	^7,8,9		1.20	^7,8,9		24.93	^4,7		58			—	⁶
Series III
12-31-2008		11.91		0.75	^1,4		(4.41	)		(3.66	)		(0.31	)		(0.33	)		—		(0.64	)		7.61		(30.61	)^2,5		0.34	^8,9		0.29	⁹		8.29	⁴		14			1
12-31-2007³		12.50		0.25	^1,4		(0.63	)		(0.38	)		(0.21	)		—			—		(0.21	)		11.91		(3.00	)^2,5,6		2.90	^7,8,9		0.70	^7,8,9		12.35	^4,7		—	¹⁰		—	⁶

^1.Based on the average of the shares outstanding.

^2.Total return would have been lower had certain expenses not been reduced during the period shown.

^3.Series I, Series II and Series III shares began operations on 10-31-07.

260

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^4.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^5.Assumes dividend reinvestment.

^6.Not annualized.

^7.Annualized.

^8.Does not take into consideration expense reductions during the periods shown.

^9.Ratios do not include expense indirectly incurred from underlying funds whose expense ratios can vary between 0.25% – 0.73% and 0.33% – 0.89%, based on the mix of underlying funds held by the portfolio for 2008 and 2007, respectively.

^10.Less than $500,000.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
American Global Diversification Trust
Series I
12-31-2008		11.88		0.23	^1,2		(4.38	)		(4.15	)		(0.24	)		(0.45	)		—		(0.69	)		7.04		(34.72	)^3,4		0.69	⁵		0.64	⁶		2.31	¹		—	⁷		6
12-31-2007⁸		12.50		0.27	^1,2		(0.67	)		(0.40	)		(0.22	)		—			—		(0.22	)		11.88		(3.17	)^3,4,9		2.85	^5,10		0.93	^6,10		13.38	^1,10		—	⁷		—	⁹
Series II
12-31-2008		11.88		0.35	^1,2		(4.51	)		(4.16	)		(0.23	)		(0.45	)		—		(0.68	)		7.04		(34.85	)^3,4		0.84	⁵		0.79	⁶		3.69	¹		542			6
12-31-2007⁸		12.50		0.49	^1,2		(0.89	)		(0.40	)		(0.22	)		—			—		(0.22	)		11.88		(3.19	)^3,4,9		1.03	^5,10		0.98	^6,10		24.24	^1,10		108			—	⁹
Series III
12-31-2008		11.87		0.27	^1,2		(4.38	)		(4.11	)		(0.28	)		(0.45	)		—		(0.73	)		7.03		(34.44	)^3,4		0.34	⁵		0.29	⁶		2.66	¹		—	⁷		6
12-31-2007⁸		12.50		0.28	^1,2		(0.68	)		(0.40	)		(0.23	)		—			—		(0.23	)		11.87		(3.19	)^3,4,9		2.50	^5,10		0.58	^6,10		13.73	^1,10		—	⁷		—	⁹

^1.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Total return would have been lower had certain expenses not been reduced during period shown.

^5.Does not take into consideration expense reductions during the periods shown.

^7.Less than $500,000.

^8.Series I, Series II and Series III shares began operations on 10-31-07.

^9.Not annualized.

^10.Annualized.

261

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

American Global Growth Trust

Series II

12-31-2008

13.11

0.14

^1,2

(5.22

)

(5.08

)

(0.14

)

(0.13

)

—

(0.27

)

7.76

(38.68

)^3,4

0.80

^5,11

0.78

⁵

1.24

150

12-31-2007⁶

12.50

0.43

^1,2

0.43

0.86

(0.20

)

(0.05

)

—

(0.25

)

13.11

6.92

^3,7

0.81

^5,8

0.81

^5,8

4.89

^2,8

227

Series III

12-31-2008⁹

13.07

0.66

^1,2

(5.66

)

(5.00

)

(0.20

)

(0.13

)

—

(0.33

)

7.74

(38.21

)^3,4,7

0.30

^5,11

0.28

^5,8

7.23

^2,8

—

¹⁰

^1.Based on the average of the shares outstanding.

^2.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^3.Assumes dividend reinvestment.

^4.Total return would have been lower had certain expenses not been reduced during period shown.

^6.Series II shares began operations on 5-1-07.

^7.Not annualized.

^8.Annualized.

^9.Series III shares began operation on 1-2-08.

^10.Less than $500,000.

^11.Do not take into consideration expense reductions during the period shown.

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

American Global Small Capitalization Trust

Series II

12-31-2008

13.35

(0.08

)^1,2

(7.11

)

(7.19

)

—

⁴

(0.13

)

—

(0.13

)

6.03

(53.79

)^3,12

0.83

^9,11

0.78

⁹

(0.78

)²

12-31-2007⁵

12.50

0.32

^1,2

0.78

⁶

1.10

(0.16

)

(0.09

)

—

(0.25

)

13.35

8.86

^3,7

0.86

^8,9

0.86

^8,9

3.49

^2,8

⁸

Series III

12-31-2008¹⁰

13.31

(0.02

)^1,2

(7.09

)

(7.11

)

—

(0.19

)

—

(0.19

)

6.01

(53.39

)^3,7,12

0.33

^9,11

0.28

^8,9

(0.28

)^2,8

^1.Based on the average of the shares outstanding.

^2.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^3.Assumes dividend reinvestment.

^4.Less than $0.01 per share.

^5.Series II shares began operations on 5-1-07.

^6.The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.

262

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^7.Not annualized.

^8.Annualized.

^10.Series III shares began operation on 1-2-08.

^11.Does not take into consideration expense reductions during the period shown.

^12.Total return would have been lower had certain expenses not been reduced during period shown.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
American Growth Trust
Series I
12-31-2008		21.65		0.11	^1,2		(9.60	)		(9.49	)		(0.11	)		(0.44	)		—		(0.55	)		11.61		(44.20	)³		0.56	⁶		0.56	⁶		0.64	¹		75		16
12-31-2007		21.73		0.10	^1,2		2.44			2.54			(0.18	)		(2.44	)		—		(2.62	)		21.65		11.93	³		0.37	⁶		0.37	⁶		0.43	¹		102		9
12-31-2006		19.98		0.13	^1,2		1.81			1.94			(0.06	)		(0.13	)		—		(0.19	)		21.73		9.80	³		0.38	⁴		0.38	⁴		0.62	¹		99		3
12-31-2005		17.28		0.10	^1,2		2.62			2.72			—			(0.02	)		—		(0.02	)		19.98		15.78	³		0.38	⁴		0.38	⁴		0.54	¹		57		3
12-31-2004		15.42		(0.01	)¹		1.88			1.87			—			(0.01	)		—		(0.01	)		17.28		12.10	³		0.37	⁴		0.37	⁴		(0.12	)¹		17		1
Series II
12-31-2008		21.57		0.07	^1,2		(9.54	)		(9.47	)		(0.08	)		(0.44	)		—		(0.52	)		11.58		(44.28	)³		0.69	⁶		0.69	⁶		0.37	¹		974		16
12-31-2007		21.64		0.06	^1,2		2.43			2.49			(0.12	)		(2.44	)		—		(2.56	)		21.57		11.73	³		0.52	⁶		0.52	⁶		0.28	¹		1,739		9
12-31-2006		19.90		0.07	^1,2		1.84			1.91			(0.04	)		(0.13	)		—		(0.17	)		21.64		9.64	³		0.53	⁴		0.53	⁴		0.33	¹		1,485		3
12-31-2005		17.24		0.05	^1,2		2.63			2.68			—			(0.02	)		—		(0.02	)		19.90		15.59	³		0.53	⁴		0.53	⁴		0.25	¹		1,134		3
12-31-2004		15.41		(0.04	)¹		1.88			1.84			—			(0.01	)		—		(0.01	)		17.24		11.91	³		0.52	⁴		0.52	⁴		(0.30	)¹		708		1
Series III
12-31-2008⁵		21.53		0.53	^1,2		(9.87	)		(9.34	)		(0.18	)		(0.44	)		—		(0.62	)		11.57		(43.75	)³		0.29	⁶		0.29	⁶		3.80	¹		10		16

^1.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Does not include expenses of the investment companies in which the Portfolio invests.

^5.Series III shares began operation on 1-2-08.

263

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
American Growth-Income Trust
Series I
12-31-2008		19.53		0.22	^1,2		(7.57	)		(7.35	)		(0.24	)		(0.41	)		—		(0.65	)		11.53		(38.08	)³		0.55	⁵		0.55	⁵		1.39	¹		19		15
12-31-2007		20.19		0.26	^1,2		0.66			0.92			(0.60	)		(0.98	)		—		(1.58	)		19.53		4.64	³		0.37	⁵		0.37	⁵		1.24	¹		29		5
12-31-2006		17.81		0.25	^1,2		2.36			2.61			(0.21	)		(0.02	)		—		(0.23	)		20.19		14.80	³		0.38	⁴		0.38	⁴		1.35	¹		20		2
12-31-2005		17.00		0.27	^1,2		0.65			0.92			(0.08	)		(0.03	)		—		(0.11	)		17.81		5.44	³		0.38	⁴		0.38	⁴		1.55	¹		14		1
12-31-2004		15.55		0.05	¹		1.49			1.54			(0.07	)		(0.02	)		—		(0.09	)		17.00		9.96	³		0.37	⁴		0.37	⁴		1.01	¹		9		1
Series II
12-31-2008		19.50		0.20	^1,2		(7.56	)		(7.36	)		(0.21	)		(0.41	)		—		(0.62	)		11.52		(38.17	)³		0.69	⁵		0.69	⁵		1.22	¹		836		15
12-31-2007		20.14		0.22	^1,2		0.66			0.88			(0.54	)		(0.98	)		—		(1.52	)		19.50		4.48	³		0.52	⁵		0.52	⁵		1.05	¹		1,440		5
12-31-2006		17.77		0.22	^1,2		2.35			2.57			(0.18	)		(0.02	)		—		(0.20	)		20.14		14.62	³		0.53	⁴		0.53	⁴		1.17	¹		1,237		2
12-31-2005		16.97		0.24	^1,2		0.66			0.90			(0.07	)		(0.03	)		—		(0.10	)		17.77		5.29	³		0.53	⁴		0.53	⁴		1.41	¹		873		1
12-31-2004		15.53		0.04	¹		1.48			1.52			(0.06	)		(0.02	)		—		(0.08	)		16.97		9.83	³		0.52	⁴		0.52	⁴		0.68	¹		558		1
Series III
12-31-2008⁶		19.30		0.84	^1,2		(7.93	)		(7.09	)		(0.30	)		(0.41	)		—		(0.71	)		11.50		(37.18	)^3,7		0.29	^5,8		0.29	^5,8		6.24	¹		12		15

^1.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Does not include expenses of the investment companies in which the Portfolio invests.

^6.Series III shares began operation on 1-2-08.

^7.Not annualized.

^8.Annualized.

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

American High Income Bond Trust

Series II

12-31-2008

11.33

0.68

^1,2

(3.46

)

(2.78

)

(0.74

)

—

(0.74

)

7.81

(24.39

)^3,5

0.86

^10,11

0.78

¹⁰

6.45

12-31-2007⁴

12.50

1.58

^1,2

(2.01

)

(0.43

)

(0.74

)

—

(0.74

)

11.33

(3.41

)^5,6

0.96

^7,10

0.96

^7,10

19.47

^2,7

Series III

12-31-2008⁸

11.32

2.53

^1,2

(5.26

)

(2.73

)

(0.79

)

—

(0.79

)

7.80

(23.93

)^3,5,6

0.36

^7,10,11

0.28

^7,10

26.70

^2,7

—

⁹

^1.Based on the average of the shares outstanding.

^2.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

264

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^3.Total return would have been lower had certain expenses not been reduced during the period shown.

^4.Series II shares began operations on 5-1-07.

^5.Assumes dividend reinvestment.

^6.Not annualized.

^7.Annualized.

^8.Series III shares began operation on 1-2-08.

^9.Less than $500,000.

^11.Does not take into consideration expense reductions during the period shown.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
American International Trust
Series I
12-31-2008		26.71		0.39	^1,2		(11.51	)		(11.12	)		(0.51	)		(0.77	)		—		(1.28	)		14.31		(42.37	)³		0.55	⁵		0.55	⁵		1.86	²		69			18
12-31-2007		24.92		0.33	^1,2		4.37			4.70			(0.43	)		(2.48	)		—		(2.91	)		26.71		19.58	³		0.37	⁵		0.37	⁵		1.23	²		106			10
12-31-2006		21.44		0.36	^1,2		3.57			3.93			(0.21	)		(0.24	)		—		(0.45	)		24.92		18.53	³		0.38	⁴		0.38	⁴		1.56	²		70			6
12-31-2005		19.37		0.34	^1,2		3.40			3.74			(0.14	)		(1.53	)		—		(1.67	)		21.44		21.07	³		0.38	⁴		0.38	⁴		1.75	²		35			6
12-31-2004		16.68		0.13	¹		2.97			3.10			(0.12	)		(0.29	)		—		(0.41	)		19.37		18.88	³		0.38	⁴		0.38	⁴		1.57	²		10			65
Series II
12-31-2008		26.67		0.31	^1,2		(11.43	)		(11.12	)		(0.48	)		(0.77	)		—		(1.25	)		14.30		(42.47	)³		0.69	⁵		0.69	⁵		1.46	²		637			18
12-31-2007		24.86		0.27	^1,2		4.38			4.65			(0.36	)		(2.48	)		—		(2.84	)		26.67		19.41	³		0.52	⁵		0.52	⁵		1.01	²		1,168			10
12-31-2006		21.40		0.30	^1,2		3.58			3.88			(0.18	)		(0.24	)		—		(0.42	)		24.86		18.32	³		0.53	⁴		0.53	⁴		1.30	²		951			6
12-31-2005		19.34		0.25	^1,2		3.45			3.70			(0.11	)		(1.53	)		—		(1.64	)		21.40		20.87	³		0.53	⁴		0.53	⁴		1.31	²		624			6
12-31-2004		16.66		0.11	¹		2.96			3.07			(0.10	)		(0.29	)		—		(0.39	)		19.34		18.74	³		0.53	⁴		0.53	⁴		1.07	²		307			65
Series III
12-31-2008⁶		26.60		1.07	^1,2		(12.03	)		(10.96	)		(0.60	)		(0.77	)		—		(1.37	)		14.27		(41.97	)^3,8		0.29	^4,9		0.29	^4,5,9		6.08	^2,9		—	⁷		18

^1.Based on the average of the shares outstanding.

^2.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^3.Assumes dividend reinvestment.

^4.Does not include expenses of the investment companies in which the Portfolio invests.

^6.Series III shares began operation on 1-2-08.

^7.Less than $500,000.

^8.Not annualized.

^9.Annualized.

265

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

American New World Trust

Series II

12-31-2008

14.76

0.10

^1,2

(6.40

)

(6.30

)

(0.13

)

(0.18

)

—

(0.31

)

8.15

(42.66

)^3,4

0.83

^10,11

0.78

¹⁰

0.82

12-31-2007⁵

12.50

0.56

^1,2

2.02

2.58

(0.23

)

(0.09

)

—

(0.32

)

14.76

20.73

^3,6

0.88

^7,10

0.88

^7,10

5.79

^2,7

Series III

12-31-2008⁸

14.71

0.47

^1,2

(6.68

)

(6.21

)

(0.19

)

(0.18

)

—

(0.37

)

8.13

(42.16

)^3,4,6

0.33

^4,10,11

0.28

^7,10

4.60

^2,7

—

⁹

^1.Based on the average of the shares outstanding.

^2.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^3.Assumes dividend reinvestment.

^4.Total returns would have been lower had certain expenses not been reduced during periods shown.

^5.Series II shares began operations on 5-1-07.

^6.Not annualized.

^7.Annualized.

^8.Series III shares began operation on 1-2-08.

^9.Less than $500,000.

^11.Does not take into consideration expense reductions during the period shown.

266

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Blue Chip Growth Trust
Series I
12-31-2008		21.70		0.03	¹		(9.14	)		(9.11	)		(0.05	)		(0.31	)		—		(0.36	)		12.23		(42.53	)^2,3		0.90	⁴		0.87			0.18			281		58
12-31-2007		19.39		0.08	¹		2.38			2.46			(0.15	)		—			—		(0.15	)		21.70		12.75	^2,3,5		0.88	⁴		0.85			0.40			593		34
12-31-2006		17.73		0.10	¹		1.60			1.70			(0.04	)		—			—		(0.04	)		19.39		9.58	^2,3,6		0.88	⁴		0.86			0.53			668		37
12-31-2005		16.86		0.04	¹		0.90			0.94			(0.07	)		—			—		(0.07	)		17.73		5.60	^2,3		0.92	⁴		0.89			0.24			769		65	⁷
12-31-2004		15.48		0.08	¹		1.32			1.40			(0.02	)		—			—		(0.02	)		16.86		9.03	^2,3		0.91	⁴		0.88			0.53			1,309		31
Series II
12-31-2008		21.65		—	^1,8		(9.11	)		(9.11	)		(0.02	)		(0.31	)		—		(0.33	)		12.21		(42.63	)^2,3		1.10	⁴		1.07			(0.02	)		102		58
12-31-2007		19.32		0.04	¹		2.37			2.41			(0.08	)		—			—		(0.08	)		21.65		12.51	^2,3,5		1.08	⁴		1.05			0.21			176		34
12-31-2006		17.68		0.06	¹		1.59			1.65			(0.01	)		—			—		(0.01	)		19.32		9.31	^2,3,6		1.08	⁴		1.06			0.32			176		37
12-31-2005		16.78		0.01	¹		0.89			0.90			—			—			—		—			17.68		5.36	³		1.12	⁴		1.09			0.04			181		65	⁷
12-31-2004		15.43		0.07	¹		1.29			1.36			(0.01	)		—			—		(0.01	)		16.78		8.83	^2,3		1.11	⁴		1.08			0.47			471		31
Series NAV
12-31-2008		21.66		0.04	¹		(9.12	)		(9.08	)		(0.07	)		(0.31	)		—		(0.38	)		12.20		(42.52	)^2,3		0.85	⁴		0.82			0.23			1,299		58
12-31-2007		19.36		0.10	¹		2.37			2.47			(0.17	)		—			—		(0.17	)		21.66		12.81	^2,3,5		0.83	⁴		0.80			0.46			2,491		34
12-31-2006		17.71		0.10	¹		1.59			1.69			(0.04	)		—			—		(0.04	)		19.36		9.59	^2,3,6		0.83	⁴		0.81			0.56			1,880		37
12-31-2005⁹		16.32		0.04	¹		1.45			1.49			(0.10	)		—			—		(0.10	)		17.71		9.19	^2,3,10		0.87	^4,11		0.84	¹¹		0.28	¹¹		1,480		65	⁷

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Blue Chip Growth Series I	$	0.01			12.70%
Blue Chip Growth Series II		—	⁸		12.51%
Blue Chip Growth Series NAV		0.01			12.76%

^6.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^7.Excludes merger activity.

^8.Less than $0.01 per share.

^9.Series NAV shares began operations on 2-28-05.

^10.Not annualized.

^11.Annualized.

267

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Capital Appreciation Trust
Series I
12-31-2008		10.05		0.04	¹		(3.78	)		(3.74	)		(0.04	)		—			—		(0.04	)		6.27		(37.22	)²		0.81			0.81			0.41			114		97
12-31-2007		9.07		0.03	¹		1.02			1.05			(0.03	)		(0.04	)		—		(0.07	)		10.05		11.61	^2,3,4		0.82	⁵		0.82			0.31			227		73
12-31-2006		10.02		0.01	¹		0.20			0.21			—			(1.16	)		—		(1.16	)		9.07		2.26	^2,3,6		0.83	⁵		0.83			0.11			263		114	⁷
12-31-2005		8.79		(0.01	)¹		1.24			1.23			—			—			—		—			10.02		13.99			0.95			0.95			(0.10	)		52		101
12-31-2004		8.04		0.01	¹		0.74			0.75			—			—			—		—			8.79		9.33			0.97			0.97			0.15			129		79
Series II
12-31-2008		9.96		0.02	¹		(3.74	)		(3.72	)		(0.02	)		—			—		(0.02	)		6.22		(37.36	)²		1.01			1.01			0.21			52		97
12-31-2007		8.99		0.01	¹		1.01			1.02			(0.01	)		(0.04	)		—		(0.05	)		9.96		11.36	^2,3,4		1.02	⁵		1.02			0.11			97		73
12-31-2006		9.96		(0.01	)¹		0.20			0.19			—			(1.16	)		—		(1.16	)		8.99		2.06	^2,3,6		1.03	⁵		1.03			(0.09	)		113		114	⁷
12-31-2005		8.76		(0.02	)¹		1.22			1.20			—			—			—		—			9.96		13.70			1.15			1.15			(0.27	)		47		101
12-31-2004		8.02		—	^1,8		0.74			0.74			—			—			—		—			8.76		9.23			1.17			1.17			0.02			125		79
Series NAV
12-31-2008		10.06		0.04	¹		(3.78	)		(3.74	)		(0.05	)		—			—		(0.05	)		6.27		(37.23	)²		0.76			0.76			0.46			526		97
12-31-2007		9.08		0.03	¹		1.03			1.06			(0.04	)		(0.04	)		—		(0.08	)		10.06		11.69	^2,3,4		0.77	⁵		0.77			0.36			780		73
12-31-2006		10.02		0.01	¹		0.21			0.22			—			(1.16	)		—		(1.16	)		9.08		2.38	^2,3,6		0.78	⁵		0.78			0.15			627		114	⁷
12-31-2005⁹		8.51		(0.01	)¹		1.53			1.52			(0.01	)		—			—		(0.01	)		10.02		17.88	^2,10		0.88	¹¹		0.88	¹¹		(0.18	)¹¹		207		101

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Capital Appreciation Series I		—	⁸		11.61%
Capital Appreciation Series II		—	⁸		11.36%
Capital Appreciation Series NAV	$	0.01			11.58%

^5.Does not take into consideration expense reductions during the periods shown.

^6.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^7.Excludes merger activity.

^8.Less than $0.01 per share.

^9.Series NAV shares began operations on 2-28-05.

^10.Not annualized.

^11.Annualized.

268

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Capital Appreciation Value Trust

Series I

12-31-2008⁷

12.50

0.15

(3.56

)

(3.41

)

(0.07

)

—

(0.07

)

9.02

(27.26

)^2,3,8

1.22

^4,5

1.18

⁵

2.01

⁵

—

⁶

^3,9

Series II

12-31-2008⁷

12.50

0.16

(3.58

)

(3.42

)

(0.06

)

—

(0.06

)

9.02

(27.37

)^2,3,8

1.42

^4,5

1.38

⁵

2.46

⁵

141

^3,9

Series NAV

12-31-2008⁷

12.50

0.16

(3.56

)

(3.40

)

(0.08

)

—

(0.08

)

9.02

(27.23

)^2,3,8

1.17

^4,5

1.13

⁵

2.26

⁵

^3,9

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Not annualized.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Annualized.

^6.Less than $500,000.

^7.Series I, II and NAV shares began operations on 4-28-08.

^8.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^9.The Portfolio turnover rate including the effect of “TBA” (to be announced) for the period ended is 63%.

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Core Allocation Plus Trust

Series I

12-31-2008¹

12.50

0.12

(4.06

)

(3.94

)

(0.06

)

—

(0.06

)

8.50

(31.50

)^3,4

1.63

^5,7

1.63

⁷

1.12

⁷

^3,6

Series II

12-31-2008¹

12.50

0.09

(4.05

)

(3.96

)

(0.04

)

—

(0.04

)

8.50

(31.67

)^3,4

1.83

^5,7

1.83

⁷

0.92

⁷

^3,6

Series NAV

12-31-2008¹

12.50

0.13

(4.07

)

(3.94

)

(0.07

)

—

(0.07

)

8.49

(31.53

)^3,4

1.59

^5,7

1.59

⁷

1.15

⁷

^3,6

^1.Series I, Series II and Series NAV shares began operations on 1-2-08.

^2.Based on the average of the shares outstanding.

^3.Not annualized.

^4.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^5.Does not take into consideration expense reductions during the periods shown.

^6.The Portfolio turnover rate including the effect of “TBA” (to be announced) securities is 122% for the year ended 12-31-08.

^7.Annualized.

269

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																										Ratios and supplemental data
			Income (loss) from investment operations								Less distributions															Ratios to average net assets
																																Ratio
																																of net
																										Ratio			Ratio			investment
	Net asset		Net			Net realized															Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from		From net			From net		From tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment		investment			realized		return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations		income			gain		capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)		($)			($)		($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Core Bond Trust
Series I
12-31-2008		12.55		0.56	¹		(0.14	)		0.42		(0.64	)		—		—		(0.64	)		12.33		3.38	^2,3		0.85	⁴		0.85			4.52			1			467	⁶
12-31-2007		12.68		0.59	¹		0.18			0.77		(0.90	)		—		—		(0.90	)		12.55		6.26	^2,3		0.80	⁴		0.79			4.71			—	⁵		336	⁶
12-31-2006		12.64		0.56	¹		(0.11	)		0.45		(0.41	)		—		—		(0.41	)		12.68		3.72	^2,3		0.84	⁴		0.84			4.50			—	⁵		359
12-31-2005⁷		12.50		0.34	¹		(0.20	)		0.14		—			—		—		—			12.64		1.12	⁸		0.93	⁹		0.93	⁹		4.01	⁹		—	⁵		619	⁸
Series II
12-31-2008		12.54		0.53	¹		(0.13	)		0.40		(0.61	)		—		—		(0.61	)		12.33		3.23	^2,3		1.03	⁴		1.03			4.28			9			467	⁶
12-31-2007		12.66		0.57	¹		0.17			0.74		(0.86	)		—		—		(0.86	)		12.54		5.98	^2,3		1.00	⁴		1.00			4.50			4			336	⁶
12-31-2006		12.61		0.53	¹		(0.09	)		0.44		(0.39	)		—		—		(0.39	)		12.66		3.61	^2,3		1.04	⁴		1.04			4.28			2			359
12-31-2005⁷		12.50		0.31	¹		(0.20	)		0.11		—			—		—		—			12.61		0.88	⁸		1.11	⁹		1.11	⁹		3.49	⁹		1			619	⁸
Series NAV
12-31-2008		12.52		0.57	¹		(0.14	)		0.43		(0.65	)		—		—		(0.65	)		12.30		3.44	^2,3		0.77	⁴		0.77			4.50			253			467	⁶
12-31-2007		12.66		0.60	¹		0.17			0.77		(0.91	)		—		—		(0.91	)		12.52		6.28	^2,3		0.75	⁴		0.74			4.75			284			336	⁶
12-31-2006		12.62		0.56	¹		(0.10	)		0.46		(0.42	)		—		—		(0.42	)		12.66		3.84	^2,3		0.79	⁴		0.79			4.48			222			359
12-31-2005⁷		12.50		0.30	¹		(0.18	)		0.12		—			—		—		—			12.62		0.96	⁸		0.82	⁹		0.82	⁹		3.55	⁹		153			619	⁸

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Less than $500,000.

^6.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 1,049% for 12-31-08 and 621% for 12-31-07. Prior years exclude the effect of TBA transactions.

^7.Series I, Series II and Series NAV shares began operations on 4-29-05.

^8.Not annualized.

^9.Annualized.

270

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Disciplined Diversification Trust

Series I

12-31-2008¹

12.50

0.19

(3.67

)

(3.48

)

(0.11

)

(0.01

)

—

(0.12

)

8.90

(27.87

)^3,4

1.04

^5,6,7

0.75

^5,6

2.63

⁶

Series II

12-31-2008¹

12.50

0.15

(3.64

)

(3.49

)

(0.09

)

(0.01

)

—

(0.10

)

8.91

(27.96

)^3,4

1.24

^5,6,7

0.95

^5,6

2.13

⁶

117

Series NAV

12-31-2008¹

12.50

0.16

(3.64

)

(3.48

)

(0.11

)

(0.01

)

—

(0.12

)

8.90

(27.83

)^3,4

0.99

^5,6,7

0.70

^5,6

2.40

⁶

^1.Series I, II and NAV shares began operations on 4-28-08.

^2.Based on the average of the shares outstanding.

^3.Not annualized.

^4.Assumes dividend reinvestment.

^5.Does not include expenses of the investment companies in which the Portfolio invests.

^6.Annualized.

^7.Does not take into consideration expense reductions during the periods shown.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Emerging Markets Value Trust
Series I
12-31-2008		14.64		0.25	¹		(7.86	)		(7.61	)		(0.26	)		(0.03	)		—		(0.29	)		6.74		(52.17	)^2,3		1.14	⁴		1.14			2.53			3		19
12-31-2007⁵		12.50		0.14	¹		2.41			2.55			(0.09	)		(0.32	)		—		(0.41	)		14.64		20.57	^2,3,6		1.14	^4,7		1.13	⁷		1.46	⁷		1		9	⁶
Series NAV
12-31-2008		14.56		0.27	¹		(7.80	)		(7.53	)		(0.27	)		(0.03	)		—		(0.30	)		6.73		(51.93	)^2,3		1.09	⁴		1.09			2.42			300		19
12-31-2007⁵		12.50		0.15	¹		2.33			2.48			(0.10	)		(0.32	)		—		(0.42	)		14.56		19.94	^2,3,6		1.09	^4,7		1.08	⁷		1.61	⁷		517		9	⁶

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series I and Series NAV shares began operations on 5-1-07.

^6.Not annualized.

^7.Annualized.

271

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net		From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment		realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income		gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)		($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Emerging Small Company Trust
Series I
12-31-2008		24.50		(0.04	)¹		(10.56	)		(10.60	)		—		(0.01	)		—		(0.01	)		13.89		(43.28	)^2,3		1.10	⁴		1.10			(0.17	)		82			128
12-31-2007		29.42		(0.15	)¹		2.27			2.12			—		(7.04	)		—		(7.04	)		24.50		8.05	^2,3,5		1.07	⁴		1.07			(0.54	)		179			70
12-31-2006		30.20		(0.17	)¹		1.00			0.83			—		(1.61	)		—		(1.61	)		29.42		2.41	^2,3		1.08	⁴		1.08			(0.57	)		213			164
12-31-2005		28.75		(0.18	)¹		1.63			1.45			—		—			—		—			30.20		5.04			1.12			1.12			(0.63	)		259			54
12-31-2004		25.78		(0.21	)¹		3.18			2.97			—		—			—		—			28.75		11.52			1.11			1.11			(0.76	)		393			55
Series II
12-31-2008		24.18		(0.07	)¹		(10.42	)		(10.49	)		—		(0.01	)		—		(0.01	)		13.68		(43.40	)^2,3		1.30	⁴		1.30			(0.36	)		21			128
12-31-2007		29.17		(0.20	)¹		2.25			2.05			—		(7.04	)		—		(7.04	)		24.18		7.84	^2,3,5		1.27	⁴		1.27			(0.74	)		43			70
12-31-2006		30.02		(0.23	)¹		0.99			0.76			—		(1.61	)		—		(1.61	)		29.17		2.18	^2,3		1.28	⁴		1.28			(0.77	)		53			164
12-31-2005		28.63		(0.23	)¹		1.62			1.39			—		—			—		—			30.02		4.86			1.32			1.32			(0.83	)		71			54
12-31-2004		25.72		(0.26	)¹		3.17			2.91			—		—			—		—			28.63		11.31			1.31			1.31			(0.98	)		120			55
Series NAV
12-31-2008		24.55		(0.02	)¹		(10.59	)		(10.61	)		—		(0.01	)		—		(0.01	)		13.93		(43.23	)^2,3		1.05	⁴		1.05			(0.09	)		2			128
12-31-2007		29.46		(0.12	)¹		2.25			2.13			—		(7.04	)		—		(7.04	)		24.55		8.08	^2,3,5		1.02	⁴		1.02			(0.44	)		2			70
12-31-2006		30.23		(0.15	)¹		0.99			0.84			—		(1.61	)		—		(1.61	)		29.46		2.44	^2,3		1.03	⁴		1.03			(0.50	)		1			164
12-31-2005⁶		28.21		(0.15	)¹		2.17			2.02			—		—			—		—			30.23		7.16	⁷		1.03	⁸		1.03	⁸		(0.61	)⁸		—	⁹		54

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007

Emerging Small Company Series I	$	0.04		7.87%
Emerging Small Company Series II		0.04		7.66%
Emerging Small Company Series NAV		0.02		7.99%

^6.Series NAV shares began operations on 2-28-05.

^7.Not annualized.

^8.Annualized.

^9.Less than $500,000.

272

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Equity-Income Trust
Series I
12-31-2008		16.47		0.34	¹		(6.14	)		(5.80	)		(0.35	)		(0.36	)		—		(0.71	)		9.96		(35.96	)^2,3		0.91	⁴		0.87			2.48			344		32
12-31-2007		18.52		0.32	¹		0.28			0.60			(0.54	)		(2.11	)		—		(2.65	)		16.47		3.35	^2,3,5		0.89	⁴		0.86			1.73			694		25
12-31-2006		16.87		0.27	¹		2.75			3.02			(0.27	)		(1.10	)		—		(1.37	)		18.52		19.02	^2,3,6		0.89	⁴		0.87			1.60			830		16
12-31-2005		17.04		0.25	¹		0.38			0.63			(0.21	)		(0.59	)		—		(0.80	)		16.87		3.92	^2,3		0.91	⁴		0.89			1.53			846		48	⁷
12-31-2004		15.22		0.24	¹		1.96			2.20			(0.20	)		(0.18	)		—		(0.38	)		17.04		14.81	^2,3		0.91	⁴		0.88			1.53			1,364		21
Series II
12-31-2008		16.42		0.32	¹		(6.14	)		(5.82	)		(0.31	)		(0.36	)		—		(0.67	)		9.93		(36.16	)^2,3		1.11	⁴		1.07			2.30			147		32
12-31-2007		18.44		0.28	¹		0.29			0.57			(0.48	)		(2.11	)		—		(2.59	)		16.42		3.16	^2,3,5		1.09	⁴		1.06			1.54			278		25
12-31-2006		16.81		0.24	¹		2.73			2.97			(0.24	)		(1.10	)		—		(1.34	)		18.44		18.76	^2,3,6		1.09	⁴		1.07			1.40			320		16
12-31-2005		16.96		0.22	¹		0.38			0.60			(0.16	)		(0.59	)		—		(0.75	)		16.81		3.72	^2,3		1.11	⁴		1.08			1.35			304		48	⁷
12-31-2004		15.17		0.21	¹		1.95			2.16			(0.19	)		(0.18	)		—		(0.37	)		16.96		14.61	^2,3		1.11	⁴		1.08			1.38			573		21
Series NAV
12-31-2008		16.43		0.35	¹		(6.13	)		(5.78	)		(0.36	)		(0.36	)		—		(0.72	)		9.93		(35.94	)^2,3		0.86	⁴		0.82			2.55			808		32
12-31-2007		18.49		0.33	¹		0.28			0.61			(0.56	)		(2.11	)		—		(2.67	)		16.43		3.39	^2,3,5		0.84	⁴		0.81			1.79			1,431		25
12-31-2006		16.85		0.28	¹		2.74			3.02			(0.28	)		(1.10	)		—		(1.38	)		18.49		19.05	^2,3,6		0.84	⁴		0.82			1.65			1,290		16
12-31-2005⁸		17.11		0.23	¹		0.34			0.57			(0.24	)		(0.59	)		—		(0.83	)		16.85		3.57	^2,3,9		0.86	^4,10		0.83	¹⁰		1.64	¹⁰		1,189		48	⁷

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Equity-Income Series I		—	¹¹		3.35	%
Equity-Income Series II	$	0.01			3.10	%
Equity-Income Series NAV		—	¹¹		3.39	%

^6.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^7.Excludes merger activity.

^8.Series NAV shares began operations on 2-28-05.

^9.Not annualized.

^10.Annualized.

^11.Less than $0.01 per share.

273

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Financial Services Trust
Series I
12-31-2008		14.54		0.10	¹		(6.34	)		(6.24	)		(0.09	)		(0.68	)		—		(0.77	)		7.53		(44.65	)^2,3		0.95	⁴		0.95			0.91			33		11
12-31-2007		18.78		0.13	¹		(1.45	)		(1.32	)		(0.24	)		(2.68	)		—		(2.92	)		14.54		(6.82	)^2,3,5		0.91	⁴		0.91			0.68			52		12
12-31-2006		15.31		0.10	¹		3.43			3.53			(0.06	)		—	⁶		—		(0.06	)		18.78		23.12	^2,3,7		0.91	⁴		0.91			0.58			80		12
12-31-2005		14.00		0.07	¹		1.29			1.36			(0.05	)		—			—		(0.05	)		15.31		9.78	^2,3		1.01	⁴		0.99			0.47			54		51
12-31-2004		12.73		0.05	¹		1.27			1.32			(0.05	)		—			—		(0.05	)		14.00		10.38	²		1.01			1.01			0.36			53		12
Series II
12-31-2008		14.48		0.08	¹		(6.30	)		(6.22	)		(0.07	)		(0.68	)		—		(0.75	)		7.51		(44.75	)^2,3		1.15	⁴		1.15			0.71			26		11
12-31-2007		18.67		0.09	¹		(1.43	)		(1.34	)		(0.17	)		(2.68	)		—		(2.85	)		14.48		(6.93	)^2,3,5		1.11	⁴		1.11			0.49			43		12
12-31-2006		15.24		0.06	¹		3.40			3.46			(0.03	)		—	⁶		—		(0.03	)		18.67		22.77	^2,3,7		1.11	⁴		1.11			0.38			62		12
12-31-2005		13.93		0.04	¹		1.30			1.34			(0.03	)		—			—		(0.03	)		15.24		9.62	^2,3		1.21	⁴		1.19			0.27			44		51
12-31-2004		12.69		0.02	¹		1.26			1.28			(0.04	)		—			—		(0.04	)		13.93		10.09	²		1.21			1.21			0.17			43		12
Series NAV
12-31-2008		14.53		0.11	¹		(6.34	)		(6.23	)		(0.10	)		(0.68	)		—		(0.78	)		7.52		(44.63	)^2,3		0.90	⁴		0.90			0.97			20		11
12-31-2007		18.77		0.14	¹		(1.45	)		(1.31	)		(0.25	)		(2.68	)		—		(2.93	)		14.53		(6.74	)^2,3,5		0.86	⁴		0.86			0.75			42		12
12-31-2006		15.31		0.10	¹		3.43			3.53			(0.07	)		—	⁶		—		(0.07	)		18.77		23.16	^2,3,7		0.86	⁴		0.86			0.63			55		12
12-31-2005⁹		13.32		0.05	¹		1.94			1.99			—			—			—		—			15.31		14.94	^3,10		0.92	^4,8		0.88	⁸		0.52	⁸		54		51

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Financial Services Series I		—	⁶		–6.82	%
Financial Services Series II	$	0.01			–6.99	%
Financial Services Series NAV		—	⁶		–6.74	%

^6.Less than $0.01 per share.

^7.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^8.Annualized.

^9.Series NAV shares began operations on 4-29-05.

^10.Not annualized.

274

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

From tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Floating Rate Income Trust

Series NAV

12-31-2008¹

12.50

0.79

(3.75

)

(2.96

)

(0.35

)

—

(0.35

)

9.19

(23.61

)^3,4

0.76

⁵

0.76

6.79

618

^1.Series NAV shares began operations on 1-2-08.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Total returns would have been lower had certain expenses not been reduced during the period shown.

^5.Does not take into consideration expense reductions during the periods shown.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Franklin Templeton Founding Allocation Trust
Series I
12-31-2008¹		11.16		0.59	^2,3		(3.94	)		(3.35	)		(0.27	)		(0.18	)		—		(0.45	)		7.36		(30.39	)^4,5,6		0.15	^7,8,9		0.08	^7,9,10		7.77	⁷		12		4	⁶
Series II
12-31-2008		12.05		0.29	^2,3		(4.53	)		(4.24	)		(0.25	)		(0.18	)		—		(0.43	)		7.38		(35.55	)^4,5		0.33	^7,8,9		0.28	^9,10		2.94	^3,7		1,111		4
12-31-2007¹¹		12.50		0.12	^2,3		(0.50	)		(0.38	)		(0.07	)		—			—		(0.07	)		12.05		(3.08	)^6,4,5		0.33	^7,8,9		0.28	^7,9		1.47	^3,7		1,139		2	⁶
Series NAV
12-31-2008¹²		11.26		0.60	^2,3		(4.22	)		(3.62	)		(0.28	)		—			—		(0.28	)		7.36		(32.08	)^4,5,6		0.08	^7,8,9		0.03	^7,9,10		10.86	⁷		1		4	⁶

^1.Series I shares began operations on 1-28-08.

^2.Based on the average of the shares outstanding.

^3.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^4.Assumes dividend reinvestment.

^5.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^6.Not annualized.

^7.Annualized.

^8.Does not take into consideration expense reductions during the periods shown.

^9.Does not include expenses of the investment companies in which the Portfolio invests.

^10.Ratios do not include expense indirectly incurred from underlying funds whose expense ratios can vary between 0.87% – 1.06% and 0.86% – 1.06%, based on the mix of underlying funds held by the portfolio for 2008 and 2007, respectively.

^11.Series II shares began operations on 5-1-07.

^12.Series NAV shares began operations on 4-28-08.

275

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Fundamental Value Trust
Series I
12-31-2008		16.50		0.13	¹		(6.55	)		(6.42	)		(0.12	)		(0.17	)		—		(0.29	)		9.79		(39.32	)^2,3		0.86	⁴		0.86			1.04			406		28	⁵
12-31-2007		16.82		0.19	¹		0.47			0.66			(0.28	)		(0.70	)		—		(0.98	)		16.50		4.04	^2,3		0.85	⁴		0.85			1.13			177		8
12-31-2006		15.32		0.13	¹		2.01			2.14			(0.12	)		(0.52	)		—		(0.64	)		16.82		14.51	^2,3		0.86	⁴		0.86			0.86			204		18
12-31-2005		14.14		0.12	¹		1.12			1.24			(0.06	)		—			—		(0.06	)		15.32		8.84	^2,3		0.92	⁴		0.90			0.84			202		36
12-31-2004		12.71		0.10	¹		1.39			1.49			(0.06	)		—			—		(0.06	)		14.14		11.80	²		0.94			0.94			0.74			429		6
Series II
12-31-2008		16.45		0.12	¹		(6.55	)		(6.43	)		(0.08	)		(0.17	)		—		(0.25	)		9.77		(39.46	)^2,3		1.06	⁴		1.06			0.84			282		28	⁵
12-31-2007		16.74		0.16	¹		0.47			0.63			(0.22	)		(0.70	)		—		(0.92	)		16.45		3.87	^2,3		1.05	⁴		1.05			0.92			445		8
12-31-2006		15.26		0.10	¹		2.00			2.10			(0.10	)		(0.52	)		—		(0.62	)		16.74		14.24	^2,3		1.06	⁴		1.06			0.66			391		18
12-31-2005		14.07		0.09	¹		1.13			1.22			(0.03	)		—			—		(0.03	)		15.26		8.70	^2,3		1.12	⁴		1.10			0.63			270		36
12-31-2004		12.68		0.07	¹		1.38			1.45			(0.06	)		—			—		(0.06	)		14.07		11.44	²		1.14			1.14			0.56			386		6
Series NAV
12-31-2008		16.45		0.15	¹		(6.55	)		(6.40	)		(0.12	)		(0.17	)		—		(0.29	)		9.76		(39.27	)^2,3		0.81	⁴		0.81			1.11			684		28	⁵
12-31-2007		16.78		0.20	¹		0.46			0.66			(0.29	)		(0.70	)		—		(0.99	)		16.45		4.08	^2,3		0.80	³		0.80			1.18			789		8
12-31-2006		15.29		0.14	¹		2.01			2.15			(0.14	)		(0.52	)		—		(0.66	)		16.78		14.56	^2,3		0.81	⁴		0.81			0.91			612		18
12-31-2005⁶		14.37		0.13	¹		0.89			1.02			(0.10	)		—			—		(0.10	)		15.29		7.14	^2,3,7		0.85	^4,8		0.82	⁸		1.08	⁸		482		36

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Excludes merger activity.

^6.Series NAV shares began operations on 2-28-05.

^7.Not annualized.

^8.Annualized.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																	Ratio
																																	of net
																												Ratio			Ratio		investment
	Net asset		Net			Net realized																	Net asset					of gross			of net		income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses		(loss) to		Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average		average		end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets		net assets		period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)		(%)		(in millions)		(%)
Global Trust
Series I
12-31-2008		17.91		0.33	¹		(7.40	)		(7.07	)		(0.30	)		—			—		(0.30	)		10.54		(39.51	)^2,3		1.00	⁵		0.99		2.26		131		12
12-31-2007		19.20		0.26	¹		(0.02	)		0.24			(0.45	)		(1.08	)		—		(1.53	)		17.91		1.28	^2,3,4		0.97	⁵		0.96		1.35		303		40
12-31-2006		16.17		0.27	¹		2.99			3.26			(0.23	)		—			—		(0.23	)		19.20		20.32	^2,3		1.01	⁵		0.99		1.58		359		27
12-31-2005		14.79		0.22	¹		1.35			1.57			(0.19	)		—			—		(0.19	)		16.17		10.72	^2,3		1.05	⁵		1.00		1.43		344		24
12-31-2004		13.11		0.18	¹		1.73			1.91			(0.23	)		—			—		(0.23	)		14.79		14.75	^2,3		1.05	⁵		1.00		1.36		358		39

276

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Series II
12-31-2008		17.84		0.30	¹		(7.37	)		(7.07	)		(0.26	)		—			—		(0.26	)		10.51		(39.64	)^2,3		1.20	⁵		1.19			2.04			31			12
12-31-2007		19.10		0.25	¹		(0.05	)		0.20			(0.38	)		(1.08	)		—		(1.46	)		17.84		1.09	^2,3,4		1.17	⁵		1.16			1.27			65			40
12-31-2006		16.09		0.24	¹		2.97			3.21			(0.20	)		—			—		(0.20	)		19.10		20.09	^2,3		1.21	⁵		1.19			1.38			41			27
12-31-2005		14.73		0.18	¹		1.35			1.53			(0.17	)		—			—		(0.17	)		16.09		10.50	^2,3		1.25	⁵		1.19			1.21			36			24
12-31-2004		13.07		0.16	¹		1.72			1.88			(0.22	)		—			—		(0.22	)		14.73		14.53	^2,3		1.25	⁵		1.20			1.21			28			39
Series NAV
12-31-2008		17.90		0.32	¹		(7.38	)		(7.06	)		(0.31	)		—			—		(0.31	)		10.53		(39.49	)^2,3		0.95	⁵		0.94			2.22			375			12
12-31-2007		19.20		0.21	¹		0.04	⁶		0.25			(0.47	)		(1.08	)		—		(1.55	)		17.90		1.32	^2,3,4		0.92	⁵		0.91			1.12			384			40
12-31-2006		16.17		0.27	¹		3.00			3.27			(0.24	)		—			—		(0.24	)		19.20		20.42	^2,3		0.96	⁵		0.96			1.56			2			27
12-31-2005⁷		14.36		0.11	¹		1.70			1.81			—			—			—		—			16.17		12.60	^3,8		0.97	^5,9		0.91	⁹		0.99	⁹		—	¹⁰		24

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007


Global Series I	$	0.03			1.11	%
Global Series II		0.04			0.87	%
Global Series NAV		—	¹¹		1.32	%

^5.Does not take into consideration expense reductions during the periods shown.

^7.Series NAV shares began operations on 4-29-05.

^8.Not annualized.

^9.Annualized.

^10.Less than $500,000.

^11.Less than $0.01 per share.

277

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Global Allocation Trust
Series I
12-31-2008		11.22		0.19	¹		(4.04	)		(3.85	)		(0.53	)		(0.02	)		—		(0.55	)		6.82		(34.29	)^2,3		1.05	⁴		1.04			1.90			43			110	¹¹
12-31-2007		12.78		0.23	¹		0.39			0.62			(0.84	)		(1.34	)		—		(2.18	)		11.22		5.13	^2,3,5		1.01	⁴		1.01			1.82			87			94
12-31-2006		11.38		0.21	¹		1.31			1.52			(0.12	)		—			—		(0.12	)		12.78		13.50	^2,3		1.02	⁴		1.02			1.77			94			90
12-31-2005		10.82		0.16	¹		0.50			0.66			(0.10	)		—			—		(0.10	)		11.38		6.20	²		1.09			1.09			1.44			80			129
12-31-2004		9.70		0.14	¹		1.08			1.22			(0.10	)		—			—		(0.10	)		10.82		12.73	²		1.10			1.10			1.38			110			76
Series II
12-31-2008		11.16		0.16	¹		(4.00	)		(3.84	)		(0.51	)		(0.02	)		—		(0.53	)		6.79		(34.39	)^2,3		1.25	⁴		1.24			1.69			133			110	¹¹
12-31-2007		12.71		0.20	¹		0.39			0.59			(0.80	)		(1.34	)		—		(2.14	)		11.16		4.87	^2,3,5		1.21	⁴		1.21			1.62			228			94
12-31-2006		11.32		0.19	¹		1.30			1.49			(0.10	)		—			—		(0.10	)		12.71		13.28	^2,3		1.22	⁴		1.22			1.57			199			90
12-31-2005		10.78		0.13	¹		0.50			0.63			(0.09	)		—			—		(0.09	)		11.32		5.93	²		1.29			1.29			1.21			113			129
12-31-2004		9.68		0.11	¹		1.09			1.20			(0.10	)		—			—		(0.10	)		10.78		12.52	²		1.30			1.30			1.12			93			76
Series NAV
12-31-2008		11.18		0.19	¹		(4.02	)		(3.83	)		(0.53	)		(0.02	)		—		(0.55	)		6.80		(34.21	)^2,3		1.00	⁴		0.99			1.92			13			110	¹¹
12-31-2007		12.76		0.23	¹		0.38			0.61			(0.85	)		(1.34	)		—		(2.19	)		11.18		5.06	^2,3,5		0.98	⁴		0.98			1.84			15			94
12-31-2006		11.37		0.22	¹		1.31			1.53			(0.14	)		—			—		(0.14	)		12.76		13.58	^2,3		0.97	⁴		0.97			1.80			2			90
12-31-2005⁶		10.87		0.16	¹		0.46			0.62			(0.12	)		—			—		(0.12	)		11.37		5.81	^2,7		0.94	⁸		0.94	⁸		1.92	⁸		—	⁹		129

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007


Global Allocation Series I	$	0.01			5.04	%
Global Allocation Series II		0.01			4.78	%
Global Allocation Series NAV		—	¹⁰		5.06	%

^6.Series NAV shares began operations on 2-28-05.

^7.Not annualized.

^8.Annualized.

^9.Less than $500,000.

^10.Less than $0.01 per share.

^11.The Portfolio turnover rate including the effect of “TBA” (to be announced) securities was 113% for the year ended 12-31-08. Prior years exclude the effect of TBA transactions.

278

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			tax return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Global Bond Trust
Series I
12-31-2008		15.20		0.72	¹		(1.39	)		(0.67	)		(0.09	)		—			—		(0.09	)		14.44		(4.48	)^2,3		0.89	⁴		0.89			4.69			99		487	⁵
12-31-2007		14.93		0.59	¹		0.79			1.38			(1.11	)		—			—		(1.11	)		15.20		9.63	^2,3		0.86	^4,6		0.86	⁶		3.96			117		325	⁵
12-31-2006		14.37		0.53	¹		0.22			0.75			—			(0.19	)		—		(0.19	)		14.93		5.27	^2,3,7		0.85	^4,8		0.85	⁸		3.61			115		204
12-31-2005		16.28		0.44	¹		(1.49	)		(1.05	)		(0.73	)		(0.13	)		—		(0.86	)		14.37		(6.66	)²		0.86			0.86			2.89			132		327	⁹
12-31-2004¹⁰		15.34		0.32	¹		1.21			1.53			(0.59	)		—			—		(0.59	)		16.28		10.38	²		0.85			0.85			2.13			438		174
Series II
12-31-2008		15.15		0.68	¹		(1.38	)		(0.70	)		(0.08	)		—			—		(0.08	)		14.37		(4.66	)^2,3		1.09	⁴		1.09			4.48			172		487	⁵
12-31-2007		14.87		0.56	¹		0.78			1.34			(1.06	)		—			—		(1.06	)		15.15		9.35	^2,3		1.06	^4,6		1.06	⁶		3.78			234		325	⁵
12-31-2006		14.34		0.50	¹		0.22			0.72			—			(0.19	)		—		(0.19	)		14.87		5.07	^2,3,7		1.05	^4,8		1.05	⁸		3.44			200		204
12-31-2005		16.20		0.41	¹		(1.47	)		(1.06	)		(0.67	)		(0.13	)		—		(0.80	)		14.34		(6.77	)²		1.06			1.06			2.67			143		327	⁹
12-31-2004¹⁰		15.29		0.29	¹		1.21			1.50			(0.59	)		—			—		(0.59	)		16.20		10.21	²		1.05			1.05			1.93			368		174
Series NAV
12-31-2008		15.16		0.72	¹		(1.38	)		(0.66	)		(0.09	)		—			—		(0.09	)		14.41		(4.42	)^2,3		0.84	⁴		0.84			4.72			602		487	⁵
12-31-2007		14.91		0.60	¹		0.78			1.38			(1.13	)		—			—		(1.13	)		15.16		9.60	^2,3		0.81	^4,6		0.81	⁶		4.04			929		325	⁵
12-31-2006		14.34		0.54	¹		0.22			0.76			—			(0.19	)		—		(0.19	)		14.91		5.35	^2,3,7		0.80	^4,8		0.80	⁸		3.69			733		204
12-31-2005¹¹		16.11		0.40	¹		(1.26	)		(0.86	)		(0.78	)		(0.13	)		—		(0.91	)		14.34		(5.58	)^2,12		0.80	¹³		0.80	¹³		3.16	¹³		520		327	⁹

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 800% for 12-31-08 and 877% for 12-31-07. Prior years exclude the effect of TBA transactions.

^6.Includes interest and fees on inverse floaters. The impact of this expense to the gross and net expense ratios was less than 0.01%.

^7.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^8.Includes interest expense on securities sold short. Excluding interest expense the expense ratios for the period ended would have been as follows:


	Ratio of gross			Ratio of net
	expenses to average			expenses to average
	net assets			net assets

Series I		0.85	%		0.85	%
Series II		1.05	%		1.05	%
Series NAV		0.80	%		0.80	%

^9.Excludes merger activity.

^10.As a result of changes in generally accepted accounting principles, periodic payments made under interest-rate swap agreements, previously included within interest income, have been included to realized gain (loss) in the Statements of Operations. The effect of this reclassification was to increase the net investment income per share by $0.04 for Series I and $0.05 for Series II, and the net investment income ratio by 0.51% for Series I and 0.68% for Series II for the year ended 12-31-04.

^11.Series NAV shares began operations on 2-28-05.

^12.Not annualized.

^13.Annualized.

279

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																													Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																	Ratios to average net assets
																																			Ratio
																																			of net
																													Ratio			Ratio			investment
	Net asset		Net			Net realized																		Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax						value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of			Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital			distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)			($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Global Real Estate Trust
Series I
12-31-2008¹		11.81		0.15	²		(5.40	)		(5.25	)		(0.39	)		—			—			(0.39	)		6.17		(44.31	)^3,4,5		1.19	^6,7		1.19	⁷		2.52	⁷		—	⁸		77
Series NAV
12-31-2008		12.11		0.22	²		(5.76	)		(5.54	)		(0.40	)		—			—			(0.40	)		6.17		(45.64	)^3,4		1.11	⁶		1.11			2.35			479			77
12-31-2007		15.26		0.21	²		(1.57	)		(1.36	)		(0.87	)		(0.82	)		(0.10	)		(1.79	)		12.11		(9.88	)^3,4		1.06	⁶		1.06			1.42			530			87
12-31-2006⁹		12.50		0.16	²		2.60			2.76			—			—			—			—			15.26		22.08	^3,5		1.07	^6,7		1.07	⁷		1.84	⁷		431			112	⁵

^1.Series I shares began operations on 4-28-08.

^2.Based on the average of the shares outstanding.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Assumes dividend reinvestment.

^5.Not annualized.

^6.Does not take into consideration expense reductions during the periods shown.

^7.Annualized.

^8.Less than $500,000.

^9.Series NAV shares began operations on 4-28-06.

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Growth Equity Trust

Series NAV

12-31-2008¹

12.50

0.02

(5.06

)

(5.04

)

(0.01

)

—

(0.01

)

7.45

(40.36

)^3,4,5

0.80

^6,7

0.80

⁶

0.23

⁶

299

^1.Class NAV shares began operation on 4-28-08.

^2.Based on the average of the shares outstanding.

^3.Not annualized.

^4.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^5.Assumes dividend reinvestment.

^6.Annualized.

^7.Does not take into consideration expense reductions during the periods shown.

280

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net		From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment		realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income		gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)		($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Health Sciences Trust
Series I
12-31-2008		15.10		(0.07	)¹		(4.37	)		(4.44	)		—		(0.31	)		—		(0.31	)		10.35		(29.90	)^2,3		1.22	⁴		1.17			(0.58	)		91		51
12-31-2007		15.71		(0.08	)¹		2.67			2.59			—		(3.20	)		—		(3.20	)		15.10		17.67	^2,3,5		1.19	⁴		1.14			(0.52	)⁶		143		50
12-31-2006		15.97		(0.12	)¹		1.35			1.23			—		(1.49	)		—		(1.49	)		15.71		8.51	^2,3		1.19	⁴		1.16			(0.77	)		133		52
12-31-2005		15.44		(0.13	)¹		1.81			1.68			—		(1.15	)		—		(1.15	)		15.97		12.50	^2,3		1.22	⁴		1.19			(0.89	)		132		67	⁷
12-31-2004		13.39		(0.12	)¹		2.17			2.05			—		—			—		—			15.44		15.31	²		1.21	⁴		1.18			(0.84	)		121		48
Series II
12-31-2008		14.89		(0.10	)¹		(4.30	)		(4.40	)		—		(0.31	)		—		(0.31	)		10.18		(30.06	)^2,3		1.42	⁴		1.37			(0.77	)		48		51
12-31-2007		15.56		(0.11	)¹		2.64			2.53			—		(3.20	)		—		(3.20	)		14.89		17.44	^2,3,5		1.39	⁴		1.34			(0.72	)⁶		81		50
12-31-2006		15.86		(0.15	)¹		1.34			1.19			—		(1.49	)		—		(1.49	)		15.56		8.30	^2,3		1.39	⁴		1.36			(0.97	)		81		52
12-31-2005		15.37		(0.16	)¹		1.80			1.64			—		(1.15	)		—		(1.15	)		15.86		12.28	^2,3		1.42	⁴		1.39			(1.09	)		85		67	⁷
12-31-2004		13.36		(0.15	)¹		2.16			2.01			—		—			—		—			15.37		15.04	²		1.41	⁴		1.38			(1.04	)		78		48
Series NAV
12-31-2008		15.12		(0.07	)¹		(4.37	)		(4.44	)		—		(0.31	)		—		(0.31	)		10.37		(29.86	)^2,3		1.17	⁴		1.12			(0.53	)		21		51
12-31-2007		15.72		(0.08	)¹		2.68			2.60			—		(3.20	)		—		(3.20	)		15.12		17.73	^2,3,5		1.14	⁴		1.09			(0.48	)⁶		34		50
12-31-2006		15.98		(0.11	)¹		1.34			1.23			—		(1.49	)		—		(1.49	)		15.72		8.50	^2,3		1.14	⁴		1.11			(0.72	)		30		52
12-31-2005⁸		12.99		(0.08	)¹		3.07			2.99			—		—			—		—			15.98		23.02	^2,9		1.12	^4,10		1.12	¹⁰		(0.81	)¹⁰		29		67	⁷

^1.Based on the average of the shares outstanding.

^2.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^3.Assumes dividend reinvestment.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Health Sciences Series I	$	0.01			17.60	%
Health Sciences Series II		0.01			17.37	%
Health Sciences Series NAV		—	¹¹		17.73	%

^6.Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflects special dividends received by the Portfolio which amounted to the following amounts:


				Percentage of
Portfolio	Series	Per share		average net assets

Health Sciences	I	$	0.03		0.18	%
Health Sciences	II		0.03		0.18	%
Health Sciences	NAV		0.02		0.17	%

^7.Excludes merger activity.

^8.Series NAV shares began operations on 4-29-05.

^9.Not annualized.

^10.Annualized.

^11.Less than $0.01 per share.

281

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
High Income Trust
Series II
12-31-2008		11.99		1.09	¹		(6.23	)		(5.14	)		(0.88	)		(0.11	)		—		(0.99	)		5.86		(43.53	)^2,5		0.99	³		0.98			11.49			2		47
12-31-2007⁴		14.13		0.61	¹		(1.61	)		(1.00	)		(0.61	)		(0.53	)		—		(1.14	)		11.99		(7.03	)^2,5,6		0.97	^3,7		0.97	⁷		6.58	⁷		1		73
Series NAV
12-31-2008		11.98		1.09	¹		(6.25	)		(5.16	)		(0.90	)		(0.11	)		—		(1.01	)		5.81		(43.65	)^2,5		0.74	³		0.73			11.35			373		47
12-31-2007		14.24		0.90	¹		(1.34	)		(0.44	)		(1.23	)		(0.59	)		—		(1.82	)		11.98		(3.40	)^2,5		0.72	³		0.72			6.41			436		73
12-31-2006⁴		12.50		0.60	¹		1.14			1.74			—			—			—		—			14.24		13.92	^5,6		0.74	^3,7		0.74	⁷		6.87	⁷		347		81	⁶

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Does not take into consideration expense reductions during the periods shown.

^4.Series II and Series NAV shares began operations on 5-1-07 and 4-28-06, respectively.

^5.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^6.Not annualized.

^7.Annualized.


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net		From tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized		return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain		capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)		($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
High Yield Trust
Series I
12-31-2008		9.50		0.86	¹		(3.66	)		(2.80	)		(0.81	)		—		—		(0.81	)		5.89		(29.52	)^2,3		0.77	⁴		0.77			9.96			63		61
12-31-2007		10.66		0.82	¹		(0.64	)		0.18			(1.34	)		—		—		(1.34	)		9.50		1.64	^2,3		0.75	⁴		0.75			7.86			110		75	⁵
12-31-2006		10.32		0.77	¹		0.25			1.02			(0.68	)		—		—		(0.68	)		10.66		10.37	^2,3,6		0.76	⁴		0.76			7.53			154		90
12-31-2005		10.51		0.76	¹		(0.40	)		0.36			(0.55	)		—		—		(0.55	)		10.32		3.70	²		0.78			0.78			7.41			179		92	⁷
12-31-2004		9.95		0.72	¹		0.33			1.05			(0.49	)		—		—		(0.49	)		10.51		11.06	²		0.80			0.80			7.28			755		69
Series II
12-31-2008		9.55		0.85	¹		(3.69	)		(2.84	)		(0.78	)		—		—		(0.78	)		5.93		(29.70	)^2,3		0.97	⁴		0.97			9.78			57		61
12-31-2007		10.70		0.80	¹		(0.65	)		0.15			(1.30	)		—		—		(1.30	)		9.55		1.36	^2,3		0.95	⁴		0.95			7.69			76		75	⁵
12-31-2006		10.35		0.75	¹		0.26			1.01			(0.66	)		—		—		(0.66	)		10.70		10.24	^2,3,6		0.96	⁴		0.96			7.33			101		90
12-31-2005		10.45		0.74	¹		(0.39	)		0.35			(0.45	)		—		—		(0.45	)		10.35		3.56	²		0.98			0.98			7.13			109		92	⁷
12-31-2004		9.91		0.69	¹		0.34			1.03			(0.49	)		—		—		(0.49	)		10.45		10.85	²		1.00			1.00			6.99			691		69
Series NAV
12-31-2008		9.46		0.86	¹		(3.65	)		(2.79	)		(0.81	)		—		—		(0.81	)		5.86		(29.48	)^2,3		0.72	⁴		0.72			10.17			1,404		61
12-31-2007		10.63		0.83	¹		(0.65	)		0.18			(1.35	)		—		—		(1.35	)		9.46		1.64	^2,3		0.70	⁴		0.70			8.07			1,900		75	⁵
12-31-2006		10.29		0.77	¹		0.25			1.02			(0.68	)		—		—		(0.68	)		10.63		10.46	^2,3,6		0.71	⁴		0.71			7.57			1,526		90
12-31-2005⁸		10.63		0.64	¹		(0.38	)		0.26			(0.60	)		—		—		(0.60	)		10.29		2.70	^2,9		0.72	¹⁰		0.72	¹⁰		7.58	¹⁰		1,349		92	⁷

^1.Based on the average of the shares outstanding.

282

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 75% for 12-31-07. Prior years exclude the effect of TBA transactions.

^6.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^7.Excludes merger activity.

^8.Series NAV shares began operations on 2-28-05.

^9.Not annualized.

^10.Annualized.

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

From tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Income Trust

Series NAV

12-31-2008

12.13

0.70

(4.18

)

(3.48

)

(0.59

)

—

(0.59

)

8.06

(28.64

)^2,3

0.87

⁴

0.87

6.59

380

12-31-2007⁵

12.50

0.45

(0.68

)

(0.23

)

(0.14

)

—

(0.14

)

12.13

(1.85

)^2,3,6

0.86

^4,7

0.86

⁷

5.38

⁷

380

129

⁶

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series NAV shares began operations on 5-1-07.

^6.Not annualized.

^7.Annualized.


Per share operating performance for a share outstanding throughout the period																													Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																	Ratios to average net assets
																																			Ratio
																																			of net
																													Ratio			Ratio			investment
	Net asset		Net			Net realized																		Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From						value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital			Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in			distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)			($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Index Allocation Trust
Series I
12-31-2008¹		13.09		0.14	^2,3		(3.40	)		(3.26	)		(0.15	)		(0.01	)		—			(0.16	)		9.67		(24.84	)^4,5,6		0.15	^7,8,9		0.07	^7,9,10		1.79	^3,9		—	¹²		5	⁶
Series II
12-31-2008		13.39		0.15	^2,3		(3.70	)		(3.55	)		(0.13	)		(0.01	)		—			(0.14	)		9.70		(26.47	)^4,5		0.35	^7,8		0.27	^7,10		1.31	³		354			5
12-31-2007		13.37		0.45	^2,3		0.42			0.87			(0.43	)		(0.42	)		—			(0.85	)		13.39		6.55	^4,5		0.33	^7,8		0.27	⁷		3.23	³		337			2
12-31-2006¹¹		12.50		0.28	^2,3		0.89			1.17			(0.19	)		(0.10	)		(0.01	)		(0.30	)		13.37		9.50	^4,5,6		0.39	^7,8,9		0.27	^7,9		2.41	^3,9		109			3	⁶
Series NAV
12-31-2008¹		13.09		0.27	^2,3		(3.52	)		(3.25	)		(0.16	)		(0.01	)		—			(0.17	)		9.67		(24.82	)^4,5,6		0.10	^7,8,9		0.02	^7,9,10		3.85	^3,9		—	¹²		5	⁶

^1.Series I and Series NAV shares began operations on 4-28-08.

283

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^2.Based on the average of the shares outstanding.

^3.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^4.Assumes dividend reinvestment.

^5.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^6.Not annualized.

^7.Does not include expenses of the underlying affiliated funds in which the Portfolio invests.

^8.Does not take into consideration expense reductions during the periods shown.

^9.Annualized.

^10.Ratios do not include expenses indirectly incurred from underlying funds whose expense ratios can vary based on the mix of underlying funds held by the Portfolio. The range of expense ratios of the underlying funds held by the Portfolios was as follows:


Period ended		Index Allocation

12/31/2008		0.49%–0.57%
12/31/2007		0.49%–0.55%

^11.Series II shares began operations on 2-10-06.

^12.Less than $500,000.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
International Core Trust
Series I
12-31-2008		14.39		0.30	¹		(5.79	)		(5.49	)		(0.62	)		(0.16	)		—		(0.78	)		8.12		(38.62	)^2,3		1.11	⁴		1.11			2.52			64		63
12-31-2007		15.16		0.32	¹		1.33			1.65			(0.35	)		(2.07	)		—		(2.42	)		14.39		11.49	^2,3,5		1.07	⁴		1.07			2.07			129		39
12-31-2006		12.78		0.28	¹		2.79			3.07			(0.08	)		(0.61	)		—		(0.69	)		15.16		24.69	^2,3		1.04	⁴		1.04			2.01			141		39
12-31-2005		11.11		0.12	¹		1.64			1.76			(0.09	)		—			—		(0.09	)		12.78		15.94	²		1.19			1.19			1.03			134		147
12-31-2004		9.69		0.12	¹		1.38			1.50			(0.08	)		—			—		(0.08	)		11.11		15.59	²		1.16			1.16			1.18			366		76
Series II
12-31-2008		14.46		0.27	¹		(5.80	)		(5.53	)		(0.59	)		(0.16	)		—		(0.75	)		8.18		(38.70	)^2,3		1.31	⁴		1.31			2.32			26		63
12-31-2007		15.21		0.29	¹		1.33			1.62			(0.30	)		(2.07	)		—		(2.37	)		14.46		11.21	^2,3,5		1.27	⁴		1.27			1.85			53		39
12-31-2006		12.82		0.24	¹		2.82			3.06			(0.06	)		(0.61	)		—		(0.67	)		15.21		24.54	^2,3		1.24	⁴		1.24			1.76			46		39
12-31-2005		11.08		0.01	¹		1.73			1.74			—			—			—		—			12.82		15.70			1.36			1.36			0.05			33		147
12-31-2004		9.68		0.10	¹		1.38			1.48			(0.08	)		—			—		(0.08	)		11.08		15.35	²		1.36			1.36			0.99			253		76
Series NAV
12-31-2008		14.36		0.31	¹		(5.78	)		(5.47	)		(0.63	)		(0.16	)		—		(0.79	)		8.10		(38.58	)^2,3		1.06	⁴		1.06			2.65			627		63
12-31-2007		15.14		0.32	¹		1.34			1.66			(0.37	)		(2.07	)		—		(2.44	)		14.36		11.54	^2,3,5		1.02	⁴		1.02			2.06			1,487		39
12-31-2006		12.76		0.27	¹		2.80			3.07			(0.08	)		(0.61	)		—		(0.69	)		15.14		24.73	^2,3		0.99	⁴		0.99			1.95			1,160		39
12-31-2005⁶		11.44		0.17	¹		1.27			1.44			(0.12	)		—			—		(0.12	)		12.76		12.78	^2,7		1.19	⁸		1.19	⁸		1.72	⁸		702		147

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:

284

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

International Core Series I	$	0.01			11.42	%
International Core Series II		—	⁹		11.21	%
International Core Series NAV		0.01			11.46	%

^6.Series NAV shares began operations on 2-28-05.

^7.Not annualized.

^8.Annualized.

^9.Less than $0.01 per share.


Per share operating performance for a share outstanding throughout the period																													Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																	Ratios to average net assets
																																			Ratio
																																			of net
																													Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset						of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,						expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of			Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period			return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)			(%)			(%)			(%)			(%)			(in millions)		(%)
International Equity Index Trust A
Series I
12-31-2008		22.38		0.53	¹		(10.42	)		(9.89	)		(0.40	)		(0.15	)		—		(0.55	)		11.94			(44.52	)^2,3		0.62	⁴		0.62			2.93			159		9
12-31-2007		21.18		0.51	¹		2.65			3.16			(0.89	)		(1.07	)		—		(1.96	)		22.38	⁵		15.37	^2,3,5		0.61	⁴		0.60			2.23			300		14
12-31-2006		17.09		0.42	¹		3.97			4.39			(0.15	)		(0.15	)		—		(0.30	)		21.18			25.93	^2,3		0.60	⁴		0.60			2.24			239		9
12-31-2005^6,7		14.42		0.19	¹		2.48			2.67			—			—			—		—			17.09			18.52	^3,8		0.79	^4,9		0.64	⁹		1.78	⁹		121		7	⁸
4-29-2005^7,13		16.33		0.14	¹		(0.46	)		(0.32	)		(0.15	)		(1.44	)		—		(1.59	)		14.42			(1.97	)⁸		0.64	⁹		0.64	⁹		2.71	⁹		90		9	⁸
12-31-2004^10,11		13.89		0.13			2.41			2.54			(0.10	)		—			—		(0.10	)		16.33			18.45	^2,8		0.72	⁹		0.72	⁹		1.40	⁹		77		20	^8,12
Series II
12-31-2008		22.36		0.50	¹		(10.41	)		(9.91	)		(0.35	)		(0.15	)		—		(0.50	)		11.95			(44.62	)^2,3		0.82	⁴		0.82			2.74			15		9
12-31-2007		21.14		0.46	¹		2.64			3.10			(0.81	)		(1.07	)		—		(1.88	)		22.36	⁵		15.11	^2,3,5		0.81	⁴		0.80			2.04			35		14
12-31-2006		17.06		0.40	¹		3.95			4.35			(0.12	)		(0.15	)		—		(0.27	)		21.14			25.70	^2,3		0.80	⁴		0.80			2.11			44		9
12-31-2005^6,7		14.41		0.17	¹		2.48			2.65			—			—			—		—			17.06			18.39	^3,8		0.98	^4,9		0.84	⁹		1.59	⁹		34		7	⁸
4-29-2005^7,13		16.31		0.13	¹		(0.46	)		(0.33	)		(0.13	)		(1.44	)		—		(1.57	)		14.41			(2.03	)⁸		0.84	⁹		0.84	⁹		2.46	⁹		27		9	⁸
12-31-2004^10,11		13.89		0.12			2.40			2.52			(0.10	)		—			—		(0.10	)		16.31			18.29	^2,8		0.91	⁹		0.91	⁹		1.04	⁹		26		20	^8,12
Series NAV
12-31-2008		22.35		0.50	¹		(10.37	)		(9.87	)		(0.41	)		(0.15	)		—		(0.56	)		11.92			(44.48	)^2,3		0.57	⁴		0.57			2.89			51		9
12-31-2007		21.16		0.51	¹		2.66			3.17			(0.91	)		(1.07	)		—		(1.98	)		22.35	⁵		15.43	^2,3,5		0.56	⁴		0.55			2.24			51		14
12-31-2006¹¹		17.95		0.32	¹		3.20			3.52			(0.16	)		(0.15	)		—		(0.31	)		21.16			19.83	^2,3,8		0.55	^4,9		0.55	⁹		1.84	⁹		16		9	⁸

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value by less than $0.01 for Series I and Series II and by $0.01 per share for Series NAV and the total return by less than 0.01% for Series I and Series II and by 0.05% for Series NAV. If the Affiliates had not made these payments, the end of period net asset value and total return would have been $22.38, $22.36 and $22.34 and 15.37%, 15.11% and 15.38% for Series I, Series II and Series NAV, respectively.

^6.Period from 4-30-05 to 12-31-05.

^7.Period from 1-1-05 to 4-29-05.

^8.Not annualized.

^9.Annualized.

^10.Audited by previous Independent Registered Public Accounting Firm.

^11.Series I, Series II and Series NAV shares began operations on 5-3-04, 5-3-04 and 2-10-06, respectively.

^12.Excludes merger activity.

285

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^13.Effective after the close of business on 4-29-05, International Equity Index, formerly a series of the John Hancock Variable Series Trust, reorganized into a separate portfolio of John Hancock Trust: International Equity Index A.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																	Ratio
																																	of net
																												Ratio			Ratio		investment
	Net asset		Net			Net realized																	Net asset					of gross			of net		income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses		(loss) to		Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of		Total			to average			to average		average		end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period		return			net assets			net assets		net assets		period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)		(%)		(in millions)		(%)
International Equity Index Trust B
Series NAV
12-31-2008		21.05		0.54	¹		(9.79	)		(9.25	)		(0.48	)		(0.16	)		—		(0.64	)		11.16		(44.36	)^4,5		0.58	⁶		0.34		3.18		304		12
12-31-2007		21.28		0.54	¹		2.58			3.12			(1.13	)		(2.22	)		—		(3.35	)		21.05		15.76	^4,5		0.57	⁶		0.34		2.51		550		9
12-31-2006		16.99		0.47	¹		4.14			4.61			(0.16	)		(0.16	)		—		(0.32	)		21.28		27.41	^4,5,7		0.57	⁶		0.34		2.48		425		20
12-31-2005²		16.25		0.33	¹		2.05			2.38			(0.20	)		(1.44	)		—		(1.64	)		16.99		16.56	^4,5		0.61	⁶		0.34		2.56		418		9
12-31-2004³		13.82		0.31			2.44			2.75			(0.32	)		—			—		(0.32	)		16.25		20.24	^4,5		0.38	⁶		0.30		2.13		200		20

^1.Based on the average of the shares outstanding.

2.The financial highlights for the year ended 12-31-2005 take into consideration the effect of the merger of the former VST International Equity Index Series NAV on 4-29-05.

^3.Audited by previous Independent Registered Public Accounting Firm.

^4.Assumes dividend reinvestment.

^5.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^6.Does not take into consideration expense reductions during the periods shown.

^7.John Hancock Life Insurance Company made a voluntary payment to the portfolio of $2,611,555. Excluding this payment, the total return would have been 26.63%.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
International Opportunities Trust
Series I
12-31-2008		17.66		0.20	¹		(8.83	)		(8.63	)		(0.17	)		(0.62	)		—		(0.79	)		8.24		(50.56	)^2,3		1.08	⁴		1.07			1.51			4			128
12-31-2007		18.15		0.23	¹		3.10			3.33			(0.29	)		(3.53	)		—		(3.82	)		17.66		20.10	^2,3		1.04	⁴		1.04			1.22			10			122
12-31-2006		15.53		0.12	¹		3.47			3.59			(0.10	)		(0.87	)		—		(0.97	)		18.15		23.83	^2,3		1.07	⁴		1.07			0.74			6			102
12-31-2005⁵		12.50		0.02	¹		3.01			3.03			—			—			—		—			15.53		24.24	⁶		1.19	⁷		1.19	⁷		0.22	⁷		—	⁸		101
Series II
12-31-2008		17.69		0.16	¹		(8.82	)		(8.66	)		(0.14	)		(0.62	)		—		(0.76	)		8.27		(50.66	)^2,3		1.28	⁴		1.27			1.14			32			128
12-31-2007		18.17		0.23	¹		3.05			3.28			(0.23	)		(3.53	)		—		(3.76	)		17.69		19.77	^2,3		1.24	⁴		1.24			1.24			84			122
12-31-2006		15.51		0.07	¹		3.53			3.60			(0.07	)		(0.87	)		—		(0.94	)		18.17		23.90	^2,3		1.25	⁴		1.25			0.43			44			102
12-31-2005⁵		12.50		0.03	¹		2.98			3.01			—			—			—		—			15.51		24.08	⁶		1.42	⁷		1.42	⁷		0.25	⁷		13			101
Series NAV
12-31-2008		17.66		0.18	¹		(8.80	)		(8.62	)		(0.18	)		(0.62	)		—		(0.80	)		8.24		(50.51	)^2,3		1.03	⁴		1.02			1.36			474			128
12-31-2007		18.17		0.26	¹		3.07			3.33			(0.31	)		(3.53	)		—		(3.84	)		17.66		20.10	^2,3		0.99	⁴		0.99			1.43			870			122
12-31-2006		15.54		0.11	¹		3.50			3.61			(0.11	)		(0.87	)		—		(0.98	)		18.17		23.96	^2,3		1.00	⁴		1.00			0.66			666			102
12-31-2005⁵		12.50		0.14	¹		2.90			3.04			—			—			—		—			15.54		24.32	⁶		1.11	⁷		1.11	⁷		1.48	⁷		332			101

286

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series I, Series II and Series NAV shares began operations on 4-29-05.

^6.Not annualized.

^7.Annualized.

^8.Less than $500,000.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
International Small Cap Trust
Series I
12-31-2008		18.79		0.40	¹		(10.22	)		(9.82	)		(0.41	)		(0.22	)		—		(0.63	)		8.34		(52.98	)^2,3		1.23	⁴		1.22			2.70			51		24
12-31-2007		24.30		0.27	¹		2.10			2.37			(0.71	)		(7.17	)		—		(7.88	)		18.79		10.18	^2,3,5		1.17	⁴		1.17			1.13			144		24
12-31-2006		19.29		0.31	¹		4.93			5.24			(0.23	)		—			—		(0.23	)		24.30		27.34	^2,3		1.16	⁴		1.16			1.45			156		41
12-31-2005		17.63		0.23	¹		1.59			1.82			(0.16	)		—			—		(0.16	)		19.29		10.39	²		1.22			1.22			1.31			139		47
12-31-2004		14.56		0.22	¹		2.87			3.09			(0.02	)		—			—		(0.02	)		17.63		21.23	²		1.24			1.24			1.44			309		32
Series II
12-31-2008		18.87		0.37	¹		(10.26	)		(9.89	)		(0.37	)		(0.22	)		—		(0.59	)		8.39		(53.11	)^2,3		1.43	⁴		1.42			2.49			24		24
12-31-2007		24.35		0.21	¹		2.11			2.32			(0.63	)		(7.17	)		—		(7.80	)		18.87		9.90	^2,3,5		1.37	⁴		1.37			0.90			71		24
12-31-2006		19.31		0.27	¹		4.97			5.24			(0.20	)		—			—		(0.20	)		24.35		27.29	^2,3		1.36	⁴		1.36			1.28			59		41
12-31-2005		17.58		0.15	¹		1.62			1.77			(0.04	)		—			—		(0.04	)		19.31		10.10	²		1.41			1.41			0.83			47		47
12-31-2004		14.54		0.17	¹		2.89			3.06			(0.02	)		—			—		(0.02	)		17.58		21.03	²		1.44			1.44			1.10			187		32
Series NAV
12-31-2008		18.73		0.41	¹		(10.20	)		(9.79	)		(0.42	)		(0.22	)		—		(0.64	)		8.30		(53.00	)^2,3		1.18	⁴		1.17			2.80			155		24
12-31-2007		24.26		0.28	¹		2.09			2.37			(0.73	)		(7.17	)		—		(7.90	)		18.73		10.20	^2,3,5		1.12	⁴		1.12			1.18			403		24
12-31-2006		19.25		0.30	¹		4.95			5.25			(0.24	)		—			—		(0.24	)		24.26		27.46	^2,3		1.11	⁴		1.11			1.38			413		41
12-31-2005⁶		18.52		0.23	¹		0.70			0.93			(0.20	)		—			—		(0.20	)		19.25		5.11	^2,7		1.16	⁸		1.16	⁸		1.52	⁸		381		47

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007

International Small Cap Series I	$	0.02		10.06	%
International Small Cap Series II		0.01		9.84	%
International Small Cap Series NAV		0.01		10.14	%

^6.Series NAV shares began operations on 2-28-05.

^7.Not annualized.

^8.Annualized.

287

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

International Small Company Trust

Series NAV

12-31-2008

12.18

0.18

(5.71

)

(5.53

)

(0.12

)

—

(0.12

)

6.53

(45.35

)^2,3

1.11

⁴

1.11

1.89

238

12-31-2007

13.24

0.15

0.52

0.67

(0.22

)

(1.51

)

—

(1.73

)

12.18

5.43

^2,5

1.11

⁴

1.10

1.08

227

12-31-2006⁶

12.50

0.08

0.66

0.74

—

13.24

5.92

^5,7

1.12

^3,4

1.12

0.96

235

⁷

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Annualized.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^6.Series NAV shares began operations on 4-28-06.

^7.Not annualized.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
International Value Trust
Series I
12-31-2008		17.14		0.47	¹		(7.61	)		(7.14	)		(0.50	)		(0.44	)		—		(0.94	)		9.06		(42.67	)^2,3		1.04	⁴		1.02			3.47			165		18
12-31-2007		19.38		0.43	¹		1.26			1.69			(0.84	)		(3.09	)		—		(3.93	)		17.14		9.53	^2,3,5		1.02	⁴		1.00			2.32			387		24
12-31-2006		15.99		0.46	¹		4.05			4.51			(0.33	)		(0.79	)		—		(1.12	)		19.38		29.59	^2,3		0.98	⁴		0.97			2.67			453		38
12-31-2005		14.80		0.33	¹		1.20			1.53			(0.15	)		(0.19	)		—		(0.34	)		15.99		10.54	^2,3		1.06	⁴		1.02			2.23			404		76
12-31-2004		12.33		0.21	¹		2.42			2.63			(0.16	)		—			—		(0.16	)		14.80		21.54	^2,3		1.07	⁴		1.00			1.64			462		29
Series II
12-31-2008		17.09		0.44	¹		(7.59	)		(7.15	)		(0.46	)		(0.44	)		—		(0.90	)		9.04		(42.81	)^2,3		1.24	⁴		1.22			3.27			118		18
12-31-2007		19.30		0.39	¹		1.26			1.65			(0.77	)		(3.09	)		—		(3.86	)		17.09		9.36	^2,3,5		1.22	⁴		1.20			2.12			259		24
12-31-2006		15.94		0.42	¹		4.03			4.45			(0.30	)		(0.79	)		—		(1.09	)		19.30		29.27	^2,3		1.18	⁴		1.17			2.46			252		38
12-31-2005		14.74		0.27	¹		1.22			1.49			(0.10	)		(0.19	)		—		(0.29	)		15.94		10.31	^2,3		1.26	⁴		1.22			1.80			213		76
12-31-2004		12.29		0.19	¹		2.41			2.60			(0.15	)		—			—		(0.15	)		14.74		21.37	^2,3		1.27	⁴		1.20			1.50			371		29
Series NAV
12-31-2008		17.06		0.47	¹		(7.58	)		(7.11	)		(0.50	)		(0.44	)		—		(0.94	)		9.01		(42.64	)^2,3		0.99	⁴		0.97			3.49			582		18
12-31-2007		19.31		0.43	¹		1.26			1.69			(0.85	)		(3.09	)		—		(3.94	)		17.06		9.61	^2,3,5		0.97	⁴		0.95			2.32			1,103		24
12-31-2006		15.94		0.46	¹		4.04			4.50			(0.34	)		(0.79	)		—		(1.13	)		19.31		29.61	^2,3		0.93	⁴		0.92			2.67			921		38
12-31-2005⁶		15.29		0.34	¹		0.68			1.02			(0.18	)		(0.19	)		—		(0.37	)		15.94		6.87	^2,3,7		1.01	^4,8		0.97	⁸		2.65	⁸		682		76

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

288

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV
	per share from	Total Return excluding
	Payment from	Payment from the
	Affiliate for the	Affiliate for the
	year ended	year ended
Portfolio	12-31-2007	12-31-2007

International Value Series I	$0.01		9.46	%
International Value Series II	0.01		9.29	%
International Value Series NAV	0.01		9.54	%

^6.Series NAV shares began operations on 2-28-05.

^7.Not annualized.

^8.Annualized.


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net		From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized		tax return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain		of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)		($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Investment Quality Bond Trust
Series I
12-31-2008		11.30		0.56	¹		(0.75	)		(0.19	)		(0.75	)		—		—		(0.75	)		10.36		(1.67	)^2,3		0.73	⁴		0.73			5.08			139		105
12-31-2007		11.66		0.59	¹		0.11			0.70			(1.06	)		—		—		(1.06	)		11.30		6.21	^2,3		0.71	⁴		0.71			5.08			164		70
12-31-2006		11.98		0.55	¹		(0.16	)		0.39			(0.71	)		—		—		(0.71	)		11.66		3.57	^2,3		0.72	⁴		0.72			4.79			183		28
12-31-2005		12.41		0.61	¹		(0.34	)		0.27			(0.70	)		—		—		(0.70	)		11.98		2.26	²		0.74			0.74			5.08			227		30
12-31-2004		12.58		0.61	¹		(0.03	)		0.58			(0.75	)		—		—		(0.75	)		12.41		4.81	²		0.74			0.74			4.94			362		23
Series II
12-31-2008		11.29		0.54	¹		(0.73	)		(0.19	)		(0.73	)		—		—		(0.73	)		10.37		(1.72	)^2,3		0.93	⁴		0.93			4.88			113		105
12-31-2007		11.64		0.56	¹		0.10			0.66			(1.01	)		—		—		(1.01	)		11.29		5.92	^2,3		0.91	⁴		0.91			4.89			161		70
12-31-2006		11.96		0.53	¹		(0.16	)		0.37			(0.69	)		—		—		(0.69	)		11.64		3.36	^2,3		0.92	⁴		0.92			4.60			143		28
12-31-2005		12.37		0.59	¹		(0.35	)		0.24			(0.65	)		—		—		(0.65	)		11.96		2.03	²		0.94			0.94			4.90			90		30
12-31-2004		12.55		0.57	¹		(0.01	)		0.56			(0.74	)		—		—		(0.74	)		12.37		4.65	²		0.94			0.94			4.67			110		23
Series NAV
12-31-2008		11.27		0.57	¹		(0.74	)		(0.17	)		(0.76	)		—		—		(0.76	)		10.34		(1.52	)^2,3		0.68	⁴		0.68			5.14			99		105
12-31-2007		11.65		0.59	¹		0.10			0.69			(1.07	)		—		—		(1.07	)		11.27		6.13	^2,3		0.66	⁴		0.66			5.13			117		70
12-31-2006		11.97		0.55	¹		(0.15	)		0.40			(0.72	)		—		—		(0.72	)		11.65		3.65	^2,3		0.67	⁴		0.67			4.82			96		28
12-31-2005⁵		12.45		0.52	¹		(0.28	)		0.24			(0.72	)		—		—		(0.72	)		11.97		2.06	^2,6		0.67	⁷		0.67	⁷		5.14	⁷		59		30

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series NAV shares began operations on 2-28-05.

^6.Not annualized.

^7.Annualized.

289

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Large Cap Trust
Series I
12-31-2008		14.44		0.17	¹		(5.88	)		(5.71	)		(0.18	)		—			—		(0.18	)		8.55		(39.52	)^3,4		0.80	⁶		0.80			1.36			145			71
12-31-2007		15.74		0.17	¹		0.05	²		0.22			(0.20	)		(1.32	)		—		(1.52	)		14.44		1.40	^3,4,5		0.80	⁶		0.79			1.08			295			43	⁷
12-31-2006		14.13		0.16	¹		1.82			1.98			(0.03	)		(0.34	)		—		(0.37	)		15.74		14.36	^3,4		0.85	⁶		0.85			1.14			1			31
12-31-2005⁸		12.50		0.05	¹		1.58			1.63			—			—			—		—			14.13		13.04	⁹		1.15	¹⁰		1.15	¹⁰		0.58	¹⁰		—	¹¹		46	⁹
Series II
12-31-2008		14.40		0.14	¹		(5.86	)		(5.72	)		(0.15	)		—			—		(0.15	)		8.53		(39.67	)^3,4		1.00	⁶		1.00			1.15			9			71
12-31-2007		15.66		0.14	¹		0.06	²		0.20			(0.14	)		(1.32	)		—		(1.46	)		14.40		1.27	^3,4,5		1.00	⁶		1.00			0.88			20			43	⁷
12-31-2006		14.09		0.12	¹		1.83			1.95			(0.04	)		(0.34	)		—		(0.38	)		15.66		14.15	^3,4		1.08	⁶		1.08			0.80			2			31
12-31-2005⁸		12.50		0.05	¹		1.54			1.59			—			—			—		—			14.09		12.72	⁹		1.11	¹⁰		1.11	¹⁰		0.53	¹⁰		1			46	⁹
Series NAV
12-31-2008		14.41		0.17	¹		(5.88	)		(5.71	)		(0.18	)		—			—		(0.18	)		8.52		(39.55	)^3,4		0.75	⁶		0.75			1.38			147			71
12-31-2007		15.70		0.17	¹		0.07	²		0.24			(0.21	)		(1.32	)		—		(1.53	)		14.41		1.53	^3,4,5		0.78	⁶		0.77			1.09			370			43	⁷
12-31-2006		14.12		0.15	¹		1.83			1.98			(0.06	)		(0.34	)		—		(0.40	)		15.70		14.38	^3,4		0.83	⁶		0.83			1.03			209			31
12-31-2005⁸		12.50		0.07	¹		1.55			1.62			—			—			—		—			14.12		12.96	⁹		0.94	¹⁰		0.94	¹⁰		0.75	¹⁰		125			46	⁹

^1.Based on the average of the shares outstanding.

^2.The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.

^3.Assumes dividend reinvestment.

^4.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007


Large Cap Series I	$	0.07		0.90%
Large Cap Series II		0.07		0.78%
Large Cap Series NAV		0.06		1.11%

^6.Does not take into consideration expense reductions during the periods shown.

^7.Excludes merger activity.

^8.Series I, Series II and Series NAV shares began operations on 4-29-05.

^9.Not annualized.

^10.Annualized.

^11.Less than $500,000.

290

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Large Cap Value Trust
Series I
12-31-2008		22.37		0.22	¹		(8.25	)		(8.03	)		(0.29	)		—			—		(0.29	)		14.05		(35.91	)^2,3		0.91	⁴		0.90			1.15			37		107
12-31-2007		23.07		0.21	¹		0.79			1.00			(0.23	)		(1.47	)		—		(1.70	)		22.37		4.38	^2,3,5		0.90	⁴		0.90			0.87			75		67
12-31-2006		21.70		0.20	¹		3.08			3.28			(0.10	)		(1.81	)		—		(1.91	)		23.07		15.93	^2,3		0.96	⁴		0.96			0.90			87		61	⁹
12-31-2005		18.79		0.10	¹		2.81			2.91			—			—			—		—			21.70		15.49			0.97			0.97			0.50			10		105
12-31-2004		15.66		0.20	¹		3.19			3.39			(0.12	)		(0.14	)		—		(0.26	)		18.79		21.80	²		1.03			1.03			1.22			71		109
Series II
12-31-2008		22.29		0.18	¹		(8.20	)		(8.02	)		(0.25	)		—			—		(0.25	)		14.02		(36.02	)^2,3		1.11	⁴		1.10			0.97			24		107
12-31-2007		22.96		0.16	¹		0.80			0.96			(0.16	)		(1.47	)		—		(1.63	)		22.29		4.18	^2,3,5		1.10	⁴		1.10			0.68			48		67
12-31-2006		21.60		0.11	¹		3.12			3.23			(0.06	)		(1.81	)		—		(1.87	)		22.96		15.75	^2,3		1.14	⁴		1.14			0.52			63		61	⁹
12-31-2005		18.74		0.08	¹		2.78			2.86			—			—			—		—			21.60		15.26			1.18			1.18			0.39			90		105
12-31-2004		15.64		0.17	¹		3.18			3.35			(0.11	)		(0.14	)		—		(0.25	)		18.74		21.53	²		1.23			1.23			1.00			102		109
Series NAV
12-31-2008		22.38		0.23	¹		(8.25	)		(8.02	)		(0.31	)		—			—		(0.31	)		14.05		(35.89	)^2,3		0.86	⁴		0.85			1.22			242		107
12-31-2007		23.09		0.22	¹		0.80			1.02			(0.26	)		(1.47	)		—		(1.73	)		22.38		4.45	^2,3,5		0.85	⁴		0.85			0.93			506		67
12-31-2006		21.71		0.19	¹		3.11			3.30			(0.11	)		(1.81	)		—		(1.92	)		23.09		16.03	^2,3		0.89	⁴		0.89			0.86			386		61	⁹
12-31-2005⁶		19.80		0.10	¹		1.81			1.91			—			—			—		—			21.71		9.65	^2,7		0.91	⁸		0.91	⁸		0.56	⁸		146		105

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007

Large Cap Value Series I	$	0.01		4.33%
Large Cap Value Series II		0.01		4.14%
Large Cap Value Series NAV		0.01		4.40%

^6.Series NAV shares began operation on 2-28-05.

^7.Not annualized.

^8.Annualized.

^9.Excludes merger activities.

291

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Lifestyle Aggressive Trust
Series I
12-31-2008		10.82		0.10	^1,2		(4.22	)		(4.12	)		(0.12	)		(1.15	)		—		(1.27	)		5.43		(41.99	)³		0.13	⁴		0.13	^4,5		1.26	¹		102		50
12-31-2007		11.27		0.16	^1,2		0.76			0.92			(0.27	)		(1.10	)		—		(1.37	)		10.82		8.55	³		0.11	⁴		0.11	^4,5		1.39	¹		217		44
12-31-2006		13.46		0.06	^1,2		1.71			1.77			(0.09	)		(3.87	)		—		(3.96	)		11.27		15.46	³		0.11	⁴		0.11	⁴		0.52	¹		251		32
12-31-2005		12.59		0.06	^1,2		1.23			1.29			(0.07	)		(0.35	)		—		(0.42	)		13.46		10.64	³		0.12	⁴		0.12	⁴		0.51	¹		210		112
12-31-2004		10.93		0.04	¹		1.70			1.74			(0.04	)		(0.04	)		—		(0.08	)		12.59		16.06	³		0.07	⁴		0.07	⁴		0.31	¹		486		57
Series II
12-31-2008		10.79		0.09	^1,2		(4.21	)		(4.12	)		(0.10	)		(1.15	)		—		(1.25	)		5.42		(42.10	)³		0.33	⁴		0.33	^4,5		1.07	¹		166		50
12-31-2007		11.22		0.14	^1,2		0.75			0.89			(0.22	)		(1.10	)		—		(1.32	)		10.79		8.31	³		0.31	⁴		0.31	^4,5		1.23	¹		332		44
12-31-2006		13.44		0.04	^1,2		1.69			1.73			(0.09	)		(3.86	)		—		(3.95	)		11.22		15.19	³		0.31	⁴		0.31	⁴		0.32	¹		367		32
12-31-2005		12.59		0.03	^1,2		1.24			1.27			(0.07	)		(0.35	)		—		(0.42	)		13.44		10.47	³		0.29	⁴		0.29	⁴		0.26	¹		331		112
12-31-2004		10.93		0.04	¹		1.70			1.74			(0.04	)		(0.04	)		—		(0.08	)		12.59		16.06	³		0.07	⁴		0.07	⁴		0.30	¹		294		57
Series NAV
12-31-2008		10.82		0.14	^1,2		(4.26	)		(4.12	)		(0.12	)		(1.15	)		—		(1.27	)		5.43		(41.94	)³		0.08	⁴		0.08	^4,5		1.80	¹		45		50
12-31-2007		11.28		0.19	^1,2		0.73			0.92			(0.28	)		(1.10	)		—		(1.38	)		10.82		8.55	³		0.06	⁴		0.06	^4,5		1.66	¹		45		44
12-31-2006		13.47		0.03	^1,2		1.74			1.77			(0.09	)		(3.87	)		—		(3.96	)		11.28		15.48	³		0.06	⁴		0.06	⁴		0.29	¹		19		32
12-31-2005⁶		11.61		(0.01	)^1,2		1.87			1.86			—	⁷		—	⁷		—		—	⁷		13.47		16.03	^3,8		0.07	^4,9		0.07	^4,9		(0.06	)^1,9		2		112

^1.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Does not include expenses of the underlying affiliated funds in which the Portfolio invests.

^5.Ratios do not include expenses indirectly incurred from underlying funds whose expense ratios can vary based on the mix of underlying funds held by the Portfolio. The range of expense ratios of the underlying funds held by the Portfolios was as follows:


Period ended	Lifestyle Aggressive Trust

12/31/2008		0.34%–1.18%
12/31/2007		0.34%–1.38%

^6.Series NAV shares began operations on 4-29-05.

^7.Less than $0.01 per share.

^8.Not annualized.

^9.Annualized.

292

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																													Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																	Ratios to average net assets
																																			Ratio
																																			of net
																													Ratio			Ratio			investment
	Net asset		Net			Net realized																		Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From						value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital			Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in			distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)			($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Lifestyle Balanced Trust
Series I
12-31-2008		13.61		0.34	^1,2		(4.46	)		(4.12	)		(0.37	)		(0.53	)		—			(0.90	)		8.59		(31.30	)³		0.12	⁴		0.12	^4,5		2.94	¹		581		36
12-31-2007		13.84		0.60	^1,2		0.27			0.87			(0.62	)		(0.48	)		—			(1.10	)		13.61		6.47	³		0.11	⁴		0.11	^4,5		4.28	¹		1,065		13
12-31-2006		13.91		0.26	^1,2		1.36			1.62			(0.25	)		(1.40	)		(0.04	)		(1.69	)		13.84		12.73	³		0.10	⁴		0.10	⁴		1.96	¹		1,132		19
12-31-2005		13.79		0.27	^1,2		0.62			0.89			(0.28	)		(0.49	)		—			(0.77	)		13.91		6.88	³		0.12	⁴		0.12	⁴		2.08	¹		1,031		99
12-31-2004		12.43		0.24	¹		1.40			1.64			(0.24	)		(0.04	)		—			(0.28	)		13.79		13.49	³		0.07	⁴		0.07	⁴		1.75	¹		1,846		51
Series II
12-31-2008		13.56		0.36	^1,2		(4.49	)		(4.13	)		(0.34	)		(0.53	)		—			(0.87	)		8.56		(31.45	)³		0.32	⁴		0.32	^4,5		3.11	¹		6,959		36
12-31-2007		13.79		0.60	^1,2		0.24			0.84			(0.59	)		(0.48	)		—			(1.07	)		13.56		6.26	³		0.31	⁴		0.31	^4,5		4.30	¹		9,496		13
12-31-2006		13.89		0.21	^1,2		1.38			1.59			(0.25	)		(1.40	)		(0.04	)		(1.69	)		13.79		12.51	³		0.30	⁴		0.30	⁴		1.60	¹		7,318		19
12-31-2005		13.78		0.18	^1,2		0.70			0.88			(0.28	)		(0.49	)		—			(0.77	)		13.89		6.80	³		0.30	⁴		0.30	⁴		1.34	¹		4,538		99
12-31-2004		12.43		0.24	¹		1.39			1.63			(0.24	)		(0.04	)		—			(0.28	)		13.78		13.41	³		0.07	⁴		0.07	⁴		1.39	¹		2,101		51
Series NAV
12-31-2008		13.63		1.43	^1,2		(5.56	)		(4.13	)		(0.37	)		(0.53	)		—			(0.90	)		8.60		(31.28	)³		0.08	⁴		0.08	^4,5		14.44	¹		1,035		36
12-31-2007		13.86		0.65	^1,2		0.23			0.88			(0.63	)		(0.48	)		—			(1.11	)		13.63		6.52	³		0.06	⁴		0.06	^4,5		4.67	¹		103		13
12-31-2006		13.92		0.21	^1,2		1.42			1.63			(0.25	)		(1.40	)		(0.04	)		(1.69	)		13.86		12.80	³		0.05	⁴		0.05	⁴		1.61	¹		52		19
12-31-2005⁶		12.67		—	^1,2,7		1.26			1.26			—	⁷		(0.01	)		—			(0.01	)		13.92		9.94	^3,8		0.06	^4,9		0.06	^4,9		(0.03	)^1,9		12		99

^1.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Does not include expenses of the underlying affiliated funds in which the Portfolio invests.


Period ended	Lifestyle Balanced Trust

12/31/2008		0.49%–1.17%
12/31/2007		0.49%–1.12%

^6.Series NAV shares began operations on 4-29-05.

^7.Less than $0.01 per share.

^8.Not annualized.

^9.Annualized.

293

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Lifestyle Conservative Trust
Series I
12-31-2008		13.02		0.55	^1,2		(2.55	)		(2.00	)		(0.51	)		(0.25	)		—		(0.76	)		10.26		(15.57	)³		0.12	⁴		0.12	^4,5		4.52	¹		168		31
12-31-2007		13.43		0.91	^1,2		(0.21	)		0.70			(0.93	)		(0.18	)		—		(1.11	)		13.02		5.38	³		0.11	⁴		0.11	^4,5		6.84	¹		182		27
12-31-2006		13.42		0.39	^1,2		0.67			1.06			(0.44	)		(0.61	)		—		(1.05	)		13.43		8.44	³		0.11	⁴		0.11	⁴		3.00	¹		171		34
12-31-2005		14.20		0.42	^1,2		(0.05	)		0.37			(0.43	)		(0.72	)		—		(1.15	)		13.42		2.88	³		0.12	⁴		0.12	⁴		3.16	¹		182		104
12-31-2004		13.64		0.42	¹		0.71			1.13			(0.42	)		(0.15	)		—		(0.57	)		14.20		8.59	³		0.07	⁴		0.07	⁴		2.80	¹		373		44
Series II
12-31-2008		12.96		0.63	^1,2		(2.63	)		(2.00	)		(0.49	)		(0.25	)		—		(0.74	)		10.22		(15.67	)³		0.32	⁴		0.32	^4,5		5.30	¹		1,297		31
12-31-2007		13.37		0.91	^1,2		(0.24	)		0.67			(0.90	)		(0.18	)		—		(1.08	)		12.96		5.17	³		0.31	⁴		0.31	^4,5		6.85	¹		738		27
12-31-2006		13.40		0.35	^1,2		0.66			1.01			(0.43	)		(0.61	)		—		(1.04	)		13.37		8.13	³		0.31	⁴		0.31	⁴		2.71	¹		524		34
12-31-2005		14.19		0.32	^1,2		0.04			0.36			(0.43	)		(0.72	)		—		(1.15	)		13.40		2.81	³		0.30	⁴		0.30	⁴		2.39	¹		422		104
12-31-2004		13.64		0.42	¹		0.70			1.12			(0.42	)		(0.15	)		—		(0.57	)		14.19		8.51	³		0.07	⁴		0.07	⁴		2.50	¹		286		44
Series NAV
12-31-2008		13.03		0.68	^1,2		(2.66	)		(1.98	)		(0.52	)		(0.25	)		—		(0.77	)		10.28		(15.43	)³		0.07	⁴		0.07	^4,5		5.72	¹		10		31
12-31-2007		13.45		1.02	^1,2		(0.32	)		0.70			(0.94	)		(0.18	)		—		(1.12	)		13.03		5.35	³		0.06	⁴		0.06	^4,5		7.60	¹		5		27
12-31-2006		13.44		0.29	^1,2		0.77			1.06			(0.44	)		(0.61	)		—		(1.05	)		13.45		8.43	³		0.06	⁴		0.06	⁴		2.22	¹		3		34
12-31-2005⁶		12.99		(0.01	)^1,2		0.46			0.45			—			—			—		—			13.44		3.46	⁷		0.06	^4,8		0.06	^4,8		(0.06	)^1,8		1		104

^1.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Does not include expenses of the underlying affiliated funds in which the Portfolio invests.


Period ended	Lifestyle Conservative Trust

12/31/2008		0.49%–1.11%
12/31/2007		0.63%–1.06%

^6.Series NAV shares began operations on 4-29-05.

^7.Not annualized.

^8.Annualized.

294

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Lifestyle Growth Trust
Series I
12-31-2008		13.76		0.25	^1,2		(5.09	)		(4.84	)		(0.26	)		(0.67	)		—		(0.93	)		7.99		(36.56	)³		0.12	⁴		0.12	^4,5		2.20	¹		512		40
12-31-2007		13.94		0.40	^1,2		0.61			1.01			(0.49	)		(0.70	)		—		(1.19	)		13.76		7.44	³		0.11	⁴		0.11	^4,5		2.84	¹		946		17
12-31-2006		14.06		0.18	^1,2		1.57			1.75			(0.21	)		(1.66	)		—		(1.87	)		13.94		13.50	³		0.10	⁴		0.10	⁴		1.31	¹		1,030		22
12-31-2005		13.40		0.17	^1,2		0.94			1.11			(0.17	)		(0.28	)		—		(0.45	)		14.06		8.66	³		0.12	⁴		0.12	⁴		1.30	¹		901		111
12-31-2004		11.86		0.13	¹		1.58			1.71			(0.13	)		(0.04	)		—		(0.17	)		13.40		14.57	³		0.07	⁴		0.07	⁴		0.98	¹		1,730		48
Series II
12-31-2008		13.73		0.25	^1,2		(5.09	)		(4.84	)		(0.24	)		(0.67	)		—		(0.91	)		7.98		(36.67	)³		0.32	⁴		0.32	^4,5		2.21	¹		8,826		40
12-31-2007		13.88		0.40	^1,2		0.59			0.99			(0.44	)		(0.70	)		—		(1.14	)		13.73		7.26	³		0.31	⁴		0.31	^4,5		2.82	¹		13,018		17
12-31-2006		14.03		0.13	^1,2		1.59			1.72			(0.21	)		(1.66	)		—		(1.87	)		13.88		13.28	³		0.30	⁴		0.30	⁴		0.96	¹		9,552		22
12-31-2005		13.39		0.10	^1,2		0.99			1.09			(0.17	)		(0.28	)		—		(0.45	)		14.03		8.51	³		0.30	⁴		0.30	⁴		0.74	¹		4,881		111
12-31-2004		11.85		0.13	¹		1.58			1.71			(0.13	)		(0.04	)		—		(0.17	)		13.39		14.59	³		0.07	⁴		0.07	⁴		0.75	¹		2,117		48
Series NAV
12-31-2008		13.78		0.30	^1,2		(5.15	)		(4.85	)		(0.26	)		(0.67	)		—		(0.93	)		8.00		(36.53	)³		0.07	⁴		0.07	^4,5		2.71	¹		211		40
12-31-2007		13.96		0.45	^1,2		0.58			1.03			(0.51	)		(0.70	)		—		(1.21	)		13.78		7.55	³		0.06	⁴		0.06	^4,5		3.22	¹		234		17
12-31-2006		14.07		0.14	^1,2		1.62			1.76			(0.21	)		(1.66	)		—		(1.87	)		13.96		13.58	³		0.05	⁴		0.05	⁴		1.03	¹		115		22
12-31-2005⁶		12.46		—	^1,2,7		1.63			1.63			—	⁷		(0.02	)		—		(0.02	)		14.07		13.08	^3,8		0.06	^4,9		0.06	^4,9		(0.03	)^1,9		23		111

^1.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Does not include expenses of the underlying affiliated funds in which the Portfolio invests.


Period ended	Lifestyle Growth Trust

12/31/2008		0.49%–1.18%
12/31/2007		0.49%–1.29%

^6.Series NAV shares began operations on 4-29-05.

^7.Less than $0.01 per share.

^8.Not annualized.

^9.Annualized.

295

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																													Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																	Ratios to average net assets
																																			Ratio
																																			of net
																													Ratio			Ratio			investment
	Net asset		Net			Net realized																		Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From						value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital			Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in			distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)			($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Lifestyle Moderate Trust
Series I
12-31-2008		13.00		0.43	^1,2		(3.53	)		(3.10	)		(0.45	)		(0.30	)		—			(0.75	)		9.15		(24.23	)³		0.12	⁴		0.12	^4,5		3.72	¹		215		28
12-31-2007		13.37		0.74	^1,2		(0.06	)		0.68			(0.75	)		(0.30	)		—			(1.05	)		13.00		5.29	³		0.11	⁴		0.11	^4,5		5.54	¹		333		13
12-31-2006		13.35		0.30	^1,2		0.99			1.29			(0.31	)		(0.93	)		(0.03	)		(1.27	)		13.37		10.42	³		0.11	⁴		0.11	⁴		2.33	¹		349		19
12-31-2005		13.80		0.33	^1,2		0.19			0.52			(0.33	)		(0.64	)		—			(0.97	)		13.35		4.15	³		0.12	⁴		0.12	⁴		2.51	¹		327		101
12-31-2004		12.79		0.31	¹		1.07			1.38			(0.31	)		(0.06	)		—			(0.37	)		13.80		11.04	³		0.07	⁴		0.07	⁴		2.26	¹		582		55
Series II
12-31-2008		12.95		0.47	^1,2		(3.57	)		(3.10	)		(0.43	)		(0.30	)		—			(0.73	)		9.12		(24.36	)³		0.32	⁴		0.32	^4,5		4.07	¹		1,890		28
12-31-2007		13.32		0.74	^1,2		(0.08	)		0.66			(0.73	)		(0.30	)		—			(1.03	)		12.95		5.08	³		0.31	⁴		0.31	^4,5		5.56	¹		2,042		13
12-31-2006		13.33		0.26	^1,2		1.00			1.26			(0.31	)		(0.93	)		(0.03	)		(1.27	)		13.32		10.18	³		0.31	⁴		0.31	⁴		2.02	¹		1,560		19
12-31-2005		13.80		0.24	^1,2		0.26			0.50			(0.33	)		(0.64	)		—			(0.97	)		13.33		4.00	³		0.30	⁴		0.30	⁴		1.80	¹		1,108		101
12-31-2004		12.79		0.31	¹		1.07			1.38			(0.31	)		(0.06	)		—			(0.37	)		13.80		11.04	³		0.07	⁴		0.07	⁴		1.90	¹		631		55
Series NAV
12-31-2008		13.01		0.58	^1,2		(3.68	)		(3.10	)		(0.45	)		(0.30	)		—			(0.75	)		9.16		(24.16	)³		0.07	⁴		0.07	^4,5		5.08	¹		19		28
12-31-2007		13.38		0.84	^1,2		(0.15	)		0.69			(0.76	)		(0.30	)		—			(1.06	)		13.01		5.34	³		0.06	⁴		0.06	^4,5		6.30	¹		13		13
12-31-2006		13.35		0.24	^1,2		1.06			1.30			(0.31	)		(0.93	)		(0.03	)		(1.27	)		13.38		10.50	³		0.06	⁴		0.06	⁴		1.88	¹		5		19
12-31-2005⁶		12.59		(0.01	)^1,2		0.77			0.76			—			—			—			—			13.35		6.04	⁷		0.06	^4,8		0.06	^4,8		(0.06	)^1,8		2		101

^1.Recognition of net investment income by the Portfolio is affected by the timing of the declaration of dividends by the underlying funds in which the Portfolio invests.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Does not include expenses of the underlying affiliated funds in which the Portfolio invests.


Period ended	Lifestyle Moderate Trust

12/31/2008		0.34%–1.17%
12/31/2007		0.34%–1.38%

^6.Series NAV shares began operations on 4-29-05.

^7.Not annualized.

^8.Annualized.

296

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																													Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																	Ratios to average net assets
																																			Ratio
																																			of net
																													Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset						of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,						expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of			Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period			return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)			(%)			(%)			(%)			(%)			(in millions)		(%)
Mid Cap Index Trust
Series I
12-31-2008		17.42		0.16	¹		(6.36	)		(6.20	)		(0.15	)		(0.40	)		—		(0.55	)		10.67			(36.45	)^2,3		0.55	⁴		0.55			1.10			240		41
12-31-2007		18.84		0.20	^1,5		1.22			1.42			(0.27	)		(2.57	)		—		(2.84	)		17.42	⁶		7.57	^2,3,6		0.55	⁴		0.54			0.99	⁵		397		29
12-31-2006		18.05		0.20	¹		1.53			1.73			(0.12	)		(0.82	)		—		(0.94	)		18.84			9.72	^2,3		0.57	⁴		0.57			1.09			377		15	⁷
12-31-2005		16.78		0.16	¹		1.77			1.93			(0.09	)		(0.57	)		—		(0.66	)		18.05			12.02	²		0.57			0.57			0.95			220		19
12-31-2004		14.56		0.09	¹		2.21			2.30			(0.06	)		(0.02	)		—		(0.08	)		16.78			15.83	²		0.57			0.57			0.63			187		16
Series II
12-31-2008		17.36		0.14	¹		(6.34	)		(6.20	)		(0.11	)		(0.40	)		—		(0.51	)		10.65			(36.56	)^2,3		0.75	⁴		0.75			0.91			68		41
12-31-2007		18.75		0.15	^1,5		1.23			1.38			(0.20	)		(2.57	)		—		(2.77	)		17.36	⁶		7.39	^2,3,6		0.75	⁴		0.74			0.73	⁵		103		29
12-31-2006		17.98		0.16	¹		1.51			1.67			(0.08	)		(0.82	)		—		(0.90	)		18.75			9.44	^2,3		0.77	⁴		0.77			0.86			81		15	⁷
12-31-2005		16.72		0.13	¹		1.76			1.89			(0.06	)		(0.57	)		—		(0.63	)		17.98			11.79	²		0.77			0.77			0.74			63		19
12-31-2004		14.52		0.06	¹		2.21			2.27			(0.05	)		(0.02	)		—		(0.07	)		16.72			15.65	²		0.77			0.77			0.43			59		16
Series NAV
12-31-2008		17.42		0.18	¹		(6.37	)		(6.19	)		(0.16	)		(0.40	)		—		(0.56	)		10.67			(36.39	)^2,3		0.50	⁴		0.50			1.23			389		41
12-31-2007		18.85		0.22	^1,5		1.21			1.43			(0.29	)		(2.57	)		—		(2.86	)		17.42	⁶		7.61	^2,3,6		0.50	⁴		0.49			1.08	⁵		430		29
12-31-2006		18.06		0.22	¹		1.51			1.73			(0.12	)		(0.82	)		—		(0.94	)		18.85			9.74	^2,3		0.52	⁴		0.52			1.21			603		15	⁷
12-31-2005⁸		15.40		0.12	¹		2.54			2.66			—			—			—		—			18.06			17.27	⁹		0.54	¹⁰		0.54	¹⁰		1.01	¹⁰		74		19

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Net investment income/loss per share and ratio of net investment income/loss to average net assets reflects special dividends received by the Portfolio which amounted to the following amounts:


				Percentage of
Portfolio	Series	Per share		average net assets

Mid Cap Index	I	$	0.04		0.21	%
	II	$	0.04		0.16	%
	NAV	$	0.05		0.25	%

^6.Payments from Affiliates increased the end of period net asset value by less than $0.01 for Series II and Series NAV and by $0.01 per share for Series I and the total return by less than 0.01% for Series II and Series NAV and by 0.05% for Series I. If the Affiliates had not made these payments, the end of period net asset value and total return would have been $17.42, $17.36 and $17.42 and 7.57%, 7.39% and 7.61% for Series I, Series II and Series NAV, respectively.

^7.Excludes merger activity.

^8.Series NAV shares began operations on 4-29-05.

^9.Not annualized.

^10.Annualized.

297

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net		Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized		return		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain		of capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)		($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Mid Cap Intersection Trust
Series I
12-31-2008		11.64		0.03	¹		(4.92	)		(4.89	)		(0.02	)		—		—		(0.02	)		6.73		(42.05	)^2,3		0.98	⁴		0.98			0.36			—	⁵		84
12-31-2007⁶		12.50		—	¹		(0.86	)		(0.86	)		—			—		—		—			11.64		(6.88	)^2,7		0.98	^4,8		0.98	⁸		—	⁸		—	⁵		87	⁷
Series II
12-31-2008		11.62		0.02	¹		(4.92	)		(4.90	)		—			—		—		—			6.72		(42.17	)²		1.18	⁴		1.18			0.22			3			84
12-31-2007⁶		12.50		(0.02	)¹		(0.86	)		(0.88	)		—			—		—		—			11.62		(7.04	)^2,7		1.18	^4,8		1.18	⁸		(0.24	)⁸		2			87	⁷
Series NAV
12-31-2008		11.64		0.02	¹		(4.91	)		(4.89	)		(0.02	)		—		—		(0.02	)		6.73		(42.00	)^2,3		0.93	⁴		0.93			0.28			79			84
12-31-2007⁶		12.50		—	¹		(0.86	)		(0.86	)		—	⁹		—		—		—			11.64		(6.87	)^2,3,7		0.93	^4,8		0.93	⁸		0.03	⁸		304			87	⁷

^1.Based on the average of the shares outstanding.

^2.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^3.Assumes dividend reinvestment.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Less than $500,000.

^6.Series I, Series II and Series NAV shares began operations on 5-1-07.

^7.Not annualized.

^8.Annualized.

^9.Less than $0.01 per share.

298

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Mid Cap Stock Trust
Series I
12-31-2008		15.98		(0.02	)¹		(6.84	)		(6.86	)		—			(0.38	)		—		(0.38	)		8.74		(43.76	)^2,3		0.94	⁴		0.94			(0.12	)		186		130	⁵
12-31-2007		16.97		(0.03	)¹		3.63			3.60			—			(4.59	)		—		(4.59	)		15.98		23.57	^2,3,6		0.94	⁴		0.93			(0.20	)		355		133
12-31-2006		15.57		—	^1,7		2.07			2.07			—			(0.67	)		—		(0.67	)		16.97		13.55	^2,3,8		0.93	⁴		0.93			—	⁹		361		123
12-31-2005		14.13		(0.04	)¹		1.99			1.95			—			(0.51	)		—		(0.51	)		15.57		14.57	²		0.97			0.97			(0.31	)		383		196	⁵
12-31-2004		11.87		(0.05	)¹		2.31			2.26			—			—			—		—			14.13		19.04			0.96			0.96			(0.43	)		349		128
Series II
12-31-2008		15.76		(0.04	)¹		(6.75	)		(6.79	)		—			(0.38	)		—		(0.38	)		8.59		(43.93	)^2,3		1.14	⁴		1.14			(0.32	)		107		130	⁵
12-31-2007		16.82		(0.07	)¹		3.60			3.53			—			(4.59	)		—		(4.59	)		15.76		23.35	^2,3,6		1.14	⁴		1.13			(0.40	)		206		133
12-31-2006		15.47		(0.03	)¹		2.05			2.02			—			(0.67	)		—		(0.67	)		16.82		13.31	^2,3,8		1.13	⁴		1.13			(0.18	)		183		123
12-31-2005		14.06		(0.07	)¹		1.99			1.92			—			(0.51	)		—		(0.51	)		15.47		14.42	²		1.17			1.17			(0.52	)		178		196	⁵
12-31-2004		11.84		(0.07	)¹		2.29			2.22			—			—			—		—			14.06		18.75			1.16			1.16			(0.58	)		226		128
Series NAV
12-31-2008		16.03		(0.01	)¹		(6.87	)		(6.88	)		—			(0.38	)		—		(0.38	)		8.77		(43.75	)^2,3		0.89	⁴		0.89			(0.07	)		296		130	⁵
12-31-2007		17.01		(0.02	)¹		3.63			3.61			—	⁷		(4.59	)		—		(4.59	)		16.03		23.59	^2,3,6		0.89	⁴		0.88			(0.13	)		702		133
12-31-2006		15.59		0.02	¹		2.07			2.09			—			(0.67	)		—		(0.67	)		17.01		13.66	^2,3,8		0.88	⁴		0.88			0.09			473		123
12-31-2005¹⁰		13.50		(0.02	)¹		2.62			2.60			—			(0.51	)		—		(0.51	)		15.59		20.07	^2,11		0.91	¹²		0.91	¹²		(0.21	)¹²		399		196	⁵

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Excludes merger activity.

^6.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007

Mid Cap Stock Series I	$	0.01		23.49%
Mid Cap Stock Series II		0.01		23.27%
Mid Cap Stock Series NAV		0.01		23.51%

^7.Less than $0.01 per share.

^8.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^9.Less than 0.01%.

^10.Series NAV shares began operations on 2-28-05.

^11.Not annualized.

^12.Annualized.

299

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

of capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Mid Cap Value Equity Trust

Series NAV

12-31-2008

13.91

0.11

(6.13

)

(6.02

)

(0.12

)

(0.29

)

—

(0.41

)

7.48

(44.21

)^2,3

1.01

⁴

1.01

0.92

12-31-2007

13.07

0.15

1.25

1.40

(0.18

)

(0.38

)

—

(0.56

)

13.91

10.72

^2,3

0.92

⁴

0.92

1.03

146

12-31-2006⁵

12.50

0.09

0.48

0.57

—

13.07

4.56

^2,6

0.99

^4,7

0.99

⁷

1.07

⁷

112

^1.Based on the average of the shares outstanding.

^2.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^3.Assumes dividend reinvestment.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series NAV shares began operations on 4-28-06.

^6.Not annualized.

^7.Annualized.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Mid Value Trust
Series I
12-31-2008		10.69		0.13	¹		(3.77	)		(3.64	)		(0.11	)		(0.20	)		—		(0.31	)		6.74		(34.72	)^2,3		1.13	⁴		1.08			1.56			33		85
12-31-2007		13.67		0.22	¹		(0.11	)		0.11			(0.28	)		(2.81	)		—		(3.09	)		10.69		0.51	^2,3		1.09	⁴		1.04			1.70			11		69
12-31-2006		12.36		0.09	¹		2.27			2.36			(0.03	)		(1.02	)		—		(1.05	)		13.67		20.31	^2,3		1.10	⁴		1.06			0.72			6		59
12-31-2005⁵		11.05		0.06	¹		1.42			1.48			—			(0.17	)		—		(0.17	)		12.36		13.49	^2,3,6		1.19	^4,7		1.17	⁷		0.66	⁷		1		47
Series II
12-31-2008		10.68		0.08	¹		(3.73	)		(3.65	)		(0.09	)		(0.20	)		—		(0.29	)		6.74		(34.88	)^2,3		1.33	⁴		1.28			0.91			8		85
12-31-2007		13.64		0.21	¹		(0.12	)		0.09			(0.24	)		(2.81	)		—		(3.05	)		10.68		0.31	^2,3		1.29	⁴		1.24			1.60			16		69
12-31-2006		12.34		0.06	¹		2.27			2.33			(0.01	)		(1.02	)		—		(1.03	)		13.64		20.05	^2,3		1.30	⁴		1.27			0.49			17		59
12-31-2005⁵		11.05		0.03	¹		1.43			1.46			—			(0.17	)		—		(0.17	)		12.34		13.30	^2,3,6		1.37	^4,7		1.35	⁷		0.38	⁷		5		47
Series NAV
12-31-2008		10.67		0.11			(3.74	)		(3.63	)		(0.12	)		(0.20	)		—		(0.32	)		6.72		(34.74	)^2,3		1.08	⁴		1.03			1.16			75		85
12-31-2007		13.65		0.24	¹		(0.11	)		0.13			(0.30	)		(2.81	)		—		(3.11	)		10.67		0.60	^2,3		1.04	⁴		0.99			1.87			159		69
12-31-2006		12.35		0.09	¹		2.27			2.36			(0.04	)		(1.02	)		—		(1.06	)		13.65		20.34	^2,3		1.06	⁴		1.03			0.70			167		59
12-31-2005⁸		11.67		0.05	¹		0.81			0.86			(0.01	)		(0.17	)		—		(0.18	)		12.35		7.39	^2,3		1.10	⁴		1.08			0.40			162		47
12-31-2004⁹		10.98		0.06			1.97			2.03			(0.04	)		(1.30	)		—		(1.34	)		11.67		18.74	^2,3		1.22	⁴		1.15			0.50			179		196

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series I and Series II shares began operations on 4-29-05.

300

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^6.Not annualized.

^7.Annualized.

^8.Effective 4-29-05, shareholders of the former VST Mid Cap Value Fund Series NAV became owners of an equal number of full and fractional Series NAV shares of Mid Value. Additionally, the accounting and performance history of the former VST Mid Cap Value Fund Series NAV was redesignated as that of Series NAV shares of Mid Value.

^9.Audited by previous Independent Registered Public Accounting Firm.


Per share operating performance for a share outstanding throughout the period																									Ratios and supplemental data
			Income (loss) from investment operations							Less distributions															Ratios to average net assets
																														Ratio
																														of net
																									Ratio			Ratio		investment
	Net asset		Net			Net realized														Net asset					of gross			of net		income
	value,		investment			and unrealized		Total from		From net			From net		From tax					value,					expenses			expenses		(loss) to		Net assets,
	beginning		income			gain (loss) on		investment		investment			realized		return		Total			end of		Total			to average			to average		average		end of		Portfolio
	of period		(loss)			investments		operations		income			gain		of capital		distributions			period		return			net assets			net assets		net assets		period		turnover
Period ended	($)		($)			($)		($)		($)			($)		($)		($)			($)		(%)			(%)			(%)		(%)		(in millions)		(%)
Money Market Trust
Series I
12-31-2008		10.00		0.18			—		0.18		(0.18	)		—		—		(0.18	)		10.00		1.76	^2,3		0.58	⁴		0.58		1.66		3,708		—
12-31-2007		10.00		0.45	¹		—		0.45		(0.45	)		—		—		(0.45	)		10.00		4.56	^2,3		0.56	⁴		0.55		4.43		2,504		—
12-31-2006		10.00		0.44	¹		—		0.44		(0.44	)		—		—		(0.44	)		10.00		4.43	^2,3		0.56	⁴		0.56		4.36		2,316		—
12-31-2005		10.00		0.26	¹		—		0.26		(0.26	)		—		—		(0.26	)		10.00		2.60	²		0.56			0.56		2.63		2,113		—
12-31-2004		10.00		0.09	¹		—		0.09		(0.09	)		—		—		(0.09	)		10.00		0.90	²		0.53			0.53		0.89		2,186		—
Series II
12-31-2008		10.00		0.16			—		0.16		(0.16	)		—		—		(0.16	)		10.00		1.56	^2,3		0.78	⁴		0.78		1.36		1,503		—
12-31-2007		10.00		0.43	¹		—		0.43		(0.43	)		—		—		(0.43	)		10.00		4.35	^2,3		0.76	⁴		0.75		4.22		487		—
12-31-2006		10.00		0.42	¹		—		0.42		(0.42	)		—		—		(0.42	)		10.00		4.23	^2,3		0.76	⁴		0.76		4.22		339		—
12-31-2005		10.00		0.25	¹		—		0.25		(0.25	)		—		—		(0.25	)		10.00		2.50	²		0.76			0.76		2.47		231		—
12-31-2004		10.00		0.06	¹		—		0.06		(0.06	)		—		—		(0.06	)		10.00		0.60	²		0.73			0.73		0.62		186		—

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.


Per share operating performance for a share outstanding throughout the period																									Ratios and supplemental data
			Income (loss) from investment operations							Less distributions															Ratios to average net assets
																														Ratio
																														of net
																									Ratio			Ratio		investment
	Net asset		Net			Net realized														Net asset					of gross			of net		income
	value,		investment			and unrealized		Total from		From net			From net		From tax					value,					expenses			expenses		(loss) to		Net assets,
	beginning		income			gain (loss) on		investment		investment			realized		return		Total			end of		Total			to average			to average		average		end of		Portfolio
	of period		(loss)			investments		operations		income			gain		of capital		distributions			period		return			net assets			net assets		net assets		period		turnover
Period ended	($)		($)			($)		($)		($)			($)		($)		($)			($)		(%)			(%)			(%)		(%)		(in millions)		(%)
Money Market Trust B
Series NAV
12-31-2008		1.00		0.02			—		0.02		(0.02	)		—		—		(0.02	)		1.00		2.11	^4,5		0.53	⁶		0.29		1.97		963		—
12-31-2007		1.00		0.05	³		—		0.05		(0.05	)		—		—		(0.05	)		1.00		4.82	^4,5		0.51	⁶		0.28		4.67		612		—
12-31-2006		1.00		0.05	³		—		0.05		(0.05	)		—		—		(0.05	)		1.00		4.70	^4,5		0.51	⁶		0.28		4.61		480		—
12-31-2005¹		1.00		0.03	³		—		0.03		(0.03	)		—		—		(0.03	)		1.00		2.97	^4,5		0.50	⁶		0.28		2.91		442		—
12-31-2004²		1.00		0.01			—		0.01		(0.01	)		—		—		(0.01	)		1.00		1.09	⁴		0.33			0.33		1.05		472		—

^1.Effective 4-29-05, shareholders of the former VST Money Market Fund Series NAV became owners of an equal number of full and fractional Series NAV shares of Money Market B. Additionally, the accounting and performance history of the former VST Money Market Fund Series NAV was redesignated as that of Series NAV shares of Money Market B.

^2.Audited by previous Independent Registered Public Accounting Firm.

301

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^3.Based on the average of the shares outstanding.

^4.Assumes dividend reinvestment.

^5.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^6.Does not take into consideration expense reductions during the periods shown.

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

of capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Mutual Shares Trust

Series I

12-31-2008⁷

10.91

0.11

(3.60

)

(3.49

)

(0.09

)

—

(0.09

)

7.33

(31.98

)^3,4,8

1.13

^5,6

1.11

⁶

1.38

⁶

Series NAV

12-31-2008

11.95

0.16

(4.69

)

(4.53

)

(0.09

)

—

(0.09

)

7.33

(37.86

)^3,8

1.07

⁵

1.06

1.67

373

12-31-2007¹

12.50

0.12

(0.67

)

(0.55

)

—

11.95

(4.40

)^3,4

1.22

^5,6

1.06

⁶

1.52

⁶

379

^1.Series NAV shares began operations on 5-1-07.

^2.Based on the average of the shares outstanding.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Not annualized.

^5.Does not take into consideration expense reductions during the periods shown.

^6.Annualized.

^7.Series I shares began operations on 1-28-08.

^8.Assumes dividend reinvestment.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																	Ratio
																																	of net
																												Ratio			Ratio		investment
	Net asset		Net			Net realized																	Net asset					of gross			of net		income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses		(loss) to		Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average		average		end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets		net assets		period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)		(%)		(in millions)		(%)
Natural Resources Trust
Series I
12-31-2008		28.81		0.16	¹		(14.58	)		(14.42	)		(0.15	)		(0.81	)		—		(0.96	)		13.43		(51.61	)^2,3		1.13	⁴		1.13		0.66		14		24
12-31-2007		31.83		0.17	¹		11.67			11.84			(0.42	)		(14.44	)		—		(14.86	)		28.81		40.68	^2,3,5		1.13	⁴		1.13		0.47		35		35
12-31-2006		31.50		0.32	¹		6.47			6.79			(0.19	)		(6.27	)		—		(6.46	)		31.83		22.30	^2,3		1.11	⁴		1.11		1.02		19		28
12-31-2005		21.96		0.13	¹		9.97			10.10			—			(0.56	)		—		(0.56	)		31.50		46.77	²		1.11			1.11		0.52		15		38
12-31-2004		18.00		0.12	¹		4.19			4.31			(0.02	)		(0.33	)		—		(0.35	)		21.96		24.32	²		1.13			1.13		0.63		226		20
Series II
12-31-2008		28.54		0.11	¹		(14.43	)		(14.32	)		(0.08	)		(0.81	)		—		(0.89	)		13.33		(51.71	)^2,3		1.33	⁴		1.33		0.43		112		24
12-31-2007		31.59		0.09	¹		11.60			11.69			(0.30	)		(14.44	)		—		(14.74	)		28.54		40.44	^2,3,5		1.33	⁴		1.33		0.27		302		35
12-31-2006		31.32		0.26	¹		6.42			6.68			(0.14	)		(6.27	)		—		(6.41	)		31.59		22.03	^2,3		1.31	⁴		1.31		0.83		237		28
12-31-2005		21.89		0.10	¹		9.89			9.99			—			(0.56	)		—		(0.56	)		31.32		46.42	²		1.32			1.32		0.39		204		38
12-31-2004		17.98		0.08	¹		4.17			4.25			(0.01	)		(0.34	)		—		(0.34	)		21.89		24.05	²		1.33			1.33		0.41		318		20

302

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Series NAV
12-31-2008		28.63		0.17	¹		(14.49	)		(14.32	)		(0.17	)		(0.81	)		—		(0.98	)		13.33		(51.60	)^2,3		1.08	⁴		1.08			0.71			244		24
12-31-2007		31.70		0.19	¹		11.63			11.82			(0.45	)		(14.44	)		—		(14.89	)		28.63		40.81	^2,3,5		1.08	⁴		1.08			0.54			808		35
12-31-2006		31.40		0.31	¹		6.46			6.77			(0.20	)		(6.27	)		—		(6.47	)		31.70		22.31	^2,3		1.06	⁴		1.06			1.02			826		28
12-31-2005⁶		25.42		0.17	¹		6.46			6.63			(0.09	)		(0.56	)		—		(0.65	)		31.40		26.89	^2,7		1.06	⁸		1.06	⁸		0.75	⁸		496		38

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Natural Resources Series I		—	⁹		40.68	%
Natural Resources Series II		—	⁹		40.44	%
Natural Resources Series NAV		—	⁹		40.81	%

^6.Series NAV shares began operation on 2-28-05.

^7.Not annualized.

^8.Annualized.

^9.Less than $0.01 per share^.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																	Ratio
																																	of net
																												Ratio			Ratio		investment
	Net asset		Net			Net realized																	Net asset					of gross			of net		income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses		(loss) to		Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average		average		end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets		net assets		period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)		(%)		(in millions)		(%)
Optimized All Cap Trust
Series I
12-31-2008		15.35		0.18	¹		(6.81	)		(6.63	)		(0.11	)		—			—		(0.11	)		8.61		(43.18	)^2,3		0.79	⁴		0.79		1.42		127		151
12-31-2007		17.36		0.22	¹		0.41			0.63			(0.21	)		(2.43	)		—		(2.64	)		15.35		3.78	^2,3,5		0.80	⁴		0.80		1.26		271		159
12-31-2006		16.55		0.15	¹		2.28			2.43			(0.17	)		(1.45	)		—		(1.62	)		17.36		15.17	^2,3		0.81	⁴		0.81		0.91		301		141
12-31-2005		16.64		0.13	¹		1.27			1.40			(0.14	)		(1.35	)		—		(1.49	)		16.55		8.58	²		0.82			0.82		0.77		300		133
12-31-2004		15.05		0.16	¹		2.02			2.18			(0.11	)		(0.48	)		—		(0.59	)		16.64		14.91	²		0.81			0.81		1.05		327		158
Series II
12-31-2008		15.32		0.15	¹		(6.77	)		(6.62	)		(0.09	)		—			—		(0.09	)		8.61		(43.24	)^2,3		0.99	⁴		0.99		1.21		63		151
12-31-2007		17.33		0.17	¹		0.42			0.59			(0.17	)		(2.43	)		—		(2.60	)		15.32		3.57	^2,3,5		1.00	⁴		1.00		0.97		132		159
12-31-2006		16.53		0.12	¹		2.26			2.38			(0.13	)		(1.45	)		—		(1.58	)		17.33		14.91	^2,3		1.01	⁴		1.01		0.71		6		141
12-31-2005		16.63		0.10	¹		1.27			1.37			(0.12	)		(1.35	)		—		(1.47	)		16.53		8.36	²		1.02			1.02		0.58		6		133
12-31-2004		15.05		0.09	¹		2.06			2.15			(0.09	)		(0.48	)		—		(0.57	)		16.63		14.67	²		1.13			1.13		0.60		5		158

303

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Series NAV
12-31-2008		15.41		0.19	¹		(6.84	)		(6.65	)		(0.12	)		—			—		(0.12	)		8.64		(43.16	)^2,3		0.74	⁴		0.74			1.62			958			151
12-31-2007		17.41		0.24	¹		0.41			0.65			(0.22	)		(2.43	)		—		(2.65	)		15.41		3.88	^2,3,5		0.75	⁴		0.75			1.35			1			159
12-31-2006		16.59		0.16	¹		2.29			2.45			(0.18	)		(1.45	)		—		(1.63	)		17.41		15.24	^2,3		0.76	⁴		0.76			0.92			—	⁶		141
12-31-2005⁷		15.38		0.11	¹		2.26			2.37			(0.16	)		(1.00	)		—		(1.16	)		16.59		15.35	^2,8		0.78	⁹		0.78	⁹		0.78	⁹		—	⁶		133

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Optimized All Cap Series I		—	¹⁰		3.78	%
Optimized All Cap Series II		—	¹⁰		3.57	%
Optimized All Cap Series NAV		—	¹⁰		3.88	%

^6.Less than $500,000.

^7.Series NAV shares began operations on 4-29-05.

^8.Not annualized.

^9.Annualized.

^10.Less than $0.01 per share.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Optimized Value Trust
Series I
12-31-2008		12.77		0.20	¹		(5.46	)		(5.26	)		(0.27	)		—			—		(0.27	)		7.24		(41.20	)^2,3		0.75	⁴		0.75			1.74			—	⁵		176
12-31-2007		15.24		0.25	¹		(0.96	)		(0.71	)		(0.31	)		(1.45	)		—		(1.76	)		12.77		(5.13	)^2,3		0.74	⁴		0.74			1.72			1			159
12-31-2006		15.16		0.23	¹		2.55			2.78			(0.28	)		(2.42	)		—		(2.70	)		15.24		21.09	^2,3		0.78	⁴		0.78			1.59			1			155
12-31-2005		14.67		0.17	¹		1.11			1.28			(0.08	)		(0.71	)		—		(0.79	)		15.16		9.19	²		0.80			0.80			1.23			1			225
12-31-2004 ⁶		12.50		0.10	¹		2.07			2.17			—			—			—		—			14.67		17.36	⁷		0.83	⁸		0.83	⁸		1.13	⁸		183			108

304

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Series II
12-31-2008		12.83		0.18	¹		(5.49	)		(5.31	)		(0.24	)		—			—		(0.24	)		7.28		(41.36	)^2,3		0.95	⁴		0.95			1.65			13		176
12-31-2007		15.28		0.20	¹		(0.95	)		(0.75	)		(0.25	)		(1.45	)		—		(1.70	)		12.83		(5.33	)^2,3		0.94	⁴		0.94			1.34			27		159
12-31-2006		15.18		0.20	¹		2.57			2.77			(0.25	)		(2.42	)		—		(2.67	)		15.28		20.97	^2,3		0.98	⁴		0.98			1.37			5		155
12-31-2005		14.66		0.11	¹		1.12			1.23			—			(0.71	)		—		(0.71	)		15.18		8.82	²		1.00			1.00			0.78			3		225
12-31-2004⁶		12.50		0.08	¹		2.08			2.16			—			—			—		—			14.66		17.28	⁷		1.03	⁸		1.03	⁸		0.96	⁸		43		108
Series NAV
12-31-2008		12.77		0.21	¹		(5.46	)		(5.25	)		(0.28	)		—			—		(0.28	)		7.24		(41.15	)^2,3		0.70	⁴		0.70			1.91			331		176
12-31-2007		15.25		0.25	¹		(0.96	)		(0.71	)		(0.32	)		(1.45	)		—		(1.77	)		12.77		(5.10	)^2,3		0.69	⁴		0.69			1.72			802		159
12-31-2006		15.15		0.23	¹		2.57			2.80			(0.28	)		(2.42	)		—		(2.70	)		15.25		21.29	^2,3		0.73	⁴		0.73			1.62			513		155
12-31-2005⁶		14.94		0.18	¹		0.83			1.01			(0.09	)		(0.71	)		—		(0.80	)		15.15		7.26	^2,7		0.76	⁸		0.76	⁸		1.50	⁸		191		225

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Less than $500,000.

^6.Series I, Series II and Series NAV shares began operations on 5-3-04, 5-3-04 and 2-28-05, respectively.

^7.Not annualized.

^8.Annualized.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Overseas Equity Trust
Series II
12-31-2008		13.98		0.22	¹		(5.85	)		(5.63	)		(0.20	)		(0.69	)		—		(0.89	)		7.46		(42.19	)^2,3		1.42	⁴		1.42			1.97			3		90
12-31-2007		14.40		0.15	¹		1.53			1.68			(0.30	)		(1.80	)		—		(2.10	)		13.98		12.21	^2,3		1.36	⁴		1.36			1.00			8		69
12-31-2006		12.51		0.16	¹		2.24			2.40			(0.06	)		(0.45	)		—		(0.51	)		14.40		19.64	^2,3,5		1.40	⁴		1.40			1.23			8		32
12-31-2005⁶		10.47		(0.02	)¹		2.32			2.30			—			(0.26	)		—		(0.26	)		12.51		22.17	^2,7		1.87	⁸		1.87	⁸		(0.24	)⁸		5		34
Series NAV
12-31-2008		13.91		0.24	¹		(5.82	)		(5.58	)		(0.23	)		(0.69	)		—		(0.92	)		7.41		(42.05	)^2,3		1.17	⁴		1.17			2.19			294		90
12-31-2007		14.36		0.19	¹		1.52			1.71			(0.36	)		(1.80	)		—		(2.16	)		13.91		12.53	^2,3		1.11	⁴		1.11			1.24			579		69
12-31-2006		12.51		0.19	¹		2.23			2.42			(0.12	)		(0.45	)		—		(0.57	)		14.36		19.86	^2,3,5		1.13	⁴		1.13			1.44			511		32
12-31-2005¹⁰		10.87		0.14	¹		1.82			1.96			(0.06	)		(0.26	)		—		(0.32	)		12.51		18.31	²		1.33			1.33			1.22			244		34
12-31-2004¹¹		9.85		0.07			1.01			1.08			(0.06	)		—			—		(0.06	)		10.87		11.02	^2,3		1.64	⁴		1.53			0.24			245		103

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

305

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^4.Does not take into consideration expense reductions during the periods shown.

^5.John Hancock Life Insurance Company made a voluntary payment to Series I, Series II and Series NAV of $14,372, $28,883 and $1,943,168, respectively. Excluding this payment, total returns would have been 19.39%, 19.14% and 19.44% for Series I, Series II and Series NAV, respectively.

^6.Series II shares began operations on 4-29-05.

^7.Not annualized.

^8.Annualized.

^9.Less than $500,000.

^10.Effective 4-29-05, shareholders of the former VST Overseas Equity B Fund Series NAV became owners of an equal number of full and fractional Series NAV shares of Overseas Equity. Additionally, the accounting and performance history of the former VST Overseas Equity B Fund Series NAV was redesignated as that of Series NAV shares of Overseas Equity.

^11.Audited by previous Independent Registered Public Accounting Firm.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Pacific Rim Trust
Series I
12-31-2008		10.46		0.15	¹		(4.25	)		(4.10	)		(0.15	)		(0.21	)		—		(0.36	)		6.00		(39.91	)^2,3		1.25	⁴		1.25			1.73			56		61
12-31-2007		13.04		0.12	¹		0.95			1.07			(0.24	)		(3.41	)		—		(3.65	)		10.46		9.14	^2,3		1.12	⁴		1.11			0.93			114		89
12-31-2006		11.84		0.10	¹		1.21			1.31			(0.11	)		—			—		(0.11	)		13.04		11.05	^2,3		1.06	⁴		1.06			0.80			124		46
12-31-2005		9.50		0.11	¹		2.31			2.42			(0.08	)		—			—		(0.08	)		11.84		25.75	²		1.09			1.09			1.12			118		26
12-31-2004		8.14		0.05	¹		1.35			1.40			(0.04	)		—			—		(0.04	)		9.50		17.19	²		1.13			1.13			0.52			80		43
Series II
12-31-2008		10.43		0.13	¹		(4.24	)		(4.11	)		(0.12	)		(0.21	)		—		(0.33	)		5.99		(40.04	)^2,3		1.45	⁴		1.45			1.57			17		61
12-31-2007		12.99		0.09	¹		0.96			1.05			(0.20	)		(3.41	)		—		(3.61	)		10.43		8.95	^2,3		1.32	⁴		1.31			0.71			44		89
12-31-2006		11.79		0.07	¹		1.22			1.29			(0.09	)		—			—		(0.09	)		12.99		10.92	^2,3		1.26	⁴		1.26			0.60			44		46
12-31-2005		9.47		0.09	¹		2.30			2.39			(0.07	)		—			—		(0.07	)		11.79		25.42	²		1.29			1.29			0.87			51		26
12-31-2004		8.12		0.03	¹		1.36			1.39			(0.04	)		—			—		(0.04	)		9.47		17.09	²		1.33			1.33			0.31			28		43
Series NAV
12-31-2008		10.53		0.15	¹		(4.29	)		(4.14	)		(0.15	)		(0.21	)		—		(0.36	)		6.03		(39.98	)^2,3		1.20	⁴		1.20			1.72			7		61
12-31-2007		13.10		0.13	¹		0.97			1.10			(0.26	)		(3.41	)		—		(3.67	)		10.53		9.29	^2,3		1.07	⁴		1.06			0.97			9		89
12-31-2006		11.88		0.11	¹		1.22			1.33			(0.11	)		—			—		(0.11	)		13.10		11.21	^2,3		1.01	⁴		1.01			0.89			7		46
12-31-2005⁵		9.36		0.06	¹		2.46			2.52			—			—			—		—			11.88		26.92	⁶		1.05	⁷		1.05	⁷		0.82	⁷		6		26

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series NAV shares began operations on 4-29-05.

^6.Not annualized.

^7.Annualized.

306

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return of

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Real Estate Equity Trust

Series NAV

12-31-2008

10.41

0.26

(4.57

)

(4.31

)

(0.21

)

—

(0.21

)

5.89

(41.69

)^2,3

0.93

⁴

0.89

2.79

193

12-31-2007

15.19

0.22

(2.86

)

(2.64

)

(0.24

)

(1.90

)

—

(2.14

)

10.41

(18.58

)^2,3

0.90

⁴

0.86

1.54

248

12-31-2006⁵

12.50

0.26

2.43

2.69

—

15.19

21.52

^3,6

0.90

^4,7

0.88

⁷

2.80

⁷

312

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series NAV shares began operations on 4-28-06.

^6.Not annualized.

^7.Annualized.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Real Estate Securities Trust
Series I
12-31-2008		12.40		0.27	¹		(5.03	)		(4.76	)		(0.38	)		(0.16	)		—		(0.54	)		7.10		(39.42	)^2,3		0.80	⁴		0.80			2.45			89		84
12-31-2007		27.64		0.35	¹		(3.13	)		(2.78	)		(0.63	)		(11.83	)		—		(12.46	)		12.40		(15.61	)^2,3		0.78	⁴		0.78			1.68			188		77
12-31-2006		24.87		0.62	¹		7.42			8.04			(0.50	)		(4.77	)		—		(5.27	)		27.64		38.10	^2,3,5		0.78	⁴		0.78			2.48			313		67
12-31-2005		26.81		0.79	¹		1.61			2.40			(0.55	)		(3.79	)		—		(4.34	)		24.87		11.85	²		0.81			0.81			3.31			265		92⁶
12-31-2004		20.85		0.76	¹		5.74			6.50			(0.54	)		—			—		(0.54	)		26.81		32.04	²		0.80			0.80			3.38			612		82
Series II
12-31-2008		12.40		0.25	¹		(5.03	)		(4.78	)		(0.35	)		(0.16	)		—		(0.51	)		7.11		(39.58	)^2,3		1.00	⁴		1.00			2.26			61		84
12-31-2007		27.59		0.32	¹		(3.14	)		(2.82	)		(0.54	)		(11.83	)		—		(12.37	)		12.40		(15.77	)^2,3		0.98	⁴		0.98			1.55			123		77
12-31-2006		24.84		0.57	¹		7.41			7.98			(0.46	)		(4.77	)		—		(5.23	)		27.59		37.82	^2,3,5		0.98	⁴		0.98			2.30			169		67
12-31-2005		26.69		0.71	¹		1.65			2.36			(0.42	)		(3.79	)		—		(4.21	)		24.84		11.65	²		1.00			1.00			2.92			131		92⁶
12-31-2004		20.79		0.74	¹		5.69			6.43			(0.53	)		—			—		(0.53	)		26.69		31.77	²		1.00			1.00			3.29			374		82
Series NAV
12-31-2008		12.34		0.28	¹		(5.01	)		(4.73	)		(0.39	)		(0.16	)		—		(0.55	)		7.06		(39.39	)^2,3		0.75	⁴		0.75			2.52			153		84
12-31-2007		27.58		0.37	¹		(3.13	)		(2.76	)		(0.65	)		(11.83	)		—		(12.48	)		12.34		(15.56	)^2,3		0.73	⁴		0.73			1.79			301		77
12-31-2006		24.83		0.59	¹		7.44			8.03			(0.51	)		(4.77	)		—		(5.28	)		27.58		38.17	^2,3,5		0.73	⁴		0.73			2.31			437		67
12-31-2005⁷		25.30		0.78	¹		3.14			3.92			(0.60	)		(3.79	)		—		(4.39	)		24.83		18.62	^2,8		0.75	⁹		0.75	⁹		3.87	⁹		828		92⁶

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

307

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^5.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^6.Excludes merger activity.

^7.Series NAV shares began operations on 2-28-05.

^8.Not annualized.

^9.Annualized.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Real Return Bond Trust
Series I
12-31-2008		13.54		0.49	¹		(1.96	)		(1.47	)		(0.08	)		(0.33	)		—		(0.41	)		11.66		(11.28	)^2,3		0.83	^4,5		0.83	⁵		3.69			9		1,032⁶
12-31-2007		12.99		0.70	¹		0.76			1.46			(0.91	)		—			—		(0.91	)		13.54		11.49	^2,3		0.80	^4,5		0.79	⁵		5.31			10		911⁶
12-31-2006		13.55		0.54	¹		(0.52	)		0.02			(0.33	)		(0.25	)		—		(0.58	)		12.99		0.23	^2,3		0.82	^4,5		0.82	⁵		4.09			5		989
12-31-2005		14.00		0.27	¹		(0.08	)		0.19			—			(0.64	)		—		(0.64	)		13.55		1.44	²		0.81			0.81			1.93			4		1,239
12-31-2004		13.11		0.09	¹		1.08			1.17			(0.06	)		(0.22	)		—		(0.28	)		14.00		9.06	²		0.82			0.82			0.68			196		1,151
Series II
12-31-2008		13.45		0.46	¹		(1.96	)		(1.50	)		(0.07	)		(0.33	)		—		(0.40	)		11.55		(11.54	)^2,3		1.03	^4,5		1.03	⁵		3.50			87		1,032⁶
12-31-2007		12.88		0.67	¹		0.76			1.43			(0.86	)		—			—		(0.86	)		13.45		11.35	^2,3		1.00	^4,5		0.99	⁵		5.13			100		911⁶
12-31-2006		13.45		0.50	¹		(0.51	)		(0.01	)		(0.31	)		(0.25	)		—		(0.56	)		12.88		(0.04	)^2,3		1.02	^4,5		1.02	⁵		3.84			108		989
12-31-2005		13.95		0.29	¹		(0.13	)		0.16			(0.02	)		(0.64	)		—		(0.66	)		13.45		1.21	²		1.02			1.02			2.14			145		1,239
12-31-2004		13.10		0.06	¹		1.07			1.13			(0.06	)		(0.22	)		—		(0.28	)		13.95		8.73	²		1.02			1.02			0.50			343		1,151
Series NAV
12-31-2008		13.42		0.48	¹		(1.94	)		(1.46	)		(0.08	)		(0.33	)		—		(0.41	)		11.55		(11.30	)^2,3		0.78	^4,5		0.78	⁵		3.71			967		1,032⁶
12-31-2007		12.88		0.70	¹		0.76			1.46			(0.92	)		—			—		(0.92	)		13.42		11.61	^2,3		0.75	^4,5		0.74	⁵		5.38			1,112		911⁶
12-31-2006		13.45		0.54	¹		(0.52	)		0.02			(0.34	)		(0.25	)		—		(0.59	)		12.88		0.20	^2,3		0.77	^4,5		0.77	⁵		4.15			872		989
12-31-2005⁷		13.93		0.31	¹		(0.05	)		0.26			(0.10	)		(0.64	)		—		(0.74	)		13.45		1.95	^2,8		0.76	⁹		0.76	⁹		2.70	⁹		542		1,239

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Includes interest expense on securities sold short. Excluding interest expense the expense ratios for the period ended would have been as follows:


	12/31/2008						12/31/2007						12/31/2006
	Ratio of gross			Ratio of net			Ratio of gross			Ratio of net			Ratio of gross			Ratio of net
	expenses to average			expenses to average			expenses to average			expenses to average			expenses to average			expenses to average
	net assets			net assets			net assets			net assets			net assets			net assets

Series I		0.82	%		0.82	%		0.80	%		0.79	%		0.82	%		0.82	%
Series II		1.02	%		1.02	%		0.99	%		0.99	%		1.02	%		1.02	%
Series NAV		0.77	%		0.77	%		0.75	%		0.74	%		0.77	%		0.77	%

^6.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 1,169% for 12-31-08 and 1,037% for 12-31-07. Prior years exclude the effect of TBA transactions.

^7.Series NAV shares began operation on 2-28-05.

^8.Not annualized.

^9.Annualized.

308

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																									Ratios and supplemental data
			Income (loss) from investment operations									Less distributions													Ratios to average net assets
																															Ratio
																															of net
																									Ratio			Ratio			investment
	Net asset		Net			Net realized														Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net		From net		Tax				value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment		realized		return of		Total		end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income		gain		capital		distributions		period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)		($)		($)		($)		($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Science & Technology Trust
Series I
12-31-2008		14.85		(0.03	)¹		(6.57	)		(6.60	)		—		—		—		—		8.25		(44.44	)²		1.20	³		1.18			(0.21	)		151			132
12-31-2007		12.42		(0.06	)¹		2.49			2.43			—		—		—		—		14.85		19.57	^2,4		1.19	³		1.16			(0.40	)		338			128
12-31-2006		11.77		(0.06	)¹		0.71			0.65			—		—		—		—		12.42		5.52	²		1.18	³		1.16			(0.48	)		347			194
12-31-2005		11.53		(0.07	)¹		0.31			0.24			—		—		—		—		11.77		2.08	²		1.17	³		1.14			(0.59	)		403			54
12-31-2004		11.43		(0.03	)¹		0.13			0.10			—		—		—		—		11.53		0.87	²		1.16	³		1.13			(0.28	)		490			55
Series II
12-31-2008		14.73		(0.05	)¹		(6.52	)		(6.57	)		—		—		—		—		8.16		(44.60	)²		1.40	³		1.38			(0.41	)		30			132
12-31-2007		12.35		(0.08	)¹		2.46			2.38			—		—		—		—		14.73		19.27	^2,4		1.39	³		1.36			(0.60	)		70			128
12-31-2006		11.72		(0.08	)¹		0.71			0.63			—		—		—		—		12.35		5.38	²		1.39	³		1.36			(0.68	)		61			194
12-31-2005		11.51		(0.09	)¹		0.30			0.21			—		—		—		—		11.72		1.82	²		1.37	³		1.34			(0.79	)		62			54
12-31-2004		11.42		(0.05	)¹		0.14			0.09			—		—		—		—		11.51		0.79	²		1.36	³		1.33			(0.42	)		71			55
Series NAV
12-31-2008		14.88		(0.02	)¹		(6.59	)		(6.61	)		—		—		—		—		8.27		(44.42	)²		1.15	³		1.13			(0.16	)		3			132
12-31-2007		12.44		(0.05	)¹		2.49			2.44			—		—		—		—		14.88		19.61	^2,4		1.14	³		1.11			(0.34	)		4			128
12-31-2006		11.78		(0.04	)¹		0.70			0.66			—		—		—		—		12.44		5.60	²		1.15	³		1.12			(0.51	)		1			194
12-31-2005⁵		10.45		(0.05	)¹		1.38			1.33			—		—		—		—		11.78		12.73	^2,6		1.13	^3,7		1.10	⁷		(0.58	)⁷		—	⁸		54

^1.Based on the average of the shares outstanding.

^2.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^3.Does not take into consideration expense reductions during the periods shown.

^4.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
	Year Ended 12-31-2007		Year Ended 12-31-2007

Portfolio
Science & Technology Series I	$	0.02		19.40	%
Science & Technology Series II		0.01		19.19	%
Science & Technology Series NAV		0.01		19.53	%

^5.Series NAV shares began operations on 4-29-05.

^6.Not annualized.

^7.Annualized.

^8.Less than $500,000.

309

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																	Ratio
																																	of net
																												Ratio			Ratio		investment
	Net asset		Net			Net realized																	Net asset					of gross			of net		income
	value,		investment			and unrealized			Total from			From net			From net		Tax						value,					expenses			expenses		(loss) to		Net assets,
	beginning		income			gain (loss) on			investment			investment			realized		return of			Total			end of		Total			to average			to average		average		end of		Portfolio
	of period		(loss)			investments			operations			income			gain		capital			distributions			period		return			net assets			net assets		net assets		period		turnover
Period ended	($)		($)			($)			($)			($)			($)		($)			($)			($)		(%)			(%)			(%)		(%)		(in millions)		(%)
Short-Term Bond Trust
Series NAV
12-31-2008		9.44		0.44	³		(2.23	)		(1.79	)		(0.68	)		—		—			(0.68	)		6.97		(18.92	)^4,5		0.66	⁶		0.66		4.81		92		47
12-31-2007		10.08		0.45	³		(0.12	)		0.33			(0.93	)		—		(0.04	)		(0.97	)		9.44		3.35	^4,5		0.60	⁶		0.60		4.55		244		60
12-31-2006		9.98		0.41	³		0.03			0.44			(0.34	)		—		—			(0.34	)		10.08		4.55	^4,5,7		0.62	⁶		0.62		4.15		297		99
12-31-2005¹		9.93		0.31	³		(0.11	)		0.20			(0.15	)		—		—			(0.15	)		9.98		2.07	⁴		0.72			0.72		3.08		207		36
12-31-2004²		10.13		0.30			(0.15	)		0.15			(0.30	)		—		(0.05	)		(0.35	)		9.93		1.42	⁴		0.69			0.69		2.96		253		39

^1.Effective 4-29-05, shareholders of the former VST Short-Term Bond Fund Series NAV became owners of an equal number of full and fractional Series NAV shares of the Short-Term Bond Trust. Additionally, the accounting and performance history of the former VST Short-Term Bond Fund Series NAV was redesignated as that of Series NAV shares of Short-Term Bond Trust.

^2.Audited by previous Independent Registered Public Accounting Firm.

^3.Based on the average of the shares outstanding.

^4.Assumes dividend reinvestment.

^5.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^6.Does not take into consideration expense reductions during the periods shown.

^7.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net		From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment		realized			return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income		gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)		($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Small Cap Growth Trust
Series I
12-31-2008		10.33		(0.02	)¹		(4.05	)		(4.07	)		—		(0.10	)		—		(0.10	)		6.16		(39.68	)^2,3		1.19	⁴		1.19			(0.28	)		31		191	¹³
12-31-2007		11.53		(0.02	)¹		1.46			1.44			—		(2.64	)		—		(2.64	)		10.33		13.99	^2,3,5		1.18	⁴		1.17			(0.20	)		29		104
12-31-2006		10.16		(0.08	)¹		1.45			1.37			—		—			—		—			11.53		13.48	^3,6		1.22	⁴		1.22			(0.73	)		23		162
12-31-2005⁷		8.06		(0.06	)¹		2.38			2.32			—		(0.22	)		—		(0.22	)		10.16		29.00	^2,8		1.23	⁹		1.23	⁹		(0.90	)⁹		1		140
Series II
12-31-2008		10.25		(0.04	)¹		(4.01	)		(4.05	)		—		(0.10	)		—		(0.10	)		6.10		(39.80	)^2,3		1.39	⁴		1.39			(0.47	)		27		191	¹³
12-31-2007		11.48		(0.05	)¹		1.46			1.41			—		(2.64	)		—		(2.64	)		10.25		13.77	^2,3,5		1.38	⁴		1.37			(0.41	)		40		104
12-31-2006		10.14		(0.10	)¹		1.44			1.34			—		—			—		—			11.48		13.21	^3,6		1.40	⁴		1.40			(0.95	)		31		162
12-31-2005⁷		8.06		(0.07	)¹		2.37			2.30			—		(0.22	)		—		(0.22	)		10.14		28.75	^2,8		1.41	⁹		1.41	⁹		(1.07	)⁹		19		140

310

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																Ratio
																																of net
																											Ratio			Ratio		investment
	Net asset		Net			Net realized																Net asset					of gross			of net		income
	value,		investment			and unrealized			Total from			From net		From net			Tax					value,					expenses			expenses		(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment		realized			return		Total			end of		Total			to average			to average		average			end of		Portfolio
	of period		(loss)			investments			operations			income		gain			of capital		distributions			period		return			net assets			net assets		net assets			period		turnover
Period ended	($)		($)			($)			($)			($)		($)			($)		($)			($)		(%)			(%)			(%)		(%)			(in millions)		(%)
Series NAV
12-31-2008		10.34		(0.02	)¹		(4.04	)		(4.06	)		—		(0.10	)		—		(0.10	)		6.18		(39.54	)^2,3		1.14	⁴		1.14		(0.23	)		181		191	¹³
12-31-2007		11.54		(0.02	)¹		1.46			1.44			—		(2.64	)		—		(2.64	)		10.34		13.98	^2,3,5		1.13	⁴		1.12		(0.16	)		245		104
12-31-2006		10.17		(0.08	)¹		1.45			1.37			—		—			—		—			11.54		13.47	^3,6		1.15	⁴		1.14		(0.70	)		241		162
12-31-2005¹¹		8.87		(0.08	)¹		1.60			1.52			—		(0.22	)		—		(0.22	)		10.17		17.34	²		1.13			1.13		(0.84	)		253		140
12-31-2004¹⁰		8.10		—	¹²		0.77			0.77			—		—			—		—			8.87		9.45	³		1.35	⁴		1.14		(0.71	)		228		160

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Small Cap Growth Series I	$	0.00	¹²		13.99%
Small Cap Growth Series II		0.00	¹²		13.77%
Small Cap Growth Series NAV		0.00	¹²		13.98%

^6.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^7.Series I and Series II shares began operations on 4-29-05.

^8.Not annualized.

^9.Annualized.

^10.Audited by previous Independent Registered Public Accounting Firm.

^11.Effective 4-29-05, shareholders of the former VST Small Cap Emerging Growth Fund Series NAV became owners of an equal number of full and fractional Series NAV shares of the Small Growth. Additionally, the accounting and performance history of the former VST Small Cap Emerging Growth Fund Series NAV was redesignated as that of Series NAV shares of Small Cap Growth.

^12.Less than $0.01 per share.

^13.Excludes merger activity.

311

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Small Cap Index Trust
Series I
12-31-2008		14.19		0.16	¹		(4.90	)		(4.74	)		(0.17	)		(0.12	)		—		(0.29	)		9.16		(33.71	)^2,3		0.58	⁴		0.58			1.33			135		41
12-31-2007		16.97		0.18	¹		(0.49	)		(0.31	)		(0.28	)		(2.19	)		—		(2.47	)		14.19		(2.16	)^2,3		0.56	⁴		0.56			1.07			209		15
12-31-2006		14.89		0.16	¹		2.43			2.59			(0.08	)		(0.43	)		—		(0.51	)		16.97		17.61	^2,3,5		0.57	⁴		0.57			1.00			239		27
12-31-2005		14.97		0.11	¹		0.41			0.52			(0.08	)		(0.52	)		—		(0.60	)		14.89		3.89	²		0.57			0.57			0.76			189		29
12-31-2004		12.80		0.09	¹		2.12			2.21			(0.04	)		—			—		(0.04	)		14.97		17.33	²		0.57			0.57			0.69			179		26
Series II
12-31-2008		14.14		0.13	¹		(4.87	)		(4.74	)		(0.14	)		(0.12	)		—		(0.26	)		9.14		(33.83	)^2,3		0.78	⁴		0.78			1.11			59		41
12-31-2007		16.89		0.15	¹		(0.49	)		(0.34	)		(0.22	)		(2.19	)		—		(2.41	)		14.14		(2.35	)^2,3		0.76	⁴		0.76			0.95			108		15
12-31-2006		14.83		0.12	¹		2.42			2.54			(0.05	)		(0.43	)		—		(0.48	)		16.89		17.35	^2,3,5		0.77	⁴		0.77			0.78			51		27
12-31-2005		14.91		0.08	¹		0.41			0.49			(0.05	)		(0.52	)		—		(0.57	)		14.83		3.70	²		0.77			0.77			0.55			52		29
12-31-2004		12.76		0.07	¹		2.11			2.18			(0.03	)		—			—		(0.03	)		14.91		17.13	²		0.77			0.77			0.49			54		26
Series NAV
12-31-2008		14.20		0.17	¹		(4.92	)		(4.75	)		(0.17	)		(0.12	)		—		(0.29	)		9.16		(33.70	)^2,3		0.53	⁴		0.53			1.44			93		41
12-31-2007		16.98		0.17	¹		(0.46	)		(0.29	)		(0.30	)		(2.19	)		—		(2.49	)		14.20		(2.07	)^2,3		0.51	⁴		0.51			1.03			84		15
12-31-2006		14.90		0.17	¹		2.43			2.60			(0.09	)		(0.43	)		—		(0.52	)		16.98		17.64	^2,3,5		0.52	⁴		0.52			1.07			179		27
12-31-2005^2,6		12.77		0.09	¹		2.04			2.13			—			—			—		—			14.90		16.68	⁷		0.53	⁸		0.53	⁸		0.92	⁸		93		29

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^6.Series NAV shares began operations on 4-29-05.

^7.Not annualized.

^8.Annualized.

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

of capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Small Cap Intrinsic Value Trust

Series I

12-31-2008¹

10.21

(0.01

)²

(5.21

)

(5.22

)

(0.03

)

(0.16

)

—

(0.19

)

4.80

(52.11

)⁴

1.25

⁵

1.25

⁵

(0.12

)⁵

—

⁶

Series NAV

12-31-2008

11.55

(0.01

)²

(6.55

)

(6.56

)

(0.03

)

(0.16

)

—

(0.19

)

4.80

(57.66

)⁷

1.20

⁸

1.20

(0.06

)

12-31-2007³

12.50

0.04

(0.77

)

(0.73

)

(0.02

)

(0.20

)

—

(0.22

)

11.55

(5.80

)^4,7

0.98

^5,8

0.98

⁵

0.48

⁵

154

⁴

^1.Series I shares began operations on 1-28-08.

312

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^2.Based on the average of the shares outstanding.

^3.Series NAV shares began operations on 5-1-07.

^4.Not annualized.

^5.Annualized.

^6.Less than $500,000.

^7.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^8.Does not take into consideration expense reductions during the periods shown.


Per share operating performance for a share outstanding throughout the period																													Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																	Ratios to average net assets
																																			Ratio
																																			of net
																													Ratio			Ratio			investment
	Net asset		Net			Net realized																		Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax						value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return			Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital			distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)			($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Small Cap Opportunities Trust
Series I
12-31-2008		20.65		0.17	¹		(8.62	)		(8.45	)		(0.35	)		(0.52	)		(0.05	)		(0.92	)		11.28		(42.13	)^2,3		1.11	⁴		1.11			1.03			33		107
12-31-2007		24.40		0.30	¹		(2.11	)		(1.81	)		(0.46	)		(1.48	)		—			(1.94	)		20.65		(7.66	)^2,3,5		1.08	⁴		1.08			1.23			73		41
12-31-2006		22.82		0.29	¹		2.09			2.38			(0.17	)		(0.63	)		—			(0.80	)		24.40		10.45	^2,3		1.07	⁴		1.07			1.23			110		36
12-31-2005		21.62		0.17	¹		1.45			1.62			—			(0.42	)		—			(0.42	)		22.82		7.77	²		1.12			1.12			0.76			124		113
12-31-2004		17.50		0.16	¹		4.28			4.44			(0.02	)		(0.30	)		—			(0.32	)		21.62		25.78	²		1.13			1.13			0.88			95		40
Series II
12-31-2008		20.57		0.14	¹		(8.58	)		(8.44	)		(0.31	)		(0.52	)		(0.05	)		(0.88	)		11.25		(42.25	)^2,3		1.31	⁴		1.31			0.83			26		107
12-31-2007		24.26		0.25	¹		(2.09	)		(1.84	)		(0.37	)		(1.48	)		—			(1.85	)		20.57		(7.80	)^2,3,5		1.28	⁴		1.28			1.05			54		41
12-31-2006		22.71		0.24	¹		2.07			2.31			(0.13	)		(0.63	)		—			(0.76	)		24.26		10.19	^2,3		1.27	⁴		1.27			1.03			76		36
12-31-2005		21.55		0.11	¹		1.47			1.58			—			(0.42	)		—			(0.42	)		22.71		7.61	²		1.32			1.32			0.49			83		113
12-31-2004		17.48		0.15	¹		4.24			4.39			(0.02	)		(0.30	)		—			(0.32	)		21.55		25.48	²		1.33			1.33			0.81			127		40
Series NAV
12-31-2008		20.53		0.17	¹		(8.57	)		(8.40	)		(0.36	)		(0.52	)		(0.05	)		(0.93	)		11.20		(42.13	)^2,3		1.06	⁴		1.06			1.04			86		107
12-31-2007		24.28		0.32	¹		(2.11	)		(1.79	)		(0.48	)		(1.48	)		—			(1.96	)		20.53		(7.61	)^2,3,5		1.03	⁴		1.03			1.34			243		41
12-31-2006		22.72		0.32	¹		2.05			2.37			(0.18	)		(0.63	)		—			(0.81	)		24.28		10.47	^2,3		1.02	⁴		1.02			1.39			272		36
12-31-2005⁶		21.40		0.18	¹		1.67			1.85			(0.11	)		(0.42	)		—			(0.53	)		22.72		8.98	^2,7		1.06	⁸		1.06	⁸		1.00	⁸		183		113

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007

Small Cap Opportunities Series I	$	0.01		−7.70%
Small Cap Opportunities Series II		0.02		−7.89%
Small Cap Opportunities Series NAV		0.01		−7.65%

^6.Series NAV shares began operation on 2-28-05.

^7.Not annualized.

^8.Annualized.

313

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																													Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																	Ratios to average net assets
																																			Ratio
																																			of net
																													Ratio			Ratio			investment
	Net asset		Net			Net realized																		Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax						value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return			Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital			distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)			($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Small Cap Value Trust
Series I
12-31-2008		16.20		0.16	¹		(4.37	)		(4.21	)		(0.18	)		(0.05	)		—			(0.23	)		11.76		(26.08	)^2,3		1.17	⁴		1.17			1.08			96		42
12-31-2007		20.58		0.18	¹		(0.59	)		(0.41	)		(0.18	)		(3.79	)		—			(3.97	)		16.20		(2.93	)^2,3		1.16	⁴		1.16			0.92			117		46	⁵
12-31-2006		20.94		0.17	¹		3.36			3.53			(0.01	)		(3.88	)		—			(3.89	)		20.58		19.26	^2,3,6		1.19	⁴		1.19			0.88			74		49
12-31-2005⁷		18.45		0.04	¹		2.68			2.72			—			(0.23	)		—			(0.23	)		20.94		14.78	^2,8		1.18	⁹		1.18	⁹		0.27	⁹		1		68
Series II
12-31-2008		16.16		0.13	¹		(4.36	)		(4.23	)		(0.15	)		(0.05	)		—			(0.20	)		11.73		(26.31	)^2,3		1.37	⁴		1.37			0.87			48		42
12-31-2007		20.50		0.12	¹		(0.56	)		(0.44	)		(0.11	)		(3.79	)		—			(3.90	)		16.16		(3.08	)^2,3		1.36	⁴		1.36			0.63			69		46	⁵
12-31-2006		20.90		0.09	¹		3.39			3.48			—			(3.88	)		—			(3.88	)		20.50		19.03	^2,3,6		1.37	⁴		1.37			0.48			69		49
12-31-2005⁷		18.45		—	^1,11		2.68			2.68			—			(0.23	)		—			(0.23	)		20.90		14.56	^2,8		1.38	⁹		1.38	⁹		0.01	⁹		34		68
Series NAV
12-31-2008		16.18		0.16	¹		(4.37	)		(4.21	)		(0.19	)		(0.05	)		—			(0.24	)		11.73		(26.12	)^2,3		1.12	⁴		1.12			1.10			134		42
12-31-2007		20.57		0.17	¹		(0.57	)		(0.40	)		(0.20	)		(3.79	)		—			(3.99	)		16.18		(2.86	)^2,3		1.11	⁴		1.11			0.87			237		46	⁵
12-31-2006		20.94		0.13	¹		3.40			3.53			(0.02	)		(3.88	)		—			(3.90	)		20.57		19.32	^2,3,6		1.11	⁴		1.11			0.67			278		49
12-31-2005¹²		19.42		0.05	¹		1.73			1.78			(0.03	)		(0.23	)		—			(0.26	)		20.94		9.21	²		1.10			1.10			0.25			265		68
12-31-2004¹⁰		16.56		0.19			3.99			4.18			—			(1.16	)		(0.16	)		(1.32	)		19.42		25.45	^2,3		1.06	⁴		1.05			1.11			247		33

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Excludes merger activity.

^6.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^7.Series I and Series II shares began operations on 4-29-05.

^8.Not annualized.

^9.Annualized.

^10.Audited by previous Independent Registered Public Accounting Firm.

^11.Less than $0.01 per share.

^12.Effective 4-29-05, shareholders of the former VST Small Cap Value Fund Series NAV became owners of an equal number of full and fractional Series NAV shares of Small Cap Value Trust. Additionally, the accounting and performance history of the former VST Small Cap Value Fund Series NAV was redesignated as that of Series NAV shares of Small Cap Value Trust.

314

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net		From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment		realized			return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income		gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)		($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Small Company Growth Trust
Series NAV
12-31-2008		15.81		(0.05	)¹		(5.97	)		(6.02	)		—		(0.25	)		—		(0.25	)		9.54		(38.57	)^2,3		1.13	⁴		1.13			(0.41	)		138		40
12-31-2007		15.11		(0.09	)¹		1.64			1.55			—		(0.85	)		—		(0.85	)		15.81		10.34	^2,3		1.08	⁴		1.08			(0.57	)		268		37
12-31-2006		13.29		(0.10	)¹		1.94			1.84			—		(0.02	)		—		(0.02	)		15.11		13.83	^2,3		1.11	⁴		1.11			(0.68	)		106		49
12-31-2005⁵		12.50		(0.02	)¹		0.81			0.79			—		—			—		—			13.29		6.32	⁶		1.13	⁷		1.13	⁷		(0.76	)⁷		58		7	⁶

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series NAV shares began operations on 10-24-05.

^6.Not annualized.

^7.Annualized.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Small Company Value Trust
Series I
12-31-2008		18.24		0.08	¹		(4.92	)		(4.84	)		(0.13	)		(0.30	)		—		(0.43	)		12.97		(27.05	)^2,3		1.13	⁴		1.08			0.48			108		30
12-31-2007		21.89		0.05	¹		(0.23	)		(0.18	)		(0.03	)		(3.44	)		—		(3.47	)		18.24		(1.20	)^2,3,5		1.11	⁴		1.06			0.23			200		18
12-31-2006		22.21		0.04	¹		3.27			3.31			(0.02	)		(3.61	)		—		(3.63	)		21.89		15.42	^2,3		1.12	⁴		1.08			0.19			275		16
12-31-2005		21.18		0.03	¹		1.40			1.43			(0.06	)		(0.34	)		—		(0.40	)		22.21		6.93	^2,3		1.12	⁴		1.10			0.13			291		12
12-31-2004		17.14		0.09	¹		4.20			4.29			(0.03	)		(0.22	)		—		(0.25	)		21.18		25.31	²		1.10			1.10			0.50			521		9
Series II
12-31-2008		18.11		0.05	¹		(4.90	)		(4.85	)		(0.08	)		(0.30	)		—		(0.38	)		12.88		(27.26	)^2,3		1.33	⁴		1.28			0.28			82		30
12-31-2007		21.76		0.01	¹		(0.22	)		(0.21	)		—			(3.44	)		—		(3.44	)		18.11		(1.35	)^2,3,5		1.31	⁴		1.26			0.03			145		18
12-31-2006		22.13		—	^1,6		3.24			3.24			—			(3.61	)		—		(3.61	)		21.76		15.16	^2,3		1.32	⁴		1.28			(0.01	)		195		16
12-31-2005		21.10		(0.01	)¹		1.39			1.38			(0.01	)		(0.34	)		—		(0.35	)		22.13		6.73	^2,3		1.32	⁴		1.30			(0.03	)		199		12
12-31-2004		17.10		0.06	¹		4.18			4.24			(0.02	)		(0.22	)		—		(0.24	)		21.10		25.06	²		1.30			1.30			0.32			278		9
Series NAV
12-31-2008		18.21		0.09	¹		(4.92	)		(4.83	)		(0.14	)		(0.30	)		—		(0.44	)		12.94		(27.04	)^2,3		1.08	⁴		1.03			0.58			283		30
12-31-2007		21.86		0.07	¹		(0.23	)		(0.16	)		(0.05	)		(3.44	)		—		(3.49	)		18.21		(1.14	)^2,3,5		1.06	⁴		1.01			0.35			294		18
12-31-2006		22.18		0.06	¹		3.26			3.32			(0.03	)		(3.61	)		—		(3.64	)		21.86		15.50	^2,3		1.06	⁴		1.03			0.26			234		16
12-31-2005⁷		21.03		0.06	¹		1.52			1.58			(0.09	)		(0.34	)		—		(0.43	)		22.18		7.72	^2,3,8		1.06	^4,9		1.04	⁹		0.33	⁹		148		12

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

315

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Small Company Value Series I		—	⁶		−1.20%
Small Company Value Series II		—	⁶		−1.35%
Small Company Value Series NAV		—	⁶		−1.14%

^6.Less than $0.01 per share.

^7.Series NAV shares began operations on 2-28-05.

^8.Not annualized.

^9.Annualized.

Per share operating performance for a share outstanding throughout the period

Ratios and supplemental data

Income (loss) from investment operations

Less distributions

Ratios to average net assets

Ratio

of net

Ratio

investment

Net asset

Net

Net realized

Net asset

of gross

of net

income

value,

investment

and unrealized

Total from

From net

Tax

value,

expenses

(loss) to

Net assets,

beginning

income

gain (loss) on

investment

realized

return

Total

end of

Total

to average

average

end of

Portfolio

of period

(loss)

investments

operations

income

gain

of capital

distributions

period

return

net assets

period

turnover

Period ended

($)

(%)

(in millions)

(%)

Smaller Company Growth Trust

Series NAV

12-31-2008¹

12.50

(0.01

)²

(1.88

)

(1.89

)

—

10.61

(15.12

)^3,5

1.30

^4,6

1.18

⁴

(0.30

)⁴

^1.Series NAV shares began operations on 10-7-08.

^2.Based on the average of the shares outstanding.

^3.Not annualized.

^4.Annualized.

^5.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^6.Does not take into consideration expense reductions during the periods shown.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			of capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Spectrum Income Trust
Series NAV
12-31-2008		13.31		0.61	¹		(1.84	)		(1.23	)		(0.79	)		(0.06	)		—		(0.85	)		11.23		(9.30	)^2,3		0.86	^4,10		0.84	¹⁰		4.76			1,053		69	⁵
12-31-2007		13.63		0.61	¹		0.17			0.78			(0.95	)		(0.15	)		—		(1.10	)		13.31		5.88	^2,3		0.88	⁴		0.86			4.48			1,083		83	⁵
12-31-2006		12.71		0.55	¹		0.45			1.00			(0.08	)		—	⁶		—		(0.08	)		13.63		7.90	^2,3		0.93	⁴		0.92			4.19			867		75
12-31-2005⁷		12.50		0.09	¹		0.12			0.21			—			—			—		—			12.71		1.68	^2,8		0.77	^4,9		0.75	⁹		3.84	⁹		551		21	⁸

^1.Based on the average of the shares outstanding.

^2.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^3.Assumes dividend reinvestment.

^4.Does not take into consideration expense reductions during the periods shown.

316

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^5.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 121% for 12-31-08 and 117% for 12-31-07. Prior years exclude the effect of TBA transactions.

^6.Less than $0.01 per share.

^7.Series NAV shares began operations on 10-24-05.

^8.Not annualized.

^9.Annualized.

^10.Includes interest expense on securities sold short. Excluding this the gross and net expense ratios would have been 0.86% and 0.84% for the year ended 12-31-08.


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net		From tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized		return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain		capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)		($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Strategic Bond Trust
Series I
12-31-2008		10.91		0.71	¹		(2.47	)		(1.76	)		(0.73	)		—		—		(0.73	)		8.42		(16.08	)^2,3		0.81	⁴		0.81			6.96			86		65	⁵
12-31-2007		12.01		0.66	¹		(0.66	)		--	⁶		(1.10	)		—		—		(1.10	)		10.91		(0.07	)^2,3		0.79	⁴		0.79			5.71			147		83	⁵
12-31-2006		12.03		0.61	¹		0.17			0.78			(0.80	)		—		—		(0.80	)		12.01		6.97	^2,3		0.80	⁴		0.80			5.26			170		141
12-31-2005		12.05		0.52	¹		(0.21	)		0.31			(0.33	)		—		—		(0.33	)		12.03		2.70	²		0.81			0.81			4.35			188		59
12-31-2004		11.73		0.45	¹		0.31			0.76			(0.44	)		—		—		(0.44	)		12.05		6.66	²		0.83			0.83			3.88			539		52
Series II
12-31-2008		10.91		0.69	¹		(2.46	)		(1.77	)		(0.71	)		—		—		(0.71	)		8.43		(16.22	)^2,3		1.01	⁴		1.01			6.77			60		65	⁵
12-31-2007		12.00		0.64	¹		(0.67	)		(0.03	)		(1.06	)		—		—		(1.06	)		10.91		(0.35	)^2,3		0.99	⁴		0.99			5.51			99		83	⁵
12-31-2006		12.01		0.59	¹		0.18			0.77			(0.78	)		—		—		(0.78	)		12.00		6.86	^2,3		1.00	⁴		1.00			5.07			111		141
12-31-2005		11.98		0.49	¹		(0.20	)		0.29			(0.26	)		—		—		(0.26	)		12.01		2.44	²		1.01			1.01			4.09			114		59
12-31-2004		11.69		0.42	¹		0.30			0.72			(0.43	)		—		—		(0.43	)		11.98		6.39	²		1.03			1.03			3.63			407		52
Series NAV
12-31-2008		10.88		0.71	¹		(2.46	)		(1.75	)		(0.74	)		—		—		(0.74	)		8.39		(16.06	)^2,3		0.76	⁴		0.76			7.05			445		65	⁵
12-31-2007		11.98		0.67	¹		(0.66	)		0.01			(1.11	)		—		—		(1.11	)		10.88		0.03	^2,3		0.74	⁴		0.74			5.79			466		83	⁵
12-31-2006		12.00		0.61	¹		0.18			0.79			(0.81	)		—		—		(0.81	)		11.98		7.05	^2,3		0.75	⁴		0.75			5.24			335		141
12-31-2005⁷		12.11		0.46	¹		(0.20	)		0.26			(0.37	)		—		—		(0.37	)		12.00		2.25	^2,8		0.74	⁹		0.74	⁹		4.55	⁹		401		59

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 300% for 12-31-08 and 463% for 12-31-07. Prior years exclude the effect of TBA transactions.

^6.Less than $0.01 per share.

^7.Series NAV shares began operations on 2-28-05.

^8.Not annualized.

^9.Annualized.

317

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
Strategic Income Trust
Series I
12-31-2008		13.73		0.81	¹		(1.96	)		(1.15	)		(1.38	)		—			—		(1.38	)		11.20		(8.61	)^2,3		0.82	⁴		0.81			6.17			16			40	⁵
12-31-2007		13.24		0.77	¹		0.01			0.78			(0.29	)		—			—		(0.29	)		13.73		5.87	^2,3		0.83	⁴		0.83			5.62			14			80	⁵
12-31-2006		13.15		0.59	¹		(0.05	)		0.54			(0.45	)		—	⁶		—		(0.45	)		13.24		4.13	^2,3		0.90	⁴		0.90			4.42			10			125
12-31-2005		13.41		0.45	¹		(0.17	)		0.28			(0.51	)		(0.03	)		—		(0.54	)		13.15		2.13	²		1.07			1.07			3.30			11			33
12-31-2004⁷		12.50		0.25	¹		0.87			1.12			(0.21	)		—			—		(0.21	)		13.41		8.93	^2,8		1.24	⁹		1.24	⁹		2.95	⁹		6			24	⁸
Series II
12-31-2008		13.74		0.78	¹		(1.95	)		(1.17	)		(1.35	)		—			—		(1.35	)		11.22		(8.76	)^2,3		1.02	⁴		1.01			5.89			10			40	⁵
12-31-2007		13.27		0.73	¹		—	⁶		0.73			(0.26	)		—			—		(0.26	)		13.74		5.54	^2,3		1.03	⁴		1.03			5.37			17			80	⁵
12-31-2006		13.15		0.56	¹		(0.05	)		0.51			(0.39	)		—	⁶		—		(0.39	)		13.27		3.95	^2,3		1.10	⁴		1.10			4.22			20			125
12-31-2005		13.41		0.42	¹		(0.16	)		0.26			(0.49	)		(0.03	)		—		(0.52	)		13.15		1.92	²		1.27			1.27			3.09			22			33
12-31-2004⁷		12.50		0.23	¹		0.88			1.11			(0.20	)		—			—		(0.20	)		13.41		8.87	^2,8		1.44	⁹		1.44	⁹		2.67	⁹		13			24	⁸
Series NAV
12-31-2008		13.71		0.82	¹		(1.96	)		(1.14	)		(1.39	)		—			—		(1.39	)		11.18		(8.57	)^2,3		0.77	⁴		0.76			6.23			518			40	⁶
12-31-2007		13.23		0.77	¹		—	⁶		0.77			(0.29	)		—			—		(0.29	)		13.71		5.84	^2,3		0.78	⁴		0.78			5.65			463			80	⁵
12-31-2006		13.15		0.60	¹		(0.06	)		0.54			(0.46	)		—	⁶		—		(0.46	)		13.23		4.15	^2,3		0.80	⁴		0.80			4.56			335			125
12-31-2005⁷		13.33		0.29	¹		0.07			0.36			(0.51	)		(0.03	)		—		(0.54	)		13.15		2.75	^2,8		1.03	⁹		1.03	⁹		2.96	⁹		—	¹⁰		33

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 46% for 12-31-08 and 86% for 12-31-07. Prior years exclude the effect of TBA transactions.

^6.Less than $0.01 per share.

^7.Series I, Series II and Series NAV shares began operations on 5-3-04, 5-3-04 and 4-29-05, respectively.

^8.Not annualized.

^9.Annualized.

^10.Less than $500,000.

318

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations								Less distributions																Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from		From net			From net			From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment		investment			realized			capital		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations		income			gain			paid-in		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)		($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Total Bond Market Trust A
Series I
12-31-2008		12.85		0.57	¹		0.18			0.75		(0.21	)		(0.03	)		—		(0.24	)		13.36		5.82	^2,3		0.57	⁴		0.57			4.37			37		139
12-31-2007⁵		12.55		0.61	¹		0.22			0.83		(0.53	)		—			—		(0.53	)		12.85		6.59	^2,3		0.57	⁴		0.56			4.72			64		91
12-31-2006⁶		12.50		0.48	¹		(0.02	)⁷		0.46		(0.41	)		—			—		(0.41	)		12.55		3.65	^2,3,8		0.60	^4,9		0.59	⁹		4.28	⁹		53		66	⁸
Series II
12-31-2008		12.89		0.53	¹		0.18			0.71		(0.18	)		(0.03	)		—		(0.21	)		13.39		5.52	^2,3		0.77	⁴		0.77			4.04			1		139
12-31-2007^5,6		12.79		0.37	¹		0.23			0.60		(0.50	)		—			—		(0.50	)		12.89		4.71	^2,3,8		0.76	^4,9		0.76	⁹		4.34	⁹		1		91	⁸
Series NAV
12-31-2008		12.87		0.53	¹		0.22			0.75		(0.21	)		(0.03	)		—		(0.24	)		13.38		5.86	^2,3		0.52	⁴		0.52			4.04			651		139
12-31-2007⁵		12.57		0.61	¹		0.22			0.83		(0.53	)		—			—		(0.53	)		12.87		6.63	^2,3		0.52	⁴		0.51			4.76			102		91
12-31-2006⁶		12.50		0.52	¹		(0.04	)⁷		0.48		(0.41	)		—			—		(0.41	)		12.57		3.85	^2,3,8		0.55	^4,9		0.54	⁹		4.56	⁹		33		66	⁸

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Prior to 11-9-07, the Portfolio was named Bond Index Trust A.

^6.Series I, Series II and Series NAV shares began operations on 2-10-06, 5-3-07 and 2-10-06, respectively.

^7.The amount shown for a share outstanding does not correspond with the aggregate net gain (loss) on investments for the period due to the timing of sales and repurchases of shares in relation to fluctuating market values of the investments of the fund.

^8.Not annualized.

^9.Annualized.

319

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations								Less distributions																	Ratios to average net assets
																																	Ratio
																																	of net
																												Ratio			Ratio		investment
	Net asset		Net			Net realized																	Net asset					of gross			of net		income
	value,		investment			and unrealized			Total from		From net			From net			From						value,					expenses			expenses		(loss) to		Net assets,
	beginning		income			gain (loss) on			investment		investment			realized			capital			Total			end of		Total			to average			to average		average		end of		Portfolio
	of period		(loss)			investments			operations		income			gain			paid-in			distributions			period		return			net assets			net assets		net assets		period		turnover
Period ended	($)		($)			($)			($)		($)			($)			($)			($)			($)		(%)			(%)			(%)		(%)		(in millions)		(%)
Total Bond Market Trust B
Series NAV
12-31-2008		9.83		0.50	¹		0.07			0.57		(0.53	)		—			—			(0.53	)		9.87		5.79	^2,3		0.54	⁴		0.26		5.07		162		68
12-31-2007		10.17		0.51	¹		0.18			0.69		(1.03	)		—			—			(1.03	)		9.83		7.13	^2,3		0.53	⁴		0.25		5.13		169		38
12-31-2006		10.13		0.50	¹		(0.11	)		0.39		(0.35	)		—			—			(0.35	)		10.17		4.07	^2,3		0.53	⁴		0.25		5.01		162		53
12-31-2005⁵		10.05		0.46	¹		(0.22	)		0.24		(0.16	)		—			—			(0.16	)		10.13		2.39	^2,3		0.42	⁴		0.25		4.55		182		18
12-31-2004⁶		10.13		0.46			(0.06	)		0.40		(0.46	)		(0.02	)		—	⁷		(0.48	)		10.05		4.05	^2,3		0.27	⁴		0.25		4.56		202		18

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Effective 4-29-05, shareholders of the former VST Bond Index Fund Series NAV became owners of an equal number of full and fractional Series NAV shares of the Bond Index Trust B. Additionally, the accounting and performance history of the former VST Bond Index Fund Series NAV was redesignated as that of Series NAV shares of Bond Index Trust B.

^6.Audited by previous Independent Registered Public Accounting Firm.

^7.Less than $0.01 per share.


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations								Less distributions																Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from		From net			From net			From tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment		investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations		income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)		($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Total Return Trust
Series I
12-31-2008		13.92		0.57	¹		(0.20	)		0.37		(0.67	)		(0.15	)		—		(0.82	)		13.47		2.69	^2,3		0.80	⁴		0.79			4.10			327		145	⁵
12-31-2007		13.83		0.64	¹		0.51			1.15		(1.06	)		—			—		(1.06	)		13.92		8.57	^2,3		0.81	^4,6,7		0.81	^6,7		4.67			339		196	⁵
12-31-2006		13.81		0.57	¹		(0.08	)		0.49		(0.47	)		—			—		(0.47	)		13.83		3.67	^2,3		0.81	⁴		0.81			4.21			368		254
12-31-2005		14.17		0.44	¹		(0.11	)		0.33		(0.34	)		(0.35	)		—		(0.69	)		13.81		2.40	²		0.82			0.82			3.18			438		409	⁸
12-31-2004⁹		14.21		0.27	¹		0.40			0.67		(0.54	)		(0.17	)		—		(0.71	)		14.17		4.96	²		0.80			0.80			1.93			903		251
Series II
12-31-2008		13.90		0.54	¹		(0.19	)		0.35		(0.64	)		(0.15	)		—		(0.79	)		13.46		2.53	^2,3		1.00	⁴		0.99			3.90			264		145	⁵
12-31-2007		13.79		0.61	¹		0.51			1.12		(1.01	)		—			—		(1.01	)		13.90		8.36	^2,3		1.01	^4,6,7		1.01	^6,7		4.47			236		196	⁵
12-31-2006		13.78		0.54	¹		(0.09	)		0.45		(0.44	)		—			—		(0.44	)		13.79		3.42	^2,3		1.01	⁴		1.01			4.01			248		254
12-31-2005		14.11		0.41	¹		(0.10	)		0.31		(0.29	)		(0.35	)		—		(0.64	)		13.78		2.25	²		1.01			1.01			2.92			286		409	⁸
12-31-2004⁹		14.17		0.23	¹		0.41			0.64		(0.53	)		(0.17	)		—		(0.70	)		14.11		4.71	²		1.00			1.00			1.69			620		251
Series NAV
12-31-2008		13.88		0.57	¹		(0.19	)		0.38		(0.68	)		(0.15	)		—		(0.83	)		13.43		2.76	^2,3		0.75	⁴		0.74			4.15			1,522		145	⁵
12-31-2007		13.80		0.64	¹		0.51			1.15		(1.07	)		—			—		(1.07	)		13.88		8.61	^2,3		0.76	^4,6,7		0.76	^6,7		4.73			1,704		196	⁵
12-31-2006		13.79		0.58	¹		(0.09	)		0.49		(0.48	)		—			—		(0.48	)		13.80		3.66	^2,3		0.76	⁴		0.76			4.27			1,319		254
12-31-2005¹⁰		14.16		0.43	¹		(0.08	)		0.35		(0.37	)		(0.35	)		—		(0.72	)		13.79		2.56	^2,11		0.76	¹²		0.76	¹²		3.71	¹²		834		409	⁸

320

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 476% for 12-31-08 and 286% for 12-31-07. Prior years exclude the effect of TBA transactions.

^6.Includes interest expense on securities sold short. Excluding interest expense the expense ratios for the period ended would have been as follows:


	Ratio of gross			Ratio of net
	expenses to average			expenses to average
	net assets			net assets
Series I		0.80	%		0.80	%
Series II		1.00	%		1.00	%
Series NAV		0.75	%		0.75	%

^7.Includes interest and fees on inverse floaters. The impact of this expense to the gross and net expense ratios was less than 0.01%.

^8.Excludes merger activity.

^9.As a result of changes in generally accepted accounting principles, periodic payments made under interest-rate swap agreements, previously included within interest income, have been included to realized gain (loss) in the Statements of Operations. The effect of this reclassification was to increase (decrease) the net investment income per share by less than ($0.01) for Series I and Series II, and the net investment income ratio by less than (0.01%) for Series I and Series II for the year ended 12-31-04.

^10.Series NAV shares began operations on 2-28-05.

^11.Not annualized.

^12.Annualized.

321

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			capital		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			paid-in		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Total Stock Market Index Trust
Series I
12-31-2008		12.98		0.17	¹		(4.99	)		(4.82	)		(0.17	)		(0.02	)		—		(0.19	)		7.97		(37.20	)^2,3		0.58	⁴		0.58			1.59			182		5
12-31-2007		13.13		0.18	¹		0.49			0.67			(0.30	)		(0.52	)		—		(0.82	)		12.98		5.18	^2,3		0.57	⁴		0.56			1.33			263		11
12-31-2006		11.56		0.16	¹		1.59			1.75			(0.12	)		(0.06	)		—		(0.18	)		13.13		15.29	^2,3,5		0.57	⁴		0.57			1.30			238		2
12-31-2005		11.06		0.13	¹		0.49			0.62			(0.12	)		—			—		(0.12	)		11.56		5.69	²		0.57			0.57			1.20			200		21
12-31-2004		9.96		0.13	¹		1.03			1.16			(0.06	)		—			—		(0.06	)		11.06		11.74	²		0.57			0.57			1.30			175		5
Series II
12-31-2008		12.94		0.14	¹		(4.95	)		(4.81	)		(0.15	)		(0.02	)		—		(0.17	)		7.96		(37.29	)^2,3		0.78	⁴		0.78			1.36			44		5
12-31-2007		13.07		0.16	¹		0.48			0.64			(0.25	)		(0.52	)		—		(0.77	)		12.94		4.99	^2,3		0.77	⁴		0.76			1.15			86		11
12-31-2006		11.51		0.13	¹		1.59			1.72			(0.10	)		(0.06	)		—		(0.16	)		13.07		15.09	^2,3,5		0.77	⁴		0.77			1.09			37		2
12-31-2005		11.02		0.11	¹		0.48			0.59			(0.10	)		—			—		(0.10	)		11.51		5.41	²		0.77			0.77			0.99			38		21
12-31-2004		9.93		0.11	¹		1.04			1.15			(0.06	)		—			—		(0.06	)		11.02		11.60	²		0.77			0.77			1.08			37		5
Series NAV
12-31-2008		12.98		0.17	¹		(4.98	)		(4.81	)		(0.18	)		(0.02	)		—		(0.20	)		7.97		(37.15	)^2,3		0.53	⁴		0.53			1.61			68		5
12-31-2007		13.14		0.19	¹		0.48			0.67			(0.31	)		(0.52	)		—		(0.83	)		12.98		5.19	^2,3		0.52	⁴		0.51			1.37			137		11
12-31-2006		11.57		0.16	¹		1.59			1.75			(0.12	)		(0.06	)		—		(0.18	)		13.14		15.33	^2,3,5		0.52	⁴		0.52			1.34			160		2
12-31-2005⁸		10.41		0.10	¹		1.06			1.16			—			—			—		—			11.57		11.14	⁶		0.52	⁷		0.52	⁷		1.30	⁷		170		21

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.John Hancock Life Insurance Company made a voluntary payment to the portfolio. Excluding this payment, the impact on total return would have been less than 0.01%.

^6.Not annualized.

^7.Annualized.

^8.Series NAV shares began operations on 4-29-05.

322

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			From tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
U.S. Government Securities Trust
Series I
12-31-2008		12.83		0.37	¹		(0.55	)		(0.18	)		(0.48	)		—			—		(0.48	)		12.17		(1.41	)^2,3		0.75	⁴		0.74			2.95			140		44
12-31-2007		13.53		0.59	¹		(0.17	)		0.42			(1.12	)		—			—		(1.12	)		12.83		3.15	^2,3		0.73	⁴		0.73			4.47			163		108
12-31-2006		13.64		0.56	¹		0.01			0.57			(0.68	)		—			—		(0.68	)		13.53		4.39	^2,3		0.75	⁴		0.75			4.20			181		57
12-31-2005		13.93		0.37	¹		(0.16	)		0.21			(0.24	)		(0.26	)		—		(0.50	)		13.64		1.58	²		0.74			0.74			2.74			218		26
12-31-2004		14.01		0.24	¹		0.15			0.39			(0.28	)		(0.19	)		—		(0.47	)		13.93		2.89	²		0.74			0.74			1.76			471		77
Series II
12-31-2008		12.84		0.34	¹		(0.55	)		(0.21	)		(0.45	)		—			—		(0.45	)		12.18		(1.64	)^2,3		0.95	⁴		0.94			2.69			93		44
12-31-2007		13.52		0.57	¹		(0.18	)		0.39			(1.07	)		—			—		(1.07	)		12.84		2.93	^2,3		0.93	⁴		0.93			4.26			81		108
12-31-2006		13.63		0.53	¹		0.01			0.54			(0.65	)		—			—		(0.65	)		13.52		4.19	^2,3		0.95	⁴		0.95			4.00			85		57
12-31-2005		13.88		0.35	¹		(0.15	)		0.20			(0.19	)		(0.26	)		—		(0.45	)		13.63		1.45	²		0.94			0.94			2.53			103		26
12-31-2004		13.97		0.21	¹		0.15			0.36			(0.26	)		(0.19	)		—		(0.45	)		13.88		2.70	²		0.94			0.94			1.56			264		77
Series NAV
12-31-2008		12.79		0.38	¹		(0.56	)		(0.18	)		(0.49	)		—			—		(0.49	)		12.12		(1.44	)^2,3		0.70	⁴		0.69			3.00			91		44
12-31-2007		13.49		0.60	¹		(0.17	)		0.43			(1.13	)		—			—		(1.13	)		12.79		3.25	^2,3		0.68	⁴		0.68			4.50			102		108
12-31-2006		13.61		0.57	¹		--	^6,7		0.57			(0.69	)		—			—		(0.69	)		13.49		4.39	^2,3		0.70	⁴		0.70			4.29			116		57
12-31-2005⁸		13.90		0.33	¹		(0.08	)		0.25			(0.28	)		(0.26	)		—		(0.54	)		13.61		1.82	^2,9		0.67	¹⁰		0.67	¹⁰		2.90	¹⁰		96		26

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.The Portfolio turnover rates, including the effect of “TBA” (to be announced) securities for the periods ended, were as follows: 520% for 12-31-08 and 775% for 12-31-07. Prior years exclude the effect of TBA transactions.

^6.Less than $0.01 per share.

^8.Series NAV shares began operations on 2-28-05.

^9.Not annualized.

^10.Annualized.

323

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net		From tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized		return of		Total			end of		Total			to average			to average			average			end of			Portfolio
	of period		(loss)			investments			operations			income			gain		capital		distributions			period		return			net assets			net assets			net assets			period			turnover
Period ended	($)		($)			($)			($)			($)			($)		($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)			(%)
U.S. High Yield Bond Trust
Series I
12-31-2008		12.49		0.65	¹		(3.25	)		(2.60	)		(0.70	)		—		—		(0.70	)		9.19		(20.86	)^2,3		0.84	⁴		0.83			5.64			1			46
12-31-2007		13.52		0.96	¹		(0.58	)		0.38			(1.41	)		—		—		(1.41	)		12.49		2.87	^2,3		0.83	⁴		0.82			7.27			1			84
12-31-2006		13.01		0.92	¹		0.28			1.20			(0.69	)		—		—		(0.69	)		13.52		9.58	^2,3		0.80	⁴		0.80			7.11			1			118
12-31-2005⁵		12.50		0.61	¹		(0.10	)		0.51			—			—		—		—			13.01		4.08	⁶		0.87	⁷		0.87	⁷		7.35	⁷		—	⁸		134	⁶
Series II
12-31-2008		12.52		0.88	¹		(3.51	)		(2.63	)		(0.67	)		—		—		(0.67	)		9.22		(21.05	)^2,3		1.04	⁴		1.03			7.57			2			46
12-31-2007		13.52		0.94	¹		(0.58	)		0.36			(1.36	)		—		—		(1.36	)		12.52		2.69	^2,3		1.03	⁴		1.02			7.07			2			84
12-31-2006		13.00		0.90	¹		0.29			1.19			(0.67	)		—		—		(0.67	)		13.52		9.46	^2,3		1.04	⁴		1.04			6.94			3			118
12-31-2005⁵		12.50		0.57	¹		(0.07	)		0.50			—			—		—		—			13.00		4.00	⁶		1.06	⁷		1.06	⁷		6.48	⁷		1			134	⁶
Series NAV
12-31-2008		12.50		0.90	¹		(3.50	)		(2.60	)		(0.70	)		—		—		(0.70	)		9.20		(20.79	)^2,3		0.79	⁴		0.78			7.87			557			46
12-31-2007		13.53		0.97	¹		(0.58	)		0.39			(1.42	)		—		—		(1.42	)		12.50		2.92	^2,3		0.78	⁴		0.77			7.33			443			84
12-31-2006		13.02		0.93	¹		0.27			1.20			(0.69	)		—		—		(0.69	)		13.53		9.62	^2,3		0.79	⁴		0.79			7.17			348			118
12-31-2005⁵		12.50		0.51	¹		0.01			0.52			—			—		—		—			13.02		4.16	⁶		0.83	⁷		0.83	⁷		5.83	⁷		147			134	⁶

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Series I, Series II and Series NAV shares began operations on 4-29-05.

^6.Not annualized.

^7.Annualized.

^8.Less than $500,000.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
U.S. Multi Sector Trust
Series NAV
12-31-2008		13.38		0.16	¹		(3.81	)		(3.65	)		(0.28	)		—			—		(0.28	)		9.45		(27.30	)^2,3		0.81	⁴		0.80			1.34			507		77
12-31-2007		14.00		0.18	¹		0.15			0.33			(0.23	)		(0.72	)		—		(0.95	)		13.38		2.38	^2,3		0.80	⁴		0.79			1.24			1,702		65
12-31-2006		13.05		0.14	¹		0.86			1.00			(0.02	)		(0.03	)		—		(0.05	)		14.00		7.63	^2,3		0.81	⁴		0.81			1.06			1,408		61
12-31-2005⁵		12.50		0.02	¹		0.53			0.55			—			—			—		—			13.05		4.40	⁶		0.77	⁷		0.77	⁷		0.84	⁷		855		5	⁶

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

324

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS

^5.Series NAV shares began operations on 10-24-05.

^6.Not annualized.

^7.Annualized.


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Utilities Trust
Series I
12-31-2008		14.34		0.30	¹		(5.67	)		(5.37	)		(0.35	)		(0.46	)		—		(0.81	)		8.16		(38.64	)^2,3		1.02	⁴		1.02			2.49			94		68
12-31-2007		14.66		0.32	¹		3.44			3.76			(0.31	)		(3.77	)		—		(4.08	)		14.34		27.40	^2,5		1.02			1.01			2.07			188		92
12-31-2006		13.18		0.29	¹		3.25			3.54			(0.33	)		(1.73	)		—		(2.06	)		14.66		31.00	^2,3		1.00	⁴		1.00			2.24			134		98
12-31-2005		12.08		0.20	¹		1.72			1.92			(0.06	)		(0.76	)		—		(0.82	)		13.18		16.82	²		1.09			1.09			1.62			89		100
12-31-2004		9.43		0.19	¹		2.56			2.75			(0.10	)		—			—		(0.10	)		12.08		29.42	²		1.15			1.15			1.87			60		106
Series II
12-31-2008		14.23		0.27	¹		(5.61	)		(5.34	)		(0.32	)		(0.46	)		—		(0.78	)		8.11		(38.73	)^2,3		1.22	⁴		1.22			2.23			30		68
12-31-2007		14.56		0.29	¹		3.41			3.70			(0.26	)		(3.77	)		—		(4.03	)		14.23		27.10	^2,5		1.22			1.21			1.86			74		92
12-31-2006		13.10		0.27	¹		3.23			3.50			(0.31	)		(1.73	)		—		(2.04	)		14.56		30.77	^2,3		1.20	⁴		1.20			2.08			66		98
12-31-2005		12.02		0.18	¹		1.70			1.88			(0.04	)		(0.76	)		—		(0.80	)		13.10		16.56	²		1.29			1.29			1.43			54		100
12-31-2004		9.39		0.17	¹		2.55			2.72			(0.09	)		—			—		(0.09	)		12.02		29.23	²		1.35			1.35			1.68			38		106
Series NAV
12-31-2008		14.32		0.31	¹		(5.66	)		(5.35	)		(0.35	)		(0.46	)		—		(0.81	)		8.16		(38.50	)^2,3		0.97	⁴		0.97			2.62			15		68
12-31-2007		14.65		0.32	¹		3.45			3.77			(0.33	)		(3.77	)		—		(4.10	)		14.32		27.43	^2,5		0.97			0.96			2.04			25		92
12-31-2006		13.17		0.30	¹		3.25			3.55			(0.34	)		(1.73	)		—		(2.07	)		14.65		31.07	^2,3		0.95	⁴		0.95			2.29			7		98
12-31-2005⁶		11.34		0.13	¹		1.70			1.83			—			—			—		—			13.17		16.14	⁷		1.04	⁸		1.04	⁸		1.34	⁸		3		100

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Does not take into consideration expense reductions during the periods shown.

^5.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share			Total Return Excluding
	from Payment from			Payment from
	Affiliate for the			Affiliate for the
Portfolio	Year Ended 12-31-2007			Year Ended 12-31-2007

Utilities Series I	$	0.01			27.31	%
Utilities Series II		—	⁹		27.10	%
Utilities Series NAV		—	⁹		27.43	%

^6.Series NAV shares began operations on 4-29-05.

^7.Not annualized.

^8.Annualized.

^9.Less than $0.01 per share.

325

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Value Trust
Series I
12-31-2008		17.36		0.16	¹		(7.09	)		(6.93	)		(0.16	)		(0.43	)		—		(0.59	)		9.84		(40.87	)^2,3		0.85	⁵		0.85			1.09			133		50
12-31-2007		22.72		0.18	¹		1.54			1.72			(0.32	)		(6.76	)		—		(7.08	)		17.36		8.22	^2,3,4		0.83	⁵		0.83			0.80			273		73
12-31-2006		21.89		0.18	¹		3.95			4.13			(0.09	)		(3.21	)		—		(3.30	)		22.72		21.05	^2,3		0.83	⁵		0.83			0.83			290		65
12-31-2005		19.57		0.08	¹		2.36			2.44			(0.12	)		—			—		(0.12	)		21.89		12.56	²		0.86			0.86			0.39			263		67
12-31-2004		17.09		0.10	¹		2.48			2.58			(0.10	)		—			—		(0.10	)		19.57		15.18	²		0.85			0.85			0.58			307		80
Series II
12-31-2008		17.29		0.13	¹		(7.05	)		(6.92	)		(0.12	)		(0.43	)		—		(0.55	)		9.82		(40.96	)^2,3		1.05	⁵		1.05			0.88			27		50
12-31-2007		22.62		0.13	¹		1.54			1.67			(0.24	)		(6.76	)		—		(7.00	)		17.29		8.00	^2,3,4		1.03	⁵		1.03			0.60			56		73
12-31-2006		21.81		0.13	¹		3.94			4.07			(0.05	)		(3.21	)		—		(3.26	)		22.62		20.80	^2,3		1.03	⁵		1.03			0.64			59		65
12-31-2005		19.50		0.04	¹		2.36			2.40			(0.09	)		—			—		(0.09	)		21.81		12.35	²		1.06			1.06			0.20			46		67
12-31-2004		17.04		0.07	¹		2.48			2.55			(0.09	)		—			—		(0.09	)		19.50		15.04	²		1.05			1.05			0.40			49		80
Series NAV
12-31-2008		17.35		0.17	¹		(7.09	)		(6.92	)		(0.17	)		(0.43	)		—		(0.60	)		9.83		(40.84	)^2,3		0.80	⁵		0.80			1.20			9		50
12-31-2007		22.72		0.19	¹		1.54			1.73			(0.34	)		(6.76	)		—		(7.10	)		17.35		8.26	^2,3,4		0.78	⁵		0.78			0.86			11		73
12-31-2006		21.90		0.19	¹		3.94			4.13			(0.10	)		(3.21	)		—		(3.31	)		22.72		21.03	^2,3		0.78	⁵		0.78			0.90			4		65
12-31-2005⁶		18.90		0.11	¹		2.89			3.00			—			—			—		—			21.90		15.87	⁷		0.82	⁸		0.82	⁸		0.77	⁸		1		67

^1.Based on the average of the shares outstanding.

^2.Assumes dividend reinvestment.

^3.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^4.Payments from Affiliates increased the end of period net asset value per share and the total return by the following amounts:


	Impact on NAV per share		Total Return Excluding
	from Payment from		Payment from
	Affiliate for the		Affiliate for the
Portfolio	Year Ended 12-31-2007		Year Ended 12-31-2007

Value Series I	$	0.03		8.03	%
Value Series II		0.03		7.82	%
Value Series NAV		0.02		8.14	%

^5.Does not take into consideration expense reductions during the periods shown.

^6.Series NAV shares began operations on 4-29-05.

^7.Not annualized.

^8.Annualized.

326

JOHN HANCOCK TRUST
FINANCIAL HIGHLIGHTS


Per share operating performance for a share outstanding throughout the period																												Ratios and supplemental data
			Income (loss) from investment operations									Less distributions																Ratios to average net assets
																																		Ratio
																																		of net
																												Ratio			Ratio			investment
	Net asset		Net			Net realized																	Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net			From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment			realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income			gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)			($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Value & Restructuring Trust
Series NAV
12-31-2008		16.13		0.19	²		(7.74	)		(7.55	)		(0.16	)		—			—		(0.16	)		8.42		(46.81	)^3,4		0.87	⁵		0.87			1.43			284		23
12-31-2007		15.14		0.23	^2,6		1.36			1.59			(0.32	)		(0.28	)		—		(0.60	)		16.13		10.56	^3,4		0.86	⁵		0.85			1.40			444		22
12-31-2006		13.31		0.17	²		1.74			1.91			(0.04	)		(0.04	)		—		(0.08	)		15.14		14.43	^3,4		0.89	⁵		0.89			1.21			337		14
12-31-2005¹		12.50		0.04	²		0.77			0.81			—			—			—		—			13.31		6.48	⁷		0.91	⁸		0.91	⁸		1.80	⁸		153		4

^1.Series NAV shares began operations on 10-24-05.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^5.Does not take into consideration expense reductions during the periods shown.

^6.Net investment income (loss) per share and ratio of net investment income (loss) to average net assets reflects special dividends received by the Portfolio which amounted to the following amounts:

Percentage of

Portfolio

Series

Per share

average net assets

Value & Restructuring

NAV

0.07

0.42

^7.Not annualized.

^8.Annualized.


Per share operating performance for a share outstanding throughout the period																											Ratios and supplemental data
			Income (loss) from investment operations									Less distributions															Ratios to average net assets
																																	Ratio
																																	of net
																											Ratio			Ratio			investment
	Net asset		Net			Net realized																Net asset					of gross			of net			income
	value,		investment			and unrealized			Total from			From net		From net			Tax					value,					expenses			expenses			(loss) to			Net assets,
	beginning		income			gain (loss) on			investment			investment		realized			return of		Total			end of		Total			to average			to average			average			end of		Portfolio
	of period		(loss)			investments			operations			income		gain			capital		distributions			period		return			net assets			net assets			net assets			period		turnover
Period ended	($)		($)			($)			($)			($)		($)			($)		($)			($)		(%)			(%)			(%)			(%)			(in millions)		(%)
Vista Trust
Series NAV
12-31-2008		17.81		(0.07	)²		(8.44	)		(8.51	)		—		(0.47	)		—		(0.47	)		8.83		(48.88	)^3,4		1.03	⁵		1.02			(0.50	)		46		205
12-31-2007		14.26		(0.08	)²		5.54			5.46			—		(1.91	)		—		(1.91	)		17.81		38.44	^3,4		0.96	⁵		0.96			(0.49	)		158		121
12-31-2006		13.12		(0.04	)²		1.18			1.14			—		—			—		—			14.26		8.69	⁴		1.02	⁵		1.02			(0.30	)		120		219
12-31-2005¹		12.50		(0.01	)²		0.63			0.62			—		—			—		—			13.12		4.96	⁶		1.00	⁷		1.00	⁷		(0.30	)⁷		69		32

^1.Series NAV shares began operations on 10-24-05.

^2.Based on the average of the shares outstanding.

^3.Assumes dividend reinvestment.

^4.Total returns would have been lower had certain expenses not been reduced during the periods shown.

^5.Does not take into consideration expense reductions during the periods shown.

^6.Not annualized.

^7.Annualized.

327

APPENDIX A

SCHEDULE OF MANAGEMENT FEES

Set forth below is the schedule of the annual percentage rates of the management fees for the Funds. For certain Funds the advisory or management fee for the Fund is calculated by applying to the net assets of the Fund an annual fee rate, which is determined based on the application of the annual percentage rates for the Fund to the “Aggregate Net Assets” of the Fund. Aggregate Net Assets of a Fund include the net assets of the Fund and in most cases the net assets of one or more other John Hancock Fund Complex funds (or portions thereof) indicated below that have the same subadviser as the Fund. If the Fund and such other fund(s) (or portions thereof) cease to have the same subadviser, their assets will no longer be aggregated for purposes of determining the applicable annual fee rate for the Fund.


Fund	APR		Advisory Fee Breakpoint


500 Index Trust		0.470%	— first $500 million; and
		0.460%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the 500 Index Fund, a series of JHF II)

500 Index Trust B		0.470%	— first $500 million; and
		0.460%	— excess over $500 million.

Absolute Return Trust			The management fee has two components: (a) a fee on assets invested in funds of JHT, John Hancock Funds II (“JHF II “) or John Hancock Funds III (“JHF III”) excluding Money Market Trust B, 500 Index Trust B, International Equity Index Trust B and Total Bond Market Trust B (“Affiliated Funds Assets”) and (b) a fee on assets not invested in Affiliated Funds (“Other Assets”).
			(a) The fee on Affiliated Funds Assets is stated as an annual percentage of the current value of the aggregate net assets of the fund and the Absolute Return Portfolio, a series of JHF II, determined in accordance with the following schedule and that rate is applied to the Affiliated Fund Assets of the Fund.
		0.06%	— first $500 million; and
		0.05%	— excess over $500 million.
			(b) The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the fund and the Absolute Return Portfolio, a series of JHF II, determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.51%	— first $500 million; and
		0.50%	— excess over $500 million.

Active Bond Trust		0.600%	— at all asset levels

All Cap Core Trust		0.800%	— first $500 million; and
		0.750%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the All Cap Core Fund, a series of JHF II)

All Cap Growth Trust		0.850%	— first $500 million;
		0.825%	— next $500 million; and
		0.800%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the All Cap Growth Fund, a series of JHF II)

All Cap Value Trust		0.850%	— first $250 million;
		0.800%	— next $250 million; and
		0.750%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the All Cap Value Fund a series of JHF II)

Alpha OpportunitiesTrust		1.025%	— first $250 million;
		1.00%	— next $250 million; and
		0.975%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Alpha Opportunities Fund, a series of JHF II)

328


Fund	APR		Advisory Fee Breakpoint


American Diversified Growth and Income Trust		0.05%	— first $500 million; and
		0.04%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund, American Global Diversification Trust and the American Fundamental Holdings Trust, each a series of JHT, and the American Diversified Growth & Income Fund, American Global Diversification Fund and the American Fundamental Holdings Fund, each a series of JHF II.)

American Fundamental Holdings Trust		0.05%	— first $500 million; and
		0.04%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the American Global Diversification Trust, each a series of JHT.)

American Global Diversification Trust		0.05%	— first $500 million; and
		0.04%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the American Fundamental Holdings Trust, each a series of JHT.)

Balanced Trust		0.84%	— first $250 million;
		0.8225%	— next 250 million;
		0.8125%	— next $500 million; and
		0.80%	— excess over $1 billion.

Blue Chip Growth Trust		0.825%	— first $1 billion; and
		0.800%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the Blue Chip Growth Fund, a series of JHF II)

Capital Appreciation Trust		0.850%	— first $300 million;
		0.800%	— next $200 million;
		0.700%	— next $500 million ; and
		0.670%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the Capital Appreciation Fund, a series of JHF II)

Capital Appreciation Value Trust			If net assets are less than $500 million, the following fee schedule shall apply:
		0.950%	— first $250 million;
		0.850%	— excess over $250 million.
			If net assets equal or exceed $500 million but are less than $2 billion, the following fee schedule shall apply:
		0.850%	— first $1 billion;
		0.800%	— excess $1 billion.
			If net assets equal or exceed $2 billion but are less than $3 billion, the following fee schedule shall apply:
		0.850%	— first $500 million;
		0.800%	— excess over $500 million.
			If net assets equal or exceed $3 billion, the following fee schedule shall apply:
		0.800%	— all asset levels

Core Allocation Plus Trust		0.915%	— first $500 million; and
		0.865%	— excess over $500 million (Aggregate Net Assets include the net assets of the fund and the Core Allocation Plus Fund, a series of JHF II)

329


Fund	APR		Advisory Fee Breakpoint


Core Allocation Trust			The management fee has two components: (a) a fee on assets invested in funds of JHT, JHF II or JHF III (“Affiliated Funds Assets”) and (b) a fee on assets not invested in Affiliated Funds (“Other Assets”). The fee on Affiliated Funds Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Affiliated Fund Assets of the fund.
		0.05%	— first $500 million; and
		0.04%	— excess over $500 million.
			The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.50%	— first $500 million; and
		0.49%	— excess over $500 million.

Core Balanced Trust			The management fee has two components: (a) a fee on assets invested in funds of JHT, JHF II or JHF III (“Affiliated Funds Assets”) and (b) a fee on assets not invested in Affiliated Funds (“Other Assets”). The fee on Affiliated Funds Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Affiliated Fund Assets of the fund.
		0.05%	— first $500 million; and
		0.04%	— excess over $500 million.
			The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.50%	— first $500 million; and
		0.49%	— excess over $500 million.

Core Bond Trust		0.690%	— first $200 million;
		0.640%	— next $200 million; and
		0.570%	— excess over $400 million. (Aggregate Net Assets include the net assets of the fund and the Core Bond Fund, a series of JHF II)

Core Disciplined Diversifcation Trust			The management fee has two components: (a) a fee on assets invested in funds of JHT, JHF II or JHF III (“Affiliated Funds Assets”) and (b) a fee on assets not invested in Affiliated Funds (“Other Assets”). The fee on Affiliated Funds Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Affiliated Fund Assets of the fund.
		0.05%	— first $500 million; and
		0.04%	— excess over $500 million.
			The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.50%	— first $500 million; and
		0.49%	— excess over $500 million.

330


Fund	APR		Advisory Fee Breakpoint


Core Fundamental Holdings Trust			The management fee has two components: (a) a fee on assets invested in funds of JHT, JHF II, JHF III and American Funds Insurance Series (“Affiliated and AFIS Funds Assets”) and (b) a fee on assets not invested in Affiliated and AFIS Funds (“Other Assets”). The fee on Affiliated Funds and AFIS Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Affiliated and AFIS Fund Assets of the fund.
		0.05%	— first $500 milllion; and
		0.04%	— excess over $500 million.
			The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.50%	— first $500 milllion; and
		0.49%	— excess over $500 million.

Core Global Diversification Trust			The management fee has two components: (a) a fee on assets invested in funds of JHT, JHF II, JHF III and American Funds Insurance Series (“Affiliated and AFIS Funds Assets”) and (b) a fee on assets not invested in Affiliated and AFIS Funds (“Other Assets”). The fee on Affiliated Funds and AFIS Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Affiliated and AFIS Fund Assets of the fund.
		0.05%	— first $500 milllion; and
		0.04%	— excess over $500 million.
			The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.50%	— first $500 milllion; and
		0.49%	— excess over $500 million.

Core Strategy Trust			The management fee has two components: (a) a fee on assets invested in funds of JHT, JHF II or JHF III excluding Money Market Trust B, 500 Index Trust B, International Equity Index Trust B and Total Bond Market Trust B (“Affiliated Funds Assets”) and (b) a fee on assets not invested in Affiliated Funds (“Other Assets”).
			(a) The fee on Affiliated Funds Assets is stated as an annual percentage of the current value of the net assets of the Fund determined in accordance with the following schedule and that rate is applied to the Affiliated Fund Assets of the fund.
		0.05%	— first $500 million; and
		0.04%	— excess over $500 million.
			(b) The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.50%	— first $500 million; and
		0.49%	— excess over $500 million.

Disciplined Diversification Trust		0.80%	— first $100 million;
		0.70%	— next $900 million; and
		0.65%	— over $1 billion

Emerging Markets Value Trust		1.00%	— first $100 million;
		0.950%	— excess over $100 million. (Aggregate Net Assets include the net assets of the fund, and the Emerging Markets Value Fund, a series of JHF II)

Emerging Small Company Trust		0.97%	— first $500 million; and
		0.90%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Emerging Small Company Fund, a series of JHF II)

331


Fund	APR		Advisory Fee Breakpoint


Equity-Income Trust		0.825%	— first $1 billion; and
		0.800%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the Equity-Income Fund, a series of JHF II)

Financial Services Trust		0.850%	— first $50 million;
		0.800%	— next $450 million; and
		0.750%	— excess over $500 million.

Floating Rate Income Trust		0.70%	— at all asset levels (Aggregate Net Assets include the net assets of the fund and the Floating Rate Income Fund, a series of JHF II)

Franklin Templeton Founding Allocation Trust			The management fee has two components: (a) a fee on assets invested in funds of JHT, JHF II or JHF III excluding Money Market Trust B, 500 Index Trust B, International Equity Index Trust B and Total Bond Market Trust B (“Affiliated Funds Assets”) and (b) a fee on assets not invested in Affiliated Funds (“Other Assets”).
			(a) The fee on Affiliated Funds Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Affiliated Fund Assets of the fund.
		0.05%	— first $500 million; and
		0.04%	— excess over $500 million.
			(b) The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the fund determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.50%	— first $500 million; and
		0.49%	— excess over $500 million.

Fundamental Value Trust		0.85%	— first $50 million;
		0.80%	— next $450 million; and
		0.75%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Fundamental Value Fund, a series of JHF II)

Global Allocation Trust		0.85%	— first $500 million; and
		0.80%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Global Allocation Fund, a series of JHF II)

Global Bond Trust		0.70%	— at all asset levels.

Global Trust		0.85%	— first $1 billion; and
		0.80%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the Global Fund, series of JHF II, and the International Value Fund, series of JHF II and the International Value Trust, a series of JHT)

Global Real Estate Trust		0.950%	— first $500 million;
		0.925%	— next $250 million; and
		0.900%	— excess over $750 million. (Aggregate Net Assets include the net assets of the fund and the Global Real Estate Fund, a series of JHF II)

Growth Trust		0.800%	— first $500 million;
		0.780%	— next $500 million
		0.770%	— next $1.5 billion; and
		0.760%	— excess over $2.5 billion

Growth Equity Trust		0.750%	— first $3 billion;
		0.725%	— between $3 billion and $6 billion; and
		0.700%	— excess over $6 billion

332


Fund	APR		Advisory Fee Breakpoint


Growth Opportunities Trust		0.800%	— first $500 million;
		0.780%	— next $500 million
		0.770%	— next $1.5 billion; and
		0.760%	— excess over $2.5 billion

Health Sciences Trust		1.050%	— first $500 million; and
		1.000%	— excess over $500 million

High Income Trust		0.725%	— first $150 million;
		0.675%	— next $350 million;
		0.650%	— next $2 billion
		0.600%	— excess over $2.5 billion. (Aggregate Net Assets include the net assets of the fund and the High Yield Fund, a series of JHF II)

High Yield Trust		0.70%	— first $500 million; and
		0.65%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the High Yield Fund, a series of JHF II)

Income Trust		1.075%	— first $50 million;
		0.915%	— next $150 million;
		0.825%	— next $300 million; and
		0.800%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Income Trust, the International Value Trust, the International Small Cap Trust, the Mutual Shares Trust and the Global Trust, and the Income Fund, the International Value Fund, the International Small Cap Fund, the Global Fund, and the Mutual Shares Fund, series of JHF II)

International Core Trust		0.920%	— first $100 million;
		0.895%	— next $900 million; and
		0.880%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the International Core Fund, a series of JHF II)

International Growth Trust		0.920%	— first $100 million;
		0.895%	— next $900 million;
		0.880%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the International Growth Fund, as series of JHF III.

International Equity Index Trust A		0.55%	— first $100 million; and
		0.53%	— excess over $100 million. (Aggregate Net Assets include the net assets of the fund and the International Equity Index Fund, a series of JHF II)

International Equity Index Trust B		0.55%	— first $100 million; and
		0.53%	— excess over $100 million.

International Index Trust		0.49%	— first $500 million; and
		0.475%	— excess over $500 million.

International Opportunities Trust		0.900%	— first $750 million;
		0.850%	— next $750 million; and
		0.800%	— excess over $1.5 billion. (Aggregate Net Assets include the net assets of the fund, and the International Opportunities Fund, a series of JHF II)

333


Fund	APR		Advisory Fee Breakpoint


International Small Cap Trust		1.050%	— first $200 million;
		0.950%	— next $300 million; and
		0.850%	— excess over $500 million (Aggregate Net Assets include the net assets of the fund and the International Small Cap Fund, a series of JHF II)

International Small Company Trust		1.00%	— first $100 million; and
		0.95%	— excess over $100 million. (Aggregate Net Assets include the net assets of the fund and the International Small Company Fund, a series of JHF II)

International Value Trust		0.95%	— first $200 million;
		0.85%	— next $300 million; and
		0.80%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Global Trust, a series of JHT, and the International Value Fund and the Global Fund, each a series of JHF II)

Intrinsic Value Trust		0.78%	— first $500 million;
		0.76%	— next $500 million;
		0.75%	— next $1.5 billion; and
		0.74%	— excess over $2.5 billion. (Aggregate Net Assets include the net assets of the fund and the Intrinsic Value Fund, a series of JHF II.)

Investment Quality Bond Trust		0.60%	— first $500 million; and
		0.55%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Investment Quality Bond Fund, a series of JHF II)

Large Cap Trust		0.78%	— first $250 million;
		0.73%	— next $250 million;
		0.68%	— next $250 million; and
		0.65%	— excess over $750 million. (Aggregate Net Assets include the net assets of the fund and the Large Cap Fund, a series of JHF II)

Large Cap Value Trust		0.825%	— first $500 million;
		0.800%	— next $500 million;
		0.775%	— next $500 million;
		0.720%	— next $500 million; and
		0.700%	— excess over $2 billion. (Aggregate Net Assets include the net assets of the fund and the Large Cap Value Fund, a series of JHF II)

Lifecycle 2010 Trust

Lifecycle 2015 Trust

Lifecycle 2020 Trust

Lifecycle 2025 Trust

Lifecycle 2030 Trust

Lifecycle 2035 Trust

Lifecycle 2040 Trust

Lifecycle 2045 Trust

Lifecycle 2050 Trust

334


Fund	APR		Advisory Fee Breakpoint


Lifecycle Retirement Trust (Collectively, the “ JHT Lifecycle Trusts)
			The management fee has two components: (a) a fee on assets invested in funds of JHT, JHF II or JHF III excluding Money Market Trust B, 500 Index Trust B, International Equity Index Trust B and Total Bond Market Trust B (“Affiliated Funds Assets”) and (b) a fee on assets not invested in Affiliated Funds (“Other Assets”).
			(a) The fee on Affiliated Funds Assets is stated as an annual percentage of the current value of the aggregate net assets of the JHT Lifecycle Portfolios and Lifecycle Portfolios that are series of JHF II determined in accordance with the following schedule and that rate is applied to the Affiliated Fund Assets of the fund.
		0.06%	— first $7.5 billion; and
		0.05%	— excess over $7.5 billion.
			(b) The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the JHT Lifecycle Portfolios and the Lifecycle Portfolios that are series of JHF II determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.51%	— first $7.5 billion; and
		0.50%	— excess over $7.5 billion.

Lifestyle Aggressive Trust

Lifestyle Growth Trust

Lifestyle Moderate Trust

Lifestyle Balanced Trust

Lifestyle Conservative Trust (Collectively, the “JHT Lifestyle Trusts”)
			The management fee has two components: (a) a fee on assets invested in funds of JHT, JHF II or JHF III excluding Money Market Trust B, 500 Index Trust B, International Equity Index Trust B and Total Bond Market Trust B (“Affiliated Funds Assets”) and (b) a fee on assets not invested in Affiliated Funds (“Other Assets”).
			(a) The fee on Affiliated Funds Assets is stated as an annual percentage of the current value of the aggregate net assets of the JHT Lifestyle Trusts and the Lifestyle Portfolios that are series of JHF II determined in accordance with the following schedule and that rate is applied to the Affiliated Fund Assets of the fund.
		0.05%	— first $7.5 billion; and
		0.04%	— excess over $7.5 billion.
			(b) The fee on Other Assets is stated as an annual percentage of the current value of the net assets of the JHT Lifestyle Trusts and the five Lifestyle Funds that are series of JHF II determined in accordance with the following schedule and that rate is applied to the Other Assets of the fund.
		0.50%	— first $7.5 billion; and
		0.49%	— excess over $7.5 billion.

Mid Cap Index Trust		0.49%	— first $250 million;
		0.48%	— next $250 million; and
		0.46%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Mid Cap Index Fund, a series of JHF II)

Mid Cap Intersection Trust		0.875%	— first $500 million; and
		0.850%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Mid Cap Intersection Fund, a series of JHF II)

335


Fund	APR		Advisory Fee Breakpoint


Mid Cap Stock Trust		0.875%	— first $200 million;
		0.850%	— next $300 million; and
		0.825%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Mid Cap Stock Fund, a series of JHF II)

Mid Cap Value Equity Trust		0.875%	— first $250 million;
		0.850%	— next $250 million;
		0.825%	— next $500 million; and
		0.800%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the Mid Cap Value Equity Fund, a series of JHF II)

Mid Value Trust		1.050%	— first $50 million; and
		0.950%	— excess over $50 million (Aggregate Net Assets include the net assets of the fund and the Mid Value Fund, a series of JHF II

Money Market Trust		0.50%	— first $500 million; and
		0.47%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Money Market Fund, a series of JHF II)

Money Market Trust B		0.50%	— first $500 million; and
		0.47%	— excess over $500 million.

Mutual Shares Trust		0.960%	— all asset levels

Natural Resources Trust		1.05%	— first $50 million; and
		1.00%	— excess over $50 million. (Aggregate Net Assets include the net assets of the fund and the Natural Resources Fund, a series of JHF II)

Optimized All Cap Trust		0.675%	— first $2.5 billion; and
		0.650%	— excess over $2.5 billion. (Aggregate Net Assets include the net assets of the fund and the Optimized All Cap Fund, a series of JHF II)

Optimized Value Trust		0.70%	— first $500 million;
		0.65%	— next $500 million; and
		0.60%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the Optimized Value Fund, a series of JHF II)

Overseas Equity Trust		0.990%	— first $500 million; and
		0.850%	— excess over $500 million

Pacific Rim Trust		0.80%	— first $500 million; and
		0.70%	— excess over $500 million

Real Estate Equity Trust		0.875%	— first $250 million;
		0.850%	— next $250 million; and
		0.825%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Real Estate Fund, a series of JHF II)

Real Estate Securities Trust		0.70%	— at all asset levels. (Aggregate Net Assets include the net assets of the fund and the Real Estate Securities Fund, a series of JHF II)

Real Return Bond Trust		0.70%	— first $1 billion; and
		0.65%	— excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the Real Return Bond Fund, a series of JHF II)

336


Fund	APR		Advisory Fee Breakpoint


Science & Technology Trust		1.05%	— first $500 million; and
		1.00%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Science & Technology Fund, a series of JHF II)

Short-Term Bond Trust		0.600%	— first $100 million;
		0.575%	— next $150 million; and
		0.550%	— excess over $250 million

Short Term Government Income Trust		0.57%	— next $250 million; and
		0.55%	— excess over $250 million (Aggregate Net Assets include the net assets of the fund and the Short Term Government Income Fund, a series of JHF II

Small Cap Growth Trust		1.10%	— first $100 million; and
		1.05%	— excess over $100 million. (Aggregate Net Assets include the net assets of the fund and the Small Cap Growth Fund, a series of JHF II)

Small Cap Index Trust		0.49%	— first $250 million;
		0.48%	— next $250 million; and
		0.46%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Small Cap Index Fund, a series of JHF II)

Small Cap Intrinsic Value Trust		0.90%	- first $1 billion; and
		0.85%	- excess over $1 billion. (Aggregate Net Assets include the net assets of the fund and the Small Cap Intrinsic Value Fund, a series of JHF II)

Small Cap Opportunities Trust		1.00%	— first $500 million;
		0.95%	— next $500 million;
		0.900%	— next 1 billion; and
		0.850%	— excess over $2 billion. (Aggregate Net Assets include the net assets of the fund and the Small Cap Opportunities Fund, a series of JHF II)
			The Adviser has agreed to cap the advisory fee so that the difference between the advisory fee and the aggregate subadvisory fee does not exceed 0.45%.

Small Cap Value Trust		1.10%	— first $100 million; and
		1.05%	— excess over $100 million. (Aggregate Net Assets include the net assets of the fund and the Small Cap Value Fund, a series of JHF II)

Small Company Growth Trust		1.05%	— first $250 million; and
		1.00%	— excess over $250 million. (Aggregate Net Assets include the net assets of the fund. However, the applicable rate is 1.000% of all net assets of the fund when the aggregate net assets of the following funds exceed $1 billion; the fund and All Cap Growth Trust as series of JHT, and the Small Company Growth Fund and All Cap Growth Fund a series of JHF II.

Small Company Value Trust		1.05%	— first $500 million; and
		1.00%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Small Company Value Fund, a series of JHF II)

Smaller Company Growth Trust		1.10%	— first $125 million;
		1.05%	— next $250 million;
		1.00%	— next $625 million; and
		0.95%	— excess over $1 billion.

337


Fund	APR		Advisory Fee Breakpoint


Spectrum Income Trust		0.800%	— first $250 million; and
		0.725%	— excess over $250 million. (Aggregate Net Assets include the net assets of the fund and the Spectrum Income Fund, a series of JHF II)

Strategic Bond Trust		0.70%	— first $500 million; and
		0.65%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Strategic Bond Fund, a series of JHF II)

Strategic Income Trust		0.725%	— first $500 million; and
		0.650%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Strategic Income Fund, a series of JHF II)

Total Bond Market Trust A		0.47%	— all asset levels.

Total Bond Market Trust B		0.47%	— all asset levels.

Total Return Trust			If PIMCO is the subadviser to the fund, the following fee schedule shall apply: If Relationship Net Assets* equal or exceed $3 Billion, the following fee schedule shall apply:
		0.700%	— first $1 billion of Total Return Net Assets **; and
		0.675%	— excess over $1billion of Total Return Net Assets **.
			If Relationship Net Assets* are less than $3 Billion, the following fee schedule shall apply:
		0.700%	— all net asset** levels
			If PIMCO is not the subadviser to the fund, the following fee schedule shall apply:
		0.700%	— first $1 billion of Total Return Net Assets **; and
		0.675%	— excess over $1billion of Total Return Net Assets **.
			*The term Relationship Net Assets shall mean the aggregate net assets of all portfolios of the JHT and the JHF II that are subadvised by the Pacific Investment Management Company. These funds currently include the Total Return Trust, the Real Return Bond Trust and the Global Bond Trust, each a series of the JHT, and the Total Return Fund, the Real Return Bond Fund and the Global Bond Fund each a series of JHF II.
			**The term Total Return Net Assets includes the net assets of the Total Return Trust and the Total Return Fund, a series of JHF II.

Total Stock Market Index Trust		0.49%	— first $250 million;
		0.48%	— next $250 million; and
		0.46%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the Total Stock Market Index Fund, a series of JHF II)

U.S. Government Securities Trust		0.62%	— first $500 million; and
		0.55%	— excess over $500 million. (Aggregate Net Assets include the net assets of the fund and the U.S. Government Securities Fund, a series of JHF II)

U.S. High Yield Bond Trust		0.75%	— first $200 million; and
		0.72%	— excess over $200 million. (Aggregate Net Assets include the net assets of the fund and the U.S. High Yield Bond Fund, a series of JHF II)

U.S. Multi-Sector Trust		0.78%	— first $500 million;
		0.76%	— next $500 million;
		0.75%	— next $1.5 billion; and
		0.74%	— excess over $2.5 billion. (Aggregate Net Assets include the net assets of the fund and the U.S. Multi Sector Fund, a series of JHF II)

338

FOR MORE INFORMATION

The following document is available that offers further information on JHT:

Annual/Semi-Annual Report to Shareholders

Includes financial statements, a discussion of the market conditions and investment strategies that significantly affected performance, as well as the auditors’ report (in annual report only).

Statement of Additional Information

The SAI contains more detailed information on all aspects of the Funds. The SAI includes a summary of JHT’s policy regarding disclosure of portfolio holdings as well as legal and regulatory matters. The current SAI has been filed with the SEC and is incorporated by reference into (and is legally a part of) this prospectus.

To request a free copy of the current annual/semiannual report or the SAI, please contact John Hancock:

By mail: John Hancock Trust

601 Congress Street

Boston, MA 02210

By phone: 1-800-344-1029

On the Internet: www.jhlifeinsurance.com or www.jhannuities.com

Or You May View or Obtain These Documents and Other Information

About the Fund from the SEC:

By mail: Public Reference Section

Securities and Exchange Commission

Washington, DC 20549-0102

(duplicating fee required)

In person: at the SEC’s Public Reference Room in Washington, DC

For access to the Reference Room call 1-800-SEC-0330

By electronic request: publicinfo@sec.gov

(duplicating fee required)

On the Internet: www.sec.gov

1940 Act File No. 811-04146

340

JOHN HANCOCK TRUST
Statement of Additional Information
May 1, 2009


500 Index Trust	Growth Trust	Mid Value Trust
500 Index Trust B	Health Sciences Trust	Money Market Trust
Absolute Return Trust	High Income Trust	Money Market Trust B
Active Bond Trust	High Yield Trust	Mutual Shares Trust
All Cap Core Trust	Income Trust	Natural Resources Trust
All Cap Growth Trust	International Core Trust	Optimized All Cap Trust
All Cap Value Trust	International Equity Index Trust A	Optimized Value Trust
Alpha Opportunities Trust	International Equity Index Trust B	Overseas Equity Trust
American Diversified Growth & Income Trust	International Growth Trust	Pacific Rim Trust
American Fundamental Holdings Trust	International Index Trust	Real Estate Equity Trust
American Global Diversification Trust	International Opportunities Trust	Real Estate Securities Trust
Balanced Trust	International Small Cap Trust	Real Return Bond Trust
Blue Chip Growth Trust	International Small Company Trust	Science & Technology Trust
Capital Appreciation Trust	International Value Trust	Short-Term Bond Trust
Capital Appreciation Value Trust	Intrinsic Value Trust	Short Term Government Income Trust
Core Allocation Trust	Investment Quality Bond Trust	Small Cap Growth Trust
Core Allocation Plus Trust	Large Cap Trust	Small Cap Index Trust
Core Balanced Trust	Large Cap Value Trust	Small Cap Intrinsic Value Trust
Core Bond Trust	Lifecycle 2010 Trust	Small Cap Opportunities Trust
Core Disciplined Diversification Trust	Lifecycle 2015 Trust	Small Cap Value Trust
Core Fundamental Holdings Trust	Lifecycle 2020 Trust	Small Company Growth Trust
Core Global Diversification Trust	Lifecycle 2025 Trust	Small Company Value Trust
Core Strategy Trust	Lifecycle 2030 Trust	Smaller Company Growth Trust
Disciplined Diversification Trust	Lifecycle 2035 Trust	Spectrum Income Trust
Emerging Markets Value Trust	Lifecycle 2040 Trust	Strategic Bond Trust
Emerging Small Company Trust	Lifecycle 2045 Trust	Strategic Income Trust
Equity-Income Trust	Lifecycle 2050 Trust	Total Bond Market Trust A
Financial Services Trust	Lifecycle Retirement Trust	Total Bond Market Trust B
Floating Rate Income Trust	Lifestyle Aggressive Trust	Total Return Trust
Franklin Templeton Founding Allocation Trust	Lifestyle Balanced Trust	Total Stock Market Index Trust
Fundamental Value Trust	Lifestyle Conservative Trust	U.S. Government Securities Trust
Global Allocation Trust	Lifestyle Growth Trust	U.S. High Yield Bond Trust
Global Bond Trust	Lifestyle Moderate Trust	U.S. Multi Sector Trust
Global Real Estate Trust	Mid Cap Index Trust	Utilities Trust
Global Trust	Mid Cap Intersection Trust	Value & Restructuring Trust
Growth Equity Trust	Mid Cap Stock Trust	Value Opportunities Trust
Growth Opportunities Trust	Mid Cap Value Equity Trust	Value Trust
		Vista Trust

This Statement of Additional Information (“SAI”) of the John Hancock Trust (“JHT”) is not a prospectus, but should be read in conjunction with JHT’s Prospectus dated May 1, 2009. The Annual Report dated December 31, 2008 for JHT is incorporated by reference into the SAI.

Copies of JHT’s Prospectus, SAI and/or Annual Report can be obtained free of charge by contacting:

John Hancock Trust
601 Congress Street, Boston, Massachusetts 02210
(800) 344-1029
www.johnhancockannuities.com

This SAI is applicable to all funds listed above (each a “fund” and collectively the “funds”). A separate SAI is applicable to the following funds of JHT are described in a separate SAI: the American Asset Allocation Trust, American Blue Chip Income and Growth Trust, American Bond Trust, American Fundamental Holdings Trust, American Global Diversification Trust, American Diversified Growth & Income Trust, American Diversified Growth & Income Trust, American Global Growth Trust, American

ORGANIZATION OF JOHN HANCOCK TRUST

JHT is organized as a Massachusetts business trust under the laws of The Commonwealth of Massachusetts and is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). Each of the funds is a series of JHT. The Board of Trustees (the “Board”) and shareholders of JHT have approved the conversion of JHT into a Delaware limited liability company. JHT may implement the conversion at such time as its management considers appropriate and does not expect that the conversion will have any adverse effect on the values of variable contracts that are determined by investment in the funds or any adverse federal income tax consequences for the owners of those contracts.

The Adviser is the investment adviser to JHT and each of the funds. The Adviser is a Delaware limited liability company whose principal offices are located at 601 Congress Street, Boston, Massachusetts 02210. The Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended. The ultimate controlling parent of the Adviser is Manulife Financial Corporation (“MFC”), a publicly traded company based in Toronto, Canada. MFC is the holding company of The Manufacturers Life Insurance Company and its subsidiaries, collectively known as Manulife Financial.

Manulife Financial is a leading Canadian-based financial services group serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily as John Hancock in the United States, the group offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. MFC trades as ‘MFC’ on the Toronto Stock Exchange, New York Stock Exchange (the “NYSE”) and Philippine Stock Exchange, and under ‘0945’ on the Stock Exchange of Hong Kong. MFC can be found on the Internet at www.manulife.com.

INVESTMENT POLICIES

The principal strategies and risks of investing in each fund are described in the Prospectus. Unless otherwise indicated in the Prospectus or this SAI, the investment objective and policies of the funds may be changed without shareholder approval. Each fund may invest in the types of instruments described below, unless otherwise indicated in the Prospectus or this SAI.

Emerging Markets Value Trust – Approved Markets

The Emerging Markets Value Trust’s subadviser has an investment committee that designates emerging markets for the fund to invest in companies that are associated with those markets (“Approved Markets”). Pending the investment of new capital in Approved Market securities, the fund will typically invest in money market instruments or other highly liquid debt instruments, including those denominated in U.S. dollars (including, without limitation, repurchase agreements) and money market mutual funds. In addition, the fund may, for liquidity, or for temporary defensive purposes during periods in which market or economic or political conditions warrant, purchase highly liquid debt instruments or hold freely convertible currencies, although the fund does not expect the aggregate of all such amounts to exceed 10% of its net assets under normal circumstances. The fund may also invest in exchange traded funds (“ETFs”) and similarly structured pooled investments that provide exposure to Approved Markets or other equity markets, including the United States, while maintaining liquidity.

This fund also may invest up to 10% of its total assets in shares of other investment companies that invest in one or more Approved Markets, although it tends to do so only where access to those markets is otherwise significantly limited. In some Approved Markets it may be necessary or advisable for the fund to establish a wholly-owned subsidiary or trust for the purpose of investing in the local markets.

Even though a company’s stock may meet the applicable market capitalization criterion for the fund’s criterion for investment, it may not be included for one or more of a number of reasons. For example, in the subadviser’s judgment, the issuer may be considered in extreme financial difficulty, a material portion of its securities may be closely held and not likely available to support market liquidity or the issuer may be a “passive foreign investment company” (as defined in the Internal Revenue Code of 1986, as amended (“Code”)). To this extent, there will be the exercise of discretion and consideration by the subadviser in purchasing securities in an Approved Market and in determining the allocation of investments among Approved Markets.

Money Market Instruments

Money market instruments (and other securities as noted under each fund description) may be purchased for temporary defensive purposes, except that the U.S. Government Securities Trust may not invest in Canadian and Provincial Government and Crown

Agency Obligations. The Special Value Trust, in addition to investing in money market instruments for temporary defensive purposes, may also invest in money market instruments when opportunities for capital growth do not appear attractive.

U.S. Government and Government Agency Obligations

U.S. Government Obligations. U.S. Government obligations are debt securities issued or guaranteed as to principal or interest by the U.S. Department of Treasury (“U.S. Treasury”). These securities include treasury bills, notes and bonds.

GNMA Obligations. GNMA obligations are mortgage-backed securities guaranteed by the Government National Mortgage Association (“GNMA”). This guarantee is supported by the full faith and credit of the U.S. government.

U.S. Agency Obligations. U.S. Government agency obligations are debt securities issued or guaranteed as to principal or interest by an agency or instrumentality of the U.S. Government pursuant to authority granted by Congress. U.S. Government agency obligations include, but are not limited to those issued by:

–		Student Loan Marketing Association (“SLMA”);

–		Federal Home Loan Banks (“FHLBs”);

–		Federal Intermediate Credit Banks; and

–		Federal National Mortgage Association (“Fannie Mae”).

U.S. Instrumentality Obligations. U.S. instrumentality obligations include, but are not limited to, those issued by the Export-Import Bank and Farmers Home Administration.

Some obligations issued or guaranteed by U.S. Government agencies or instrumentalities are supported by the right of the issuer to borrow from the U.S. Treasury or the Federal Reserve Banks, such as those issued by Federal Intermediate Credit Banks. Others, such as those issued by the Fannie Mae, the FHLBs and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), are supported by discretionary authority of the U.S. Government to purchase certain obligations of the agency or instrumentality. In addition, other obligations such as those issued by the SLMA are supported only by the credit of the agency or instrumentality. There are also separately traded interest components of securities issued or guaranteed by the U.S. Treasury.

No assurance can be given that the U.S. Government will provide financial support for the obligations of such U.S. Government-sponsored agencies or instrumentalities in the future, since it is not obligated to do so by law. In this document, “U.S. Government securities” refers not only to securities issued or guaranteed as to principal or interest by the U.S. Treasury but also to securities that are backed only by their own credit and not the full faith and credit of the U.S. Government.

Municipal Obligations

Municipal Bonds. Municipal bonds are issued to obtain funding for various public purposes including the construction of a wide range of public facilities, such as airports, highways, bridges, schools, hospitals, housing, mass transportation, streets and water and sewer works. Other public purposes for which municipal bonds may be issued include refunding outstanding obligations, obtaining funds for general operating expenses and obtaining funds to lend to other public institutions and facilities. In addition, certain types of industrial development bonds are issued by or on behalf of public authorities to obtain funds for many types of local, privately operated facilities. Such debt instruments are considered municipal obligations if the interest paid on them is exempt from federal income tax. The payment of principal and interest by issuers of certain obligations purchased may be guaranteed by a letter of credit, note, repurchase agreement, insurance or other credit facility agreement offered by a bank or other financial institution. Such guarantees and the creditworthiness of guarantors will be considered by the subadviser in determining whether a municipal obligation meets investment quality requirements. No assurance can be given that a municipality or guarantor will be able to satisfy the payment of principal or interest on a municipal obligation.

Municipal Notes. Municipal notes are short-term obligations of municipalities, generally with a maturity ranging from six months to three years. The principal types of such notes include tax, bond and revenue anticipation notes and project notes.

Municipal Commercial Paper. Municipal commercial paper is a short-term obligation of a municipality, generally issued at a discount with a maturity of less than one year. Such paper is likely to be issued to meet seasonal working capital needs of a municipality or interim construction financing. Municipal commercial paper is backed in many cases by letters of credit, lending agreements, notes, repurchase agreements or other credit facility agreements offered by banks and other institutions.

Federal tax legislation enacted in the 1980s placed substantial new restrictions on the issuance of the bonds described above and in some cases eliminated the ability of state or local governments to issue municipal obligations for some of the above purposes. Such restrictions do not affect the federal income tax treatment of municipal obligations issued prior to the effective dates of the provisions imposing such restrictions. The effect of these restrictions may be to reduce the volume of newly issued municipal obligations.

Issuers of municipal obligations are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy Act, and laws, if any, which may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that as a result of litigation or other conditions the power or ability of any one or more issuers to pay when due the principal of and interest on their municipal obligations may be affected.

The yields of municipal bonds depend upon, among other things, general money market conditions, general conditions of the municipal bond market, size of a particular offering, the maturity of the obligation and rating of the issue. The ratings of Standard & Poor’s Ratings Group (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”) represent their respective opinions on the quality of the municipal bonds they undertake to rate. It should be emphasized, however, that ratings are general and not absolute standards of quality. Consequently, municipal bonds with the same maturity, coupon and rating may have different yields and municipal bonds of the same maturity and coupon with different ratings may have the same yield. See Appendix I for a description of ratings. Many issuers of securities choose not to have their obligations rated. Although unrated securities eligible for purchase must be determined to be comparable in quality to securities having certain specified ratings, the market for unrated securities may not be as broad as for rated securities since many investors rely on rating organizations for credit appraisal.

Canadian and Provincial Government and Crown Agency Obligations

Canadian Government Obligations. Canadian Government obligations are debt securities issued or guaranteed as to principal or interest by the Government of Canada pursuant to authority granted by the Parliament of Canada and approved by the Governor in Council, where necessary. These securities include treasury bills, notes, bonds, debentures and marketable Government of Canada loans.

Canadian Crown Obligations. Canadian Crown agency obligations are debt securities issued or guaranteed by a Crown corporation, company or agency (“Crown Agencies”) pursuant to authority granted by the Parliament of Canada and approved by the Governor in Council, where necessary. Certain Crown Agencies are by statute agents of Her Majesty in right of Canada, and their obligations, when properly authorized, constitute direct obligations of the Government of Canada. These obligations include, but are not limited to, those issued or guaranteed by the:

–		Export Development Corporation;

–		Farm Credit Corporation;

–		Federal Business Development Bank; and

–		Canada Post Corporation.

In addition, certain Crown Agencies that are not by law agents of Her Majesty may issue obligations that by statute the Governor in Council may authorize the Minister of Finance to guarantee on behalf of the Government of Canada. Other Crown Agencies that are not by law agents of Her Majesty may issue or guarantee obligations not entitled to be guaranteed by the Government of Canada. No assurance can be given that the Government of Canada will support the obligations of Crown Agencies which are not agents of Her Majesty, which it has not guaranteed, since it is not obligated to do so by law.

Provincial Government Obligations. Provincial Government obligations are debt securities issued or guaranteed as to principal or interest by the government of any province of Canada pursuant to authority granted by the provincial Legislature and approved by the

Lieutenant Governor in Council of such province, where necessary. These securities include treasury bills, notes, bonds and debentures.

Provincial Crown Agency Obligations. Provincial Crown Agency obligations are debt securities issued or guaranteed by a provincial Crown corporation, company or agency (“Provincial Crown Agencies”) pursuant to authority granted by the provincial Legislature and approved by the Lieutenant Governor in Council of such province, where necessary. Certain Provincial Crown Agencies are by statute agents of Her Majesty in right of a particular province of Canada, and their obligations, when properly authorized, constitute direct obligations of such province. Other Provincial Crown Agencies that are not by law agents of Her Majesty in right of a particular province of Canada may issue obligations which by statute the Lieutenant Governor in Council of such province may guarantee, or may authorize the Treasurer thereof to guarantee, on behalf of the government of such province. Finally, other Provincial Crown Agencies that are not by law agencies of Her Majesty may issue or guarantee obligations not entitled to be guaranteed by a provincial government. No assurance can be given that the government of any province of Canada will support the obligations of Provincial Crown Agencies that are not agents of Her Majesty and which it has not guaranteed, as it is not obligated to do so by law. Provincial Crown Agency obligations described above include, but are not limited to, those issued or guaranteed by a:

–		provincial railway corporation;

–		provincial hydroelectric or power commission or authority;

–		provincial municipal financing corporation or agency; and

–		provincial telephone commission or authority.

Any Canadian obligation acquired will be payable in U.S. dollars.

Certificates of Deposit, Time Deposits and Bankers’ Acceptances

Certificates of Deposit. Certificates of deposit are certificates issued against funds deposited in a bank or a savings and loan. They are issued for a definite period of time and earn a specified rate of return.

Time Deposits. Time deposits are non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates.

Bankers’ Acceptances. Bankers’ acceptances are short-term credit instruments evidencing the obligation of a bank to pay a draft which has been drawn on it by a customer. These instruments reflect the obligations both of the bank and of the drawer to pay the face amount of the instrument upon maturity. They are primarily used to finance the import, export, transfer or storage of goods. They are “accepted” when a bank guarantees their payment at maturity.

These obligations are not insured by the Federal Deposit Insurance Corporation.

Commercial Paper

Commercial paper consists of unsecured promissory notes issued by corporations or other entities to finance short-term credit needs. Commercial paper may be issued in bearer or registered form with maturities generally not exceeding nine months. Commercial paper obligations may include variable amount master demand notes.

Variable Amount Master Demand Notes. Variable amount master demand notes are obligations that permit the investment of fluctuating amounts at varying rates of interest pursuant to direct arrangements between a fund, as lender, and the borrower. These notes permit daily changes in the amounts borrowed. The investing (i.e., “lending”) fund has the right to increase the amount under the note at any time up to the full amount provided by the note agreement, or to decrease the amount, and the borrower may prepay up to the full amount of the note without penalty. Because variable amount master demand notes are direct lending arrangements between the lender and borrower, it is not generally contemplated that such instruments will be traded. There is no secondary market for these notes, although they are redeemable (and thus immediately repayable by the borrower) at face value, plus accrued interest, at any time.

A subadviser will only invest in variable amount master demand notes issued by companies which, at the date of investment, have an outstanding debt issue rated “Aaa” or “Aa” by Moody’s or “AAA” or “AA” by S&P and which the applicable subadviser has

determined present minimal risk of loss. A subadviser will look generally at the financial strength of the issuing company as “backing” for the note and not to any security interest or supplemental source such as a bank letter of credit. A variable amount master demand note will be valued on each day a net asset value (“NAV”) is determined. The NAV will generally be equal to the face value of the note plus accrued interest unless the financial position of the issuer is such that its ability to repay the note when due is in question.

Corporate Obligations

Corporate obligations are bonds and notes issued by corporations to finance long-term credit needs.

Repurchase Agreements

Repurchase agreements are arrangements involving the purchase of an obligation and the simultaneous agreement to resell the same obligation on demand or at a specified future date and at an agreed upon price. A repurchase agreement can be viewed as a loan made by a fund to the seller of the obligation with such obligation serving as collateral for the seller’s agreement to repay the amount borrowed with interest. Repurchase agreements permit the opportunity to earn a return on cash that is only temporarily available. Repurchase agreements may be entered with banks, brokers or dealers. However, a repurchase agreement will only be entered with a broker or dealer if the broker or dealer agrees to deposit additional collateral should the value of the obligation purchased decrease below the resale price.

Generally, repurchase agreements are of a short duration, often less than one week but on occasion for longer periods. Securities subject to repurchase agreements will be valued every business day and additional collateral will be requested if necessary so that the value of the collateral is at least equal to the value of the repurchase obligation, including the interest accrued thereon.

A subadviser shall engage in a repurchase agreement transaction only with those banks or broker/dealers who meet the subadviser’s quantitative and qualitative criteria regarding creditworthiness, asset size and collateralization requirements. The Adviser also may engage in repurchase agreement transactions. The counterparties to a repurchase agreement transaction are limited to a:

–		Federal Reserve System member bank;

–		primary government securities dealer reporting to the Federal Reserve Bank of New York Mellon’s Market Reports Division; or

–		broker/dealer that reports U.S. Government securities positions to the Federal Reserve Board.

A fund may also participate in repurchase agreement transactions utilizing the settlement services of clearing firms that meet applicable Adviser and/or subadviser creditworthiness requirements.

The Adviser and the subadvisers will continuously monitor the respective transaction to ensure that the collateral held with respect to a repurchase agreement equals or exceeds the amount of the respective obligation.

The risk of a repurchase agreement transaction is limited to the ability of the seller to pay the agreed-upon sum on the delivery date. If an issuer of a repurchase agreement fails to repurchase the underlying obligation, the loss, if any, would be the difference between the repurchase price and the underlying obligation’s market value. A fund might also incur certain costs in liquidating the underlying obligation. Moreover, if bankruptcy or other insolvency proceedings are commenced with respect to the seller, realization upon the underlying obligation might be delayed or limited.

Foreign Repurchase Agreements

Foreign repurchase agreements involve an agreement to purchase a foreign security and to sell that security back to the original seller at an agreed-upon price in either U.S. dollars or foreign currency. Unlike typical U.S. repurchase agreements, foreign repurchase agreements may not be fully collateralized at all times. The value of a security purchased may be more or less than the price at which the counterparty has agreed to repurchase the security. In the event of default by the counterparty, a fund may suffer a loss if the value of the security purchased is less than the agreed-upon repurchase price, or if it is unable to successfully assert a claim to the collateral under foreign laws. As a result, foreign repurchase agreements may involve higher credit risks than repurchase agreements in U.S. markets, as well as risks associated with currency fluctuations. In addition, as with other emerging market investments, repurchase

agreements with counterparties located in emerging markets, or relating to emerging markets, may involve issuers or counterparties with lower credit ratings than typical U.S. repurchase agreements.

Recent Events

Other Instruments

The following discussion provides an explanation of some of the other instruments in which certain funds (as indicated, except the Lifestyle Trusts), may directly invest consistent with their investment objectives and policies.

Warrants & Rights

Each fund (excluding the Money Market Trust, the Money Market Trust B (collectively, the “Money Market Trusts”), the Index Allocation Trust, Franklin Templeton Founding Allocation Trust and the Lifestyle Trusts) may purchase warrants, including warrants traded independently of the underlying securities. The funds may also receive rights or warrants as part of a unit or attached to securities purchased.

Warrants are rights to purchase securities at specific prices and are valid for a specific period of time. Warrant prices do not necessarily move parallel to the prices of the underlying securities, and warrant holders receive no dividends and have no voting rights or rights with respect to the assets of an issuer. The price of a warrant may be more volatile than the price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss. Warrants cease to have value if not exercised prior to the expiration date. These factors can make warrants more speculative than other types of investments.

Reverse Repurchase Agreements

Each fund (excluding the Lifestyle Trusts, Franklin Templeton Founding Allocation Trust and Index Allocation Trust) may enter into “reverse” repurchase agreements. Under a reverse repurchase agreement, a fund sells a debt security and agrees to repurchase it at an agreed upon time and at an agreed upon price. The fund retains record ownership of the security and the right to receive interest and principal payments thereon. At an agreed upon future date, the fund repurchases the security by remitting the proceeds previously received, plus interest. The difference between the amount the fund receives for the security and the amount it pays on repurchase is payment of interest. In certain types of agreements, there is no agreed-upon repurchase date and interest payments are calculated daily, often based on the prevailing overnight repurchase rate. A reverse repurchase agreement may be considered a form of leveraging and may, therefore, increase fluctuations in a fund’s NAV per share. A fund will cover its repurchase agreement transactions by maintaining in a segregated custodial account cash, treasury bills or other U.S. Government securities having an aggregate value at least equal to the amount of such commitment to repurchase including accrued interest, until payment is made.

Mortgage Securities

Adjustable Rate Mortgage Securities. Adjustable rate mortgage securities are similar to the fixed rate mortgage securities discussed above, except that, unlike fixed rate mortgage securities, adjustable rate mortgage securities are collateralized by or represent interests in mortgage loans with variable rates of interest. These variable rates of interest reset periodically to align themselves with market rates. Most adjustable rate mortgage securities provide for an initial mortgage rate that is in effect for a fixed period, typically ranging from three to twelve months. Thereafter, the mortgage interest rate will reset periodically in accordance with movements in a specified published interest rate index. The amount of interest due to an adjustable rate mortgage holder is determined in accordance with movements in a specified published interest rate index by adding a pre-determined increment or “margin” to the specified interest rate index. Many adjustable rate mortgage securities reset their interest rates based on changes in:

–		one-year, three-year and five-year constant maturity Treasury Bill rates;

–		three-month or six-month Treasury Bill rates;

–		11th District Federal Home Loan Bank Cost of Funds;

–		National Median Cost of Funds; or

–		one-month, three-month, six-month or one-year London Interbank Offered Rate (“LIBOR”) and other market rates.

During periods of increasing rates, a fund will not benefit from such increase to the extent that interest rates rise to the point where they cause the current coupon of adjustable rate mortgages held as investments to exceed any maximum allowable annual or lifetime reset limits or “cap rates” for a particular mortgage. In this event, the value of the mortgage securities in a fund would likely decrease. During periods of declining interest rates, income to a fund derived from adjustable rate mortgages that remain in a mortgage pool may decrease in contrast to the income on fixed rate mortgages, which will remain constant. Adjustable rate mortgages also have less potential for appreciation in value as interest rates decline than do fixed rate investments. Also, a fund’s NAV could vary to the extent that current yields on adjustable rate mortgage securities held as investments are different than market yields during interim periods between coupon reset dates.

Privately-Issued Mortgage Securities. Privately-issued mortgage securities provide for the monthly principal and interest payments made by individual borrowers to pass through to investors on a corporate basis, and in privately issued collateralized mortgage obligations, as further described below. Privately-issued mortgage securities are issued by private originators of, or investors in, mortgage loans, including:

–		mortgage bankers;

–		commercial banks;

–		investment banks;

–		savings and loan associations; and

–		special purpose subsidiaries of the foregoing.

Since privately-issued mortgage certificates are not guaranteed by an entity having the credit status of the GNMA or Freddie Mac, such securities generally are structured with one or more types of credit enhancement. For a description of the types of credit enhancements that may accompany privately-issued mortgage securities, see “Types of Credit Support” below. A fund that invests in mortgage securities will not limit its investments to asset-backed securities with credit enhancements.

Collateralized Mortgage Obligations (“CMOs”). CMOs generally are bonds or certificates issued in multiple classes that are collateralized by or represent an interest in mortgages. CMOs may be issued by single-purpose, stand-alone finance subsidiaries or trusts of financial institutions, government agencies, investment banks or other similar institutions. Each class of CMOs, often referred to as a “tranche,” may be issued with a specific fixed coupon rate (which may be zero) or a floating coupon rate. Each class of CMOs also has a stated maturity or final distribution date. Principal prepayments on the underlying mortgages may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates. Interest is paid or accrued on CMOs on a monthly, quarterly or semiannual basis.

Separate Trading of Registered Interest and Principal of Securities (“STRIPS”). A fund may invest in separately traded interest components of securities issued or guaranteed by the U.S. Treasury. The interest components of selected securities are traded independently under the STRIPS program. Under the STRIPS program, the interest components are individually numbered and separately issued by the U.S. Treasury at the request of depository financial institutions, which then trade the component parts independently.

Stripped Mortgage Securities. Stripped mortgage securities are derivative multi-class mortgage securities. Stripped mortgage securities may be issued by agencies or instrumentalities of the U.S. Government, or by private issuers, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped mortgage securities have greater volatility than other types of mortgage securities in which the funds invest. Although stripped mortgage securities are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, the market for such securities has not yet been fully developed. Accordingly, stripped mortgage securities may be illiquid and, together with any other illiquid investments, will not exceed 15% of a fund’s net assets. See “Additional Investment Policies — Illiquid Securities.”

Stripped mortgage securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. A common type of stripped mortgage security will have one class receiving some of the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest only or “IO” class), while the other class will receive all of the principal (the principal only or “PO” class). The yield to maturity on an IO class is extremely sensitive to changes in prevailing interest rates and the rate of principal payments (including prepayments) on the related underlying mortgage assets. A rapid rate of principal payments may have a material adverse effect on an investing fund’s yield to maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, such fund may fail to fully recoup its initial investment in these securities even if the securities are rated highly.

As interest rates rise and fall, the value of IOs tends to move in the same direction as interest rates. The value of the other mortgage securities described in the Prospectus and this SAI, like other debt instruments, will tend to move in the opposite direction to interest rates. Accordingly, investing in IOs, in conjunction with the other mortgage securities described in the Prospectus and this SAI, is expected to contribute to a fund’s relatively stable NAV.

In addition to the stripped mortgage securities described above, each of the Strategic Bond Trust, High Yield Trust and Value Trust may invest in similar securities such as Super Principal Only (“SPO”) and Leverage Interest Only (“LIO”), which are more volatile than POs and IOs. Risks associated with instruments, such as SPOs, are similar in nature to those risks related to investments in POs. Risks associated with LIOs and IOs are similar in nature to those associated with IOs. The Strategic Bond Trust may also invest in other similar instruments developed in the future that are deemed consistent with the investment objectives, policies and restrictions.

Under the Code, POs may generate taxable income from the current accrual of original issue discount, without a corresponding distribution of cash to a fund.

Inverse Floaters. Each of the Global Bond Trust, Total Return Trust, Real Return Bond Trust, Strategic Bond Trust, High Income Trust, High Yield Trust, Investment Quality Bond Trust and Value Trust may invest in inverse floaters. Inverse floaters may be issued by agencies or instrumentalities of the U.S. Government, or by private issuers, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Inverse floaters have greater volatility than other types of mortgage securities in which a fund invests (with the exception of stripped mortgage securities and there is a risk that the market value will vary from the amortized cost). Although inverse floaters are purchased and sold by institutional investors through several investment banking firms acting as brokers or dealers, the market for such securities has not yet been fully developed. Accordingly, inverse floaters together with any other illiquid investments, will not exceed 15% of a fund’s net assets. See “Additional Investment Policies — Illiquid Securities.”

Inverse floaters are derivative mortgage securities, which are structured as a class of security that receives distributions on a pool of mortgage assets. Yields on inverse floaters move in the opposite direction of short-term interest rates and at an accelerated rate.

Types of Credit Support. Mortgage securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the impact of an obligor’s failure to make payments on underlying assets, mortgage securities may contain elements of credit support. A discussion of credit support is described under “Asset-Backed Securities.”

Asset-Backed Securities

The securitization techniques used to develop mortgage securities are also being applied to a broad range of other assets. Through the use of trusts and special purpose corporations, automobile and credit card receivables are being securitized in pass-through structures similar to mortgage pass-through structures or in a pay-through structure similar to the CMO structure.

Generally, the issuers of asset-backed bonds, notes or pass-through certificates are special purpose entities and do not have any significant assets other than the receivables securing such obligations. In general, the collateral supporting asset-backed securities is of a shorter maturity than mortgage loans. As a result, investment in these securities should be subject to less volatility than mortgage securities. Instruments backed by pools of receivables are similar to mortgage-backed securities in that they are subject to unscheduled prepayments of principal prior to maturity. When the obligations are prepaid, a fund must reinvest the prepaid amounts in securities with the prevailing interest rates at the time. Therefore, a fund’s ability to maintain an investment, including high-yielding asset-backed securities, will be affected adversely to the extent that prepayments of principal must be reinvested in securities which have lower yields than the prepaid obligations. Moreover, prepayments of securities purchased at a premium could result in a realized loss. Unless otherwise stated in the Prospectus’ disclosure for a fund, a fund will only invest in asset-backed securities rated, at the time of purchase, AA or better by S&P or Aa or better by Moody’s.

As with mortgage securities, asset-backed securities are often backed by a pool of assets representing the obligation of a number of different parties and use similar credit enhancement techniques. For a description of the types of credit enhancement that may accompany asset-backed securities, see “Types of Credit Support” below. A fund investing in asset-backed securities will not limit its investments to asset-backed securities with credit enhancements. Although asset-backed securities are not generally traded on a national securities exchange, such securities are widely traded by brokers and dealers, and will not be considered illiquid securities for the purposes of the investment restriction on illiquid securities under “Additional Investment Policies.”

Types of Credit Support. To lessen the impact of an obligor’s failure to make payments on underlying assets, mortgage securities and asset-backed securities may contain elements of credit support. Such credit support falls into two categories:

–		liquidity protection; and

–		default protection.

Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the pass-through of payments due on the underlying pool of assets occurs in a timely fashion. Default protection provides protection against losses resulting from ultimate default and enhances the likelihood of ultimate payment of the obligations on at least a portion of the assets in the pool. This protection may be provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a combination of such approaches. A fund will not pay any additional fees for such credit support, although the existence of credit support may increase the price of a security.

Some examples of credit support include:

–		“senior-subordinated securities” (multiple class securities with one or more classes subordinate to other classes as to the payment of principal thereof and interest thereon, with the result that defaults on the underlying assets are borne first by the holders of the subordinated class);

–		creation of “reserve funds” (where cash or investments, sometimes funded from a portion of the payments on the underlying assets, are held in reserve against future losses); and

–		“over-collateralization” (where the scheduled payments on, or the principal amount of, the underlying assets exceed those required to make payment on the securities and pay any servicing or other fees).

The ratings of mortgage securities and asset-backed securities for which third-party credit enhancement provides liquidity protection or default protection are generally dependent upon the continued creditworthiness of the provider of the credit enhancement. The ratings of these securities could be reduced in the event of deterioration in the creditworthiness of the credit enhancement provider even in cases where the delinquency and loss experienced on the underlying pool of assets is better than expected.

The degree of credit support provided for each issue is generally based on historical information concerning the level of credit risk associated with the underlying assets. Delinquency or loss greater than anticipated could adversely affect the return on an investment in mortgage securities or asset-backed securities.

Collateralized Debt Obligations. A fund may invest in collateralized debt obligations (“CDOs”), which include collateralized bond obligations (“CBOs”), collateralized loan obligations (“CLOs”) and other similarly structured securities. CBOs and CLOs are types of asset-backed securities. A CBO is a trust that is backed by a diversified pool of high risk, below investment grade fixed-income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans.

For both CBOs and CLOs, the cash flows from the trust are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the “equity” tranche, which bears the bulk of defaults from the bonds or loans in the CBO trust or CLO trust, as applicable, and serves to protect the other, more senior tranches from default in all but the most severe circumstances. Since it is partially protected from defaults, a senior tranche from a CBO trust or CLO trust typically has higher ratings and lower yields than their underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as aversion to CBO or CLO securities as a class.

The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus, are not registered under the securities laws. As a result, investments in CDOs may be characterized by a fund as illiquid securities; however, an active dealer market may exist for CDOs allowing transactions in CDOs to qualify as eligible transactions under Rule 144A under the Securities Act of 1933, as amended (“1933 Act”). In addition to the normal risks associated with fixed-income securities discussed elsewhere in this SAI and the Prospectus (e.g., interest rate risk and default risk), CDOs carry additional risks including, but are not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) the funds (excluding the Lifestyle Trusts) may invest in CDOs that are subordinate to other classes; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.

Zero Coupon Securities, Deferred Interest Bonds and Pay-In-Kind Bonds

Zero coupon securities, deferred interest bonds and pay-in-kind bonds involve special risk considerations. Zero coupon securities and deferred interest bonds are debt securities that pay no cash income but are sold at substantial discounts from their value at maturity. While zero coupon bonds do not require the periodic payment of interest, deferred interest bonds provide for a period of delay before the regular payment of interest begins. When a zero coupon security or a deferred interest bond is held to maturity, its entire return, which consists of the amortization of discount, comes from the difference between its purchase price and its maturity value. This difference is known at the time of purchase, so that investors holding these securities until maturity know at the time of their

investment what the return on their investment will be. The funds (excluding Lifestyle Trusts and Index Allocation Trust) also may purchase pay-in-kind bonds. Pay-in-kind bonds are bonds that pay all or a portion of their interest in the form of debt or equity securities.

Zero coupon securities, deferred interest bonds and pay-in-kind bonds are subject to greater price fluctuations in response to changes in interest rates than ordinary interest-paying debt securities with similar maturities. The value of zero coupon securities and deferred interest bonds usually appreciate during periods of declining interest rates and usually depreciates during periods of rising interest rates.

Issuers of Zero Coupon Securities and Pay-In-Kind Bonds. Zero coupon securities and pay-in-kind bonds may be issued by a wide variety of corporate and governmental issuers. Although zero coupon securities and pay-in-kind bonds are generally not traded on a national securities exchange, these securities are widely traded by brokers and dealers and, to the extent they are widely traded, will not be considered illiquid for the purposes of the investment restriction under “Additional Investment Policies.”

Tax Considerations. Current federal income tax law requires the holder of a zero coupon security or certain pay-in-kind bonds to accrue income with respect to these securities prior to the receipt of cash payments. To maintain its qualification as a regulated investment company and avoid liability for federal income and excise taxes, a fund may be required to distribute income accrued with respect to these securities and may have to dispose of fund securities under disadvantageous circumstances in order to generate cash to satisfy these distribution requirements.

Loans and Other Direct Debt Instruments

A fund may invest in loans and other direct debt instruments to the extent authorized by its investment policies. Direct debt instruments are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates (loans and loan participations), to suppliers of goods or services (trade claims or other receivables), or to other parties. Direct debt instruments involve a risk of loss in case of default or insolvency of the borrower and may offer less legal protection to the purchaser in the event of fraud or misrepresentation, or there may be a requirement that a fund supply additional cash to a borrower on demand.

High Yield (High Risk) Domestic Corporate Debt Securities

High yield U.S. corporate debt securities in which a fund may invest include bonds, debentures, notes, bank loans, credit-linked notes and commercial paper. Most of these debt securities will bear interest at fixed rates, except bank loans, which usually have floating rates. The fund may also invest in bonds with variable rates of interest or debt securities which involve equity features, such as equity warrants or convertible outright and participation features (i.e., interest or other payments, often in addition to a fixed rate of return, that are based on the borrower’s attainment of specified levels of revenues, sales or profits and thus enable the holder of the security to share in the potential success of the venture).

The market for high yield U.S. corporate debt securities has undergone significant changes since it was first established. Issuers in the U.S. high yield market originally consisted primarily of growing small capitalization companies and larger capitalization companies whose credit quality had declined from investment grade. During the mid-1980s, participants in the U.S. high yield market issued high yield securities principally in connection with leveraged buyouts and other leveraged recapitalizations. In late 1989 and 1990, the volume of new issues of high yield U.S. corporate debt declined significantly and liquidity in the market decreased. Since early 1991, the volume of new issues of high yield U.S. corporate debt securities has increased substantially and secondary market liquidity has improved. During the same periods, the U.S. high yield debt market exhibited strong returns. Currently, most new offerings of U.S. high yield securities are being issued to refinance higher coupon debt and to raise funds for general corporate purposes as well as to provide financing in connection with leveraged transactions.

Brady Bonds

Brady Bonds are debt securities issued under the framework of the “Brady Plan,” an initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in 1989 as a mechanism for debtor nations to restructure their outstanding external commercial bank indebtedness. The Brady Plan framework, as it has developed, involves the exchange of external commercial bank debt for newly issued bonds (“Brady Bonds”). Brady Bonds may also be issued in respect of new money being advanced by existing lenders in connection with the debt restructuring. Brady Bonds issued to date generally have maturities between 15 and 30 years from the date of issuance and have traded at a deep discount from their face value. In addition to Brady Bonds, the funds may invest in emerging market governmental obligations issued as a result of debt restructuring agreements outside of the scope of the Brady Plan.

Agreements implemented under the Brady Plan to date are designed to achieve debt and debt-service reduction through specific options negotiated by a debtor nation with its creditors. As a result, the financial packages offered by each country differ. The types of options have included:

–		the exchange of outstanding commercial bank debt for bonds issued at 100% of face value which carry a below-market stated rate of interest (generally known as par bonds);

–		bonds issued at a discount from face value (generally known as discount bonds);

–		bonds bearing an interest rate which increases over time; and

–		bonds issued in exchange for the advancement of new money by existing lenders.

Discount bonds issued to date under the framework of the Brady Plan have generally borne interest computed semi-annually at a rate equal to 13/16 of one percent above the current six-month LIBOR rate. Regardless of the stated face amount and interest rate of the various types of Brady Bonds, a fund investing in Brady Bonds will purchase Brady Bonds in secondary markets in which the price and yield to the investor reflect market conditions at the time of purchase.

Certain sovereign bonds are entitled to “value recovery payments” in certain circumstances, which in effect constitute supplemental interest payments but generally are not collateralized. Certain Brady Bonds have been collateralized as to principal due at maturity (typically 15 to 30 years from the date of issuance) by U.S. Treasury zero coupon bonds with a maturity equal to the final maturity of such Brady Bonds, although the collateral is not available to investors until the final maturity of the Brady Bonds. Collateral purchases are financed by the International Monetary Fund (“IMF”), the World Bank and the debtor nations’ reserves. In addition, interest payments on certain types of Brady Bonds may be collateralized by cash or high-grade securities in amounts that typically represent between 12 and 18 months of interest accruals on these instruments, with the balance of the interest accruals being uncollateralized.

A fund may purchase Brady Bonds with no or limited collateralization, and must rely for payment of interest and (except in the case of principal collateralized Brady Bonds) principal primarily on the willingness and ability of the foreign government to make payment in accordance with the terms of the Brady Bonds.

Brady Bonds issued to date are purchased and sold in secondary markets through U.S. securities dealers and other financial institutions and are generally maintained through European transactional securities depositories. A substantial portion of the Brady Bonds and other sovereign debt securities in which a fund invests are likely to be acquired at a discount.

Sovereign Debt Obligations

A fund may invest in sovereign debt obligations to the extent authorized by its investment polices. Sovereign debt obligations are issued or guaranteed by foreign governments or their agencies and instrumentalities, including debt of Latin American nations or other developing countries. Sovereign debt may be in the form of conventional securities or other types of debt instruments, such as loan or loan participations. Sovereign debt of developing countries may involve a high degree of risk, and may be in default or present the risk of default. Governmental entities responsible for repayment of the debt may be unable or unwilling to repay principal and pay interest when due, and may require renegotiation or rescheduling of debt payments. In addition, prospects for repayment and payment of interest may depend on political as well as economic factors. Although some sovereign debt, such as Brady Bonds, is collateralized by U.S. Government securities, repayment of principal and payment of interest is not guaranteed by the U.S. Government.

Indexed Securities

A fund may invest in indexed securities to the extent authorized by its investment policies. Indexed securities are instruments whose prices are indexed to the prices of other securities, securities indices, currencies, or other financial indicators. Indexed securities typically, but not always, are debt securities or deposits whose value at maturity or coupon rate is determined by reference to a specific instrument or statistic.

Currency indexed securities typically are short-term to intermediate-term debt securities whose maturity values or interest rates are determined by reference to the values of one or more specified foreign currencies, and may offer higher yields than U.S. dollar

denominated securities. Currency indexed securities may be positively or negatively indexed; that is, their maturity value may increase when the specified currency value increases, resulting in a security that performs similarly to a foreign denominated instrument, or their maturity value may decline when foreign currencies increase, resulting in a security whose price characteristics are similar to a put on the underlying currency. Currency indexed securities may also have prices that depend on the values of a number of different foreign currencies relative to each other.

The performance of indexed securities depends to a great extent on the performance of the security, currency, or other instrument to which they are indexed, and may also be influenced by interest rate changes in the United States and abroad. Indexed securities may be more volatile than the underlying instruments. Indexed securities are also subject to the credit risks associated with the issuer of the security, and their values may decline substantially if the issuer’s creditworthiness deteriorates. Recent issuers of indexed securities have included banks, corporations, and certain U.S. Government agencies.

Hybrid Instruments

Hybrid instruments (a type of potentially high-risk derivative) combine the elements of futures contracts or options with those of debt, preferred equity or a depository instrument (“Hybrid Instruments”).

Characteristics of Hybrid Instruments. Generally, a Hybrid Instrument is a debt security, preferred stock, depository share, trust certificate, certificate of deposit or other evidence of indebtedness on which a portion of or all interest payments, and/or the principal or stated amount payable at maturity, redemption or retirement, is determined by reference to the following:

–		prices, changes in prices, or differences between prices of securities, currencies, intangibles, goods, articles or commodities (collectively, “underlying assets”); or

–		an objective index, economic factor or other measure, such as interest rates, currency exchange rates, commodity indices, and securities indices (collectively, “Benchmarks”).

Hybrid Instruments may take a variety of forms, including, but not limited to:

–		debt instruments with interest or principal payments or redemption terms determined by reference to the value of a currency or commodity or securities index at a future point in time;

–		preferred stock with dividend rates determined by reference to the value of a currency; or

–		convertible securities with the conversion terms related to a particular commodity.

Uses of Hybrid Instruments. Hybrid Instruments provide an efficient means of creating exposure to a particular market, or segment of a market, with the objective of enhancing total return. For example, a fund may wish to take advantage of expected declines in interest rates in several European countries, but avoid the transaction costs associated with buying and currency-hedging the foreign bond positions.

One approach is to purchase a U.S. dollar-denominated Hybrid Instrument whose redemption price is linked to the average three-year interest rate in a designated group of countries. The redemption price formula would provide for payoffs of greater than par if the average interest rate was lower than a specified level, and payoffs of less than par if rates were above the specified level. Furthermore, the investing fund could limit the downside risk of the security by establishing a minimum redemption price so that the principal paid at maturity could not be below a predetermined minimum level if interest rates were to rise significantly.

The purpose of this type of arrangement, known as a structured security with an embedded put option, is to give the fund the desired European bond exposure while avoiding currency risk, limiting downside market risk, and lowering transactions costs. Of course, there is no guarantee that such a strategy will be successful and the value of the fund may decline; for example, if interest rates may not move as anticipated or credit problems could develop with the issuer of the Hybrid Instrument.

Risks of Investing in Hybrid Instruments. The risks of investing in Hybrid Instruments are a combination of the risks of investing in securities, options, futures and currencies. Therefore, an investment in a Hybrid Instrument may include significant risks not associated with a similar investment in a traditional debt instrument with a fixed principal amount, is denominated in U.S. dollars, or that bears interest either at a fixed rate or a floating rate determined by reference to a common, nationally published benchmark (“Benchmark”). The risks of a particular Hybrid Instrument will depend upon the terms of the instrument, but may include, without limitation, the possibility of significant changes in the Benchmarks or the prices of underlying assets to which the instrument is linked. These risks generally depend upon factors unrelated to the operations or credit quality of the issuer of the Hybrid Instrument and that may not be readily foreseen by the purchaser. Such factors include economic and political events, the supply and demand for the underlying assets, and interest rate movements. In recent years, various Benchmarks and prices for underlying assets have been highly volatile, and such volatility may be expected in the future. See “Hedging and Other Strategic Transactions” for a description of certain risks associated with investments in futures, options, and forward contracts.

Volatility. Hybrid Instruments are potentially more volatile and carry greater market risks than traditional debt instruments. Depending on the structure of the particular Hybrid Instrument, changes in a Benchmark may be magnified by the terms of the Hybrid Instrument and have an even more dramatic and substantial effect upon the value of the Hybrid Instrument. Also, the prices of the Hybrid Instrument and the Benchmark or underlying asset may not move in the same direction or at the same time.

Leverage Risk. Hybrid Instruments may bear interest or pay preferred dividends at below market (or even relatively nominal) rates. Alternatively, Hybrid Instruments may bear interest at above market rates, but bear an increased risk of principal loss (or gain). For example, an increased risk of principal loss (or gain) may result if “leverage” is used to structure a Hybrid Instrument. Leverage risk occurs when the Hybrid Instrument is structured so that a change in a Benchmark or underlying asset is multiplied to produce a greater value change in the Hybrid Instrument, thereby magnifying the risk of loss, as well as the potential for gain.

Liquidity Risk. Hybrid Instruments may also carry liquidity risk since the instruments are often “customized” to meet the needs of a particular investor. Therefore, the number of investors that would be willing and able to buy such instruments in the secondary market may be smaller than for more traditional debt securities. In addition, because the purchase and sale of Hybrid Instruments could take place in an over-the-counter (“OTC”) market without the guarantee of a central clearing organization or in a transaction between a fund and the issuer of the Hybrid Instrument, the creditworthiness of the counterparty or issuer of the Hybrid Instrument would be an additional risk factor which the fund would have to consider and monitor.

Lack of U.S. Regulation. Hybrid Instruments may not be subject to regulation of the Commodity Futures Trading Commission (“CFTC”), which generally regulates the trading of commodity futures by U.S. persons, the Securities and Exchange Commission (“SEC”), which regulates the offer and sale of securities by and to U.S. persons, or any other governmental regulatory authority.

The various risks discussed above with respect to Hybrid Instruments particularly the market risk of such instruments, may cause significant fluctuations in the NAV of a fund that invests in such instruments.

DEPOSITARY RECEIPTS

A fund may invest in American Depositary Receipts, European Depositary Receipts, Global Depositary Receipts, International Depositary Receipts and Non-Voting Depositary Receipts (“ADRs,” “EDRs,” “GDRs,” “IDRs” and “NVDRs” respectively) as described in their investment policies.

Securities of foreign issuers may include ADRs, EDRs, GDRs, IDRs, NVDRs and other similar securities, including, without limitation, dual listed securities. Depositary Receipts are certificates typically issued by a bank or trust company that give their holders the right to receive securities issued by a foreign or domestic corporation.

ADRs are U.S. dollar-denominated securities backed by foreign securities deposited in a U.S. securities depository. ADRs are created for trading in the U.S. markets. The value of an ADR will fluctuate with the value of the underlying security and will reflect any changes in exchange rates. An investment in ADRs involves risks associated with investing in foreign securities.

Securities of foreign issuers also include EDRs, GDRs, IDRs and NVDRs, which are receipts evidencing an arrangement with a non-U.S. bank similar to that for ADRs and are designed for use in non-U.S. securities markets. EDRs, GDRs, IDRs and NVDRs are not necessarily quoted in the same currency as the underlying security.

Variable and Floating Rate Obligations

A fund may invest in floating or variable rate securities. Investments in floating or variable rate securities may involve industrial development or revenue bonds which provide that the rate of interest is set as a specific percentage of a designated base rate, such as rates of Treasury Bonds or Bills or the prime rate at a major commercial bank, and that a bondholder can demand payment of the obligations on behalf of the investing fund on short notice at par plus accrued interest, which amount may be more or less than the amount the bondholder paid for them. The maturity of floating or variable rate obligations (including participation interests therein) is deemed to be the longer of: (i) the notice period required before a fund is entitled to receive payment of the obligation upon demand; or (ii) the period remaining until the obligation’s next interest rate adjustment. If not redeemed by the investing fund through the demand feature, the obligations mature on a specified date which may range up to thirty years from the date of issuance.

Exchange Traded Funds (“ETFs”)

A fund may invest in ETFs. These are a type of investment company bought and sold on a securities exchange. An ETF represents a fixed portfolio of securities designed to track a particular market index. A fund could purchase an ETF to temporarily gain exposure to a portion of the U.S. or a foreign market while awaiting purchase of underlying securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities it is designed to track, although lack of liquidity in an ETF could result in it being more volatile than the underlying securities and ETFs have management fees that increase their costs.

ADDITIONAL INVESTMENT POLICIES

The following provides a more detailed explanation of some investment policies.

Lending Securities

A fund may lend its securities so long as its loans of securities do not represent in excess of 33 1/3% of such fund’s total assets. This lending limitation is a fundamental restriction which may not be changed without shareholder approval. The procedure for lending securities is for the borrower to give the lending fund collateral consisting of cash, cash equivalents or securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities. The lending fund may invest the cash collateral and earn additional income or receive an agreed upon fee from a borrower which has delivered cash equivalent collateral.

A fund anticipates that securities will be loaned only under the following conditions:

(1) the borrower must furnish collateral equal at all times to the market value of the securities loaned and the borrower must agree to increase the collateral on a daily basis if the securities loaned increase in value;

(2) the loan must be made in accordance with NYSE rules, which presently require the borrower, after notice, to redeliver the securities within five business days; and

(3) a fund making the loan may pay reasonable service, placement, custodian or other fees in connection with loans of securities and share a portion of the interest from these investments with the borrower of the securities.

As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower of the securities fail financially.

When-Issued Securities/Forward Commitments

In order to help ensure the availability of suitable securities, a fund may purchase debt or equity securities on a “when-issued” or on a “forward commitment” basis. Purchasing securities on a when-issued or forward commitment basis means that the obligations will be delivered to a fund at a future date, which may be one month or longer after the date of the commitment. Except as may be imposed by these factors, there is no limit on the percent of a fund’s total assets that may be committed to such transactions.

Under normal circumstances, a fund purchasing securities on a when-issued or forward commitment basis will take delivery of the securities, but a fund may, if deemed advisable, sell the securities before the settlement date. In general, a fund does not pay for the securities, or start earning interest on them, until the obligations are scheduled to be settled. A fund does, however, record the transaction and reflect the value each day of the securities in determining its NAV. At the time of delivery, the value of when-issued

or forward commitment securities may be more or less than the transaction price, and the yields then available in the market may be higher than those obtained in the transaction. While awaiting delivery of the obligations purchased on such basis, a fund will maintain on its records liquid assets consisting of cash, liquid high quality debt obligations or other assets equal to the amount of the commitments to purchase when-issued or forward commitment securities. The availability of liquid assets for this purpose and the effect of asset segregation on a fund’s ability to meet its current obligations, to honor requests for redemption, and to otherwise manage its investment portfolio will limit the extent to which a fund may purchase when-issued or forward commitment securities.

Mortgage Dollar Rolls

Each fund (excluding the Money Market Trusts) may enter into mortgage dollar rolls. Under a mortgage dollar roll, a fund sells mortgage-backed securities for delivery in the future (generally within 30 days) and simultaneously contracts to repurchase substantially similar securities (of the same type, coupon and maturity) securities on a specified future date. During the roll period, a fund forgoes principal and interest paid on the mortgage-backed securities. A fund is compensated by the difference between the current sale price and the lower forward price for the future purchase (often referred to as the “drop”), as well as by the interest earned on the cash proceeds of the initial sale. A fund may also be compensated by receipt of a commitment fee. A fund may only enter into “covered rolls.” A covered roll is a specific type of dollar roll for which there is an offsetting cash or cash equivalent security position that matures on or before the forward settlement date of the dollar roll transaction or for which a fund maintains on its records liquid assets having an aggregate value at least equal to the amount of such commitment to repurchase. Dollar roll transactions involve the risk that the market value of the securities sold by a fund may decline below the repurchase price of those securities. A mortgage dollar roll may be considered a form of leveraging, and may, therefore, increase fluctuations in a fund’s NAV per share.

Illiquid Securities

Neither of the Money Market Trusts may invest more than 10% of it nets assets in illiquid securities. No other fund may invest more than 15% of its net assets in securities that are not readily marketable (“illiquid securities”). Investment in illiquid securities involves the risk that, because of the lack of consistent market demand for such securities, a fund may be forced to sell them at a discount from the last offer price.

Illiquid securities may include, but are not limited to: (a) repurchase agreements with maturities greater than seven days, (b) futures contracts and options thereon for which a liquid secondary market does not exist, (c) time deposits maturing in more than seven calendar days, (d) securities of new and early stage companies whose securities are not publicly traded and (e) securities that trade in inactive markets.

Rule 144A Securities are Excluded from the Limitation on Illiquid Securities. Securities that are restricted as to resale but for which a ready market is available pursuant to an exemption provided by Rule 144A under the 1933 Act, or other exemptions from the registration requirements of the 1933 Act may be excluded from the 10% and 15% limitation on illiquid securities. The subadvisers decide, subject to the Trustees’ oversight, whether securities sold pursuant to Rule 144A are readily marketable for purposes of a fund’s investment restriction. The subadvisers will also monitor the liquidity of Rule 144A securities held by the funds for which they are responsible. To the extent that Rule 144A securities held by a fund should become illiquid because of a lack of interest on the part of qualified institutional investors, the overall liquidity of a fund could be adversely affected.

Section 4(2) Commercial Paper is Excluded from the Limitation on Illiquid Securities. The Money Market Trusts may invest in commercial paper issued in reliance on the exemption from registration afforded by Section 4(2) of the 1933 Act. Section 4(2) commercial paper is restricted as to its distribution under federal securities law, and is generally sold to institutional investors, such as the Money Market Trusts, who agree that they are purchasing the paper for investment purposes and not with a view to public distribution. Any resale by the purchaser must be made in an exempt transaction. Section 4(2) commercial paper is normally resold to other institutional investors, like the Money Market Trusts, through or with the assistance of the issuer or investment dealers who make a market in Section 4(2) commercial paper, thus providing liquidity. The Money Market Trusts’ subadviser believes that Section 4(2) commercial paper meets its criteria for liquidity. The Money Market Trusts intend, therefore, to treat Section 4(2) commercial paper as liquid and not subject to the investment limitation applicable to illiquid securities. The Money Market Trusts’ subadviser will monitor the liquidity of Section 4(2) commercial paper held by the Money Market Trusts, subject to the Trustees’ oversight.

Investments in Creditors’ Claims. The High Income Trust may purchase creditors’ claims in bankruptcy (“Creditors’ Claims”), which are rights to payment from a debtor under the U.S. bankruptcy laws. Creditors’ Claims may be secured or unsecured. A secured claim generally receives priority in payment over unsecured claims.

Sellers of Creditors’ Claims can either be: (i) creditors that have extended unsecured credit to the debtor company (most commonly trade suppliers of materials or services); or (ii) secured creditors (most commonly financial institutions) that have obtained collateral to secure an advance of credit to the debtor. Selling a Creditor’s Claim offers the creditor an opportunity to turn a claim that otherwise might not be satisfied for many years into liquid assets.

Creditors’ Claims may be purchased directly from a creditor although most are purchased through brokers. Creditors’ Claims can be sold as a single claim or as part of a package of claims from several different bankruptcy filings. Purchasers of Creditors’ Claims, such as the High Income Trust, may take an active role in the reorganization process of the bankrupt company and, in certain situations where the Creditors’ Claim is not paid in full, the claim may be converted into stock of the reorganized debtor.

Although Creditors’ Claims can be sold to other investors, the market for Creditors’ Claims is not liquid and, as a result, a purchaser of a Creditors’ Claim may be unable to sell the claim or may have to sell it at a drastically reduced price. There is no guarantee that any payment will be received from a Creditors’ Claim, especially in the case of unsecured claims.

Short Sales

A fund may make short sales of securities or maintain a short position, provided that at all times when a short position is open a fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for an equal amount of the securities of the same issuer as the securities sold short (a short sale “against-the-box”).

A fund may also sell a security it does not own in anticipation of a decline in the market value of that security (a “short sale”). To complete such a transaction, a fund must borrow the security to make delivery to the buyer. A fund is then obligated to replace the security borrowed by purchasing it at market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by a fund. Until the security is replaced, a fund is required to pay the lender any dividends or interest that accrues during the period of the loan. To borrow the security, a fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out. Until a fund replaces a borrowed security, it will segregate with its custodian cash or other liquid assets at such a level that: (i) the amount segregated plus the amount deposited with the broker as collateral will equal the current value of the security sold short; and (ii) the amount segregated plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time it was sold short. A fund will incur a loss as a result of the short sale if the price of the security increases between the date of the short sale and the date on which a fund replaced the borrowed security. A fund will realize a gain if the security declines in price between those dates. This result is the opposite of what one would expect from a cash purchase of a long position in a security. The amount of any gain will be decreased, and the amount of any loss increased, by the amount of any premium, dividends or interest the fund may be required to pay in connection with a short sale.

Investment in Other Investment Companies

A fund may invest in other investment companies (including shares of closed-end investment companies, unit investment trusts, and open-end investment companies) to the extent permitted by federal securities laws (including the rules, regulations and interpretations thereunder) and to the extent permitted by exemptive relief granted by the SEC.

Investing in other investment companies involves substantially the same risks as investing directly in the underlying instruments, but the total return on such investments at the investment company-level may be reduced by the operating expenses and fees of such other investment companies, including advisory fees. Certain types of investment companies, such as closed-end investment companies, issue a fixed number of shares that trade on a stock exchange or may involve the payment of substantial premiums above the value of such investment companies’ portfolio securities when traded OTC or a discount to their NAV. Others are continuously offered at NAV, but may also be traded in the secondary market.

Loan Participations and Assignments

A fund may invest in loan participations or assignments. Loan participations are loans or other direct debt instruments which are interests in amounts owned by a corporate, governmental or other borrower to another party. They may represent amounts owed to lenders or lending syndicates to suppliers of goods or services, or to other parties. A fund will have the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the participation and only upon receipt by the lender of the payments from the borrower. In connection with purchasing participations, a fund generally will have no right to enforce

compliance by the borrower with the term of the loan agreement relating to loan, nor any rights of set-off against the borrower, and a fund may not directly benefit from any collateral supporting the loan in which it has purchased the participation. As a result, a fund will assume the credit risk of both the borrower and the lender that is selling the participation. In the event of the insolvency of the lender selling a participation, a fund may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower.

When a fund purchases assignments from lenders, it will acquire direct rights against the borrower on the loan. However, because assignments are arranged through private negotiations between potential assignees and potential assignors, the rights and obligation acquired by a fund as the purchaser of an assignment may differ from, and be more limited than, those held by the assigning lender. Investments in loan participations and assignments present the possibility that a fund could be held liable as a co-lender under emerging legal theories of lender liability. In addition, if the loan is foreclosed, a fund could be part owner of any collateral and could bear the costs and liabilities of owning and disposing of the collateral. It is anticipated that such securities could be sold only to a limited number of institutional investors. In addition, some loan participations and assignments may not be rated by major rating agencies and may not be protected by the securities laws.

Index-Related Securities (“Equity Equivalents”)

A fund may invest in certain types of securities that enable investors to purchase or sell shares in a portfolio of securities that seeks to track the performance of an underlying index or a portion of an index. Such Equity Equivalents include, among others, DIAMONDS (interests in a portfolio of securities that seeks to track the performance of the Dow Jones Industrial Average), or S&P’s Depositary Receipts (“SPDRs”) (interests in a portfolio of securities of the largest and most actively traded non-financial companies listed on the Nasdaq Stock Market). Such securities are similar to index mutual funds, but they are traded on various stock exchanges or secondary markets. The value of these securities is dependent upon the performance of the underlying index on which they are based. Thus, these securities are subject to the same risks as their underlying indices as well as the securities that make up those indices. For example, if the securities comprising an index that an index-related security seeks to track perform poorly, the index-related security will lose value.

Equity Equivalents may be used for several purposes, including to simulate full investment in the underlying index while retaining a cash balance for fund management purposes, to facilitate trading, to reduce transaction costs or to seek higher investment returns where an Equity Equivalent is priced more attractively than securities in the underlying index. Because the expense associated with an investment in Equity Equivalents may be substantially lower than the expense of small investments directly in the securities compromising the indices they seek to track, investments in Equity Equivalents may provide a cost-effective means of diversifying a fund’s assets across a broad range of securities.

To the extent a fund invests in securities of other investment companies, including Equity Equivalents, fund shareholders would indirectly pay a portion of the operating costs of such companies in addition to the expenses of its own operations. These costs include management, brokerage, shareholder servicing and other operational expenses. Indirectly, if a fund invests in Equity Equivalents, shareholders may pay higher operational costs than if they owned the underlying investment companies directly. Additionally, a fund’s investments in such investment companies are subject to limitations under the 1940 Act and market availability.

The prices of Equity Equivalents are derived and based upon the securities held by the particular investment company. Accordingly, the level of risk involved in the purchase or sale of an Equity Equivalent is similar to the risk involved in the purchase or sale of traditional common stock, with the exception that the pricing mechanism for such instruments is based on a basket of stocks. The market prices of Equity Equivalents are expected to fluctuate in accordance with both changes in the NAVs of their underlying indices and the supply and demand for the instruments on the exchanges on which they are traded. Substantial market or other disruptions affecting Equity Equivalents could adversely affect the liquidity and value of the shares of a fund.

Fixed-Income Securities

A fund may invest in investment grade bonds, rated at the time of purchase in the four highest rating categories by a nationally recognized statistical rating organization (“NRSRO”), such as those rated Aaa, Aa, A and Baa by Moody’s or AAA, AA, A and BBB by S&P. A fund may also invest in obligations rated in the lowest of the top four rating categories (such as Baa by Moody’s or BBB by S&P). These obligations may have speculative characteristics and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments, including a greater possibility of default or bankruptcy of the issuer, than is the case with higher grade bonds. Subsequent to its purchase by a fund, an issue of securities may cease to be rated or its rating may be reduced below the minimum required for purchase by a fund. In addition, it is possible that Moody’s, S&P

and other NRSROs might not timely change their ratings of a particular issue to reflect subsequent events. None of these events will require the sale of the securities by a fund, although the subadviser will consider these events in determining whether it should continue to hold the securities.

Market Capitalization Weighted Approach

The investment strategy of each of the International Small Company Trust, Emerging Markets Value Trust, and Disciplined Diversification Trust involves market capitalization weighting in determining individual security weights and, where applicable, country or region weights. Market capitalization weighting means each security is generally purchased based on the issuer’s relative market capitalization. Market capitalization weighting will be adjusted by the subadviser, for a variety of factors. A fund may deviate from market capitalization weighting to limit or fix the exposure to a particular country or issuer to a maximum portion of the assets of the fund. Additionally, the subadviser may consider such factors as free float, momentum, trading strategies, liquidity management and other factors determined to be appropriate by the subadviser given market conditions. The subadviser may exclude the eligible security of a company that meets applicable market capitalization criterion if it determines that the purchase of such security is inappropriate in light of other conditions. These adjustments will result in a deviation from traditional market capitalization weighting.

Adjustment for free float adjusts market capitalization weighting to exclude the share capital of a company that is not freely available for trading in the public equity markets by international investors. For example, the following types of shares may be excluded: (i) those held by strategic investors (such as governments, controlling shareholders and management), (ii) treasury shares, or (iii) shares subject to foreign ownership restrictions.

Deviation from market capitalization weighting also will occur because the subadviser generally intends to purchase in round lots. Furthermore, the subadviser may reduce the relative amount of any security held in order to retain sufficient portfolio liquidity. Except with respect to the Disciplined Diversification Trust, a portion, but generally not in excess of 20% of a fund’s assets, may be invested in interest bearing obligations, such as money market instruments, thereby causing further deviation from market capitalization weighting.

Block purchases of eligible securities may be made at opportune prices, even though such purchases exceed the number of shares that, at the time of purchase, would be purchased under a market capitalization weighted approach. Changes in the composition and relative ranking (in terms of market capitalization) of the stocks that are eligible for purchase take place with every trade when the securities markets are open for trading due, primarily, to price fluctuations of such securities. On at least a semi-annual basis, the subadviser will prepare a list of companies whose stock is eligible for investment by the fund. Additional investments generally will not be made in securities that have changed in value sufficiently to be excluded from the subadviser then current market capitalization requirement for eligible portfolio securities. This may result in further deviation from market capitalization weighting. This deviation could be substantial if a significant amount of holdings of a fund change in value sufficiently to be excluded from the requirement for eligible securities, but not by a sufficient amount to warrant their sale.

Country weights may be based on the total market capitalization of companies within each country. The calculation of country market capitalization may take into consideration the free float of companies within a country or whether these companies are eligible to be purchased for the particular strategy. In addition, to maintain a satisfactory level of diversification, the subadviser may limit or adjust the exposure to a particular country or region to a maximum proportion of the assets of that vehicle. Country weights may also deviate from target weights due to general day-to-day trading patterns and price movements. As a result, the weighting of countries will likely vary from their weighting in published international indices.

RISK FACTORS

The risks of investing in certain types of securities are described below. The value of an individual security or a particular type of security can be more volatile than the market as a whole and can perform differently than the value of the market as a whole. As described in the Prospectus, by owning shares of the underlying funds, each fund of funds indirectly invests in the securities and instruments held by the underlying funds and bears the same risks as the underlying funds in which it invests. To the extent a fund of funds invests in securities or instruments directly, the fund of funds will be subject to the same risks.

Non-Diversified

Certain of the funds are non-diversified.

Definition of Non-Diversified. Any fund that is non-diversified is not limited as to the percentage of its assets that may be invested in any one issuer, and as to the percentage of the outstanding voting securities of such issuer that may be owned, only by its own investment restrictions. In contrast, a diversified fund, as to at least 75% of the value of its total assets, generally may not invest more than five percent of its total assets in the securities, or own more than ten percent of the outstanding voting securities, of any one issuer.

Since a non-diversified fund may invest a high percentage of its assets in the securities of a small number of companies, it may be affected more than a diversified fund by a change in the financial condition of any of these companies or by the financial markets’ assessment of any of these companies.

Equity Securities

Equity securities include common, preferred and convertible preferred stocks and securities the values of which are tied to the price of stocks, such as rights, warrants and convertible debt securities. Common and preferred stocks represent equity ownership in a company. Stock markets are volatile. The price of equity securities will fluctuate and can decline and reduce the value of a fund investing in equities. The price of equity securities fluctuates based on changes in a company’s financial condition and overall market and economic conditions. The value of equity securities purchased by a fund could decline if the financial condition of the companies invested in decline or if overall market and economic conditions deteriorate. Even funds that invest in high quality or “blue chip” equity securities or securities of established companies with large market capitalizations (which generally have strong financial characteristics) can be negatively impacted by poor overall market and economic conditions. Companies with large market capitalizations may also have less growth potential than smaller companies and may be able to react less quickly to change in the marketplace.

Fixed-Income Securities

Fixed-income securities are generally subject to two principal types of risks: (a) interest rate risk; and (b) credit quality risk.

Interest Rate Risk. Fixed-income securities are affected by changes in interest rates. When interest rates decline, the market value of the fixed-income securities generally can be expected to rise. Conversely, when interest rates rise, the market value of fixed-income securities generally can be expected to decline.

Credit Quality Risk. Fixed-income securities are subject to the risk that the issuer of the security will not repay all or a portion of the principal borrowed and will not make all interest payments. If the credit quality of a fixed-income security deteriorates after a fund has purchased the security, the market value of the security may decrease and lead to a decrease in the value of the fund’s investments. Funds that may invest in lower rated fixed-income securities are riskier than funds that may invest in higher rated fixed-income securities.

Investment Grade Fixed-Income Securities in the Lowest Rating Category

Investment grade fixed-income securities in the lowest rating category (rated “Baa” by Moody’s or “BBB” by S&P and comparable unrated securities) involve a higher degree of risk than fixed-income securities in the higher rating categories.

While such securities are considered investment grade quality and are deemed to have adequate capacity for payment of principal and interest, such securities lack outstanding investment characteristics and have speculative characteristics as well. For example, changes

in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher grade securities.

Lower Rated Fixed-Income Securities

Lower rated fixed-income securities are defined as securities rated below investment grade (rated “Ba” and below by Moody’s and “BB” and below by S&P). The principal risks of investing in these securities are as follows:

Risk to Principal and Income. Investing in lower rated fixed-income securities is considered speculative. While these securities generally provide greater income potential than investments in higher rated securities, there is a greater risk that principal and interest payments will not be made. Issuers of these securities may even go into default or become bankrupt.

Price Volatility. The price of lower rated fixed-income securities may be more volatile than securities in the higher rating categories. This volatility may increase during periods of economic uncertainty or change. The price of these securities is affected more than higher rated fixed-income securities by the market’s perception of their credit quality especially during times of adverse publicity. In the past, economic downturns or an increase in interest rates have, at times, caused more defaults by issuers of these securities and may do so in the future. Economic downturns and increases in interest rates have an even greater effect on highly leveraged issuers of these securities.

Liquidity. The market for lower rated fixed-income securities may have more limited trading than the market for investment grade fixed-income securities. Therefore, it may be more difficult to sell these securities and these securities may have to be sold at prices below their market value in order to meet redemption requests or to respond to changes in market conditions.

Dependence on Subadviser’s Own Credit Analysis. While a subadviser to a fund may rely on ratings by established credit rating agencies, it will also supplement such ratings with its own independent review of the credit quality of the issuer. Therefore, the assessment of the credit risk of lower rated fixed-income securities is more dependent on the subadviser’s evaluation than the assessment of the credit risk of higher rated securities.

Additional Risks Regarding Lower Rated Corporate Fixed-Income Securities. Lower rated corporate debt securities (and comparable unrated securities) tend to be more sensitive to individual corporate developments and changes in economics conditions than higher-rated corporate fixed-income securities.

Issuers of lower rated corporate debt securities may also be highly leveraged, increasing the risk that principal and income will not be repaid.

Additional Risks Regarding Lower Rated Foreign Government Fixed-Income Securities. Lower rated foreign government fixed-income securities are subject to the risks of investing in emerging market countries described under

“Foreign Securities.” In addition, the ability and willingness of a foreign government to make payments on debt when due may be affected by the prevailing economic and political conditions within the country. Emerging market countries may experience high inflation, interest rates and unemployment as well as exchange rate trade difficulties and political uncertainty or instability. These factors increase the risk that a foreign government will not make payments when due.

Small and Medium Size Companies

Survival of Small or Unseasoned Companies. Companies that are small or unseasoned (i.e., less than 3 years of operating history) are more likely than larger or established companies to fail or not to accomplish their goals. As a result, the value of their securities could decline significantly. These companies are less likely to survive since they are often dependent upon a small number of products, may have limited financial resources and a small management group.

Changes in Earnings and Business Prospects. Small or unseasoned companies often have a greater degree of change in earnings and business prospects than larger or established companies, resulting in more volatility in the price of their securities.

Liquidity. The securities of small or unseasoned companies may have limited marketability. This factor could cause the value of a fund’s investments to decrease if it needs to sell such securities when there are few interested buyers.

Impact of Buying or Selling Shares. Small or unseasoned companies usually have fewer outstanding shares than larger or established companies. Therefore, it may be more difficult to buy or sell large amounts of these shares without unfavorably impacting the price of the security.

Publicly Available Information. There may be less publicly available information about small or unseasoned companies. Therefore, when making a decision to purchase a security for a fund, a subadviser may not be aware of problems associated with the company issuing the security.

Medium Size Companies. Investments in the securities of medium sized companies present risks similar to those associated with small or unseasoned companies although to a lesser degree due to the larger size of the companies.

Foreign Securities

Currency Fluctuations. Investments in foreign securities may cause a fund to lose money when converting investments from foreign currencies into U.S. dollars. A fund may attempt to lock in an exchange rate by purchasing a foreign currency exchange contract prior to the settlement of an investment in a foreign security. However, it may not always be successful in doing so and a fund could still lose money.

Political and Economic Conditions. Investments in foreign securities subject a fund to the political or economic conditions of the foreign country. These conditions could cause a fund’s investments to lose value if these conditions deteriorate for any reason. This risk increases in the case of emerging market countries, which are more likely to be politically unstable. Such political instability could cause the value of any investment in the securities of an issuer based in a foreign country to decrease or could prevent or delay a fund from selling its investment and taking the money out of the country.

Removal of Proceeds of Investments from a Foreign Country. Foreign countries, especially emerging market countries, often have currency controls or restrictions which may prevent or delay a fund from taking money out of the country or may impose additional taxes on money removed from the country. Therefore, a fund could lose money if it is not permitted to remove capital from the country or if there is a delay in taking the assets out of the country, since the value of the assets could decline during this period or the exchange rate to convert the assets into U.S. dollars could worsen.

Nationalization of Assets. Investments in foreign securities subject a fund to the risk that the company issuing the security may be nationalized. If the company is nationalized, the value of the company’s securities could decrease in value or even become worthless.

Settlement of Sales. Foreign countries, especially emerging market countries, may also have problems associated with settlement of sales. Such problems could cause a fund to suffer a loss if a security to be sold declines in value while settlement of the sale is delayed.

Investor Protection Standards. Foreign countries, especially emerging market countries, may have less stringent investor protection and disclosure standards than the U.S. Therefore, when making a decision to purchase a security for a fund, a subadviser may not be aware of problems associated with the company issuing the security and may not enjoy the same legal rights as those provided in the U.S.

Investment Company Securities

Fund of Funds Risk Factors

Each fund of funds such as the Lifestyle Trusts and the Lifecycle Trusts (the “Allocation Funds”) may invest in shares of the underlying funds. The following discussion provides information on the risks of investing in the underlying funds.

As permitted by Section 12 of the 1940 Act, Allocation Funds invest in a number of other funds and may reallocate or rebalance assets among the underlying funds.

From time to time, one or more of the underlying funds may experience relatively large redemptions or investments due to reallocations or rebalancings of the assets of an Allocation Fund (“Rebalancings”), as effected by its subadviser, MFC Global Investment Management (U.S.A.) Limited (“MFC Global U.S.A.”). Shareholders should note that Rebalancings may affect the underlying funds. The underlying funds subject to redemptions by an Allocation Fund may find it necessary to sell securities, and the underlying funds that receive additional cash from a fund of funds will find it necessary to invest the cash. The impact of Rebalancings is likely to be greater when an Allocation Fund owns, redeems, or invests in, a substantial portion of an underlying fund. Rebalancings could affect the underlying funds, which could adversely affect their performance and, therefore, the performance of the fund of funds.

Both the Adviser and MFC Global U.S.A. will monitor the impact of Rebalancings on the underlying funds and attempt to minimize any such adverse impact, consistent with pursuing the investment objective of each fund of funds. However, there is no guarantee that the Adviser and MFC Global U.S.A. will be successful in doing so.

Possible adverse effects of Rebalancings on the underlying funds include:

1. The underlying funds could be required to sell securities or to invest cash, at times when they may not otherwise desire to do so.

2. Rebalancings may increase brokerage and/or other transaction costs of the underlying funds.

3. When a fund of funds owns a substantial portion of an underlying fund, a large redemption by the fund of funds could cause that underlying fund’s expenses to increase and could result in its portfolio becoming too small to be economically viable.

Both the fund of funds and the funds are managed by the Adviser. MFC Global U.S.A., which is an affiliate of the Adviser, is the subadviser to each fund of funds and to certain of the underlying funds. Shareholders should note that the Adviser has the responsibility to oversee and monitor both the Allocation Funds and the funds and MFC Global U.S.A. has the responsibility to manage both the fund of funds and certain of the underlying funds. The Adviser and MFC Global U.S.A. will monitor the impact of Rebalancings on the funds and attempt to minimize any adverse effect of the Rebalancings on the underlying funds, consistent with pursuing the investment objective of each Allocation Fund.

With respect to Rebalancings, shareholders should also note that MFC Global U.S.A. as the subadviser to both the Allocation Funds and certain of the underlying funds, may appear to have incentive to allocate more fund of funds assets to those underlying funds that it subadvises. However, the Adviser believes it has no financial incentive since the net amount of advisory fee retained after payment of the subadvisory fee is the same for all underlying funds although the Adviser’s ultimate controlling parent, MFC, may appear to have an incentive to do so since it also controls MFC Global U.S.A. The Adviser will monitor MFC Global U.S.A.’s allocation of fund of funds assets to the underlying funds to attempt to ensure that assets are not allocated to other MFC Global U.S.A. subadvised funds unless it is in the best interest of the fund of funds to do so.

Stripped Securities

Stripped securities are the separate income or principal components of a debt security. The risks associated with stripped securities are similar to those of other debt securities, although stripped securities may be more volatile, and the value of certain types of stripped securities may move in the same direction as interest rates. U.S. Treasury securities that have been stripped by a Federal Reserve Bank are obligations issued by the U.S. Treasury.

Mortgage-Backed and Asset-Backed Securities

Mortgage-Backed Securities. Mortgage-backed securities represent participating interests in pools of residential mortgage loans which are guaranteed by the U.S. Government, its agencies or instrumentalities. However, the guarantee of these types of securities relates to the principal and interest payments and not the market value of such securities. In addition, the guarantee only relates to the mortgage-backed securities held by a fund and not the purchase of shares of a fund.

Mortgage-backed securities are issued by lenders such as mortgage bankers, commercial banks, and savings and loan associations. Such securities differ from conventional debt securities which provide for the periodic payment of interest in fixed amounts (usually semiannually) with principal payments at maturity or on specified dates. Mortgage-backed securities provide periodic payments, which are, in effect, a “pass-through” of the interest and principal payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans. A mortgage-backed security will mature when all the mortgages in the pool mature or are prepaid. Therefore, mortgage-backed securities do not have a fixed maturity, and their expected maturities may vary when interest rates raise or fall.

When interest rates fall, homeowners are more likely to prepay their mortgage loans. An increased rate of prepayments on a fund’s mortgage-backed securities will result in an unforeseen loss of interest income to the fund as the fund may be required to reinvest assets at a lower interest rate. Because prepayments increase when interest rates fall, the prices of mortgaged-backed securities do not increase as much as other fixed-income securities when interest rates fall.

When interest rates rise, homeowners are less likely to prepay their mortgages loans. A decreased rate of prepayments lengthen the expected maturity of a mortgage-backed security. Therefore, the prices of mortgage-backed securities may decrease more than prices of other fixed-income securities when interest rates rise.

The yield of mortgage-backed securities is based on the average life of the underlying pool of mortgage loans. The actual life of any particular pool may be shortened by unscheduled or early payments of principal and interest. Principal prepayments may result from the sale of the underlying property or the refinancing or foreclosure of underlying mortgages. The occurrence of prepayments is affected by a wide range of economic, demographic and social factors and, accordingly, it is not possible to accurately predict the average life of a particular pool. The actual prepayment experience of a pool of mortgage loans may cause the yield realized by a fund to differ from the yield calculated on the basis of the average life of the pool. In addition, if a fund purchases mortgage-backed securities at a premium, the premium may be lost in the event of early prepayment which may result in a loss to a fund.

Prepayments tend to increase during periods of falling interest rates, while during periods of rising interest rates prepayments are likely to decline. Monthly interest payments received by a fund have a compounding effect that will increase the yield to shareholders as compared to debt obligations that pay interest semiannually. Because of the reinvestment of prepayments of principal at current rates, mortgage-backed securities may be less effective than Treasury bonds of similar maturity at maintaining yields during periods of declining interest rates. Also, although the value of debt securities may increase as interest rates decline, the value of these pass-through type of securities may not increase as much due to their prepayment feature.

Collateralized Mortgage Obligations. A fund may invest in mortgage-backed securities called CMOs. CMOs are issued in separate classes with different stated maturities. As the mortgage pool experiences prepayments, the pool pays off investors in classes with shorter maturities first. By investing in CMOs, a fund may manage the prepayment risk of mortgage-backed securities. However, prepayments may cause the actual maturity of a CMO to be substantially shorter than its stated maturity

Asset-Backed Securities. Asset-backed securities include interests in pools of debt securities, commercial or consumer loans, or other receivables. The value of these securities depends on many factors, including changes in interest rates, the availability of information concerning the pool and its structure, the credit quality of the underlying assets, the market’s perception of the servicer of the pool, and any credit enhancement provided. In addition, asset-backed securities have prepayment risks similar to mortgage-backed securities.

Securities Linked to the Real Estate Market

Investing in securities of companies in the real estate industry subjects a fund to the risks associated with the direct ownership of real estate. These risks include:

–		declines in the value of real estate;

–		risks related to general and local economic conditions;

–		possible lack of availability of mortgage funds;

–		overbuilding;

–		extended vacancies of properties;

–		increased competition;

–		increases in property taxes and operating expenses;

–		change in zoning laws;

–		losses due to costs resulting from the clean-up of environmental problems;

–		liability to third parties for damages resulting from environmental problems;

–		casualty or condemnation losses;

–		limitations on rents;

–		changes in neighborhood values and the appeal of properties to tenants; and

–		changes in interest rates.

Therefore, for a fund investing a substantial amount of its assets in securities of companies in the real estate industry, the value of a fund’s shares may change at different rates compared to the value of shares of a fund with investments in a mix of different industries.

Securities of companies in the real estate industry include real estate investment trusts (“REITs”), including equity REITs and mortgage REITs. Equity REITs may be affected by changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Further, equity and mortgage REITs are dependent upon management skills and generally may not be diversified. Equity and mortgage REITs are also subject to heavy cash flow dependency, defaults by borrowers and self-liquidations. In addition, equity and mortgage REITs could possibly fail to qualify for tax free pass-through of income under the Code, or to maintain their exemptions from registration under the 1940 Act. The above factors may also adversely affect a borrower’s or a lessee’s ability to meet its obligations to the REIT. In the event of a default by a borrower or lessee, the REIT may experience delays in enforcing its rights as a mortgagee or lessor and may incur substantial costs associated with protecting its investments.

In addition, even the larger REITs in the industry tend to be small to medium-sized companies in relation to the equity markets as a whole. See “Small and Medium Size Companies” for a discussion of the risks associated with investments in these companies.

Industry or Sector Investing

When a fund’s investments are concentrated in a particular industry or sector of the economy, they are not as diversified as the investments of most mutual funds and are far less diversified than the broad securities markets. This means that concentrated funds tend to be more volatile than other mutual funds, and the values of their investments tend to go up and down more rapidly. In addition, a fund that invests in a particular industry or sector is particularly susceptible to the impact of market, economic, regulatory and others factors affecting that industry or sector.

Internet-Related Investments. The value of companies engaged in Internet-related activities, which is a developing industry, is particularly vulnerable to: (a) rapidly changing technology, (b) extensive government regulation and (c) relatively high risk of obsolescence caused by scientific and technological advances. In addition, companies engaged in Internet-related activities are difficult to value and many have high share prices relative to their earnings, which they may not be able to maintain over the long-term. Moreover, many Internet companies are not yet profitable and will need additional financing to continue their operations. There is no guarantee that such financing will be available when needed. Since many Internet companies are start-up companies, the risks associated with investing in small companies are heightened for these companies. Any fund that invests a significant portion of its

assets in Internet-related companies should be considered extremely risky even as compared to other funds that invest primarily in small company securities.

Financial Services Industry. A fund investing principally in securities of companies in the financial services industry is particularly vulnerable to events affecting that industry. Companies in the financial services industry include commercial and industrial banks, savings and loan associations and their holding companies, consumer and industrial finance companies, diversified financial services companies, investment banking, securities brokerage and investment advisory companies, leasing companies and insurance companies. These companies are all subject to extensive regulation, rapid business changes and volatile performance dependent upon the availability and cost of capital, prevailing interest rates and significant competition. General economic conditions significantly affect these companies. Credit and other losses resulting from the financial difficulty of borrowers or other third parties have a potentially adverse effect on companies in this industry. Investment banking, securities brokerage and investment advisory companies are particularly subject to government regulation and the risks inherent in securities trading and underwriting activities.

Banking. Commercial banks (including “money center” regional and community banks), savings and loan associations and holding companies of the foregoing are especially subject to adverse effects of volatile interest rates, concentrations of loans in particular industries (such as real estate or energy) and significant competition. The profitability of these businesses is to a significant degree dependent upon the availability and cost of capital funds. Economic conditions in the real estate market may have a particularly strong effect on certain banks and savings associations. Commercial banks and savings associations are subject to extensive federal and, in many instances, state regulation. Neither such extensive regulation nor the federal insurance of deposits ensures the solvency or profitability of companies in this industry, and there is no assurance against losses in securities issued by such companies.

Insurance. Insurance companies are particularly subject to government regulation and rate setting, potential anti-trust and tax law changes, and industry-wide pricing and competition cycles. Property and casualty insurance companies may also be affected by weather and other catastrophes. Life and health insurance companies may be affected by mortality and morbidity rates, including the effects of epidemics. Individual insurance companies may be exposed to reserve inadequacies, problems in investment portfolios (for example, due to real estate or “junk” bond holdings) and failures of reinsurance carriers.

Telecommunications. Companies in the telecommunications sector are subject to the additional risks of rapid obsolescence, lack of standardization or compatibility with existing technologies, an unfavorable regulatory environment, and a dependency on patent and copyright protection. The prices of the securities of companies in the telecommunications sector may fluctuate widely due to both federal and state regulations governing rates of return and services that may be offered, fierce competition for market share, and competitive challenges in the U.S. from foreign competitors engaged in strategic joint ventures with U.S. companies, and in foreign markets from both U.S. and foreign competitors. In addition, recent industry consolidation trends may lead to increased regulation of telecommunications companies in their primary markets.

Utilities. Issuers in the utilities sector are subject to many risks, including the following: increases in fuel and other operating costs; restrictions on operations, increased costs and delays as a result of environmental and safety regulations; coping with the impact of energy conservation and other factors reducing the demand for services; technological innovations that may render existing plants, equipment or products obsolete; the potential impact of natural or man-made disasters; difficulty in obtaining adequate returns on invested capital; difficulty in obtaining approval of rate increases; the high cost of obtaining financing, particularly during periods of inflation; increased competition resulting from deregulation, overcapacity, and pricing pressures; and the negative impact of regulation. Because utility companies are faced with the same obstacles, issues and regulatory burdens, their securities may react similarly and more in unison to these or other market conditions.

Health Sciences. Companies in this sector are subject to the additional risks of increased competition within the health care industry, changes in legislation or government regulations, reductions in government funding, product liability or other litigation and the obsolescence of popular products. The prices of the securities of health sciences companies may fluctuate widely due to government regulation and approval of their products and services, which may have a significant effect on their price and availability. In addition, the types of products or services produced or provided by these companies may quickly become obsolete. Moreover, liability for products that are later alleged to be harmful or unsafe may be substantial and may have a significant impact on a company’s market value or share price.

Initial Public Offerings (“IPOs”)

A fund may invest a portion of its assets in shares of IPOs, consistent with its investment objectives and policies. IPOs may have a magnified impact on the performance of a fund with a small asset base. The impact of IPOs on a fund’s performance likely will

decrease as the fund’s asset size increases, which could reduce the fund’s returns. IPOs may not be consistently available to a fund for investing, particularly as the fund’s asset base grows. IPO shares frequently are volatile in price due to the absence of a prior public market, the small number of shares available for trading and limited information about the issuer. Therefore, a fund may hold IPO shares for a very short period of time. This may increase the turnover of a fund and may lead to increased expenses for a fund, such as commissions and transaction costs. In addition, IPO shares can experience an immediate drop in value if the demand for the securities does not continue to support the offering price.

U.S. Government Securities

A fund may invest in U.S. government securities issued or guaranteed by the U.S. government or by an agency or instrumentality of the U.S. government. Not all U.S. government securities are backed by the full faith and credit of the United States. Some are supported only by the credit of the issuing agency or instrumentality, which depends entirely on its own resources to repay the debt. U.S. government securities that are backed by the full faith and credit of the United States include U.S. Treasuries and mortgage-backed securities guaranteed by the GNMA. Securities that are only supported by the credit of the issuing agency or instrumentality include Fannie Mae, FHLBs and Freddie Mac.

High Yield (High Risk) Securities

General. A fund may invest in high yield (high risk) securities, consistent with its investment objectives and policies. High yield securities are those rated below investment grade and comparable unrated securities. These securities offer yields that fluctuate over time but generally are superior to the yields offered by higher rated securities. However, securities rated below investment grade also have greater risks than higher rated securities as described below.

Interest Rate Risk. To the extent a fund invests primarily in fixed-income securities, the NAV of the fund’s shares can be expected to change as general levels of interest rates fluctuate. However, the market values of securities rated below investment grade (and comparable unrated securities) tend to react less to fluctuations in interest rate levels than do those of higher-rated securities. Except to the extent that values are affected independently by other factors (such as developments relating to a specific issuer) when interest rates decline, the value of a fixed-income fund generally rise. Conversely, when interest rates rise, the value of a fixed-income fund will decline.

Liquidity. The secondary markets for high yield corporate and sovereign debt securities are not as liquid as the secondary markets for investment grade securities. The secondary markets for high yield debt securities are concentrated in relatively few market makers and participants are mostly institutional investors. In addition, the trading volume for high yield debt securities is generally lower than for investment grade securities. Furthermore, the secondary markets could contract under adverse market or economic conditions independent of any specific adverse changes in the condition of a particular issuer.

These factors may have an adverse effect on the ability of funds investing in high yield securities to dispose of particular portfolio investments. These factors also may limit funds that invest in high yield securities from obtaining accurate market quotations to value securities and calculate NAV. If a fund investing in high yield debt securities is not able to obtain precise or accurate market quotations for a particular security, it will be more difficult for the subadviser to value its investments.

Less liquid secondary markets may also affect a fund’s ability to sell securities at their fair value. A fund may invest up to 15% (10% in the case of each Money Market Trust) of its net assets, measured at the time of investment, in illiquid securities. These securities may be more difficult to value and to sell at fair value. If the secondary markets for high yield debt securities are affected by adverse economic conditions, the proportion of a fund’s assets invested in illiquid securities may increase.

Non-Investment Grade Corporate Debt Securities. While the market values of securities rated below investment grade (and comparable unrated securities) tend to react less to fluctuations in interest rate levels than do those of higher-rated securities, the market values of non-investment grade corporate debt securities tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated securities.

In addition, these securities generally present a higher degree of credit risk. Issuers of these securities are often highly leveraged and may not have more traditional methods of financing available to them. Therefore, their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. The risk of loss due to default by such issuers is significantly greater than with investment grade securities because such securities generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness.

Non-Investment Grade Foreign Sovereign Debt Securities. Investing in non-investment grade foreign sovereign debt securities will expose funds to the consequences of political, social or economic changes in the developing and emerging market countries that issue the securities. The ability and willingness of sovereign obligors in these countries to pay principal and interest on such debt when due may depend on general economic and political conditions within the relevant country. Developing and emerging market countries have historically experienced (and may continue to experience) high inflation and interest rates, exchange rate trade difficulties, extreme poverty and unemployment. Many of these countries are also characterized by political uncertainty or instability.

The ability of a foreign sovereign obligor to make timely payments on its external debt obligations will also be strongly influenced by:

–		the obligor’s balance of payments, including export performance;

–		the obligor’s access to international credits and investments;

–		fluctuations in interest rates; and

–		the extent of the obligor’s foreign reserves.

Obligor’s Balance of Payments. A country whose exports are concentrated in a few commodities or whose economy depends on certain strategic imports could be vulnerable to fluctuations in international prices of these commodities or imports. To the extent that a country receives payment for its exports in currencies other than dollars, its ability to make debt payments denominated in dollars could be adversely affected.

Obligor’s Access to International Credits and Investments. If a foreign sovereign obligor cannot generate sufficient earnings from foreign trade to service its external debt, it may need to depend on continuing loans and aid from foreign governments, commercial banks, and multilateral organizations, and inflows of foreign investment. The commitment on the part of these entities to make such disbursements may be conditioned on the government’s implementation of economic reforms and/or economic performance and the timely service of its obligations. Failure in any of these efforts may result in the cancellation of these third parties’ lending commitments, thereby further impairing the obligor’s ability or willingness to service its debts on time.

Obligor’s Fluctuation in Interest Rates. The cost of servicing external debt is generally adversely affected by rising international interest rates since many external debt obligations bear interest at rates which are adjusted based upon international interest rates.

Obligor’s Foreign Reserves. The ability to service external debt will also depend on the level of the relevant government’s international currency reserves and its access to foreign exchange. Currency devaluations may affect the ability of a sovereign obligor to obtain sufficient foreign exchange to service its external debt.

The Consequences of a Default. As a result of the previously listed factors, a governmental obligor may default on its obligations. If a default occurs, a fund holding foreign sovereign debt securities may have limited legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting party itself, and the ability of the holder of the foreign sovereign debt securities to obtain recourse may be subject to the political climate in the relevant country. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of other foreign sovereign debt obligations in the event of default under their commercial bank loan agreements.

Sovereign obligors in developing and emerging countries are among the world’s largest debtors to commercial banks, other governments, international financial organizations and other financial institutions. These obligors have in the past experienced substantial difficulties in servicing their external debt obligations. This difficulty has led to defaults on certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things:

	–		reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements or converting outstanding principal and unpaid interest to Brady Bonds; and

	–		obtaining new credit to finance interest payments.

Holders of certain foreign sovereign debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the Brady Bonds and other foreign sovereign debt securities in

which a fund may invest will not be subject to similar restructuring arrangements or to requests for new credit, which may adversely affect a fund’s holdings. Furthermore, certain participants in the secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants.

Securities in the Lowest Rating Categories. Certain debt securities in which a fund may invest may have (or be considered comparable to securities having) the lowest ratings for non-subordinated debt instruments assigned by Moody’s or S&P. These securities are rated Caa or lower by Moody’s or CCC or lower by S&P. These securities are considered to have the following characteristics:

–		extremely poor prospects of ever attaining any real investment standing;

–		current identifiable vulnerability to default;

–		unlikely to have the capacity to pay interest and repay principal when due in the event of adverse business, financial or economic conditions;

–		are speculative with respect to the issuer’s capacity to pay interest and repay principal in accordance with the terms of the obligations; and/or

–		are default or not current in the payment of interest or principal.

Accordingly, it is possible that these types of characteristics could, in certain instances, reduce the value of securities held by a fund with a commensurate effect on the value of the fund’s shares.

HEDGING AND OTHER STRATEGIC TRANSACTIONS

Hedging refers to protecting against possible changes in the market value of securities a fund already owns or plans to buy or protecting unrealized gains in the fund. These strategies may also be used to gain exposure to a particular market. The hedging and other strategic transactions which may be used by a fund, consistent with its investment objectives and policies, are described below:

–		exchange-listed and OTC put and call options on securities, financial futures contracts, currencies, fixed-income indices and other financial instruments;

–		financial futures contracts (including stock index futures);

–		interest rate transactions*;

–		currency transactions**;

–		swaps (including interest rate, index, equity, credit default swaps and currency swaps); and

–		structured notes, including hybrid or “index” securities.


*		A fund’s interest rate transactions may take the form of swaps, caps, floors and collars.

**		A fund’s currency transactions may take the form of currency forward contracts, currency futures contracts, currency swaps and options on currencies or currency futures contracts.

Hedging and other strategic transactions may be used for the following purposes:

–		to attempt to protect against possible changes in the market value of securities held or to be purchased by a fund resulting from securities markets or currency exchange rate fluctuations;

–		to protect a fund’s unrealized gains in the value of its securities;

–		to facilitate the sale of a fund’s securities for investment purposes;

–		to manage the effective maturity or duration of a fund’s securities;

–		to establish a position in the derivatives markets as a method of gaining exposure to a particular market; or

–		to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another.

General Characteristics of Options

Put options and call options typically have similar structural characteristics and operational mechanics regardless of the underlying instrument on which they are purchased or sold. Many hedging and other strategic transactions involving options require segregation of portfolio assets in special accounts, as described under “Use of Segregated and Other Special Accounts.”

Put Options. A put option gives the purchaser of the option, upon payment of a premium, the right to sell (and the writer the obligation to buy) the underlying security, commodity, index, currency or other instrument at the exercise price. A fund’s purchase of a put option on a security, for example, might be designed to protect its holdings in the underlying instrument (or, in some cases, a similar instrument) against a substantial decline in the market value of such instrument by giving a fund the right to sell the instrument at the option exercise price.

If and to the extent authorized to do so, a fund may purchase and sell put options on securities (whether or not it holds the securities in its portfolio) and on securities indices, currencies and futures contracts. A fund will not sell put options if, as a result, more than 50% of the fund’s assets would be required to be segregated to cover its potential obligations under put options other than those with respect to futures contracts.

Risk of Selling Put Options. In selling put options, a fund faces the risk that it may be required to buy the underlying security at a disadvantageous price above the market price.

Call Options. A call option, upon payment of a premium, gives the purchaser of the option the right to buy (and the seller the obligation to sell) the underlying instrument at the exercise price. A fund’s purchase of a call option on an underlying instrument might be intended to protect a fund against an increase in the price of the underlying instrument that it intends to purchase in the future by fixing the price at which it may purchase the instrument. An “American” style put or call option may be exercised at any time during the option period, whereas a “European” style put or call option may be exercised only upon expiration or during a fixed period prior to expiration.

Partial Hedge or Income to the Fund. If a fund sells a call option, the premium that it receives may serve as a partial hedge, to the extent of the option premium, against a decrease in the value of the underlying securities or instruments held by a fund or will increase a fund’s income. Similarly, the sale of put options can also provide fund gains.

Covering of Options. All call options sold by a fund must be “covered” (that is, the fund must own the securities or futures contract subject to the call or must otherwise meet the asset segregation requirements described below for so long as the call is outstanding).

Risk of Selling Call Options. Even though a fund will receive the option premium to help protect it against loss, a call option sold by a fund will expose the fund during the term of the option to possible loss of the opportunity to sell the underlying security or instrument with a gain.

Exchange-Listed Options. Exchange-listed options are issued by a regulated intermediary such as the Options Clearing Corporation (“OCC”), which guarantees the performance of the obligations of the parties to the options. The discussion below uses the OCC as an example, but is also applicable to other similar financial intermediaries.

OCC-issued and exchange-listed options, with certain exceptions, generally settle by physical delivery of the underlying security or currency, although in the future, cash settlement may become available. Index options and Eurodollar instruments (which are described below under “Eurodollar Instruments”) are cash settled for the net amount, if any, by which the option is “in-the-money” at the time the option is exercised. “In-the-money” means the amount by which the value of the underlying instrument exceeds, in the case of a call option, or is less than, in the case of a put option, the exercise price of the option. Frequently, rather than taking or

making delivery of the underlying instrument through the process of exercising the option, listed options are closed by entering into offsetting purchase or sale transactions that do not result in ownership of the new option.

A fund’s ability to close out its position as a purchaser or seller of an OCC-issued or exchange-listed put or call option is dependent, in part, upon the liquidity of the particular option market. Among the possible reasons for the absence of a liquid option market on an exchange are:

–		insufficient trading interest in certain options;

–		restrictions on transactions imposed by an exchange;

–		trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities, including reaching daily price limits;

–		interruption of the normal operations of the OCC or an exchange;

–		inadequacy of the facilities of an exchange or the OCC to handle current trading volume; and/or

–		a decision by one or more exchanges to discontinue the trading of options (or a particular class or series of options), in which event the relevant market for that option on that exchange would cease to exist, although any such outstanding options on that exchange would continue to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours during which the underlying financial instruments are traded. To the extent that the option markets close before the markets for the underlying financial instruments, significant price and rate movements can take place in the underlying markets that would not be reflected in the corresponding option markets.

OTC Options. OTC options are purchased from or sold to counterparties such as securities dealers, financial institutions through direct bilateral agreement with the counterparty. In contrast to exchange-listed options, which generally have standardized terms and performance mechanics, all of the terms of an OTC option, including such terms as method of settlement, term, exercise price, premium, guaranties and security, are determined by negotiation of the parties. It is anticipated that any fund authorized to use OTC options will generally only enter into OTC options that have cash settlement provisions, although it will not be required to do so.

Unless the parties provide for it, no central clearing or guaranty function is involved in an OTC option. As a result, if a counterparty fails to make or take delivery of the security, currency or other instrument underlying an OTC option it has entered into with a fund or fails to make a cash settlement payment due in accordance with the terms of that option, the fund will lose any premium it paid for the option as well as any anticipated benefit of the transaction. Thus, the subadviser must assess the creditworthiness of each such counterparty or any guarantor or credit enhancement of the counterparty’s credit to determine the likelihood that the terms of the OTC option will be met. A fund will enter into OTC option transactions only with U.S. Government securities dealers recognized by the Federal Reserve Bank of New York Mellon as “primary dealers,” or broker-dealers, domestic or foreign banks, or other financial institutions that are deemed creditworthy by the subadviser. In the absence of a change in the current position of the SEC’s staff, OTC options purchased by a fund and the amount of the fund’s obligation pursuant to an OTC option sold by the fund (the cost of the sell-back plus the in-the-money amount, if any) or the value of the assets held to cover such options will be deemed illiquid.

Types of Options That May Be Purchased. A fund may purchase and sell call options on securities indices, currencies, and futures contracts, as well as and on Eurodollar instruments that are traded on U.S. and foreign securities exchanges and in the OTC markets.

A fund reserves the right to invest in options on instruments and indices that may be developed in the future to the extent consistent with applicable law, the investment objective and the restrictions set forth herein.

General Characteristics of Futures Contracts and Options on Futures Contracts

A fund may trade financial futures contracts (including stock index futures contracts which are described below) or purchase or sell put and call options on those contracts for the following purposes:

–

as a hedge against anticipated interest rate, currency or market changes;

–		for duration management;

–		for risk management purposes; and

–		to gain exposure to a securities market.

Futures contracts are generally bought and sold on the commodities exchanges where they are listed with payment of initial and variation margin as described below. The sale of a futures contract creates a firm obligation by a fund, as seller, to deliver to the buyer the specific type of financial instrument called for in the contract at a specific future time for a specified price (or, with respect to certain instruments, the net cash amount). Options on futures contracts are similar to options on securities, except that an option on a futures contract gives the purchaser the right, in return for the premium paid, to assume a position in a futures contract and obligates the seller to deliver that position.

With respect to futures contracts that are not legally required to “cash settle,” a fund may cover the open position by setting aside or earmarking liquid assets in an amount equal to the market value of the futures contract. With respect to futures that are required to “cash settle”, such as Eurodollar, UK 90-day and Euribor futures; however, a fund is permitted to set aside or earmark liquid assets in an amount equal to the fund’s daily marked to market (net) obligation, if any, (in other words, the fund’s daily net liability, if any) rather than the market value of the futures contract. By setting aside assets equal to only its net obligation under cash-settled futures contracts, a fund will have the ability to employ such futures contracts to a greater extent than if the fund were required to segregate assets equal to the full market value of the futures contract.

Use Will Be Consistent with Applicable Regulatory Requirements. A fund’s use of financial futures contracts and options thereon will in all cases be consistent with applicable regulatory requirements and in particular with the rules and regulations of the CFTC and will be entered into primarily for bona fide hedging, risk management (including duration management) or to attempt to increase income or gains.

Margin. Maintaining a futures contract or selling an option on a futures contract will typically require a fund to deposit with a financial intermediary or in a segregated account at the fund’s custodian, as security for its obligations, an amount of cash or other specified assets (“initial margin”) that initially is from 1% to 10% of the face amount of the contract (but may be higher in some circumstances). Additional cash or assets (“variation margin”) may be required to be deposited thereafter daily as the mark-to-market value of the futures contract fluctuates. The purchase of an option on a financial futures contract involves payment of a premium for the option without any further obligation on the part of a fund. If a fund exercises an option on a futures contract it will be obligated to post initial margin (and potentially variation margin) for the resulting futures position just as it would for any futures position.

Settlement. Futures contracts and options thereon are generally settled by entering into an offsetting transaction, but no assurance can be given that a position can be offset prior to settlement or that delivery will occur.

Value of Futures Contracts Sold by a Fund. The value of all futures contracts sold by a fund (adjusted for the historical volatility relationship between such fund and the contracts) will not exceed the total market value of the fund’s securities.

Stock Index Futures

Definition. A stock index futures contract (an “Index Future”) is a contract to buy a certain number of units of the relevant index at a specified future date at a price agreed upon when the contract is made. A unit is the value at a given time of the relevant index.

Uses of Index Futures. Below are some examples of how Index Futures may be used:

–		In connection with a fund’s investment in common stocks, a fund may invest in Index Futures while the subadviser seeks favorable terms from brokers to effect transactions in common stocks selected for purchase.

–		A fund may also invest in Index Futures when a subadviser believes that there are not enough attractive common stocks available to maintain the standards of diversity and liquidity set for the fund’s pending investment in such stocks when they do become available.

–		Through the use of Index Futures, a fund may maintain a pool of assets with diversified risk without incurring the substantial brokerage costs that may be associated with investment in multiple issuers. This may permit a fund to avoid potential market and

liquidity problems (e.g., driving up or forcing down the price by quickly purchasing or selling shares of a portfolio security), which may result from increases or decreases in positions already held by a fund.

–

A fund may also invest in Index Futures in order to hedge its equity positions.

Hedging and other strategic transactions involving futures contracts and options on futures contracts will be purchased, sold or entered into primarily for bona fide hedging, risk management or appropriate fund management purposes including gaining exposure to a particular securities market. None of the funds will act as a “commodity pool” (i.e., a pooled investment vehicle which trades in commodity futures contracts and options thereon and the operator of which is registered with the CFTC).

Options on Securities Indices and Other Financial Indices

A fund may purchase and sell call and put options on securities indices and other financial indices (“Options on Financial Indices”). In so doing, a fund can achieve many of the same objectives it would achieve through the sale or purchase of options on individual securities or other instruments.

Description of Options on Financial Indices. Options on Financial Indices are similar to options on a security or other instrument, except that, rather than settling by physical delivery of the underlying instrument, Options on Financial Indices settle by cash settlement. Cash settlement means that the holder has the right to receive, upon exercise of the option, an amount of cash if the closing level of the index upon which the option is based exceeds, in the case of a call (or is less than, in the case of a put) the exercise price of the option. This amount of cash is equal to the excess of the closing price of the index over the exercise price of the option, which also may be multiplied by a formula value. The seller of the option is obligated to make delivery of this amount. The gain or loss on an option on an index depends on price movements in the instruments comprising the market or other composite on which the underlying index is based, rather than price movements in individual securities, as is the case for options on securities. In the case of an OTC option, physical delivery may be used instead of cash settlement.

Yield Curve Options

A fund may also enter into options on the “spread,” or yield differential, between two fixed-income securities, in transactions referred to as “yield curve” options. In contrast to other types of options, a yield curve option is based on the difference between the yields of designated securities, rather than the prices of the individual securities, and is settled through cash payments. Accordingly, a yield curve option is profitable to the holder if this differential widens (in the case of a call) or narrows (in the case of a put), regardless of whether the yields of the underlying securities increase or decrease.

Yield curve options may be used for the same purposes as other options on securities. Specifically, a fund may purchase or write such options for hedging purposes. For example, a fund may purchase a call option on the yield spread between two securities, if it owns one of the securities and anticipates purchasing the other security and wants to hedge against an adverse change in the yield spread between the two securities. A fund may also purchase or write yield curve options for other than hedging purposes (i.e., in an effort to increase its current income) if, in the judgment of the subadviser, the fund will be able to profit from movements in the spread between the yields of the underlying securities. The trading of yield curve options is subject to all of the risks associated with the trading of other types of options. In addition, however, such options present risk of loss even if the yield of one of the underlying securities remains constant, if the spread moves in a direction or to an extent which was not anticipated. Yield curve options written by a fund will be “covered.” A call (or put) option is covered if a fund holds another call (or put) option on the spread between the same two securities and owns liquid and unencumbered assets sufficient to cover the fund’s net liability under the two options. Therefore, a fund’s liability for such a covered option is generally limited to the difference between the amounts of the fund’s liability under the option written by the fund less the value of the option held by it. Yield curve options may also be covered in such other manner as may be in accordance with the requirements of the counterparty with which the option is traded and applicable laws and regulations. Yield curve options are traded over-the-counter.

Currency Transactions

A fund may engage in currency transactions with counterparties to hedge the value of portfolio securities denominated in particular currencies against fluctuations in relative value. Currency transactions include:

–

forward currency contracts;

–		exchange-listed currency futures contracts and options thereon;

–		exchange-listed and OTC options on currencies; and

–		currency swaps.

A forward currency contract involves a privately negotiated obligation to purchase or sell (with delivery generally required) a specific currency at a future date at a price set at the time of the contract. A currency swap is an agreement to exchange cash flows based on the notional difference among two or more currencies and operates similarly to an interest rate swap, which is described under “Swap Agreements and Options on Swap Agreements.” A fund may enter into currency transactions only with counterparties that are deemed creditworthy by the subadviser.

A fund’s dealings in forward currency contracts and other currency transactions, such as futures contracts, options, options on futures contracts and swaps, will be limited to hedging and similar purposes, including transaction hedging, position hedging, cross hedging and proxy hedging. A fund may also use foreign currency options and foreign currency forward contracts to increase exposure to a foreign currency or to shift exposure to foreign currency fluctuation from one country to another.

A fund may also engage in non-deliverable forward transactions to manage currency risk or to gain exposure to a currency without purchasing securities denominated in that currency. A non-deliverable forward is a transaction that represents an agreement between a fund and a counterparty (usually a commercial bank) to buy or sell a specified (notional) amount of a particular currency at an agreed upon foreign exchange rate on an agreed upon future date. Unlike other currency transactions, there is no physical delivery of the currency on the settlement of a non-deliverable forward transaction. Rather, the fund and the counterparty agree to net the settlement by making a payment in U.S. dollars or another fully convertible currency that represents any differential between the foreign exchange rate agreed upon at the inception of the non-deliverable forward agreement and the actual exchange rate on the agreed upon future date. Thus, the actual gain or loss of a given non-deliverable forward transaction is calculated by multiplying the transaction’s notional amount by the difference between the agreed upon forward exchange rate and the actual exchange rate when the transaction is completed.

When a fund enters into a non-deliverable forward transaction, its custodian will place segregated assets in a segregated account of the fund in an amount not less than the value of the fund’s total assets committed to the consummation of such non-deliverable forward transaction. If the additional segregated assets placed in the segregated account decline in value or the amount of the fund’s commitment increases because of changes in currency rates, additional cash or securities will be placed in the account on a daily basis so that the value of the account will equal the amount of the fund’s commitments under the non-deliverable forward agreement.

Since a fund generally may only close out a non-deliverable forward with the particular counterparty, there is a risk that the counterparty will default on its obligation to pay under the agreement. If the counterparty defaults, the fund will have contractual remedies pursuant to the agreement related to the transaction, but there is no assurance that contract counterparties will be able to meet their obligations pursuant to such agreements or that, in the event of a default, the fund will succeed in pursuing contractual remedies. The fund thus assumes the risk that it may be delayed or prevented from obtaining payments owed to it pursuant to non-deliverable forward transactions.

In addition, where the currency exchange rates that are the subject of a given non-deliverable forward transaction do not move in the direction or to the extent anticipated, a fund could sustain losses on the non-deliverable forward transaction. A fund’s investment in a particular non-deliverable forward transaction will be affected favorably or unfavorably by factors that affect the subject currencies, including economic, political and legal developments that impact the applicable countries, as well as exchange control regulations of the applicable countries. These risks are heightened when a non-deliverable forward transaction involves currencies of emerging market countries because such currencies can be volatile and there is a greater risk that such currencies will be devalued against the U.S. dollar or other currencies.

Transaction Hedging. Transaction hedging involves entering into a currency transaction with respect to specific assets or liabilities of a fund, which will generally arise in connection with the purchase or sale of the fund’s securities or the receipt of income from them.

Position Hedging. Position hedging involves entering into a currency transaction with respect to fund securities positions denominated or generally quoted in that currency.

Cross Hedging. A fund may cross-hedge currencies by entering into transactions to purchase or sell one or more currencies that are expected to increase or decline in value relative to other currencies to which the fund has or in which the fund expects to have exposure.

Proxy Hedging. To reduce the effect of currency fluctuations on the value of existing or anticipated holdings of its securities, a fund may also engage in proxy hedging. Proxy hedging is often used when the currency to which a fund’s holdings are exposed is generally difficult to hedge or specifically difficult to hedge against the dollar. Proxy hedging entails entering into a forward contract to sell a currency, the changes in the value of which are generally considered to be linked to a currency or currencies in which some or all of a fund’s securities are or are expected to be denominated, and to buy dollars. The amount of the contract would not exceed the market value of the fund’s securities denominated in linked currencies.

Risk of Currency Transactions. Currency transactions are subject to risks different from other fund transactions, as discussed below under “Risk Factors.” If a fund enters into a currency hedging transaction, the fund will comply with the asset segregation requirements described below under “Use of Segregated and Other Special Accounts.”

Combined Transactions

A fund may enter into multiple transactions, including multiple options transactions, multiple futures transactions, multiple currency transactions (including forward currency contracts), multiple interest rate transactions and any combination of futures, options, currency and interest rate transactions. A combined transaction will usually contain elements of risk that are present in each of its component transactions. Although a fund will normally enter into combined transactions to reduce risk or otherwise more effectively achieve the desired fund management goal, it is possible that the combination will instead increase the risks or hinder achievement of the fund’s objective.

Swap Agreements and Options on Swap Agreements

Among the hedging and other strategic transactions into which a fund may be authorized to enter are swap transactions, including, but not limited to, swap agreements on interest rates, security or commodity indexes, specific securities and commodities, and credit, credit default and event-linked swaps, as well as other credit, equity and commodity derivatives. To the extent a fund may invest in foreign currency-denominated securities, it may also invest in currency exchange rate swap agreements. A fund may also enter into options on swap agreements (“Swap Options”).

A fund may enter into swap transactions for any legal purpose consistent with its investment objective and policies, such as attempting to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets, to protect against currency fluctuations, as a duration management technique, to protect against any increase in the price of securities the fund anticipates purchasing at a later date, or to gain exposure to certain markets in the most economical way possible, among others.

Swap agreements are two party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard “swap” transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or “swapped” between the parties are generally calculated with respect to a “notional amount” (i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a “basket” of securities or commodities representing a particular index). A “quanto” or “differential” swap combines both an interest rate and a currency transaction. Other forms of swap agreements include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or “cap”; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified rate, or “floor”; and interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels. Consistent with its investment objective and general investment policies, a fund may invest in commodity swap agreements. For example, an investment in a commodity swap agreement may involve the exchange of floating-rate interest payments for the total return on a commodity index. In a total return commodity swap, a fund will receive the price appreciation of a commodity index, a portion of the index, or a single commodity in exchange for paying an agreed-upon fee. If the commodity swap is for one period, a fund may pay a fixed fee, established at the outset of the swap. However, if the term of the commodity swap is more than one period, with interim swap payments, a fund may pay an adjustable or floating fee. With a “floating” rate, the fee may be pegged to a base rate, such as the LIBOR, and is adjusted each period.

Therefore, if interest rates increase over the term of the swap contract, a fund may be required to pay a higher fee at each swap reset date.

A fund may also enter into Swap Options. A Swap Option is a contract that gives a counterparty the right (but not the obligation) in return for payment of a premium, to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. A fund may also write (sell) and purchase put and call Swap Options.

Depending on the terms of the particular option agreement, a fund will generally incur a greater degree of risk when it writes a Swap Option than it will incur when it purchases a Swap Option. When a fund purchases a swap option, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when the fund writes a Swap Option, upon exercise of the option the fund will become obligated according to the terms of the underlying agreement. Most other types of swap agreements entered into by a fund would calculate the obligations of the parties to the agreement on a “net basis.” Consequently, a fund’s current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net amount”). A fund’s current obligations under a swap agreement will be accrued daily (offset against any amounts owed to the fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the segregation or “earmarking” of liquid assets, to avoid any potential leveraging of a fund’s portfolio. Obligations under swap agreements so covered will not be construed to be “senior securities” for purposes of a fund’s investment restriction concerning senior securities. No fund will enter into a swap agreement with any single party if the net amount owed or to be received under existing contracts with that party would exceed 5% of the fund’s total assets.

A fund may also be authorized to enter into credit default swap agreements. The credit default swap agreement may have as reference obligations one or more securities that are not currently held by a fund. The protection “buyer” in a credit default contract is generally obligated to pay the protection “seller” an upfront or a periodic stream of payments over the term of the contract provided that no credit event, such as a default, on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the “par value” (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. A fund may be either the buyer or seller in the transaction. If a fund is a buyer and no credit event occurs, the fund may recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer generally may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased. As a seller, a fund generally receives an upfront payment or a fixed rate of income throughout the term of the swap provided that there is no credit event. As the seller, a fund would effectively add leverage to the fund because, in addition to its total net assets, the fund would be subject to investment exposure on the notional amount of the swap.

Credit default swap agreements involve greater risks than if a fund had invested in the reference obligation directly since, in addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risk. A fund will enter into credit default swap agreements only with counterparties that meet certain standards of creditworthiness. A buyer generally also will lose its investment and recover nothing should no credit event occur and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. A fund’s obligations under a credit default swap agreement will be accrued daily (offset against any amounts owing to the fund). In connection with credit default swaps in which a fund is the buyer, the fund will segregate or “earmark” cash or liquid assets determined, or enter into certain offsetting positions, with a value at least equal to the fund’s exposure (any accrued but unpaid net amounts owed by the fund to any counterparty), on a mark-to-market basis. In connection with credit default swaps in which a fund is the seller, the fund will segregate or “earmark” cash or liquid assets, or enter into offsetting positions, with a value at least equal to the full notional amount of the swap (minus any amounts owed to the fund). Such segregation or “earmarking” will ensure that the fund has assets available to satisfy its obligations with respect to the transaction and will limit any potential leveraging of the fund’s portfolio. Such segregation or “earmarking” will not limit the fund’s exposure to loss.

Whether a fund’s use of swap agreements or Swap Options will be successful in furthering its investment objective of total return will depend on the subadviser’s ability to predict correctly whether certain types of investments are likely to produce greater returns than other investments. Because they are two party contracts and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid. Moreover, a fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. A fund will enter into swap agreements

only with counterparties that meet certain standards of creditworthiness. Certain restrictions imposed on a fund by the Code may limit its ability to use swap agreements. The swaps market is a relatively new market and is largely unregulated. It is possible that developments in the swaps market, including potential government regulation, could adversely affect a fund’s ability to terminate existing swap agreements or to realize amounts to be received under such agreements.

Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with traditional investments. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. Swap agreements may be subject to liquidity risk, which exists when a particular swap is difficult to purchase or sell. If a swap transaction is particularly large or if the relevant market is illiquid (as is the case with many OTC swaps), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses. In addition, a swap transaction may be subject to a fund’s limitation on investments in illiquid securities.

Like most other investments, swap agreements are subject to the risk that the market value of the instrument will change in a way detrimental to a fund’s interest. A fund bears the risk that the subadviser will not accurately forecast future market trends or the values of assets, reference rates, indexes, or other economic factors in establishing swap positions for it. If a subadviser attempts to use a swap as a hedge against, or as a substitute for, the fund investment, the fund will be exposed to the risk that the swap will have or will develop imperfect or no correlation with the fund investment. This could cause substantial losses for a fund. While hedging strategies involving swap instruments can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other fund investments.

Many swaps are complex and often valued subjectively. Certain swap agreements are exempt from most provisions of the Commodity Exchange Act (“CEA”) and, therefore, are not regulated as futures or commodity option transactions under the CEA, pursuant to regulations approved by the CFTC.

To qualify for this exemption, a swap agreement must be entered into by “eligible participants,” which includes the following, provided the participants’ total assets exceed established levels: a bank or trust company, savings association or credit union, insurance company, investment company subject to regulation under the 1940 Act, commodity pool, corporation, partnership, proprietorship, organization, trust or other entity, employee benefit plan, governmental entity, broker-dealer, futures commission merchant, natural person, or regulated foreign person. To be eligible, natural persons and most other entities must have total assets exceeding $10 million; commodity pools and employee benefit plans must have assets exceeding $5 million. In addition, an eligible swap transaction must meet three conditions. First, the swap agreement may not be part of a fungible class of agreements that are standardized as to their material economic terms. Second, the creditworthiness of parties with actual or potential obligations under the swap agreement must be a material consideration in entering into or determining the terms of the swap agreement, including pricing, cost or credit enhancement terms. Third, swap agreements may not be entered into and traded on or through a multilateral transaction execution facility.

This exemption is not exclusive, and participants may continue to rely on existing exclusions for swaps, such as the Policy Statement issued in July 1989, which recognized a safe harbor for swap transactions from regulation as futures or commodity option transactions under the CEA or its regulations. The Policy Statement applies to swap transactions settled in cash that: (1) have individually tailored terms, (2) lack exchange-style offset and the use of a clearing organization or margin system, (3) are undertaken in conjunction with a line of business, and (4) are not marketed to the public.

Eurodollar Instruments

A fund may make investments in Eurodollar instruments, which are typically dollar-denominated futures contracts or options on those contracts that are linked to the LIBOR. In addition, foreign currency denominated instruments are available from time to time. Eurodollar futures contracts enable purchasers to obtain a fixed rate for the lending of funds and sellers to obtain a fixed rate for borrowings. A fund might use Eurodollar futures contracts and options thereon to hedge against changes in LIBOR, to which many interest rate swaps and fixed-income instruments are linked.

Risks of Hedging and Other Strategic Transactions

Hedging and other strategic transactions have special risks associated with them, including:

–

possible default by the counterparty to the transaction;

–		markets for the securities used in these transactions could be illiquid; and

–		to the extent the subadviser’s assessment of market movements is incorrect, the risk that the use of the hedging and other strategic transactions could result in losses to the fund.

Losses resulting from the use of hedging and other strategic transactions will reduce a fund’s NAV, and possibly income. Losses can be greater than if hedging and other strategic transactions had not been used.

Options and Futures Transactions. Options transactions are subject to the following additional risks:

–		option transactions could force the sale or purchase of fund securities at inopportune times or for prices higher than current market values (in the case of put options) or lower than current market values (in the case of call options), or could cause a fund to hold a security it might otherwise sell (in the case of a call option); and

–		options markets could become illiquid in some circumstances and certain OTC options could have no markets. As a result, in certain markets, a fund might not be able to close out a transaction without incurring substantial losses.

Futures transactions are subject to the following additional risks:

–		The degree of correlation between price movements of futures contracts and price movements in the related securities position of a fund could create the possibility that losses on the hedging instrument are greater than gains in the value of the fund’s position.

–		Futures markets could become illiquid. As a result, in certain markets, a fund might not be able to close out a transaction without incurring substantial losses.

Although a fund’s use of futures and options for hedging should tend to minimize the risk of loss due to a decline in the value of the hedged position, it will tend, at the same time, to limit the potential gain that might result from an increase in value.

Currency Hedging. In addition to the general risks of hedging and other strategic transactions described above, currency hedging transactions have the following risks:

–		Currency hedging can result in losses to a fund if the currency being hedged fluctuates in value to a degree or direction that is not anticipated.

–		Proxy hedging involves determining the correlation between various currencies. If the subadviser’s determination of this correlation is incorrect, a fund’s losses could be greater than if the proxy hedging were not used.

–		Foreign government exchange controls and restrictions on repatriation of currency can negatively affect currency transactions. These forms of governmental actions can result in losses to a fund if it is unable to deliver or receive currency or monies to settle obligations. Such governmental actions could also cause hedges it has entered into to be rendered useless, resulting in full currency exposure as well as incurring transaction costs.

Currency Futures Contracts and Options on Currency Futures Contracts. Currency futures contracts are subject to the same risks that apply to the use of futures contracts generally. In addition, settlement of a currency futures contract for the purchase of most currencies must occur at a bank based in the issuing nation. Trading options on currency futures contracts is relatively new, and the ability to establish and close out positions on these options is subject to the maintenance of a liquid market that may not always be available.

Risks of Hedging and Other Strategic Transactions Outside the United States

When conducted outside the United States, hedging and other strategic transactions will not only be subject to the risks described above, but could also be adversely affected by:

–

foreign governmental actions affecting foreign securities, currencies or other instruments;

–		less stringent regulation of these transactions in many countries as compared to the United States;

–		the lack of clearing mechanisms and related guarantees in some countries for these transactions;

–		more limited availability of data on which to make trading decisions than in the United States;

–		delays in a fund’s ability to act upon economic events occurring in foreign markets during non-business hours in the United States;

–		the imposition of different exercise and settlement terms and procedures and margin requirements than in the United States; and

–		lower trading volume and liquidity.

Use of Segregated and Other Special Accounts

Use of extensive hedging and other strategic transactions by a fund will require, among other things, that the fund segregate cash, liquid high grade debt obligations or other assets with its custodian, or a designated subcustodian, to the extent the fund’s obligations are not otherwise “covered” through ownership of the underlying security, financial instrument or currency.

In general, either the full amount of any obligation by a fund to pay or deliver securities or assets must be covered at all times by: (a) holding the securities, instruments or currency required to be delivered, or (b) subject to any regulatory restrictions, segregating an amount of cash or other liquid assets at least equal to the current amount of the obligation. The segregated assets cannot be sold or transferred unless equivalent assets are substituted in their place or it is no longer necessary to segregate them. Some examples of cover requirements are set forth below.

Call Options. A call option on securities written by a fund will require the fund to hold the securities subject to the call (or securities convertible into the needed securities without additional consideration) or to segregate cash or other liquid assets sufficient to purchase and deliver the securities if the call is exercised. A call option sold by a fund on an index will require the fund to own portfolio securities that correlate with the index or to segregate cash or other liquid assets equal to the excess of the index value over the exercise price on a current basis.

Put Options. A put option on securities written by a fund will require the fund to segregate cash or other liquid assets equal to the exercise price.

OTC Options. OTC options entered into by a fund, including those on securities, currency, financial instruments or indices, and OTC-issued and exchange-listed index options will generally provide for cash settlement, although a fund will not be required to do so. As a result, when a fund sells these instruments it will segregate an amount of cash or other liquid assets equal to its obligations under the options. OTC-issued and exchange-listed options sold by a fund other than those described above generally settle with physical delivery, and the fund will segregate an amount of cash or liquid high grade debt securities equal to the full value of the option. OTC options settling with physical delivery or with an election of either physical delivery or cash settlement will be treated the same as other options settling with physical delivery.

Currency Contracts. Except when a fund enters into a forward contract in connection with the purchase or sale of a security denominated in a foreign currency or for other non-speculative purposes, which requires no segregation, a currency contract that obligates the fund to buy or sell a foreign currency will generally require the fund to hold an amount of that currency or liquid securities denominated in that currency equal to a fund’s obligations or to segregate cash or other liquid assets equal to the amount of the fund’s obligations.

Futures Contracts and Options on Futures Contracts. In the case of a futures contract or an option on a futures contract, a fund must deposit initial margin and, in some instances, daily variation margin, in addition to segregating assets sufficient to meet its obligations under the contract. These assets may consist of cash, cash equivalents, liquid debt, equity securities or other acceptable assets.

Swaps. A fund will calculate the net amount, if any, of its obligations relating to swaps on a daily basis and will segregate an amount of cash or other liquid assets having an aggregate value at least equal to this net amount.

Caps, Floors and Collars. Caps, floors and collars require segregation of assets with a value equal to a fund’s net obligation, if any.

Hedging and other strategic transactions may be covered by means other than those described above when consistent with applicable regulatory policies. A fund may also enter into offsetting transactions so that its combined position, coupled with any segregated assets, equals its net outstanding obligation. A fund could purchase a put option, for example, if the exercise price of that option is the same or higher than the exercise price of a put option sold by the fund. In addition, if it holds a futures contracts or forward contract, a fund could, instead of segregating assets, purchase a put option on the same futures contract or forward contract with an exercise price as high or higher than the price of the contract held. Other hedging and strategic transactions may also be offset in combinations. If the offsetting transaction terminates on or after the time the primary transaction terminates, no segregation is required, but if it terminates prior to that time, assets equal to any remaining obligation would need to be segregated.

Other Limitations

No fund will maintain open short positions in futures contracts, call options written on futures contracts, and call options written on securities indices if, in the aggregate, the current market value of the open positions exceeds the current market value of that portion of its securities portfolio being hedged by those futures and options, plus or minus the unrealized gain or loss on those open positions. The gain or loss on these open positions will be adjusted for the historical volatility relationship between that portion of the fund and the contracts (e.g., the Beta volatility factor). In the alternative, however, a fund could maintain sufficient liquid assets in a segregated account equal at all times to the current market value of the open short position in futures contracts, call options written on futures contracts and call options written on securities indices, subject to any other applicable investment restrictions.

For purposes of this limitation, to the extent a fund has written call options on specific securities in that portion of its portfolio, the value of those securities will be deducted from the current market value of that portion of the securities portfolio. If this limitation should be exceeded at any time, the fund will take prompt action to close out the appropriate number of open short positions to bring its open futures and options positions within this limitation.

INVESTMENT RESTRICTIONS

There are two classes of investment restrictions to which JHT is subject in implementing the investment policies of the funds: (a) fundamental; and (b) non-fundamental. Fundamental restrictions with respect to a fund may only be changed by a vote of a majority of the fund’s outstanding voting securities, which means a vote of the lesser of (i) 67% or more of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares. Non-fundamental restrictions are subject to change by the Trustees of a fund without shareholder approval.

When submitting an investment restriction change to the holders of JHT’s outstanding voting securities, the matter shall be deemed to have been effectively acted upon with respect to a particular fund if a majority of the outstanding voting securities (as described above) of the fund vote for the approval of the matter, notwithstanding: (1) that the matter has not been approved by the holders of a majority of the outstanding voting securities of any other fund affected by the matter, and (2) that the matter has not been approved by the vote of a majority of the outstanding voting securities of JHT.

Restrictions (1) through (8) are fundamental. Restrictions (9) through (12) are non-fundamental.

Fundamental

Unless a fund is specifically excepted by the terms of a restriction:

(1) Each fund (except Global Real Estate Trust, Health Sciences Trust, Natural Resources Trust, Real Estate Securities Trust, Real Estate Equity Trust, and Utilities Trust) may not concentrate, as that term is used in the 1940 Act, its investments in a particular industry in violation of the requirements of the 1940 Act, as amended, as interpreted or modified by the SEC from time to time.

(2) Each fund (except Financial Services Trust, Global Bond Trust, Global Real Estate Trust, Growth Opportunities Trust, Growth Trust, Health Sciences Trust, Intrinsic Value Trust, Natural Resources Trust, Real Estate Securities Trust, Real Return Bond Trust, Utilities Trust, and U.S. Multi Sector Trust) has elected to be treated a diversified investment company, as that term is used in the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.

(3) Each fund may not borrow money, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.

(4) Each fund may not engage in the business of underwriting securities issued by others, except to the extent that a fund may be deemed to be an underwriter in connection with the disposition of portfolio securities.

(5) Each fund may not purchase or sell real estate, which term does not include securities of companies which deal in real estate or mortgages or investments secured by real estate or interests therein, except that each fund reserves freedom of action to hold and to sell real estate acquired as a result of the fund’s ownership of securities.

(6) Each fund may not purchase or sell commodities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.

(7) Each fund may not make loans except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.

(8) Each fund may not issue senior securities, except as permitted under the 1940 Act, as amended, and as interpreted or modified by regulatory authority having jurisdiction, from time to time.

Non-Fundamental

Unless a fund is specifically excepted by the terms of a restriction, each fund will not:

(9) Knowingly invest more than 15% of the value of its net assets in securities or other investments, including repurchase agreements maturing in more than seven days but excluding master demand notes, that are not readily marketable, except that each of the Money Market Trust and the Money Market Trust B may not invest in excess of 10% of its net assets in such securities or other investments.

(10) Make short sales of securities or maintain a short position, if, when added together, more than 25% of the value of the fund’s net assets would be (i) deposited as collateral for the obligation to replace securities borrowed to effect short sales and (ii) allocated to segregated accounts in connection with short sales, except that it may obtain such short-term credits as may be required to clear transactions. For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve the use of margin. Short sales “against-the-box” are not subject to this limitation.

(11) Purchase securities for the purpose of exercising control or management, except the Mutual Shares Fund.

(12) Pledge, hypothecate, mortgage or transfer (except as provided in restriction (7)) as security for indebtedness any securities held by the fund, except in an amount of not more than 10%* of the value of the fund’s total assets and then only to secure borrowings permitted by restrictions (3) and (10). For purposes of this restriction, collateral arrangements with respect to hedging and other strategic transactions will not be deemed to involve a pledge of assets.


*		33 1/3% in the case of the Small Company Value, Blue Chip Growth, Equity-Income, International Core, Science & Technology, Total Return, International Value, Mid Cap Stock, Health Sciences, Financial Services, All Cap Value, Utilities, Mid Cap Value, Fundamental Value, Natural Resources, Real Return Bond, Large Cap Value, Optimized All Cap, Emerging Growth, Small Cap Opportunities, Small Company, Core Equity, Classic Value, Optimized Value, Strategic Income, Money Market Trust B, 500 Index Trust B, International Equity Index Trust A, International Equity Index Trust B; Total Bond Market Trust A, Total Bond Market Trust B, Mid Value, Small Cap Value, Overseas Equity, Active Bond, Short-Term Bond, Managed, Large Cap, International Opportunities, Core Bond, U.S. High Yield Bond, Small Cap, Small Company Growth, Growth Opportunities, Value Opportunities, Vista, Intrinsic Value, Growth, U.S. Multi Sector, International Growth, Spectrum Income, Value & Restructuring, Index Allocation, International Small Company, Global Real Estate, Real Estate Equity, Mid Cap Value Equity, Absolute Return, Small Cap Intrinsic Value, Franklin Templeton Founding Allocation, Income, Mutual Shares, Mid Cap Intersection, Emerging Markets Value and High Income Trusts, Disciplined Diversification Trust, Capital Appreciation Value Trust and Growth Equity Trust, Balanced Trust, Core Fundamental Holdings Trust, Core Global Diversification Trust, Core Allocation Trust, Core Balanced Trust, Core Disciplined Diversification Trust, International Index Trust, American Diversified Growth & Income Trust, Alpha Opportunities Trust, Smaller Company Growth Trust, Short Term Government Income Trust, Floating Rate Income Trust,


		Global Asset Allocation Trust, Global Balanced Trust, each Lifestyle Trust, American Fundamental Holdings Trust, American Global Diversification Trust, Bond Index Trust A, Index Allocation Trust.

		15% in the case of the International Small Cap, Growth and Balanced Trusts;

		50% in the case of the Value Trust.

If a percentage restriction is adhered to at the time of an investment, a later increase or decrease in the investment’s percentage of the value of a fund’s total assets resulting from a change in such values or assets will not constitute a violation of the percentage restriction, except in the case of the Money Market Trust and the Money Market Trust B where the percentage limitation of restriction (9) must be met at all times. Any subsequent change in a rating assigned by any rating service to a security (or, if unrated, any change in the subadvisers assessment of the security), or change in the percentage of portfolio assets invested in certain securities or other instruments, or change in the average duration of a fund’s investment, resulting from market fluctuations or other changes in a fund’s total assets will not require a fund to dispose of an investment until the subadviser determines that it is practicable to sell or close out the investment without undue market or tax consequences to the fund. In the event that rating services assign different ratings to the same security, the subadviser will determine which rating it believes best reflects the security’s quality and risk at that time, which may be the higher of the several assigned ratings.

ADDITIONAL INVESTMENT RESTRICTIONS

MONEY MARKET TRUST AND MONEY MARKET TRUST B

In addition to the above policies, the Money Market Trust and the Money Market Trust B are subject to certain restrictions required by Rule 2a-7 under the 1940 Act. In order to comply with such restrictions, the Money Market Trust and the Money Market Trust B will, among other things, not purchase the securities of any issuer if it would cause:

–		more than 5% of its total assets to be invested in the securities of any one issuer (excluding U.S. Government securities and repurchase agreements fully collateralized by U.S. Government securities), except as permitted by Rule 2a-7 for certain securities for a period of up to three business days after purchase,

–		more than 5% of its total assets to be invested in “second tier securities,” as defined by Rule 2a-7, or

–		more than the greater of $1 million or 1% of its total assets to be invested in the second tier securities of that issuer.

INVESTMENT RESTRICTIONS THAT MAY BE CHANGED ONLY UPON 60 DAYS’ NOTICE TO SHAREHOLDERS

In order to comply with Rule 35d-1 under the 1940 Act, the following policies of the funds named below are subject to change only upon 60 days’ prior notice to shareholders. Any other policy, other than one designated as a fundamental policy, is not subject to this 60-day notice requirement.

500 Index Trust
500 Index Trust B

Under normal market conditions, the funds invest at least 80% of their net assets (plus any borrowings for investment purposes) in: (a) the common stocks that are included in the S&P 500 Index; and (b) securities (which may or may not be included in the S&P 500 Index) that the subadviser believes as a group will behave in a manner similar to the index.

ACTIVE BOND TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in debt securities.

BLUE CHIP GROWTH TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in the common stocks of large and medium-size blue chip growth companies.

CORE BOND TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in debt securities.

EMERGING MARKETS VALUE TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in emerging market securities.

EMERGING SMALL COMPANY TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) at the time of investment in securities of small cap companies.

EQUITY-INCOME TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowing for investment purposes) in equity securities.

FINANCIAL SERVICES TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowing for investment purposes) are invested in companies that are principally engaged in financial services.

GLOBAL BOND TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in fixed-income securities.

GLOBAL REAL ESTATE TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowing for investment purposes) in securities of REITS and real estate companies including foreign REITS and real estate companies.

GROWTH EQUITY TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities.

HEALTH SCIENCES TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowing for investment purposes) in common stocks of companies engaged in the research, development, production, or distribution of products or services related to health care, medicine, or the life sciences.

HIGH YIELD TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in high yield debt securities, including corporate bonds and other fixed-income securities (such as preferred stocks and convertible securities), which have the following ratings (or, if unrated, are considered to be of equivalent quality):


		CORPORATE BONDS, PREFERRED STOCKS
Rating Agency		AND CONVERTIBLE SECURITIES
Moody’s		Ba through C
S&P		BB through D

International Equity Index Trust A
International Equity Index Trust B

Under normal market conditions, each fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in: (a) the common stocks that are included in the Morgan Stanley Capital International All Country World Excluding U.S. Index (the “MSCI ACW ex-US Index”) and/or corresponding American Depository Receipts (ADRs) or Global Depository Receipts (GDRs) and (b) securities (which may or may not be included in the MSCI ACW ex-US Index) that the subadviser believes as a group will behave in a manner similar to the index.

INTERNATIONAL INDEX TRUST

Under normal market conditions, the fund invests at least 80% of its assets in one or more of the following: (a) securities listed an index (the “Index”); (b) securities (which may or may not be included in the Index) that the subadviser believes as a group will behave in a manner similar to the Index; and (c) stock index futures to maintain exposure to the Index.

INTERNATIONAL SMALL CAP TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities issued by foreign small cap companies.

INTERNATIONAL SMALL COMPANY TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities of small cap companies.

INVESTMENT QUALITY BOND TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in investment grade bonds.

LARGE CAP TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities of large cap companies.

LARGE CAP VALUE TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in large cap companies selected from those that are, at the time of purchase, included in the Russell 1000 Value Index.

MID CAP INDEX TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in: (a) the common stocks that are included in the S&P 400 Index; and (b) securities (which may or may not be included in the S&P 400 Index) that the subadviser believes as a group will behave in a manner similar to the index.

MID CAP INTERSECTION TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in mid cap securities.

MID CAP STOCK TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of mid-sized companies.

MID CAP VALUE EQUITY TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities of medium-sized companies.

NATURAL RESOURCES TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in natural resource-related companies.

OVERSEAS EQUITY TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in equity securities.

PACIFIC RIM TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in common stocks and equity-related securities of established, larger-capitalization non-U.S. companies located in the Pacific Rim region.

REAL ESTATE EQUITY TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in the equity securities of real estate companies.

REAL ESTATE SECURITIES TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities of real estate companies.

REAL RETURN BOND TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus borrowings for investment purposes) in bonds (either through cash market purchases, forward commitments, or derivative instruments) of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities, and corporations.

SCIENCE & TECHNOLOGY TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in the common stocks of companies expected to benefit from the development, advancement, and use of science and technology.

SHORT-TERM BOND TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in debt securities.

SMALL CAP GROWTH TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in small cap companies.

SMALL CAP INDEX TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in: (a) the common stocks that are included in the Russell 2000 Index; and (b) securities (which may or may not be included in the Russell 2000 Index) that the subadviser believes as a group will behave in a manner similar to the index.

SMALL CAP INTRINSIC VALUE TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in small cap securities.

SMALL CAP OPPORTUNITIES TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in small cap companies.

SMALL CAP VALUE TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in small cap companies.

SMALL COMPANY GROWTH TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities of small cap companies.

SMALL COMPANY VALUE TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in companies with market capitalizations that do not exceed the maximum market capitalization of any security in the Russell 2000 Index.

STRATEGIC BOND TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in fixed-income securities.

TOTAL BOND MARKET TRUST A
TOTAL BOND MARKET TRUST B

Under normal market conditions, each funds invest at least 80% of its net assets (plus any borrowing for investment purposes) in bonds.

TOTAL STOCK MARKET INDEX TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in: (a) the common stocks that are included in the Wilshire 5000 Index; and (b) securities (which may or may not be included in the Wilshire 5000 Index) that the subadviser believes as a group will behave in a manner similar to the index.

U.S. GOVERNMENT SECURITIES TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in debt obligations and mortgage-backed securities issued or guaranteed by the U.S. government, its agencies or instrumentalities and derivative securities.

U.S. HIGH YIELD BOND TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in U.S. high yield debt securities.

U.S. MULTI SECTOR TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in investments tied economically to the U.S.

UTILITIES TRUST

Under normal market conditions, the fund invests at least 80% of its net assets (plus any borrowings for investment purposes) in securities of companies in the utilities industry.

PORTFOLIO TURNOVER

The annual rate of portfolio turnover will normally differ for each fund and may vary from year to year as well as within a year. A high rate of portfolio turnover (100% or more) generally involves correspondingly greater brokerage commission expenses, which must be borne directly by the fund. No portfolio turnover rate can be calculated for the Money Market Trusts due to the short maturities of the instruments purchased. Portfolio turnover is calculated by dividing the lesser of purchases or sales of fund securities during the fiscal year by the monthly average of the value of the fund’s securities. (Excluded from the computation are all securities, including options, with maturities at the time of acquisition of one year or less). The portfolio turnover rates for the funds for the years ended December 31, 2008 and 2007 were as follows:


FUND	2008		2007
500 Index Trust	4	%	5	%
500 Index Trust B	7	%	13	%
Absolute Return Trust	N/A		N/A
Active Bond Trust	100	%	140	%
All Cap Core Trust	239	%	257	%
All Cap Growth Trust	111	%	74	%
All Cap Value Trust	77	%	63	%
Alpha Opportunities Trust	N/A		N/A
American Diversified Growth & Income Trust	N/A		N/A
American Fundamental Holdings Trust	N/A		N/A
American Global Diversification Trust	N/A		N/A
Balanced Trust	N/A		N/A
Blue Chip Growth Trust	58	%	34	%
Capital Appreciation Trust	97	%	73	%
Capital Appreciation Value Trust	N/A		NA
Core Allocation Trust	N/A		N/A
Core Allocation Plus Trust	97	%	N/A
Core Balanced Trust	N/A		N/A
Core Bond Trust	467	%	336	%
Core Disciplined Diversification Trust	N/A		N/A
Core Fundamental Holdings Trust	N/A		N/A
Core Global Diversification Trust	N/A		N/A
Core Strategy Trust	5	%	2	%
Disciplined Diversification Trust	7	%	N/A
Emerging Markets Value Trust	19	%	9	%
Emerging Small Company Trust	128	%	70	%
Equity-Income Trust	32	%	25	%
Financial Services Trust	11	%	12	%
Floating Rate Income Trust	18	%	N/A
Franklin Templeton Founding Allocation Trust	4	%	2	%
Fundamental Value Trust	28	%	8	%
Global Allocation Trust	110	%	94	%
Global Bond Trust	487	%	325	%
Global Real Estate Trust	77	%	87	%
Global Trust	12	%	40	%
Growth Equity Trust	74	%	N/A
Growth Opportunities Trust	N/A		N/A
Growth Trust	N/A		N/A
Health Sciences Trust	51	%	50	%
High Income Trust	47	%	73	%
High Yield Trust	61	%	75	%
Income Trust	42	%	129	%
International Core Trust	63	%	39	%
International Equity Index Trust A	9	%	14	%
International Equity Index Trust B	12	%	9	%
International Growth Trust	N/A		N/A
International Index Trust	N/A		N/A


FUND	2008		2007
International Opportunities Trust	N/A		N/A
International Small Cap Trust	24	%	24	%
International Small Company Trust	10	%	29	%
International Value Trust	18	%	24	%
Intrinsic Value Trust	N/A		N/A
Investment Quality Bond Trust	105	%	70	%
Large Cap Trust	71	%	43	%
Large Cap Value Trust	107	%	67	%
Lifecycle 2010 Trust	N/A		N/A
Lifecycle 2015 Trust	N/A		N/A
Lifecycle 2020 Trust	N/A		N/A
Lifecycle 2025 Trust	N/A		N/A
Lifecycle 2030 Trust	N/A		N/A
Lifecycle 2035 Trust	N/A		N/A
Lifecycle 2040 Trust	N/A		N/A
Lifecycle 2045 Trust	N/A		N/A
Lifecycle 2050 Trust	N/A		N/A
Lifestyle Aggressive Trust	50	%	44	%
Lifestyle Balanced Trust	36	%	13	%
Lifestyle Conservative Trust	31	%	27	%
Lifestyle Growth Trust	40	%	17	%
Lifestyle Moderate Trust	28	%	13	%
Lifecycle Retirement Trust	N/A		N/A
Mid Cap Index Trust	41	%	29	%
Mid Cap Intersection Trust	84	%	87	%
Mid Cap Stock Trust	130	%	133	%
Mid Cap Value Equity Trust	51	%	30	%
Mid Value Trust	85	%	69	%
Money Market Trust	N/A		N/A
Money Market Trust B	N/A		N/A
Mutual Share Trust	44	%	48	%
Natural Resources Trust	24	%	35	%
Optimized All Cap Trust	151	%	159	%
Optimized Value Trust	176	%	159	%
Overseas Equity Trust	90	%	69	%
Pacific Rim Trust	61	%	89	%
Real Estate Equity Trust	57	%	51	%
Real Estate Securities Trust	84	%	77	%
Real Return Bond Trust	1032	%	911	%
Science & Technology Trust	132	%	128	%
Short-Term Bond Trust	47	%	60	%
Short Term Government Income Trust	N/A		N/A
Small Cap Growth Trust	191	%	104	%
Small Cap Index Trust	41	%	15	%
Small Cap Intrinsic Value Trust	54	%	21	%
Small Cap Opportunities Trust	107	%	41	%
Small Cap Value Trust	42	%	46	%
Small Company Growth Trust	40	%	37	%
Small Company Value Trust	30	%	18	%
Smaller Company Growth Trust	16	%	N/A
Spectrum Income Trust	69	%	83	%
Strategic Bond Trust	65	%	83	%
Strategic Income Trust	40	%	80	%
Total Bond Market Trust A	139	%	91	%
Total Bond Market Trust B	68	%	38	%
Total Return Trust	145	%	196	%
Total Stock Market Index Trust	5	%	11	%
U.S. Government Securities Trust	44	%	108	%
U.S. High Yield Bond Trust	46	%	84	%
U.S. Multi Sector Trust	77	%	65	%


FUND	2008		2007
Utilities Trust	68	%	92	%
Value & Restructuring Trust	23	%	22	%
Value Opportunities	N/A		N/A
Value Trust	50	%	73	%
Vista Trust	205	%	121	%

Prior rates of portfolio turnover do not provide an accurate guide as to what the rate will be in any future year, and prior rates are not a limiting factor when it is deemed appropriate to purchase or sell securities for a fund.

MANAGEMENT OF JHT

The business of JHT, an open-end management investment company, is managed by the Board, including certain Trustees who are not “interested persons” of the funds (as defined by the 1940 Act) (the “Independent Trustees”). The Trustees elect officers who are responsible for the day-to-day operations of the funds and who execute policies formulated by the Trustees. Several of the Trustees and officers of JHT are also officers or directors of the Adviser, or officers or directors of the principal distributor to the funds, John Hancock Distributors, LLC (the “Distributor”). The tables below present certain information regarding the Trustees and officers of JHT, including their principal occupations. Each Trustee oversees all funds of JHT, and some Trustees also oversee other funds in the John Hancock fund complex. As of December 31, 2008, the John Hancock fund complex consisted of 273 funds (the “John Hancock Fund Complex” or “Fund Complex”).

Independent Trustees


			Number of John
Name, Address ¹		Principal Occupation(s) and other	Hancock Funds
And Year of Birth	Position with JHT ²	Directorships During Past 5 Years	Overseen by Trustee
Charles L. Bardelis (1941)	Trustee (since 1988)	Director, Island Commuter Corp. (Marine Transport).	212

		Trustee of John Hancock Funds II (“JHF II”) (since 2005).

Peter S. Burgess (1942)	Trustee (since 2005)	Consultant (financial, accounting and auditing matters) (since 1999); Certified Public Accountant; Partner, Arthur Andersen (independent public accounting firm) (prior to 1999).	212

		Director of the following publicly traded companies: PMA Capital Corporation (since 2004) and Lincoln Educational Services Corporation (since 2004).

		Trustee of JHF II (since 2005).

Elizabeth G. Cook (1937)	Trustee (since 2005)	Expressive Arts Therapist, Massachusetts General Hospital (September 2001 to June 2007); Expressive Arts Therapist, Dana Farber Cancer Institute (September 2000 to January 2004).	212

		Trustee of JHF II (since 2005).

Theron S. Hoffman ³ (1947)	Trustee (since September 2008)	Chief Executive Officer, T. Hoffman Associates, LLC (2003 — Present); Director, The Todd Organization (2003 — Present); President, Westport Resources Management (2006 — 2008);	212


			Number of John
Name, Address ¹		Principal Occupation(s) and other	Hancock Funds
And Year of Birth	Position with JHT ²	Directorships During Past 5 Years	Overseen by Trustee
		Partner / Operating Head & Senior Managing Director, Putnam Investments (2000 — 2003).

		Trustee of JHF II (since 2008).

Hassell H. McClellan (1945)	Trustee (since 2005)	Associate Professor, The Graduate School of The Wallace E. Carroll School of Management, Boston College.	212

		Trustee of JHF II (since 2005) and Trustee of Virtus Funds (formerly Phoenix Mutual Funds) (since 2008).

James M. Oates (1946)	Trustee (since 2004)	Managing Director, Wydown Group (financial consulting firm)(since 1994); Chairman, Emerson Investment Management, Inc. (since 2000); Chairman, Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services company) (1997 to 2006); Independent Chairman, Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc. (financial services company) (1997 to 2006).	212

		Director of the following publicly traded companies:
		Stifel Financial (since 1996); Investor Financial Services Corporation (1995 — 2007); and Connecticut River Bancorp, (since 1998).

		Director of the following mutual funds: Director, Virtus Funds (formerly, Phoenix Mutual Funds (since 1988)); and Emerson Investment Management (since 2000).

		Trustee of JHF II (since 2005).

Steven M. Roberts³ (1944)	Trustee (since September 2008)	Board of Governors Deputy Director, Federal Reserve System (2005 — 2008); Partner, KPMG (1987 — 2004).	212

		Trustee of JHF II (since 2008).

F. David Rolwing (1934)	Trustee (since 1997)	Former Chairman, President and CEO, Montgomery Mutual Insurance Company, 1991 to 1999. (Retired 1999).	125


1		The business address of all Trustees and officers is 601 Congress Street, Boston, Massachusetts 02210-2805.

2		Because JHT does not hold regular annual shareholders meetings, each Trustee holds office for an indefinite term until his/her successor is duly elected and qualified or until he/she dies, retires, resigns, is removed or becomes disqualified.

3		Mr. Hoffman and Mr. Roberts were appointed by the Board as Trustees on September 26, 2008.

Non-Independent Trustees


			Number of John
			Hancock Funds
Name, Address ¹		Principal Occupation(s) and other Directorships	Overseen by
And Year of Birth	Position with JHT ²	During Past 5 Years	Trustee
James R. Boyle ³ (1959)	Trustee (since 2005)	Executive Vice President, Manulife Financial Corporation (since 1999); Director and President, John Hancock Variable Life Insurance Company (since 2007); Director and Executive Vice President, John Hancock Life Insurance Company (since 2004); Chairman and Director, John Hancock Advisers, LLC (“JHA”), The Berkeley Financial Group, LLC (“The Berkeley Group”) (holding company) and John Hancock Funds, LLC (“John Hancock Funds”) (since 2005); Chairman and Director, the Adviser (since 2006); Senior Vice President, The Manufacturers Life Insurance Company (U.S.A) (until 2004).	273

Grace K. Fey ⁴ (1946)	Trustee (since September 2008)	Trustee of JHF II (since 2008); Chief Executive Officer, Grace Fey Advisors (since 2007); Director & Executive Vice President, Frontier Capital Management Company (1988 to 2007); Director, Fiduciary Trust (since 2009).	212

Trustee Emeritus
John D. Richardson ⁵ (1938)	Trustee Emeritus (since December 2006); Non-Independent Trustee (prior to December 2006)	Non-Independent Trustee of John Hancock Trust prior to December 14, 2006. Retired; Former Senior Executive Vice President, Office of the President, Manulife Financial (2000 to 2002) (Retired, March, 2002); Executive Vice President and General Manager, U.S. Operations, Manulife Financial (1995 to 2000).	212

		Director of BNS Split Corp and BNS Split Corp II, each of which is a publicly traded company listed on the Toronto Stock Exchange (2005 to 2007).


(1)		The business address of all Trustees and officers is 601 Congress Street, Boston, Massachusetts 02210-2805.

(2)		Because JHT does not hold regular annual shareholders meetings, each Trustee holds office for an indefinite term until his successor is duly elected and qualified or until he dies, retires, resigns, is removed or becomes disqualified.

(3)		Mr. Boyle is an “interested person” (as defined in the 1940 Act) due to his positions with Manulife Financial Corporation (and its affiliates), the ultimate controlling parent of the Adviser.

(4)		Ms. Fey was appointed by the Board as a Trustee on September 26, 2008. Ms. Fey is an “interested person” (as defined in the 1940 Act) due to a deferred compensation arrangement with her former employer, Frontier Capital Management Company, which is a sub-adviser of certain funds of JHF II and JHT.

(5)		Mr. Richardson retired as Trustee effective December 14, 2006. On such date, Mr. Richardson became a non-voting Trustee Emeritus.

Principal Officers who are not Trustees


Name, Address ¹
And Year of Birth	Position with JHT	Principal Occupation(s) and other Directorships During Past 5 Years
Keith F. Hartstein ² (1956)	President (since 2005)	Senior Vice President, Manulife Financial Corporation (since 2004); Director, President and Chief Executive Officer, JHA, The Berkeley Group, John Hancock Funds (since 2005); Director, MFC Global Investment Management (U.S.), LLC (“MFC Global (U.S.)”) (since 2005); Chairman and Director, John Hancock Signature Services, Inc. (since 2005); Director, President and Chief Executive Officer, the Adviser (since 2006); President and Chief Executive Officer, John Hancock Funds (“JHF”) JHF II, JHF III, and JHT; Director, Chairman and President, NM Capital Management, Inc. (since 2005); Member and former Chairman, Investment Company Institute Sales Force Marketing Committee (since 2003); President and Chief Executive Officer, MFC Global (U.S.) (2005-2006); Executive Vice President, John Hancock Funds (until 2005).

Thomas M. Kinzler² (1955)	Chief Legal Officer and Secretary (since 2006)	Vice President and Counsel, John Hancock Life Insurance Company (U.S.A.) (since 2006); Secretary and Chief Legal Officer, JHF, JHF II and JHT (since 2006); Vice President and Associate General Counsel, Massachusetts Mutual Life Insurance Company (1999-2006); Secretary and Chief Legal Counsel, MML Series Investment Fund (2000-2006); Secretary and Chief Legal Counsel, MassMutual Institutional Funds (2000-2004); Secretary and Chief Legal Counsel, MassMutual Select Funds and MassMutual Premier Funds (2004-2006).

Francis V. Knox, Jr.² (1947)	Chief Compliance Officer (“CCO”) (since 2005)	Vice President and CCO, the Adviser, JHA and MFC Global (U.S.) (since 2005); Vice President and CCO, JHF, JHF II, JHF III and JHT (since 2005); Vice President and Assistant Treasurer, Fidelity Group of Funds (until 2004).

Charles A. Rizzo ² (1959)	Chief Financial Officer (since 2007)	Chief Financial Officer, JHF, JHF II, JHFIII and JHT (since 2007); Assistant Treasurer, Goldman Sachs Mutual Fund Complex (registered investment companies) (2005-2007); Vice President, Goldman Sachs (2005-2007); Managing Director and Treasurer of Scudder Funds, Deutsche Asset Management (2003-2005); Director, Tax and Financial Reporting, Deutsche Asset Management (2002-2003).

Gordon M. Shone² (1956)	Treasurer (since 2005)	Senior Vice President, John Hancock Life Insurance Company (U.S.A.) (since 2001); Treasurer for JHF (since 2006); JHFII, JHF III and JHT (since 2005); Vice President and Chief Financial Officer, JHT (2003-2005); Vice President, the Adviser, John Hancock Advisers (since 2006).

John G. Vrysen² (1955)	Chief Operating Officer (since 2007) Chief Financial Officer (2005-2007)	Senior Vice President, MFC (since 2006); Director, Executive Vice President and Chief Operating Officer, JHA, The Berkley Group, the Adviser and John Hancock Funds (since 2007); Chief Operating Officer, John Hancock Funds, JHFII, JHFIII and JHT (since 2007), Director, John Hancock Signature Services, Inc. (since 2005); Chief Financial Officer, JHA, The Berkley Group, MFC Global (U.S.), the Adviser, JHF, JHF II, JHF III and JHT (2005-2007); Vice President, MFC (until 2006).


(1)		The business address of all Trustees and officers is 601 Congress Street, Boston, Massachusetts 02210-2805.

(2)		Affiliated with the Adviser.

Duties and Compensation of Trustees

JHT is organized as a Massachusetts business trust. Under JHT’s Declaration of Trust, the Trustees are responsible for managing the affairs of JHT, including the appointment of advisers and subadvisers. The Trustees may appoint officers of JHT who assist in managing the day-to-day affairs of JHT.

The Board met eight times during JHT’s last fiscal year. The Board has a standing Audit Committee composed solely of Independent Trustees (Peter S. Burgess, Charles L. Bardelis and Steven M. Roberts). The Committee met four times during JHT’s last fiscal year to review the internal and external accounting and auditing procedures of JHT and, among other things, to consider the selection of an independent registered public accounting firm for JHT, approve all significant services proposed to be performed by its independent registered public accounting firm and to consider the possible effect of such services on its independence.

The Board also has a Nominating Committee composed of all of the Independent Trustees. The Nominating Committee did not meet during the last fiscal year. The Nominating Committee will consider nominees recommended by contract owners investing in JHT. Nominations should be forwarded to the attention of the Secretary of JHT at 601 Congress Street, Boston, MA 02210. Any shareholder nomination must be submitted in compliance with all of the pertinent provisions of Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) in order to be considered by the Nominating Committee.

The Board also has a standing Compliance Committee and three Investment Committees. The Compliance Committee reviews and makes recommendation to the full Board regarding certain compliance matters relating to JHT. The Compliance Committee is composed of the following Trustees: Elizabeth G. Cook, Hassell H. McClellan, David Rolwing, James M. Oates, Theron Hoffman and Grace Fey) (the Interested Trustees may serve as ex-officio members). The Compliance Committee met four times during the last fiscal year. Each Investment Committee reviews investment matters relating to a particular group of funds. Each Investment Committee is composed of the following Trustees: Investment Committee A: Elizabeth G. Cook, James M. Oates and Theron S. Hoffman; Investment Committee B: Charles L. Bardelis, Steven M. Roberts and David Rolwing; Investment Committee C: Hassell H. McClellan, James R. Boyle, Peter S. Burgess, Grace K. Fey. Each Investment Committee met five times during the last fiscal year.

JHT pays the following fees to its Independent Trustees as well as Grace Fey, an interested Trustee, and John Richardson, a Trustee Emeritus. The Independent Trustees, Ms. Fey and Mr. Richardson receive an annual retainer of $100,000 and a fee of $14,000 for each meeting of the Trustees that they attend in person. The Chairman of the Board receives an additional $60,000 annual retainer. The Chairman of the Audit Committee receives $10,000 as an annual retainer. The Chairman of the Compliance Committee receives $7,500 as an annual retainer. Trustees are reimbursed for travel and other out-of-pocket expenses.

Compensation Table (1)(2)


	AGGREGATE COMPENSATION FROM		TOTAL COMPENSATION FROM JOHN
	JHT FISCAL YEAR ENDED DECEMBER 31, 2008		HANCOCK FUND COMPLEX FOR FISCAL
NAMES OF TRUSTEE	(1)		YEAR ENDED DECEMBER 31, 2008 (2)
Independent Trustees:
Charles L. Bardelis	$	170,000	$	230,000
Peter S. Burgess	$	180,000	$	245,000
Elizabeth Cook	$	177,500	$	240,000
Theron S. Hoffman	$	39,000	$	53,000
Hassell H. McClellan	$	170,000	$	230,000
James M. Oates	$	230,000	$	320,000
Steven M. Roberts	$	39,000	$	53,000
F. David Rolwing	$	131,000	$	131,000
Interested Trustees:
James R. Boyle
Grace K. Fey	$	39,000	$	53,000
Trustee Emeritus
John D. Richardson (3)	$	156,000	$	212,000


(1)		Compensation received for services as a Trustee. JHT does not have a pension, retirement or deferred compensation plan for any of its Trustees or officers.

(2)		As noted above, Ms. Cook and Messrs. Bardelis, Boyle, Burgess, McClellan and Oates are also Trustees of JHF II, which is within the same family of investment companies as JHT.

(3)		Mr. Richardson is a non-voting “emeritus” Trustee.

Trustee Ownership of Funds

The table below lists the amount of securities of each JHT fund beneficially owned by each Trustee as of December 31, 2008 (excluding those funds that had not yet commenced operations on December 31, 2008). For purposes of this table, beneficial ownership is defined to mean a direct or indirect pecuniary interest. Please note that exact dollar amounts of securities held are not listed. Rather, ownership is listed based on the following table:

A — $0

B — $1 up to and including $10,000

C — $10,001 up to and including $50,000

D — $50,001 up to and including $100,000

E — $100,001 or more

Real

Small

Total-

Lifestyle

Global

Return

Financial

Natural

Company

Money

John Hancock

Agressive

Growth

Balanced

Bond

Services

Resources

Value

Balanced

Market

Fund Complex

FUNDS*

Charles L. Bardelis

Peter S. Burgess

Elizabeth G. Cook

Theron S. Hoffman

Hassell H. McClellan

James M. Oates

Steven M. Roberts

F. David Rolwing

James R. Boyle

Grace K. Fey


*		Only funds owned by a Trustee are listed.

INVESTMENT MANAGEMENT ARRANGEMENTS AND OTHER SERVICES

The Advisory Agreement

Each fund has entered into an investment management contract (the “Advisory Agreement”) with the Adviser. Pursuant to the Advisory Agreement, the Adviser provides supervision over all aspects of each fund’s operations, except those which are delegated to a custodian, transfer agent or other agent. Subject to the general supervision of the Trustees, the Adviser selects, contracts with, and compensates subadvisers to manage the investment and reinvestment of the assets of the funds. The Adviser monitors the compliance of such subadvisers with the investment objectives and related policies of the respective funds and reviews the performance of such subadvisers and reports periodically on such performance to the Trustees. The Adviser may elect directly to manage the investment and reinvestment of the assets of any of the funds, subject to the approval of the Trustees. In directly managing the assets, the Adviser will have the same responsibilities as those described below with respect to a subadviser under a subadvisory agreement.

JHT bears all costs of its organization and operation, including, but not limited to, expenses of preparing, printing and mailing all shareholders’ reports, notices, prospectuses, proxy statements and reports to regulatory agencies; expenses relating to the issuance, registration and qualification of shares; government fees; interest charges; expenses of furnishing to shareholders their account statements; taxes; expenses of redeeming shares; brokerage and other expenses connected with the execution of portfolio securities transactions; expenses pursuant to a fund’s plan of distribution; fees and expenses of custodians including those for keeping books and accounts maintaining a committed line of credit and calculating the NAV of shares; fees and expenses of transfer agents and dividend disbursing agents; legal, accounting, financial, management, tax and auditing fees and expenses of the fund (including an allocable portion of the cost of the Adviser’s employees rendering such services to the funds); the compensation and expenses of officers and Trustees (other than persons serving as President or Trustee who are otherwise affiliated with the fund, the Adviser or any of their affiliates); expenses of Trustees’ and shareholders’ meetings; trade association memberships; insurance premiums; and any extraordinary expenses.

Prior to June 27, 2008, the Advisory Agreement provided that the Adviser was responsible for providing investment management services as described above, as well as providing, at the expense of JHT, certain non-advisory services (including financial, accounting and administrative services). At a special meeting of shareholders of the JHT held on January 8, 2008, as adjourned to January 28, 2008 (April 14, 2008 in the case of the U.S. Multi Sector Trust), JHT shareholders approved an amendment to the Advisory Agreement transferring to a new Service Agreement with the Adviser the non-advisory services. Accordingly, pursuant to the Service Agreement, the Adviser provides JHT certain financial, accounting and administrative services such as legal services, tax, accounting, valuation, financial reporting and performance, compliance and service provider oversight as well as services related to the office of CCO.

Adviser Compensation. As compensation for its services under the Advisory Agreement, the Adviser receives a fee from the funds, computed separately for each as described in the Prospectus.

From time to time, the Adviser may reduce its fee or make other arrangements to limit a fund’s expenses to a specified percentage of average daily net assets. The Adviser retains the right to re-impose a fee and recover any other payments to the extent that, at the end of any fiscal year, the fund’s annual expenses fall below this limit.

For the fiscal years ended December 31, 2008, 2007 and 2006 the aggregate investment advisory fee paid by JHT under the fee schedule then in effect, absent the expense limitation provision, was $377,235,563, $450,351,591 and $368,192,849 allocated among the funds as follows:


FUND	2008			2007			2006
500 Index Trust
Gross Fee	$	9,727,933		$	7,294,227		$	6,488,537
Waivers	$	(32,914	)	$	(42,293	)	$	(34,102	)
Net Fee	$	9,695,019		$	7,251,934		$	6,454,435
500 Index Trust B
Gross Fee	$	4,503,563		$	5,756,092		$	5,152,722
Waivers	$	(2,454,855	)	$	(2,967,491	)	$	(2,677,386	)
Net Fee	$	2,048,708		$	2,788,601		$	2,475,336
Absolute Return Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0


FUND	2008			2007			2006
Net Fee	$	0		$	0		$	0
Active Bond Trust
Gross Fee	$	14,284,359		$	15,291,629		$	13,301,008
Waivers	$	(42,258	)	$	(67,976	)	$	(5,022	)
Net Fee	$	14,242,101		$	15,223,653		$	13,295,986
All Cap Core Trust
Gross Fee	$	6,588,339		$	5,908,327		$	3,511,233
Waivers	$	(16,765	)	$	(21,060	)	$	(1,219	)
Net Fee	$	6,571,574		$	5,887,267		$	3,510,014
All Cap Growth Trust
Gross Fee	$	2,364,027		$	3,322,384		$	3,333,426
Waivers	$	(5,536	)	$	(10,404	)	$	(807	)
Net Fee	$	2,358,491		$	3,311,980		$	3,332,619
All Cap Value Trust
Gross Fee	$	908,334		$	1,819,328		$	2,577,916
Waivers	$	(1,989	)	$	(5,184	)	$	(5,510	)
Net Fee	$	906,345		$	1,814,144		$	2,572,406
Alpha Opportunities Trust
Gross Fee	$	565,837		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	565,837		$	0		$	0
American Diversified Growth & Income Trust
Gross Fee	$	185		$	0		$	0
Waivers	$	(20,667	)	$	0		$	0
Net Fee	$	(20,482	)	$	0		$	0
American Fundamental Holdings Trust
Gross Fee	$	168,920		$	1,720		$	0
Waivers	$	(168,920	)	$	(2,406	)	$	0
Net Fee	$	0		$	(686	)	$	0
American Global Diversification Trust
Gross Fee	$	198,026		$	3,404		$	0
Waivers	$	(198,025	)	$	(3,956	)	$	0
Net Fee	$	1		$	(552	)	$	0
Balanced Trust
Gross Fee	$	0
Waivers	$	0
Net Fee	$	0
Blue Chip Growth Trust
Gross Fee	$	22,412,833		$	23,592,740		$	20,437,439
Waivers	$	(922,290	)	$	(989,438	)	$	(494,620	)
Net Fee	$	21,490,543		$	22,603,302		$	19,942,819
Capital Appreciation Trust
Gross Fee	$	7,906,673		$	7,708,655		$	5,518,609
Waivers	$	(21,023	)	$	(28,524	)	$	(2,020	)
Net Fee	$	7,885,650		$	7,680,131		$	5,516,589
Capital Appreciation Value Trust
Gross Fee	$	351,316		$	0		$	0
Waivers	$	(15,727	)	$	0		$	0
Net Fee	$	335,589		$	0		$	0
Core Allocation Trust
Gross Fee	$	0
Waivers	$	0
Net Fee	$	0
Core Allocation Plus Trust
Gross Fee	$	308,013		$	0		$	0
Waivers	$	(367	)	$	0		$	0
Net Fee	$	307,646		$	0		$	0
Core Balanced Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0


FUND	2008			2007			2006
Net Fee	$	0		$	0		$	0
Core Bond Trust
Gross Fee	$	1,823,876		$	1,665,125		$	1,244,541
Waivers	$	(5,008	)	$	(7,010	)	$	(443	)
Net Fee	$	1,818,868		$	1,658,115		$	1,244,098
Core Disciplined Diversification Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Core Fundamental Holdings Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Core Global Diversification Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Core Strategy Trust
Gross Fee	$	175,891		$	118,364		$	20,615
Waivers	$	(266,836	)	$	(149,844	)	$	(48,796	)
Net Fee	$	(90,945	)	$	(31,480	)	$	(28,181	)
Disciplined Diversification Trust
Gross Fee	$	402,132		$	0		$	0
Waivers	$	(144,045	)	$	0		$	0
Net Fee	$	258,087		$	0		$	0
Emerging Markets Value Trust
Gross Fee	$	4,372,869		$	2,862,075		$	0
Waivers	$	(8,759	)	$	(9,433	)	$	0
Net Fee	$	4,364,110		$	2,852,642		$	0
Emerging Small Company Trust
Gross Fee	$	1,563,355		$	2,440,083		$	3,014,440
Waivers	$	(3,114	)	$	(6,673	)	$	(2,777	)
Net Fee	$	1,560,241		$	2,433,410		$	3,011,663
Equity-Income Trust
Gross Fee	$	15,765,416		$	20,126,360		$	18,788,587
Waivers	$	(648,897	)	$	(848,406	)	$	(453,535	)
Net Fee	$	15,116,519		$	19,277,954		$	18,335,052
Financial Services Trust
Gross Fee	$	908,822		$	1,376,574		$	1,303,334
Waivers	$	(2,081	)	$	(4,399	)	$	(2,713	)
Net Fee	$	906,741		$	1,372,175		$	1,300,621
Floating Rate Income Trust
Gross Fee	$	3,116,882		$	0		$	0
Waivers	$	(5,999	)	$	0		$	0
Net Fee	$	3,110,883		$	0		$	0
Franklin Templeton Founding Allocation Trust
Gross Fee	$	546,349		$	189,883		$	0
Waivers	$	(693,077	)	$	(216,254	)	$	0
Net Fee	$	146,728		$	(26,371	)	$	0
Fundamental Value Trust
Gross Fee	$	11,755,236		$	10,306,109		$	7,939,119
Waivers	$	(27,628	)	$	(36,558	)	$	(7,473	)
Net Fee	$	11,727,608		$	10,269,551		$	7,931,646
Global Allocation Trust
Gross Fee	$	2,291,944		$	2,775,359		$	1,999,123
Waivers	$	(5,144	)	$	(8,769	)	$	(573	)
Net Fee	$	2,286,800		$	2,766,590		$	1,998,550
Global Bond Trust
Gross Fee	$	7,751,504		$	8,274,328		$	6,373,035
Waivers	$	(20,667	)	$	(31,910	)	$	(4,961	)


FUND	2008			2007			2006
Net Fee	$	7,730,837		$	8,242,418		$	6,368,074
Global Real Estate Trust
Gross Fee	$	5,207,253		$	4,535,851		$	2,312,528
Waivers	$	(10,048	)	$	(13,162	)	$	(838	)
Net Fee	$	5,197,205		$	4,522,689		$	2,311,690
Global Trust
Gross Fee	$	5,577,452		$	4,411,811		$	3,178,108
Waivers	$	(114,049	)	$	(90,085	)	$	(72,864	)
Net Fee	$	5,463,403		$	4,321,726		$	3,105,244
Growth Equity Trust
Gross Fee	$	1,892,275		$	0		$	0
Waivers	$	(3,404	)	$	0		$	0
Net Fee	$	1,888,871		$	0		$	0
Growth Opportunities Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Growth Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Health Sciences Trust
Gross Fee	$	2,257,624		$	2,611,100		$	2,578,376
Waivers	$	(117,132	)	$	(137,172	)	$	(81,975	)
Net Fee	$	2,140,492		$	2,473,928		$	2,496,401
High Income Trust
Gross Fee	$	2,841,617		$	2,710,654		$	1,380,440
Waivers	$	(7,503	)	$	(10,874	)	$	(690	)
Net Fee	$	2,834,114		$	2,699,780		$	1,379,750
High Yield Trust
Gross Fee	$	11,739,575		$	12,975,302		$	10,819,024
Waivers	$	(32,491	)	$	(53,255	)	$	(8,399	)
Net Fee	$	11,707,084		$	12,922,047		$	10,810,625
Income Trust
Gross Fee	$	3,350,816		$	1,136,009		$	0
Waivers	$	(7,382	)	$	(4,509	)	$	0
Net Fee	$	3,343,434		$	1,131,500		$	0
International Core Trust
Gross Fee	$	10,585,673		$	13,590,181		$	9,760,692
Waivers	$	(23,731	)	$	(41,557	)	$	(2,642	)
Net Fee	$	10,561,942		$	13,548,624		$	9,758,050
International Equity Index Trust A
Gross Fee	$	1,696,599		$	1,849,677		$	1,205,833
Waivers	$	(6,113	)	$	(9,460	)	$	(2,999	)
Net Fee	$	1,690,486		$	1,840,217		$	1,202,834
International Equity Index Trust B
Gross Fee	$	2,357,150		$	2,716,997		$	2,158,415
Waivers	$	(1,041,719	)	$	(1,146,512	)	$	(937,573	)
Net Fee	$	1,315,431		$	1,570,485		$	1,220,842
International Growth Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
International Index Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
International Opportunities Trust
Gross Fee	$	6,934,499		$	7,339,267		$	4,653,791
Waivers	$	(15,434	)	$	(23,023	)	$	(1,377	)


FUND	2008			2007			2006
Net Fee	$	6,919,065		$	7,316,244		$	4,652,414
International Small Cap Trust
Gross Fee	$	3,913,067		$	5,936,477		$	5,290,949
Waivers	$	(8,384	)	$	(17,311	)	$	(3,386	)
Net Fee	$	3,904,683		$	5,919,166		$	5,287,563
International Small Company Trust
Gross Fee	$	2,631,273		$	2,228,899		$	1,293,292
Waivers	$	(4,856	)	$	(6,055	)	$	(458	)
Net Fee	$	2,626,417		$	2,222,844		$	1,292,834
International Value Trust
Gross Fee	$	11,051,164		$	13,987,835		$	11,551,657
Waivers	$	(203,557	)	$	(263,977	)	$	(230,950	)
Net Fee	$	10,847,607		$	13,723,858		$	11,320,707
Intrinsic Value Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Investment Quality Bond Trust
Gross Fee	$	2,524,883		$	2,590,495		$	2,362,925
Waivers	$	(7,596	)	$	(11,700	)	$	(3,159	)
Net Fee	$	2,517,287		$	2,578,795		$	2,359,766
Large Cap Trust
Gross Fee	$	3,953,444		$	3,841,929		$	1,301,217
Waivers	$	(10,668	)	$	(15,803	)	$	(411	)
Net Fee	$	3,942,776		$	3,826,126		$	1,300,806
Large Cap Value Trust
Gross Fee	$	4,674,613		$	4,815,374		$	2,792,932
Waivers	$	(10,939	)	$	(16,063	)	$	(929	)
Net Fee	$	4,663,674		$	4,799,311		$	2,792,003
Lifecycle 2010 Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Lifecycle 2015 Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Lifecycle 2020 Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Lifecycle 2025 Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Lifecycle 2030 Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Lifecycle 2035 Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Lifecycle 2040 Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Lifecycle 2045 Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0


FUND	2008			2007			2006
Net Fee	$	0		$	0		$	0
Lifecycle 2050 Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Lifecycle Retirement Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Lifestyle Aggressive Trust
Gross Fee	$	191,830		$	256,253		$	247,814
Waivers	$	0		$	0		$	(14,428	)
Net Fee	$	191,830		$	256,253		$	233,386
Lifestyle Balanced Trust
Gross Fee	$	4,010,623		$	4,026,995		$	2,935,469
Waivers	$	0		$	0		$	(35,606	)
Net Fee	$	4,010,623		$	4,026,995		$	2,899,863
Lifestyle Conservative Trust
Gross Fee	$	534,168		$	337,552		$	274,250
Waivers	$	0		$	0		$	(9,811	)
Net Fee	$	534,168		$	337,552		$	264,439
Lifestyle Growth Trust
Gross Fee	$	5,122,302		$	5,250,761		$	3,425,135
Waivers	$	0		$	0		$	(33,666	)
Net Fee	$	5,122,302		$	5,250,761		$	3,391,469
Lifestyle Moderate Trust
Gross Fee	$	983,459		$	893,537		$	693,854
Waivers	$	0		$	0		$	(12,086	)
Net Fee	$	983,459		$	893,537		$	681,768
Mid Cap Index Trust
Gross Fee	$	3,502,855		$	4,960,246		$	2,556,837
Waivers	$	(13,685	)	$	(27,897	)	$	(7,704	)
Net Fee	$	3,489,170		$	4,932,349		$	2,549,133
Mid Cap Intersection Trust
Gross Fee	$	1,848,955		$	1,683,478		$	0
Waivers	$	(4,305	)	$	(6,036	)	$	0
Net Fee	$	1,844,650		$	1,677,442		$	0
Mid Cap Stock Trust
Gross Fee	$	8,084,051		$	9,750,741		$	8,261,076
Waivers	$	(18,759	)	$	(31,820	)	$	(13,444	)
Net Fee	$	8,065,292		$	9,718,921		$	8,247,632
Mid Cap Value Equity Trust
Gross Fee	$	756,032		$	1,151,167		$	550,583
Waivers	$	(1,760	)	$	(3,585	)	$	(221	)
Net Fee	$	754,272		$	1,147,582		$	550,362
Mid Value Trust
Gross Fee	$	1,414,850		$	1,978,152		$	1,719,304
Waivers	$	(69,714	)	$	(99,006	)	$	(50,223	)
Net Fee	$	1,345,136		$	1,879,146		$	1,669,081
Money Market Trust
Gross Fee	$	18,592,095		$	13,775,142		$	12,374,716
Waivers	$	(69,895	)	$	(78,759	)	$	(28,395	)
Net Fee	$	18,522,200		$	13,696,383		$	12,346,321
Money Market Trust B
Gross Fee	$	3,434,926		$	2,696,136		$	2,413,578
Waivers	$	(1,687,039	)	$	(1,233,272	)	$	(1,120,381	)
Net Fee	$	1,747,887		$	1,462,864		$	1,293,197
Mutual Shares Trust
Gross Fee	$	4,019,940		$	1,351,153		$	0
Waivers	$	(37,119	)	$	(224,563	)	$	0


FUND	2008			2007			2006
Net Fee	$	3,982,821		$	1,126,590		$	0
Natural Resources Trust
Gross Fee	$	7,518,087		$	11,200,579		$	9,320,274
Waivers	$	(15,278	)	$	(29,849	)	$	(10,008	)
Net Fee	$	7,502,809		$	11,170,730		$	9,310,266
Optimized All Cap Trust
Gross Fee	$	8,282,123		$	2,815,262		$	2,157,031
Waivers	$	(21,093	)	$	(11,042	)	$	(6,050	)
Net Fee	$	8,261,030		$	2,804,220		$	2,150,981
Optimized Value Trust
Gross Fee	$	4,549,437		$	4,638,379		$	2,219,037
Waivers	$	(13,420	)	$	(19,766	)	$	(952	)
Net Fee	$	4,536,017		$	4,618,613		$	2,218,085
Overseas Equity Trust
Gross Fee	$	4,653,218		$	5,485,366		$	4,024,207
Waivers	$	(9,214	)	$	(15,166	)	$	(1,040	)
Net Fee	$	4,644,004		$	5,470,200		$	4,023,167
Pacific Rim Trust
Gross Fee	$	979,207		$	1,398,514		$	1,498,046
Waivers	$	(2,425	)	$	(4,668	)	$	(3,936	)
Net Fee	$	976,782		$	1,393,846		$	1,494,110
Real Estate Equity Trust
Gross Fee	$	2,067,947		$	2,393,468		$	1,640,199
Waivers	$	(90,838	)	$	(107,426	)	$	(45,258	)
Net Fee	$	1,977,109		$	2,286,042		$	1,594,941
Real Estate Securities Trust
Gross Fee	$	3,516,630		$	5,705,579		$	7,042,742
Waivers	$	(9,752	)	$	(21,090	)	$	(9,778	)
Net Fee	$	3,506,878		$	5,684,489		$	7,032,964
Real Return Bond Trust
Gross Fee	$	7,269,654		$	7,731,012		$	5,805,549
Waivers	$	(18,903	)	$	(77,222	)	$	(4,137	)
Net Fee	$	7,250,751		$	7,653,790		$	5,801,412
Science & Technology Trust
Gross Fee	$	3,116,326		$	4,255,773		$	4,457,660
Waivers	$	(81,496	)	$	(116,474	)	$	(119,176	)
Net Fee	$	3,034,830		$	4,139,299		$	4,338,484
Short-Term Bond Trust
Gross Fee	$	1,198,062		$	1,613,328		$	1,355,865
Waivers	$	(3,921	)	$	(7,325	)	$	(612	)
Net Fee	$	1,194,141		$	1,606,003		$	1,355,253
Short Term Government Income Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Small Cap Growth Trust
Gross Fee	$	2,776,094		$	3,258,282		$	3,122,161
Waivers	$	(4,657	)	$	(8,186	)	$	(610	)
Net Fee	$	2,771,437		$	3,250,096		$	3,121,551
Small Cap Index Trust
Gross Fee	$	1,635,702		$	2,172,858		$	1,942,340
Waivers	$	(8,730	)	$	(11,885	)	$	(6,615	)
Net Fee	$	1,626,972		$	2,160,973		$	1,935,725
Small Cap Intrinsic Value Trust
Gross Fee	$	800,490		$	822,454		$	0
Waivers	$	(1,840	)	$	(2,875	)	$	0
Net Fee	$	798,650		$	819,579		$	0
Small Cap Opportunities Trust
Gross Fee	$	2,320,888		$	4,244,974		$	4,253,256
Waivers	$	(4,572	)	$	(11,310	)	$	(935	)


FUND	2008			2007			2006
Net Fee	$	2,316,316		$	4,233,664		$	4,252,321
Small Cap Value Trust
Gross Fee	$	3,798,936		$	4,587,497		$	3,685,401
Waivers	$	(6,611	)	$	(11,502	)	$	(849	)
Net Fee	$	3,792,325		$	4,575,995		$	3,684,552
Small Company Growth Trust
Gross Fee	$	2,057,891		$	2,060,635		$	816,967
Waivers	$	(3,778	)	$	(5,748	)	$	(209	)
Net Fee	$	2,054,113		$	2,054,887		$	816,758
Small Company Value Trust
Gross Fee	$	6,127,890		$	7,056,696		$	7,018,573
Waivers	$	(310,524	)	$	(364,997	)	$	(210,990	)
Net Fee	$	5,817,366		$	6,691,699		$	6,807,583
Smaller Company Growth Trust
Gross Fee	$	195,513		$	0		$	0
Waivers	$	(21,998	)	$	0		$	0
Net Fee	$	173,515		$	0		$	0
Spectrum Income Trust
Gross Fee	$	8,077,782		$	7,234,631		$	5,214,580
Waivers	$	(291,468	)	$	(272,607	)	$	(112,384	)
Net Fee	$	7,786,314		$	6,962,024		$	5,102,196
Strategic Bond Trust
Gross Fee	$	4,445,490		$	4,553,195		$	4,245,929
Waivers	$	(11,850	)	$	(18,266	)	$	(4,365	)
Net Fee	$	4,433,640		$	4,534,929		$	4,241,564
Strategic Income Trust
Gross Fee	$	3,480,999		$	3,053,259		$	1,652,840
Waivers	$	(8,660	)	$	(11,980	)	$	(736	)
Net Fee	$	3,472,339		$	3,041,279		$	1,652,104
Total Market Bond Trust A
Gross Fee	$	1,157,146		$	614,629		$	269,748
Waivers	$	(2,960	)	$	(3,647	)	$	(2,954	)
Net Fee	$	1,154,186		$	610,982		$	266,794
Total Market Bond Trust B
Gross Fee	$	777,486		$	769,283		$	795,138
Waivers	$	(475,672	)	$	(449,808	)	$	(472,154	)
Net Fee	$	301,814		$	319,475		$	322,984
Total Return Trust
Gross Fee	$	15,560,286		$	14,798,686		$	11,996,292
Waivers	$	(146,048	)	$	(56,915	)	$	(15,453	)
Net Fee	$	15,414,238		$	14,741,771		$	11,980,839
Total Stock Market Index Trust
Gross Fee	$	1,925,889		$	2,374,689		$	2,014,177
Waivers	$	(7,414	)	$	(13,263	)	$	(4,176	)
Net Fee	$	1,918,475		$	2,361,426		$	2,010,001
U.S. Government Securities Trust
Gross Fee	$	2,161,629		$	2,217,092		$	2,445,049
Waivers	$	(6,036	)	$	(9,535	)	$	(3,073	)
Net Fee	$	2,155,593		$	2,207,557		$	2,441,976
U.S. High Yield Bond Trust
Gross Fee	$	3,620,984		$	2,944,913		$	1,883,922
Waivers	$	(8,382	)	$	(10,960	)	$	(693	)
Net Fee	$	3,612,602		$	2,933,953		$	1,883,229
U.S. Multi Sector Trust
Gross Fee	$	8,549,043		$	11,820,756		$	8,464,831
Waivers	$	(22,807	)	$	(42,215	)	$	(2,757	)
Net Fee	$	8,526,236		$	11,778,541		$	8,462,074
Utilities Trust
Gross Fee	$	1,854,305		$	2,086,259		$	1,364,931
Waivers	$	(4,407	)	$	(6,901	)	$	(3,724	)


FUND	2008			2007			2006
Net Fee	$	1,849,898		$	2,079,358		$	1,361,207
Value Trust
Gross Fee	$	1,917,817		$	2,689,672		$	2,385,250
Waivers	$	(4,976	)	$	(9,718	)	$	(704	)
Net Fee	$	1,912,841		$	2,679,954		$	2,384,546
Value & Restructuring Trust
Gross Fee	$	3,595,711		$	3,198,091		$	2,089,078
Waivers	$	(8,351	)	$	(10,635	)	$	(663	)
Net Fee	$	3,587,360		$	3,187,456		$	2,088,415
Value Opportunities Trust
Gross Fee	$	0		$	0		$	0
Waivers	$	0		$	0		$	0
Net Fee	$	0		$	0		$	0
Vista Trust
Gross Fee	$	799,204		$	1,233,639		$	834,088
Waivers	$	(1,842	)	$	(3,799	)	$	(234	)
Net Fee	$	797,362		$	1,229,840		$	833,854

Subadvisory Agreements

Duties of the Subadvisers. Under the terms of each of the current subadvisory agreements, including the sub-subadvisory agreement with Western Asset Management Company Limited (“WAMCL”), the sub-subadvisory agreement with MFC Global (U.S.) and the Deutsche Subadvisory Consulting Agreement, the subadviser manages the investment and reinvestment of the assets of the assigned funds (or portion thereof), subject to the supervision of the Board and the Adviser. (In the case of the WAMCL sub-subadvisory agreement, the Deutsche Subadvisory Consulting Agreement and the MFC Global (U.S.) sub-subadvisory agreement, the activities of the sub-subadviser are also subject to the supervision of Western Asset Management Company in the case of the WAMCL sub-subadvisory agreement and MFC Global U.S.A in the case of the Deutsche Subadvisory Consulting Agreement and the MFC Global (U.S.) sub-subadvisory agreement.) The subadviser formulates a continuous investment program for each such fund consistent with its investment objective and policies outlined in the Prospectus. Each subadviser implements such programs by purchases and sales of securities and regularly reports to the Adviser and the Board with respect to the implementation of such programs. (In the case of the Deutsche Subadvisory Consulting Agreement for the Lifestyle Trusts, Deutsche Investment Management Americas, Inc. (“DIMA”) does not purchase and sell securities but rather provides information and services to MFC Global U.S.A. to assist MFC Global U.S.A. in this process as noted below). Each subadviser, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel required for it to execute its duties, as well as administrative facilities, including bookkeeping, clerical personnel, and equipment necessary for the conduct of the investment affairs of the assigned funds.

Subadvisory Fees. As compensation for their services, the subadvisers receive fees from the Adviser computed separately for each fund. In respect of the sub-subadvisory agreements and the subadvisory consulting agreement, the fees are paid by the subadviser to the entity providing the subadvisory or consulting services as described below.

DIMA Subadvisory Consulting Agreement for the Lifestyle Trust. The Prospectus refers to a subadvisory consulting agreement between MFC Global U.S.A. and DIMA for the provision of subadvisory consulting services to MFC Global U.S.A. in regards to the Lifestyle Trusts. A portion of the subadvisory fee paid to MFC Global U.S.A. by the Adviser is paid by MFC Global U.S.A. to DIMA. The Lifestyle Trusts do not incur any expenses in connection with DIMA’s services other than the advisory fee.

The information and services DIMA provides to MFC Global U.S.A. pursuant to the Subadvisory Consulting Agreement for the Funds are as follows:

DIMA will provide MFC Global U.S.A. the following information and services, as may be requested by MFC Global U.S.A. from time to time:


–		calculate the probability that the subadvisers to the non-Lifestyle Trusts outperform their performance benchmarks;

–		perform statistical performance analysis of historical manager returns for managers that MFC Global U.S.A. would like to include in its potential line up on a quarterly basis;


–		using DIMA’s proprietary optimization technology, DIMA will seek to optimize the Lifestyle Trusts’ investments consistent with the performance objective specified by the subadviser (i.e. the probability of out-performing a benchmark, minimum shortfall relative to the benchmark, and specification of the benchmark for each fund, and any constraints that MFC Global U.S.A. may specify on allocations to non-funds) on a quarterly basis; and

–		consult with MFC Global U.S.A. to explain proposed allocations on a quarterly basis and review past performance of the Lifestyle Trusts provided that DIMA is given information on the performance of these Lifestyle Trusts and the actual allocations implemented.

MFC Global (U.S.) Sub-Subadvisory Agreement. The Prospectus refers to a sub-subadvisory agreement between MFC Global (U.S.) and MFC Global U.S.A., affiliates, under which MFC Global (U.S.) serves as sub-subadviser for the Absolute Return Trust. Under that agreement, MFC Global (U.S.) provides certain investment advisory services to MFC Global U.S.A. with its management of the Absolute Return Trust.

WAMCL Sub-Subadvisory Agreement. The Prospectus refers to a sub-subadvisory agreement between Western Asset Management Company and WAMCL, which is subject to certain conditions as set forth in the Prospectus. Under that agreement WAMCL provides certain investment advisory services to Western Asset Management Company relating to currency transactions and investments in non-dollar denominated debt securities for the benefit of the Strategic Bond Trust and the High Yield Trust. Western Asset Management Company pays WAMCL, as full compensation for all services provided under the sub-subadvisory agreement, a portion of its subadvisory fee. JHT does not incur any expenses in connection with WAMCL’s services other than the advisory fee.

Franklin Mutual Expense Provision. Franklin Mutual Advisers, LLC (“Franklin Mutual”) may incur certain Expenses (as defined below) on behalf of the Mutual Shares Trust for which the Mutual Shares Trust and not Franklin Mutual will be responsible. In pursuing certain alternative investments, such as those in distressed debt and bankruptcy claims, private transactions and restructuring deals, Franklin Mutual will incur research, due diligence and other expenses. Franklin Mutual will bear all such expenses incurred prior to making an investment decision and Mutual Shares Trust will bear the Expenses incurred after an investment decision is made. “Expenses” shall mean:

(i) certain post investment decision, pre-acquisition due diligence expenses as part of the cost of acquisition of certain investment opportunities for the Mutual Shares Trust; and

(ii) certain post investment expenditures to protect or enhance an investment or to pursue other claims or legal action on behalf of the Mutual Shares Trust.

Franklin Mutual may incur similar expenses for other funds that it manages. Mutual Shares Trust shall be obligated to pay only its proportionate share of the Expenses with respect to the particular investment.

Business Arrangement Between the Adviser and Grantham, Mayo, Van Otterloo & Co. LLC (“GMO”). As a part of the overall business arrangement between the Adviser and GMO under which the Adviser has obtained exclusive rights to certain GMO investment management services for up to five years, the Adviser has agreed that under certain circumstances it (and not JHT or a particular fund) will pay to GMO a specified amount if the GMO subadvisory agreement is terminated within a five year period from the date of its effectiveness. The specified amount is $5 million in the case of the subadvisory agreement for the International Core Trust (formerly, the International Stock Trust). The Adviser has also agreed that, subject to its fiduciary duties as an investment adviser to each fund and its shareholders, it will not recommend to the Board to terminate the applicable GMO subadvisory agreement or to reduce any of the fees payable thereunder to GMO for a five year period from the date of its effectiveness. Substantially similar agreements (with varying amounts to be paid upon termination) apply with respect to certain other John Hancock funds that are or will be advised by the Adviser and subadvised by GMO. JHT is not a party to any of these arrangements, and they are not binding upon JHT, JHT’s funds subadvised by GMO or the Board. However, these arrangements present certain conflicts of interest because the Adviser has a financial incentive to support the continuation of the GMO agreement for as long as the termination provisions described above remain in effect. In approving the advisory agreement and the GMO subadvisory agreement for the International Core Trust, the Board, including the Independent Trustees, was aware of and considered these potential conflicts of interest, including any financial obligations of the Adviser to GMO.

Dimensional Fund Advisors

In the case of the Disciplined Diversification Trust, the Adviser has entered into an agreement with Dimensional Fund Advisers (“DFA”) in which DFA agrees that it will not for a period of five years serve as investment adviser (including subadviser) or distributor to another mutual fund that is sold to commission-based, broker-sold variable annuity products and that is managed in a style similar to the Disciplined Diversification Trust. (This provision does not apply to DFA’s Financial Advisor business and only applies to funds sold in John Hancock variable insurance product distribution channels.) In the event that DFA should advise such a fund, the agreement would entitle the Adviser to $1 million in liquidated damages during the first three years following commencement of fund operations and $500,000 for the following two years due to the fact that the Adviser and the distributor to the Disciplined Diversification Trust will make unreimbursed expenditures in the organization and ongoing promotion of the fund. However, DFA is not required to pay the Adviser such liquidated damages if the Disciplined Diversification Trust does not reach certain asset levels (which range from $150 million on the first anniversary of the fund’s commencement to $450 million on the fourth anniversary of the fund’s commencement) assuming certain performance requirements are met. The agreement also provides that if DFA is terminated as subadviser to the Disciplined Diversification Trust, then DFA is released from any obligation to pay the Adviser such liquidated damages. Therefore, the Adviser has a financial interest in not having the Board terminate DFA as subadviser to the Disciplined Diversification Trust for a five year period.

DFA has also agreed that if DFA or one of its affiliates advises, underwrites or distributes any commission-paid, broker-sold, open-end U.S. registered investment company offering Class A, B or C shares or any closed-end U.S. registered investment company that is classified in the Morningstar Moderate Allocation category, and that has an investment objective and policies substantially similar to those of the Disciplined Diversification Trust, then the Adviser will be offered a similar opportunity to reach terms with DFA to manage and distribute a similar fund. (This provision does not apply to activities and services through DFA Financial Advisors business and in particular funds DFA advises for American International Group, Inc., Genworth Financial and AEGON, and their respective subsidiaries.)

Rainer Investment Management Inc.

Rainer Investment Management Inc. (“Rainer”) is also the subadviser to the JHF III John Hancock Rainer Growth Fund (the “JHF III Rainer Fund”). In connection with the management of this fund, the Adviser and Rainier have entered into an overall business arrangement under which Rainier has agreed not to offer investment management services to certain competitors of the Adviser for the investment strategies it manages for the Adviser for a period of up to three years. As part of this arrangement, the Adviser has agreed that under certain circumstances it (and not the JHF III Rainer Fund) will pay to Rainier specified amounts if total assets of John Hancock investment products subadvised by Rainier do not equal or exceed certain thresholds for a period of up to three years. Such amounts may total up to $7.5 million per year for each of the three years. As a further part of this arrangement, the Adviser has agreed that under certain circumstances it (and not the JHF III Rainer Fund) will pay to Rainier a specified amount if the Rainier subadvisory agreement for the JHF III Rainer Fund is terminated within a three-year period. Such amount may total up to $22.5 million. The Adviser has also agreed that, subject to its fiduciary duties as an investment adviser to the JHF III Rainer Fund and its shareholders, it will not support or recommend to the board of trustees of JHF III any termination of the Rainier subadvisory agreement with respect to the JHF III Rainer Fund for a three-year period. Neither JHF III nor the JHF III Rainer Fund is a party to any of these arrangements, and they are not binding upon the JHF III Rainer Fund or the JHF III board of trustees. However, these arrangements present certain conflicts of interest because the Adviser has a financial incentive to support the continuation of the JHF III Rainier subadvisory agreements for as long as these arrangements remain in effect.

Western Asset Management Company

Western Asset Management Company (“WAMCO”) is also the subadviser to the JHF II Floating Rate Income Fund, a series of JHFII (the “JHF II Floating Rate Income Fund”). In connection with the management of the JHF II Floating Rate Income Fund, the Adviser has entered into an agreement with WAMCO in which WAMCO agrees that it will not serve as investment adviser (including subadviser) to another investment company that is sold to retail investors and is managed in a style similar to the JHF II Floating Rate Income Fund for a period of five years and the Adviser agrees that it will develop a program for the marketing of the fund. In the event WAMCO should advise such an investment company, the agreement would entitle the Adviser to $2 million in liquidated damages due to the fact that the Adviser and the distributor to the JHF II Floating Rate Income Fund will make unreimbursed expenditures in the organization and ongoing promotion of the fund. However, WAMCO is not required to pay the Adviser such liquidated damages if the JHF II Floating Rate Income Fund does not reach certain asset levels (which range from $500 million on the first anniversary of the fund’s commencement to $2 billion on the fourth anniversary of the fund’s commencement) assuming certain performance requirements are met. The agreement also provides that if WAMCO is terminated as subadviser to the JHF II Floating Rate Income Fund, then WAMCO is released from any obligation to pay the Adviser such liquidated damages. Therefore, the Adviser

has a financial interest in not having the Board terminate WAMCO as subadviser to the JHF II Floating Rate Income Fund for a five year period.

Affiliated Subadvisers — Potential Conflicts of Interest.

The Adviser and the following subadvisers are controlled by MFC (and are affiliated: MFC Global (U.S.A.) Limited, Declaration Management & Research LLC and MFC Global (U.S.) (collectively, “Affiliated Subadvisers”)>

Advisory arrangements involving Affiliated Subadvisers may present certain potential conflicts of interest. For each fund subadvised by an Affiliated Subadviser, MFC will benefit not only from the net advisory fee retained by the Adviser but also from the subadvisory fee paid by the Adviser to the Affiliated Subadviser. Consequently, MFC may be viewed as benefiting financially from (i) the appointment of or continued service of Affiliated Subadvisers to manage the funds; and (ii) the allocation of the assets of JHT a fund of funds (a “Funds of Funds”) to other funds (“Underlying Funds”) having Affiliated Subadvisers.

In addition, MFC and its John Hancock insurance company subsidiaries may benefit from investment decisions made by Affiliated Subadvisers, including allocation decisions with respect to Fund-of-Funds assets. For example, Affiliated Subadvisers, by selecting more conservative investments, or by making more conservative allocations of Fund-of-Funds assets by increasing the percentage allocation to Underlying Funds which invest primarily in fixed-income securities or otherwise, may reduce the regulatory capital requirements which the John Hancock insurance company subsidiaries of MFC must satisfy in order to support their guarantees under variable annuity and insurance contracts which they issue. In all cases, however, the Adviser in recommending to the Board the appointment or continued service of Affiliated Subadvisers and the Affiliated Subadvisers in selecting investments and allocating Fund-of-Funds assets have a fiduciary duty to act in the best interests of the funds and their shareholders. Moreover, JHT’s “manager of managers” exemptive order from the SEC provides that JHT obtain shareholder approval of any subadvisory agreement appointing an Affiliated Subadviser as the subadviser to a fund (in the case of a new fund, the initial sole shareholder of the fund, an affiliate of the Adviser and MFC, may provide this approval). The Independent Trustees are aware of and monitor these potential conflicts of interest.

Additional Information Applicable to Subadvisory Agreements

Term of Each Subadvisory Agreement. Each Subadvisory Agreement will initially continue in effect as to a fund for a period no more than two years from the date of its execution (or the execution of an amendment making the agreement applicable to that fund) and thereafter 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 that fund. In either event, such continuance shall also be approved by the vote of the majority of the Trustees who are not interested persons of any party to the Agreements.

Any required shareholder approval of any continuance of any of the Agreements shall be effective with respect to any fund if a majority of the outstanding voting securities of that fund 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 fund affected by the Agreement or (b) all of the funds of JHT.

Failure of Shareholders to Approve Continuance of any Subadvisory Agreement. If the outstanding voting securities of any fund fail to approve any continuance of any Subadvisory Agreement, the party may continue to act as investment subadviser with respect to such fund pending the required approval of the continuance of such agreement or a new agreement with either that party or a different subadviser, or other definitive action.

Termination of the Agreements. 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 Agreements, and also to the relevant fund. The following parties may terminate the agreements:


–		the Board;

–		with respect to any fund, a majority of the outstanding voting securities of such fund;

–		the Adviser; and

–		the respective subadviser.

The Subadvisory Agreements will automatically terminate in the event of their assignment.

Under certain circumstances, the termination of the subadvisory agreement with GMO with respect to certain funds within five years of its effective date may result in the payment to GMO by the Adviser (and not by the funds) of a termination fee. See “Subadvisory Agreements — Business Arrangement Between the Adviser and GMO” above.

Amendments to the Agreements. The subadvisory agreements 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 relevant fund (except as noted below) and by the vote of a majority of the Independent Trustees of the applicable fund, the Adviser or the subadviser.

The required shareholder approval of any amendment shall be effective with respect to any fund if a majority of the outstanding voting securities of that fund 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 fund affected by the amendment; or (b) all the funds of JHT.

As noted under “Subadvisory Arrangements and Management Biographies” in the Prospectus, an SEC order permits the Adviser to appoint a subadviser (other than an Affiliated Subadviser) or change a subadvisory fee or otherwise amend a subadvisory agreement (other than for an Affiliated Subadviser) pursuant to an agreement that is not approved by shareholders.

Amount of Subadvisory Fees Paid. For the years ended December 31, 2008, 2007 and 2006, the Adviser paid aggregate subadvisory fees of $133,410,789, $171,153,985 and $141,155,943, respectively, allocated among the funds as follows:


FUND	2008		2007		2006
500 Index Trust	$	245,878	$	205,133	$	187,270
500 Index Trust B	$	146,817	$	174,045	$	160,929
Absolute Return Trust		N/A		N/A		N/A
Active Bond Trust	$	3,589,038	$	3,822,957	$	3,325,252
All Cap Core Trust	$	2,721,679	$	2,458,114	$	1,494,731
All Cap Growth Trust	$	1,112,465	$	1,562,367	$	1,568,671
All Cap Value Trust	$	427,451	$	829,028	$	1,164,749
Alpha Opportunities Trust	$	314,208		N/A		N/A
American Diversified Growth & Income Trust	$	110		N/A		N/A
American Fundamental Holdings Trust	$	107,630	$	1,721		N/A
American Global Diversification Trust	$	128,702	$	3,404		N/A
Balanced Trust		N/A		N/A		N/A
Blue Chip Growth Trust	$	9,024,811	$	9,497,252	$	9,036,171
Capital Appreciation Trust	$	2,935,258	$	2,929,024	$	2,210,136
Capital Appreciation Value Trust	$	169,519		N/A		N/A
Core Allocation Trust	$	156,213		N/A		N/A
Core Allocation Plus Trust		N/A		N/A		N/A
Core Balanced Trust		N/A		N/A		N/A
Core Bond Trust	$	541,002	$	501,028	$	402,429
Core Disciplined Diversification Trust		N/A		N/A		N/A
Core Fundamental Holdings Trust		N/A		N/A		N/A
Core Global Diversification Trust		N/A		N/A		N/A
Core Strategy Trust	$	58,044
Disciplined Diversification Trust	$	138,929		N/A		N/A
Emerging Markets Value Trust	$	2,312,906	$	1,514,293		N/A
Emerging Small Company Trust	$	838,088	$	1,308,086	$	1,631,638
Equity-Income Trust	$	6,382,965	$	8,125,883	$	8,325,768
Financial Services Trust	$	411,672	$	616,314	$	584,271
Floating Rate Income Trust	$	1,113,057		N/A		N/A
Franklin Templeton Founding Allocation Trust	$	313,494	$	128,127		N/A
Fundamental Value Trust	$	4,791,199	$	4,216,400	$	3,272,307
Global Allocation Trust	$	1,078,562	$	1,306,052	$	940,764
Global Bond Trust	$	2,768,394	$	2,955,117	$	2,276,084
Global Real Estate Trust	$	2,684,983	$	2,348,330	$	1,207,435
Global Trust	$	2,395,779	$	1,897,407	$	1,359,953


FUND	2008		2007		2006
Growth Equity Trust	$	756,911		N/A		N/A
Growth Opportunities Trust		N/A		N/A		N/A
Growth Trust		N/A		N/A		N/A
Health Sciences Trust	$	1,177,582	$	1,361,055	$	1,473,358
High Income Trust	$	945,772	$	905,377	$	462,468
High Yield Trust	$	3,707,239	$	4,089,274	$	3,440,918
Income Trust	$	1,484,285	$	502,556		N/A
International Core Trust	$		$	6,684,980	$	4,814,721
International Equity Index Trust A	$	263,086	$	286,890	$	189,799
International Equity Index Trust B	$	372,777	$	427,094	$	342,780
International Growth Trust		N/A		N/A		N/A
International Index Trust		N/A		N/A		N/A
International Opportunities Trust	$	3,339,724	$	3,539,243	$	2,289,048
International Small Cap Trust	$	2,036,457	$	3,006,570	$	2,698,304
International Small Company Trust	$	1,395,823	$	1,195,449	$	706,572
International Value Trust	$	4,757,354	$	6,024,400	$	4,954,214
Intrinsic Value Trust		N/A		N/A		N/A
Investment Quality Bond Trust	$	600,957	$	620,888	$	584,952
Large Cap Trust	$	1,466,930	$	1,399,573	$	558,606
Large Cap Value Trust	$	2,064,401	$	2,133,322	$	1,270,432
Lifecycle 2010 Trust		N/A		N/A		N/A
Lifecycle 2015 Trust		N/A		N/A		N/A
Lifecycle 2020 Trust		N/A		N/A		N/A
Lifecycle 2025 Trust		N/A		N/A		N/A
Lifecycle 2030 Trust		N/A		N/A		N/A
Lifecycle 2035 Trust		N/A		N/A		N/A
Lifecycle 2040 Trust		N/A		N/A		N/A
Lifecycle 2045 Trust		N/A		N/A		N/A
Lifecycle 2050 Trust		N/A		N/A		N/A
Lifecycle Retirement Trust		N/A		N/A		N/A
Lifestyle Aggressive Trust	$	86,275	$	115,258	$	114,687
Lifestyle Balanced Trust	$	1,804,845	$	1,809,597	$	1,359,499
Lifestyle Conservative Trust	$	240,722	$	151,680	$	126,968
Lifestyle Growth Trust	$	2,303,928	$	2,358,812	$	1,585,623
Lifestyle Moderate Trust	$	442,664	$	401,644	$	322,305
Mid Cap Index Trust	$	161,951	$	192,016	$	148,976
Mid Cap Intersection Trust	$	898,838	$	812,710		N/A
Mid Cap Stock Trust	$	3,731,829	$	4,499,683	$	3,828,569
Mid Cap Value Equity Trust	$	366,967		558,123	$	267,426
Mid Value Trust	$	700,982	$	971,123	$	928,581
Money Market Trust	$	934,770	$	729,793	$	670,201
Money Market Trust B	$	289,784	$	256,781	$	239,803
Mutual Shares Trust	$	2,135,593	$	717,800		N/A
Natural Resources Trust	$	4,141,079	$	6,166,531	$	5,132,342
Optimized All Cap Trust	$	2,784,580	$	1,021,279	$	786,320
Optimized Value Trust	$	1,414,224	$	1,432,165	$	754,361
Overseas Equity Trust	$	2,520,519	$	2,951,937	$	2,218,994
Pacific Rim Trust	$	428,403	$	611,850	$	655,395
Real Estate Equity Trust	$	903,536	$	1,040,220	$	780,257
Real Estate Securities Trust	$	1,255,940	$	2,037,707	$	2,515,265
Real Return Bond Trust	$	2,428,758	$	2,655,993	$	2,073,410
Science & Technology Trust	$	1,705,131	$	2,326,691	$	2,547,234
Short Term Bond Trust	$	279,903	$	364,909	$	311,036
Short Term Government Income Trust		N/A		N/A		N/A
Small Cap Growth Trust	$	1,606,385	$	1,883,304	$	1,805,521
Small Cap Index Trust	$	120,640	$	145,631	$	136,043
Small Cap Intrinsic Value Trust	$	400,245	$	411,227		N/A
Small Cap Opportunities Trust	$	1,276,250	$	2,298,550	$	2,313,402
Small Cap Value Trust	$	2,192,220	$	2,642,878	$	2,127,372
Small Company Growth Trust	$	1,185,068	$	1,163,896	$	416,472


FUND	2008		2007		2006
Small Company Value Trust	$	3,139,150	$	3,601,833	$	3,932,796
Smaller Company Growth Trust	$	91,175		N/A		N/A
Spectrum Income Trust	$	2,852,684	$	2,556,927	$	2,035,129
Strategic Bond Trust	$	1,467,745	$	1,506,408	$	1,431,477
Strategic Income Trust	$	1,209,499	$	1,076,151	$	607,951
Total Bond Market Trust A	$	49,240	$	26,154	$	11,479
Total Bond Market Trust B	$	33,085	$	32,735	$	33,836
Total Return Trust	$	5,376,622	$	5,285,245	$	4,284,390
Total Stock Market Index Trust	$	143,803	$	169,922	$	149,324
U.S. Government Securities Trust	$	577,708	$	585,224	$	661,930
U.S. High Yield Bond Trust	$	1,377,238	$	1,123,591	$	725,363
U.S. Multi Sector Trust	$	3,474,167	$	4,770,352	$	3,442,675
Utilities Trust	$	842,866	$	948,300	$	628,759
Value & Restructuring Trust	$	1,604,359	$	1,434,162	$	969,455
Value Trust	$	755,551	$	1,050,342	$	935,699
Vista Trust	$	395,717	$	604,624	$	415,285

OTHER SERVICES

Proxy Voting Policies

The funds’ proxy voting policies and procedures delegate to the subadviser of each fund the responsibility to vote all proxies relating to securities held by that fund in accordance with the subadviser’s proxy voting policies and procedures. A subadviser has a duty to vote such proxies in the best interests of the Fund and its shareholders. Complete descriptions of JHT’s Procedures and the proxy voting procedures of each of the fund subadvisers are set forth in Appendix IV to this SAI.

It is possible that conflicts of interest could arise for a subadviser when voting proxies. Such conflicts could arise, for example, when the subadviser or its affiliate has an existing business relationship with the issuer of the security being voted or with a third party that has an interest in the vote. A conflict of interest could also arise when the fund, its Adviser or principal underwriter or any of their affiliates has an interest in the vote.

In the event a subadviser becomes aware of a material conflict of interest, JHT’s Procedures generally require the subadviser to follow any conflicts procedures that may be included in the subadvisers’ proxy voting procedures. Although conflicts procedures will vary among subadvisers, they generally include one or more of the following:

(a) voting pursuant to the recommendation of a third party voting service;

(b) voting pursuant to pre-determined voting guidelines; or

The specific conflicts procedures of each subadviser are set forth in its proxy voting procedures included in Appendix IV. While these conflicts procedures may reduce the influence of conflicts of interest on proxy voting, such influence will not necessarily be eliminated.

Although subadvisers have a duty to vote all proxies on behalf of the funds they subadvise, it is possible that a subadviser may not be able to vote proxies under certain circumstances. For example, it may be impracticable to translate in a timely manner voting materials that are written in a foreign language or to travel to a foreign country when voting in person rather than by proxy is required. In addition, if the voting of proxies for shares of a security prohibits the subadviser from trading the shares in the marketplace for a period of time, the subadviser may determine that it is not in the best interests of the fund to vote the proxies.

Information regarding how the funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available: (1) without charge, upon request, by calling (800) 344-1029 (attention: Gordon Shone); and (2) on the SEC’s website at http://www.sec.gov.

DISTRIBUTOR; RULE 12B-1 PLANS

John Hancock Distributors, LLC (the “Distributor”), located at 601 Congress Street, Boston, MA 02210, is the principal underwriter of JHT and distributes shares of JHT on a continuous basis. Other than the Rule 12b-1 payments and service fees described below, the Distributor does not receive compensation from JHT.

The Board has approved Plans (the “Plans”) under Rule 12b-1 under the 1940 Act (“Rule 12b-1”) for Series I shares, Series II shares and, in the case of certain funds, Series III shares. The purpose of each Plan is to encourage the growth and retention of assets of each fund subject to a Plan.

Series I and Series II shares of each fund and Series III shares of certain funds are subject to Rule 12b-1 fees, as described in the Prospectus.

A portion of the Rule 12b-1 fee may constitute a “service fee” as defined in Rule 2830(d)(5) of the NASD Conduct Rules of the Financial Industry Regulatory Authority (“FINRA”).

Service fees are paid to the Distributor, which then may reallocate all or a portion of the service fee to one or more affiliated or unaffiliated parties that have agreed to provide with respect to the shares of JHT the kinds of services encompassed by the term “personal service and/or the maintenance of shareholder accounts” as defined in FINRA Conduct Rule 2830(d)(5).

Each Rule 12b-1 Plan is a compensation plan rather than a reimbursement plan and compensates the Distributor regardless of its expenses. Rule 12b-1 fees are paid to the Distributor.

To the extent consistent with applicable laws, regulations and rules, the Distributor may use Rule 12b-1 fees:


–		for any expenses relating to the distribution of the shares of the class,

–		for any expenses relating to shareholder or administrative services for holders of the shares of the class (or owners of contracts funded in insurance company separate accounts that invest in the shares of the class) and

–		for the payment of “service fees” that come within FINRA Conduct Rule 2830(d)(5).

Without limiting the foregoing, the Distributor may pay all or part of the Rule 12b-1 fees from a fund to one or more affiliated and unaffiliated insurance companies that have issued variable insurance contracts for which the fund serves as an investment vehicle as compensation for providing some or all of the types of services described in the preceding paragraph; this provision, however, does not obligate the Distributor to make any payments of Rule 12b-1 fees and does not limit the use that the Distributor may make of the Rule 12b-1 fees it receives. Currently, all such payments are made to insurance companies affiliated with the Adviser and Distributor. However, payments may be made to non-affiliated insurance companies in the future.

The Plans authorize any payments in addition to fees described above made by a fund to the Distributor or any of its affiliates, including the payment of any management or advisory fees, which may be deemed to be an indirect financing of distribution costs.

The Plans may not be amended to increase materially the amount to be spent by a fund without such shareholder approval as is required by Rule 12b-1. All material amendments of a Plan must be approved in the manner described in the rule. Each Plan shall continue in effect: (i) with respect to a fund only so long as the Plan is specifically approved for that fund least annually as provided in the Rule 12b-1; and (ii) only while (a) a majority of the Trustees are not interested persons (as defined in the 1940 Act) of JHT, (b) incumbent Independent Trustees select and nominate any new Independent Trustees of JHT and (c) any person who acts as legal counsel for the Independent Trustees is an independent legal counsel. Each Plan may be terminated with respect to any fund at any time as provided in Rule 12b-1.

During the fiscal year ended December 31, 2008, the following amounts were paid pursuant to the Plans:

Series I Shares


			DISTRIBUTION
			PAYMENT
	SERVICE FEE		TO THE
FUND	PAYMENTS		DISTRIBUTOR
500 Index Trust	$	536,640	$	0
500 Index Trust B		N/A	$	0
Absolute Return Trust		N/A	$	0
Active Bond Trust	$	50,420	$	0
All Cap Core Trust	$	64,539	$	0
All Cap Growth Trust	$	74,199	$	0
All Cap Value Trust	$	24,646	$	0
Alpha Opportunities Trust		N/A	$	0
American Asset Allocation Trust	$	1,394	$	1,951
American Blue Chip Income and Growth Trust	$	33,232	$	66,861
American Bond Trust	$	15,035	$	31,209
American Diversified Growth & Income Trust	$	103	$	145
American Fundamental Holdings Trust	$	155	$	354
American Global Diversification Trust	$	150	$	348
American Growth Trust	$	169,698	$	347,074
American Growth-Income Trust	$	31,837	$	93,845
American International Trust	$	156,522	$	309,313
Balanced Trust		N/A	$	0
Blue Chip Growth Trust	$	222,055	$	0
Capital Appreciation Trust	$	85,939	$	0
Capital Appreciation Value	$	150	$	0
Core Allocation Trust		N/A	$	0
Core Allocation Plus Trust	$	4,917	$	0
Core Balanced Trust		N/A	$	0
Core Bond Trust	$	171	$	0
Core Disciplined Diversification Trust		N/A	$	0
Core Fundamental Holdings Trust		N/A	$	0
Core Global Diversification Trust		N/A	$	0
Core Strategy Trust	$	31	$	0
Disciplined Diversification Trust	$	290	$	0
Emerging Markets Value Trust	$	877	$	0
Emerging Small Company Trust	$	64,391	$	0
Equity-Income Trust	$	261,213	$	0
Financial Services Trust	$	22,020	$	0
Floating Rate Income Trust		N/A	$	0
Franklin Templeton Founding Allocation Trust	$	2,527	$	0
Fundamental Value Trust	$	90,867	$	0
Global Allocation Trust	$	33,473	$	0
Global Bond Trust	$	62,167	$	0
Global Real Estate Trust	$	35	$	0
Global Trust	$	110,471	$	0
Growth Equity Trust		N/A	$	0
Growth Opportunities Trust		N/A	$	0
Growth Trust		N/A	$	0
Health Sciences Trust	$	60,202	$	0
High Income Trust		N/A	$	0


			DISTRIBUTION
			PAYMENT
	SERVICE FEE		TO THE
FUND	PAYMENTS		DISTRIBUTOR
High Yield Trust	$	43,450	$	0
Income Trust		N/A	$	0
International Core Trust	$	48,541	$	0
International Equity Index Trust A	$	120,863	$	0
International Equity Index Trust B		N/A	$	0
International Growth Trust		N/A	$	0
International Index Trust		N/A	$	0
International Opportunities Trust	$	3,598	$	0
International Small Cap Trust	$	48,993	$	0
International Small Company Trust		N/A	$	0
International Value Trust	$	134,991	$	0
Intrinsic Value Trust		N/A	$	0
Investment Quality Bond Trust	$	74,573	$	0
Large Cap Trust	$	111,292	$	0
Large Cap Value Trust	$	27,243	$	0
Lifecycle 2010 Trust		N/A	$	0
Lifecycle 2015 Trust		N/A	$	0
Lifecycle 2020 Trust		N/A	$	0
Lifecycle 2025 Trust		N/A	$	0
Lifecycle 2030 Trust		N/A	$	0
Lifecycle 2035 Trust		N/A	$	0
Lifecycle 2040 Trust		N/A	$	0
Lifecycle 2045 Trust		N/A	$	0
Lifecycle 2050 Trust		N/A	$	0
Lifecycle Retirement Trust		N/A	$	0
Lifestyle Aggressive Trust	$	79,916	$	0
Lifestyle Balanced Trust	$	424,660	$	0
Lifestyle Conservative Trust	$	92,993	$	0
Lifestyle Growth Trust	$	373,842	$	0
Lifestyle Moderate Trust	$	142,213	$	0
Mid Cap Index Trust	$	167,941	$	0
Mid Cap Intersection Trust	$	52	$	0
Mid Cap Stock Trust	$	142,484	$	0
Mid Cap Value Equity Trust		N/A	$	0
Mid Value Trust	$	7,572	$	0
Money Market Trust	$	1,499,302	$	0
Mutual Shares Trust	$	2,826	$	0
Natural Resources Trust	$	14,856	$	0
Optimized All Cap Trust	$	101,817	$	0
Optimized Value Trust	$	230	$	0
Overseas Equity Trust	$	2,197	$	0
Pacific Rim Trust	$	42,510	$	0
Real Estate Equity Trust		N/A	$	0
Real Estate Securities Trust	$	75,070	$	0
Real Return Bond Trust	$	5,543	$	0
Science & Technology Trust	$	121,811	$	0
Short-Term Bond Trust		N/A	$	0
Short Term Government Income Trust		N/A	$	0
Small Cap Growth Trust	$	13,612	$	0
Small Cap Index Trust	$	87,102	$	0
Small Cap Intrinsic Value Trust	$	3	$	0
Small Cap Opportunities Trust	$	26,200	$	0
Small Cap Value Trust	$	53,954	$	0
Small Company Growth Trust		N/A	$	0
Small Company Value Trust	$	81,451	$	0
Smaller Company Growth Trust		N/A	$	0


			DISTRIBUTION
			PAYMENT
	SERVICE FEE		TO THE
FUND	PAYMENTS		DISTRIBUTOR
Spectrum Income Trust		N/A	$	0
Strategic Bond Trust	$	59,436	$	0
Strategic Income Trust	$	8,146	$	0
Total Bond Market Trust A	$	26,966	$	0
Total Return Trust	$	173,407	$	0
Total Stock Market Index Trust	$	113,703	$	0
U.S. Government Securities Trust	$	75,878	$	0
U.S. High Yield Bond Trust	$	431	$	0
U.S. Multi Sector Trust		N/A	$	0
Utilities Trust	$	74,522	$	0
Value Trust	$	102,957	$	0
Value & Restructuring Trust		N/A	$	0
Value Opportunities Trust		N/A	$	0
Vista Trust		N/A	$	0

Series II Shares


			DISTRIBUTION
			PAYMENT
	SERVICE FEE		TO THE
FUND	PAYMENTS		DISTRIBUTOR
500 Index Trust	$	178,118	$	0
500 Index Trust B		N/A	$	0
Absolute Return Trust		N/A	$	0
Active Bond Trust	$	1,145,797	$	0
All Cap Core Trust	$	33,839	$	0
All Cap Growth Trust	$	48,580	$	0
All Cap Value Trust	$	103,896	$	0
Alpha Opportunities Trust		N/A	$	0
American Diversified Growth & Income Trust	$	725	$	1,448
American Fundamental Holdings Trust	$	912,567	$	1,825,134
American Global Diversification Trust	$	1,079,510	$	2,159,021
Balanced Trust		N/A	$	0
Blue Chip Growth Trust	$	363,239	$	0
Capital Appreciation Trust	$	187,245	$	0
Capital Appreciation Value	$	90,751	$	0
Core Allocation Trust		N/A	$	0
Core Allocation Plus Trust	$	48,568	$	0
Core Balanced Trust		N/A	$	0
Core Bond Trust	$	13,419	$	0
Core Disciplined Diversification Trust		N/A	$	0
Core Fundamental Holdings Trust		N/A	$	0
Core Global Diversification Trust		N/A $	$	0
Core Strategy Trust	$	878,955	$	0
Disciplined Diversification Trust	$	122,267	$	0
Emerging Markets Value Trust		N/A	$	0
Emerging Small Company Trust	$	76,381	$	0
Equity-Income Trust	$	527,113	$	0
Financial Services Trust	$	88,851	$	0
Floating Rate Income Trust		N/A	$	0
Franklin Templeton Founding Allocation Trust	$	3,088,974	$	0
Fundamental Value Trust	$	901,545	$	0
Global Allocation Trust	$	473,277	$	0
Global Bond Trust	$	579,548	$	0
Global Real Estate Trust		N/A $	$	0
Global Trust	$	116,877	$	0
Growth Equity Trust		N/A $	$	0


			DISTRIBUTION
			PAYMENT
	SERVICE FEE		TO THE
FUND	PAYMENTS		DISTRIBUTOR
Growth Opportunities Trust		N/A	$	0
Growth Trust		N/A	$	0
Health Sciences Trust	$	163,607	$	0
High Income Trust	$	2,794	$	0
High Yield Trust	$	154,082	$	0
Income Trust		N/A	$	0
International Core Trust	$	98,445	$	0
International Equity Index Trust A	$	62,692	$	0
International Equity Index Trust B		N/A	$	0
International Growth Trust		N/A	$	0
International Index Trust		N/A	$	0
International Opportunities Trust	$	140,779	$	0
International Small Cap Trust	$	112,780	$	0
International Small Company Trust		N/A	$	0
International Value Trust	$	461,424	$	0
Intrinsic Value Trust		N/A	$	0
Investment Quality Bond Trust	$	369,586	$	0
Large Cap Trust	$	36,473	$	0
Large Cap Value Trust	$	85,578	$	0
Lifecycle 2010 Trust		N/A	$	0
Lifecycle 2015 Trust		N/A	$	0
Lifecycle 2020 Trust		N/A	$	0
Lifecycle 2025 Trust		N/A	$	0
Lifecycle 2030 Trust		N/A	$	0
Lifecycle 2035 Trust		N/A	$	0
Lifecycle 2040 Trust		N/A	$	0
Lifecycle 2045 Trust		N/A	$	0
Lifecycle 2050 Trust		N/A	$	0
Lifecycle Retirement Trust		N/A	$	0
Lifestyle Aggressive Trust	$	630,897	$	0
Lifestyle Balanced Trust	$	21,428,851	$	0
Lifestyle Conservative Trust	$	2,734,056	$	0
Lifestyle Growth Trust	$	28,420,329	$	0
Lifestyle Moderate Trust	$	5,176,916	$	0
Mid Cap Index Trust	$	237,128	$	0
Mid Cap Intersection Trust	$	9,160	$	0
Mid Cap Stock Trust	$	398,191	$	0
Mid Cap Value Equity Trust		N/A	$	0
Mid Value Trust	$	29,616	$	0
Money Market Trust	$	2,313,115	$	0
Money Market Trust B		N/A	$	0
Mutual Shares Trust		N/A	$	0
Natural Resources Trust	$	619,569	$	0
Optimized All Cap Trust	$	241,475	$	0
Optimized Value Trust	$	49,986	$	0
Overseas Equity Trust	$	14,259	$	0
Pacific Rim Trust	$	72,845	$	0
Real Estate Equity Trust		N/A	$	0
Real Estate Securities Trust	$	249,157	$	0
Real Return Bond Trust	$	278,939	$	0
Science & Technology Trust	$	121,705	$	0
Short-Term Bond Trust		N/A	$	0
Short Term Government Income Trust		N/A	$	0
Small Cap Growth Trust	$	82,507	$	0
Small Cap Index Trust	$	208,349	$	0
Small Cap Intrinsic Value Trust		N/A	$	0


			DISTRIBUTION
			PAYMENT
	SERVICE FEE		TO THE
FUND	PAYMENTS		DISTRIBUTOR
Small Cap Opportunities Trust	$	98,569	$	0
Small Cap Value Trust	$	149,780	$	0
Small Company Growth Trust		N/A	$	0
Small Company Value Trust	$	297,292	$	0
Smaller Company Growth Trust		N/A	$	0
Spectrum Income Trust		N/A	$	0
Strategic Bond Trust	$	201,458	$	0
Strategic Income Trust	$	34,892	$	0
Total Bond Market Trust A	$	2,024	$	0
Total Bond Market Trust B		N/A	$	0
Total Return Trust	$	658,510	$	0
Total Stock Market Index Trust	$	161,579	$	0
U.S. Government Securities Trust	$	213,525	$	0
U.S. High Yield Bond Trust	$	5,040	$	0
U.S. Multi Sector Trust		N/A	$	0
Utilities Trust	$	135,849	$	0
Value Trust	$	103,028	$	0
Value & Restructuring Trust		N/A	$	0
Value Opportunities Trust		N/A	$	0
Vista Trust		N/A	$	0

Series III Shares


			DISTRIBUTION
			PAYMENT
	SERVICE FEE		TO THE
FUND	PAYMENTS		DISTRIBUTOR
American Diversified Growth & Income Trust	$	104	$	0
American Fundamental Holdings Trust	$	13,419	$	0
American Global Diversification Trust	$	208	$	0

PORTFOLIO BROKERAGE

Pursuant to the subadvisory agreements, the subadvisers are responsible for placing all orders for the purchase and sale of portfolio securities of the funds. The subadvisers have no formula for the distribution of fund 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 fund. The cost of securities transactions for each fund 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 OTC 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.

Selection of Brokers or Dealers to Effect Trades. In selecting brokers or dealers to implement 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;

Soft Dollar Considerations. In selecting brokers and dealers, the subadvisers may give consideration to the value and quality of any research, statistical, quotation, brokerage or valuation services provided by the broker or dealer to the subadviser. 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 fund and any other accounts managed by the subadviser. In addition to statistical, quotation, brokerage or valuation services, a subadviser may receive from brokers or dealers 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 portion attributable to research. Only the portion attributable to research will be paid through fund brokerage. The portion not attributable to research will be paid by the subadviser. Research products and services may be acquired or received either directly from executing brokers or indirectly through other brokers in step-out transactions. A “step-out” is an arrangement by which a subadviser executes a trade through one broker-dealer but instructs that entity to step-out all or a portion of the trade to another broker-dealer. This second broker-dealer will clear and settle, and receive commissions for, the stepped-out portion. The second broker-dealer may or may not have a trading desk of its own.

Subadvisers may also receive research or research credits from brokers which are generated from underwriting commissions when purchasing new issues of fixed-income securities or other assets for a fund. These services, which in some cases may also be purchased for cash, include such matters as general economic and security market reviews, industry and company reviews, evaluations of securities and recommendations as to the purchase and sale of securities. Some of these services are of value to the subadviser in advising several of its clients (including the funds), although not all of these services are necessarily useful and of value in managing the funds. The management fee paid by a fund is not reduced because a subadviser and its affiliates receive such services.

As noted above, a subadviser may purchase new issues of securities for a fund in underwritten fixed price offerings. In these situations, the underwriter or selling group member may provide the subadviser with research in addition to selling the securities (at the fixed public offering price) to the fund or other advisory clients. Because the offerings are conducted at a fixed price, the ability to obtain research from a broker-dealer in this situation provides knowledge that may benefit the fund, other subadviser clients, and the subadviser without incurring additional costs. These arrangements may not fall within the safe harbor in Section 28(e) of the Exchange Act because the broker-dealer is considered to be acting in a principal capacity in underwritten transactions. However, FINRA has adopted rules expressly permitting broker-dealers to provide bona fide research to advisers in connection with fixed price offerings under certain circumstances. As a general matter in these situations, the underwriter or selling group member will provide research credits at a rate that is higher than that which is available for secondary market transactions.

Brokerage and research services provided by brokers and 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) fund 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 a subadviser, such services would tend to reduce such party’s expenses. However, the subadvisers do not believe that an exact dollar value can be assigned to these services. Research services received by the subadvisers from brokers or dealers executing transactions for the funds, which may not be used in connection with a fund, will also be available

for the benefit of other funds and accounts managed by the subadvisers.

Commission Recapture Program. The Board has adopted a commission recapture program. Under the program, a percentage of commissions generated by a fund’s portfolio transactions is rebated to that fund by the broker-dealers and credited to short-term security gain/loss.

Allocation of Trades by the Subadvisers. The subadvisers manage a number of accounts other than the funds. Although investment determinations for the funds will be made by the subadvisers independently from the investment determinations made by them for any other account, investments deemed appropriate for the funds by the subadvisers may also be deemed appropriate by them for other accounts. Therefore, the same security may be purchased or sold at or about the same time for both the funds and other accounts. In such circumstances, the subadvisers may determine that orders for the purchase or sale of the same security for the funds and one or more other accounts should be combined. In this event the transactions will be priced and allocated in a manner deemed by the subadvisers to be equitable and in the best interests of the funds and such other accounts. While in some instances combined orders could adversely affect the price or volume of a security, the fund believes that their participation in such transactions on balance will produce better overall results for the fund.

Affiliated Underwriting Transactions by the Subadvisers. JHT has approved procedures in conformity with Rule 10f-3 under the 1940 Act whereby a fund may purchase securities that are offered in underwritings in which an affiliate of the subadviser participates. These procedures prohibit a fund from directly or indirectly benefiting a subadviser affiliate in connection with such underwritings. In addition, for underwritings where a subadviser affiliate participates as a principal underwriter, certain restrictions may apply that could, among other things, limit the amount of securities that the funds could purchase.

Brokerage Commission Paid. For the years ended December 31, 2008, 2007 and 2006, JHT paid brokerage commissions in connection with portfolio transactions of $38,931,500, $41,450,836 and $39,288,790, respectively, allocated among the Funds as follows:


	Total Commissions Paid		Total Commissions Paid		Total Commissions Paid
	for Fiscal Year Ended		for Fiscal Year Ended		for Fiscal Year Ended
Fund	December 31, 2008		December 31, 2007		December 31, 2006
500 Index Trust	$	1,085,488	$	72,026	$	105,034
500 Index Trust B	$	37,506	$	18,968	$	17,665
Absolute Return Trust		N/A		N/A		N/A
Active Bond Trust	$	2,344		N/A	$	8,999
All Cap Core Trust	$	1,018,237	$	928,552	$	504,261
All Cap Growth Trust	$	604,475	$	595,219	$	967,778
All Cap Value Trust	$	98,177	$	263,076	$	275,218
Alpha Opportunities Trust	$	402,315		N/A		N/A
American Diversified Growth & Income Trust		N/A		N/A		N/A
American Fundamental Holdings Trust		N/A		N/A		N/A
American Global Diversification Trust		N/A		N/A		N/A
Balanced Trust		N/A		N/A		N/A
Blue Chip Growth Trust	$	1,720,420	$	1,087,761	$	1,382,198
Capital Appreciation Trust	$	1,672,803	$	1,310,557	$	1,409,074
Capital Appreciation Value Trust	$	83,616		N/A		N/A
Core Allocation Trust		N/A		N/A		N/A
Core Allocation Plus Trust	$	67,810		N/A		N/A
Core Balanced Trust		N/A		N/A		N/A
Core Bond Trust		N/A		N/A		N/A
Core Disciplined Diversification Trust		N/A		N/A		N/A


	Total Commissions Paid		Total Commissions Paid		Total Commissions Paid
	for Fiscal Year Ended		for Fiscal Year Ended		for Fiscal Year Ended
Fund	December 31, 2008		December 31, 2007		December 31, 2006
Core Fundamental Holdings Trust		N/A		N/A		N/A
Core Global Diversification Trust		N/A		N/A		N/A
Core Strategy Trust		N/A		N/A		N/A
Disciplined Diversification Trust	$	63,430		N/A		N/A
Emerging Markets Value Trust	$	347,739	$	807,256		N/A
Emerging Small Company Trust	$	619,150	$	536,457	$	1,006,364
Equity-Income Trust	$	840,472	$	770,767	$	717,267
Financial Services Trust	$	23,935	$	34,364	$	15,651
Floating Rate Income Trust		N/A		N/A		N/A
Franklin Templetong Founding Allocation Trust		N/A		N/A		N/A
Fundamental Value Trust	$	863,044	$	272,248	$	264,577
Global Allocation Trust	$	261,870	$	218,754	$	201,890
Global Bond Trust		N/A		N/A		N/A
Global Real Estate Trust	$	1,811,302	$	1,214,931	$	2,343,205
Global Trust	$	278,460	$	757,331	$	378,363
Growth Equity Trust	$	578,641		N/A		N/A
Growth Opportunities Trust		N/A		N/A		N/A
Growth Trust		N/A		N/A		N/A
Health Sciences Trust	$	186,254	$	242,700	$	283,232
High Income Trust	$	88,751	$	45,509	$	108,272
High Yield Trust		N/A		N/A		N/A
Income Trust	$	154,818	$	123,172		N/A
International Core Trust	$	1,014,043	$	785,627	$	606,468
International Equity Index Trust A	$	34,868	$	77,695	$	103,067
International Equity Index Trust B	$	46,210	$	70,304	$	97,945
International Growth Trust		N/A		N/A		N/A
International Index Trust		N/A		N/A		N/A
International Opportunities Trust	$	2,407,510	$	2,200,201	$	1,781,650
International Small Cap Trust	$	605,137	$	656,841	$	693,036
International Small Company Trust	$	154,087	$	145,350	$	413,869
International Value Trust	$	819,759	$	1,108,500	$	1,637,930
Intrinsic Value Trust		N/A		N/A		N/A
Investment Quality Bond Trust	$	33		N/A		N/A
Large Cap Trust	$	880,355	$	370,514	$	149,505
Large Cap Value Trust	$	308,111	$	159,167	$	119,387
Lifecycle 2010 Trust		N/A		N/A		N/A
Lifecycle 2015 Trust		N/A		N/A		N/A
Lifecycle 2020 Trust		N/A		N/A		N/A
Lifecycle 2025 Trust		N/A		N/A		N/A
Lifecycle 2030 Trust		N/A		N/A		N/A
Lifecycle 2035 Trust		N/A		N/A		N/A
Lifecycle 2040 Trust		N/A		N/A		N/A
Lifecycle 2045 Trust		N/A		N/A		N/A
Lifecycle 2050 Trust		N/A		N/A		N/A
Lifecycle Retirement Trust		N/A		N/A		N/A
Lifestyle Aggressive Trust		N/A		N/A		N/A
Lifestyle Balanced Trust		N/A		N/A		N/A


	Total Commissions Paid		Total Commissions Paid		Total Commissions Paid
	for Fiscal Year Ended		for Fiscal Year Ended		for Fiscal Year Ended
Fund	December 31, 2008		December 31, 2007		December 31, 2006
Lifestyle Conservative Trust		N/A		N/A		N/A
Lifestyle Growth Trust		N/A		N/A		N/A
Lifestyle Moderate Trust		N/A		N/A		N/A
Mid Cap Index Trust	$	205,990	$	145,297	$	117,387
Mid Cap Intersection Trust	$	339,741	$	593,683		N/A
Mid Cap Stock Trust	$	2,495,824	$	2,454,098	$	2,557,393
Mid Cap Value Equity Trust	$	138,738	$	81,796	$	104,548
Mid Value Trust	$	248,488	$	279,439	$	236,311
Money Market Trust		N/A		N/A		N/A
Money Market Trust B		N/A		N/A		N/A
Mutual Shares Trust	$	370,189	$	210,058		N/A
Natural Resources Trust	$	385,261	$	647,644	$	452,499
Optimized All Cap Trust	$	4,026,207	$	1,006,123	$	916,296
Optimized Value Trust	$	2,234,059	$	1,732,177	$	903,366
Overseas Equity Trust	$	879,495	$	635,499	$	315,575
Pacific Rim Trust	$	359,701	$	728,758	$	360,459
Real Estate Equity Trust	$	200,047	$	130,336	$	272,273
Real Estate Securities Trust	$	978,469	$	1,438,075	$	1,461,705
Real Return Bond Trust		N/A		N/A		N/A
Science & Technology Trust	$	800,123	$	1,288,722	$	1,454,620
Short-Term Bond Trust		N/A		N/A		N/A
Short Term Governement Income Trust		N/A		N/A		N/A
Small Cap Growth Trust	$	1,100,498	$	672,440	$	1,033,787
Small Cap Index Trust	$	177,037	$	50,760	$	103,456
Small Cap Intrinsic Value Trust	$	302,717	$	491,051		N/A
Small Cap Opportunities Trust	$	838,088	$	513,624	$	427,769
Small Cap Value Trust	$	319,255	$	307,844	$	324,230
Small Company Growth Trust	$	208,302	$	228,267	$	116,457
Small Company Value Trust	$	295,644	$	280,370	$	235,325
Smaller Company Growth Trust	$	167,903		N/A		N/A
Spectrum Income Trust	$	90,596	$	71,261	$	53,437
Strategic Bond Trust		N/A		N/A		N/A
Strategic Income Trust	$	23,929	$	7,114	$	20,621
Total Bond Market Trust A		N/A		N/A		N/A
Total Bond Market Trust B		N/A		N/A		N/A
Total Return Trust		N/A		N/A		N/A
Total Stock Market Index Trust	$	44,228	$	23,546	$	5,256
U.S. Government Securities Trust		N/A		N/A		N/A
U.S. High Yield Bond Trust	$	1,231	$	2,018	$	4,492
U.S. Multi Sector Trust	$	984,737	$	1,363,510	$	817,237
Utilities Trust	$	444,154	$	582,182	$	409,642
Value & Restructuring Trust	$	319,979	$	278,189	$	208,297
Value Opportunities Trust		N/A		N/A		N/A
Value Trust	$	633,003	$	430,531	$	513,599
Vista Trust	$	136,697	$	135,970	$	192,634

Brokerage Commissions Paid to Affiliated Brokers. For the years ended December 31, 2008, 2007 and 2006, commissions were paid by a Fund to brokers affiliated with the Fund’s subadvisers as follows:

Commissions Paid to J.P. Morgan. For the years ended December 31, 2008, 2007 and 2006, brokerage commissions were paid as follows:


			% OF FUND’S BROKERAGE			% OF AGGREGATE $ AMOUNT
	AGGREGATE $ AMOUNT OF		COMMISSIONS REPRESENTED			OF TRANSACTIONS FOR THE
Vista	COMMISSIONS		FOR THE PERIOD			PERIOD
Year ended December 31, 2008:	$	11,280		8.25	%		1.21	%
Year ended December 31, 2007:	$	1,482		1.09	%		0.08	%
Year ended December 31, 2006:	$	848		0.00	%		0.00	%

Commissions Paid to Morgan Stanley. For the years ended December 31, 2008, 2007 and 2006, brokerage commissions were paid as follows:


			% OF FUND’S BROKERAGE			% OF AGGREGATE $ AMOUNT
	AGGREGATE $ AMOUNT OF		COMMISSIONS REPRESENTED			OF TRANSACTIONS FOR THE
Value	COMMISSIONS		FOR THE PERIOD			PERIOD
Year ended December 31, 2008:	$	37,671		5.95	%		0.83	%
Year ended December 31, 2007:	$	11,878		2.76	%		0.12	%
Year ended December 31, 2006:	$	31,145		6.06	%		0.00	%

Commissions Paid to Wachovia. For the years ended December 31, 2008, 2007 and 2006, brokerage commissions were paid as follows:


			% OF FUND’S BROKERAGE			% OF AGGREGATE $ AMOUNT
	AGGREGATE $ AMOUNT OF		COMMISSIONS REPRESENTED			OF TRANSACTIONS FOR THE
Core Bond	COMMISSIONS		FOR THE PERIOD			PERIOD
Year ended December 31, 2008:	$	0		0.00	%		0.38	%
Year ended December 31, 2007:	$	0		0.00	%		0.49	%
Year ended December 31, 2006:	$	0		0.00	%		0.74	%

REDEMPTION OF SHARES

JHT will redeem all full and fractional fund shares for cash at the NAV per share of each fund. Payment for shares redeemed will generally be made within seven days after receipt of a proper notice of redemption. However, JHT may suspend the right of redemption or postpone the date of payment beyond seven days during any period when:


–		trading on the NYSE is restricted, as determined by the SEC, or the NYSE is closed for other than weekends and holidays;

–		an emergency exists, as determined by the SEC, as a result of which disposal by JHT of securities owned by it is not reasonably practicable or it is not reasonably practicable for JHT fairly to determine the value of its net assets; or

–		the SEC by order so permits for the protection of security holders of JHT.

Special Redemptions. Although it would not normally do so, a fund has the right to pay the redemption price of shares of the fund in whole or in part in portfolio securities as prescribed by the Trustees. When a shareholder sells any portfolio securities received in a redemption of fund shares, the shareholder will incur a brokerage charge. Any such securities would be valued for the purposes of fulfilling such a redemption request in the same manner as they are in computing the fund’s NAV.

JHT has adopted Procedures Regarding Redemptions in Kind by Affiliates (the “Procedures”) to facilitate the efficient and cost effective movement of portfolio assets in connection with certain investment and marketing strategies. It is the position of the SEC that the 1940 Act prohibits an investment company, such as a fund, from satisfying a redemption request from a shareholder that is affiliated with the investment company by means of an in kind distribution of portfolio securities. However, under a no-action letter issued by the SEC, a redemption in kind to an affiliated shareholder is permissible provided certain conditions are met. The Procedures, which are intended to conform to the requirements of this no-action letter, allow for in kind redemptions by affiliated fund shareholders subject to specified conditions, including that:


–		the distribution is effected through a pro rata distribution of the distributing fund’s portfolio securities;

–		the distributed securities are valued in the same manner as they are in computing the fund’s NAV;

–		neither the affiliated shareholder nor any other party with the ability and the pecuniary incentive to influence the redemption in kind may select or influence the selection of the distributed securities; and

–		the Trustees of JHT, including a majority of the Independent Trustees, must determine on a quarterly basis that any redemptions in kind to affiliated shareholders made during the prior quarter were effected in accordance with the Procedures, did not favor the affiliated shareholder to the detriment of any other shareholder and were in the best interests of the fund.

DETERMINATION OF NET ASSET VALUE

For purposes of calculating the NAV of a fund’s shares, the following procedures are utilized wherever applicable.

For purposes of calculating the NAV per share of each fund, investment transactions are accounted for on a “trade date plus one basis” (i.e. the business day following the trade date). However, for financial reporting purposes, investment transactions are reported on the trade date.

Except for the types of securities described below, securities held by the funds will be valued as follows:


–		Securities that are traded on stock exchanges (including securities traded in both the OTC market and on an exchange) are valued at the last sales price as of the close of the regularly scheduled day–time trading of the NYSE on the day the securities are being valued, or, lacking any sales, at the closing bid prices.

–		Securities traded only in the OTC market are valued at the last bid prices quoted by brokers that make markets in the securities at the close of day–time trading on the NYSE.

–		Securities and assets for which market quotations are not readily available are valued at fair value as determined in good faith by the Trustees or their designee.

–		A fund’s interest in entities such as limited partnerships and other pooled investment vehicles, such as hedge funds, will be subject to fair valuation. In general, the fair value of a fund’s interest in a hedge fund will represent the amount that the fund could reasonably expect to receive from a hedge fund or from a third party if the fund’s interest was redeemed or sold at the time of valuation, based on information available at the time the valuation is made that the fund reasonably believes to be reliable. In determining fair value for investments in hedge funds, a fund ordinarily may rely upon the fair value information provided to it by the administrator for and/or manager of a hedge fund in which the fund has invested, computed in compliance with the hedge fund’s valuation policies and procedures, in addition to any other relevant information available at the time of valuation. In certain instances, the Trustees or their designee may determine that a reported valuation does not reflect fair value, based on additional information available or other factors, and may accordingly determine in good faith the fair value of the assets, which may differ from the reported valuation.

–		Shares of the Underlying Funds held by a Fund of Fund are valued at their NAV as described in the Prospectus under “Purchase and Redemption of Shares.”

Non-Negotiable Security. A non-negotiable security not treated as an illiquid security because it may be redeemed with the issuer, subject to a penalty for early redemption, shall be assigned a value that takes into account the reduced amount that would be received if it were currently liquidated.

Debt Instruments with Remaining Maturities of 60 Days or Less. Debt instruments with a remaining maturity of 60 days or less held by each of the funds, other than the Money Market Trusts, and all instruments held by the Money Market Trusts, will be valued on an amortized cost basis. Under this method of valuation, the instrument is initially valued at cost (or in the case of instruments initially valued at market value, at the market value on the day before its remaining maturity is such that it qualifies for amortized cost valuation). After the initial valuation, the fund assumes a constant proportionate amortization in value until maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price that would be received upon sale of the instrument.

Money Market Trusts – Rule 2a-7. Each of the Money Market Trusts uses the amortized cost valuation method in reliance upon Rule 2a-7 under the 1940 Act. As required by this rule, each Money Market Trust will maintain a dollar weighted average maturity of 90 days or less. In addition, each Money Market Trust is only permitted to purchase securities that the subadviser determines present minimal credit risks and at the time of purchase are “eligible securities,” as defined by Rule 2a-7. Generally, eligible securities must be rated by a NRSRO in one of the two highest rating categories for short-term debt obligations or be of comparable quality. Each Money Market Trust will invest only in obligations that have remaining maturities of 397 days or less.

The Trustees have established procedures designed to stabilize, to the extent reasonably possible, each Money Market Trust’s price per share as computed for the purpose of sales and redemptions at $10.00 in the case of the Money Market Trust and $1.00 in the case of the Money Market Trust B. The procedures direct the Adviser to establish procedures that will allow for the monitoring of the propriety of the continued use of amortized cost valuation to maintain a constant net asset value per share (“NAV”) of $10.00 for the Money Market Trust and $1.00 for the case of the Money Market Trust B. The procedures also direct the Adviser to determine NAV based upon available market quotations (“Shadow Pricing”), pursuant to which each Money Market Trust shall value weekly (a) all portfolio instruments for which market quotations are readily available at market, and (b) all portfolio instruments for which market quotations are not readily available or are not obtainable from a pricing service, at their fair value as determined in good faith by the Trustees (the actual calculations, however, may be made by persons acting pursuant to the direction of the Trustees.) If the fair value of a security needs to be determined, the subadviser will provide determinations, in accordance with procedures and methods established by the Trustees of JHT, of the fair value of securities held by a Money Market Trust.

In the event that the deviation from the amortized cost exceeds 0.50 of 1% or $0.05 per share in NAV, the Adviser shall promptly call a special meeting of the Trustees to determine what, if any, action should be initiated. Where the Trustees believe the extent of any deviation from a Money Market Trust’s amortized cost NAV may result in material dilution or other unfair results to investors or existing shareholders, they shall take the action they deem appropriate to eliminate or reduce to the extent reasonably practical such dilution or unfair results. The actions that may be taken by the Trustees include, but are not limited to:

	•		redeeming shares in kind;

	•		selling portfolio instruments prior to maturity to realize capital gains or losses or to shorten the average portfolio maturity of a Money Market Trust;

	•		withholding or reducing dividends;

	•		utilizing a NAV based on available market quotations; or

	•		investing all cash in instruments with a maturity on the next business day.

A Money Market Trust may also reduce the number of shares outstanding by redeeming proportionately from shareholders, without the payment of any monetary compensation, such number of full and fractional shares as is necessary to maintain the NAV at $10.00 for the Money Market Trust or $1.00 for the Money Market Trust B. Any such redemption will be treated as a negative dividend for purposes of the net investment factor under the contracts issued by Manulife New York and Manufacturers USA.

POLICY REGARDING DISCLOSURE OF PORTFOLIO HOLDINGS

The Board has adopted the Policy Regarding Disclosure of Portfolio Holdings (“Disclosure Policy”) to protect the interests of the shareholders of JHT and to address potential conflicts of interest that could arise between the interests of shareholders and the interests of the Adviser, or the interests of a fund’s subadvisers, principal underwriter or affiliated persons of a fund’s Adviser or principal underwriter. JHT’s general policy with respect to the release of portfolio holdings to non-affiliated persons is to do so only in limited

circumstances and only to provide nonpublic information regarding portfolio holdings to any person, including affiliated persons, on a “need to know” basis and, when released, to release such information only as consistent with applicable legal requirements and the fiduciary duties owed to shareholders. JHT applies its policy uniformly to all, including individual and institutional investors, intermediaries, affiliated persons of a fund, and to all third party service providers and rating agencies.

Portfolio holdings information that is not publicly available will be released only pursuant to the exceptions described in the Disclosure Policy. Material nonpublic holdings information may be provided to non-affiliated persons as part of the investment activities of a fund to: entities which, by explicit agreement, are required to maintain the confidentiality of the information disclosed; rating organizations, such as Morningstar and Lipper; Vestek (Thompson Financial) or other entities for the purpose of compiling reports and preparing data; proxy voting services for the purpose of voting proxies; entities providing computer software; courts (including bankruptcy courts) or regulators with jurisdiction over JHT, and its affiliates; and, institutional traders to assist in research and trade execution. Exceptions to the portfolio holdings release policy can only be approved by JHT’s CCO or his duly authorized delegate after considering: (a) the purpose of providing such information; (b) the procedures that will be used to ensure that such information remains confidential and is not traded upon; and (c) whether such disclosure is in the best interest of the shareholders.

At this time, the entities receiving information described in the preceding paragraph are: Vestek (holdings, monthly with 30 day lag); Evare (holdings, daily); Morningstar (holdings, monthly with 32 day lag); Lipper (holdings, monthly with 32 day lag); Fact Set (holdings, daily); PricewaterhouseCoopers (prices, annual audits); Confluence (holdings, daily); ISS (holdings, daily); Elkins McSherry (purchases and sales, quarterly); NASDQ (NAVs, daily); S&P’s (holdings, monthly with 32 day lag); Charles River (holdings and securities details, daily); and DST (NAVs, daily).

The CCO is also required to pre-approve the disclosure of nonpublic information regarding portfolio holdings to any affiliated persons of JHT. The CCO will use the same three considerations stated above before approving disclosure of nonpublic information to affiliated persons.

The CCO shall report to the Board whenever additional disclosures of portfolio holdings are approved. The CCO’s report shall be at the Board meeting following such approval. The CCO then provides annually a report to the Board regarding the operation of the policy and any material changes recommended as a result of such review.

When the CCO believes that the disclosure of nonpublic information to a non-affiliated person is a potential conflict of interest between the interest of the shareholders and the interest of affiliated persons of JHT, the CCO shall refer the conflict to the Board. The Board shall then only permit such disclosure of the nonpublic information if in their reasonable business judgment they conclude such disclosure will be in the best interests of JHT’s shareholders.

The receipt of compensation by a fund, the Adviser, a subadviser or an affiliate as consideration for disclosing nonpublic portfolio holdings information is not deemed a legitimate business purpose and is strictly forbidden.

JHT Portfolio Holdings Currently Posted on a Website. Each of the Funds of Funds invests in shares of other funds. The holdings of each Fund of Funds in other funds will be posted to the website listed below within 30 days after each calendar quarter end and within 30 days after any material changes are made to the holdings of a Fund of Fund. In addition, the ten largest holdings of each fund will be posted to the website listed below 30 days after each calendar quarter end. The information described above will remain on the website until the date JHT files its Form N-CSR or Form N-Q with the SEC for the period that includes the date as of which the website information is current. JHT’s Form N-CSR and Form N-Q will contain each fund’s entire portfolio holdings as of the applicable calendar quarter end.

http://jh1.jhlifeinsurance.com/JHPortal/channel/0,2446,2072859_2079697,00.html

http://www.jhannuities.com/FundPerformance/FundPerformance.aspx?globalNavID=4

SHAREHOLDERS OF JHT

JHT currently serves as the underlying investment medium for premiums and purchase payments invested in variable contracts issued by insurance companies affiliated with MFC, the ultimate controlling parent of the Adviser.

Control Persons. As of March 31, 2009, no one was considered a control person of any of the funds. A control person is one who has beneficial ownership of more than 25% of the voting securities of a fund or who acknowledges or asserts having or is adjudicated to have control of a fund. As of March 31, 2009, shares of JHT were legally owned 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”), John Hancock Variable Life Insurance Company (“JHVLICO”) (collectively, the “Insurance Companies”) and the Funds of Funds.

The Insurance Companies hold shares principally in their separate accounts. They may also hold shares directly. An Insurance Company may legally own in the aggregate more than 25% of the shares of a fund. For purposes of the 1940 Act, any person who owns “beneficially” more than 25% of the outstanding shares of a fund is presumed to “control” the fund. Shares are generally deemed to be beneficially owned by a person who has the power to vote or dispose of the shares. An Insurance Company has no power to exercise any discretion in voting or disposing of any of the shares that it legally owns, except that it may have the power to dispose of shares that it holds directly. Consequently, an Insurance Company would be presumed to control a fund only if it holds directly for its own account, and has the power to dispose of, more than 25% of the shares of the fund. The Funds of Funds, individually or collectively, may hold more than 25% of the shares of an Underlying Fund.

Shareholders. As of March 31, 2009, JHT Shareholders are as follows:


–		the Insurance Companies affiliated with Manulife Financial discussed above (the “Manulife Insurance Companies”). (Each Insurance Company that is a shareholder of JHT holds of record in its separate accounts JHT shares attributable to variable contracts), and

–		the Lifestyle Trusts, Franklin Templeton Founding Allocation Trust, and the Index Allocation Trust, each of which invests in and holds of record shares of Underlying Funds.

JHT may be used for other purposes in the future, such as funding annuity contracts issued by other insurance companies. JHT shares are not offered directly to, and may not be purchased directly by, members of the public. The paragraph below lists the entities that are eligible to be shareholders of JHT.

Entities Eligible to Be Shareholders of JHT. In order to reflect the conditions of Section 817(h) and other provisions of the Code and regulations thereunder, shares of JHT may be purchased only by the following eligible shareholders:


–		separate accounts of the Manulife Insurance Companies and other insurance companies;

–		the Manulife Insurance Companies and certain of their affiliates; and

–		any trustee of a qualified pension or retirement plan.

Voting of Shares by the Insurance Companies and JHT. The Manulife Insurance Companies have the right to vote upon matters that may be voted upon at any JHT Shareholders’ meeting. These companies will vote all shares of the funds issued to them in proportion to the timely voting instructions received from owners of variable contracts participating in the separate accounts of such companies that are registered under the 1940 Act (“Contract Owner Instructions”). The effect of proportional voting is that a small number of contract owners can determine the outcome of the voting. In addition, JHT will vote all shares of the funds issued to the Core Fundamental Holdings Trust, Core Global Diversification Trust, Core Allocation Trust, Core Balanced Trust, Core Disciplined Diversification Trust, Lifestyle Trusts, the Lifecycle Trusts, the Franklin Templeton Founding Allocation Trust, the Index Allocation Trust and the Absolute Return Trust in proportion to Contract Owner Instructions.

Mixed Funding. Shares of JHT may be sold to JHT Shareholders described above. JHT currently does not foresee any disadvantages to any JHT Shareholders arising from the fact that the interests of those investors may differ. Nevertheless, the Board will monitor events in order to identify any material irreconcilable conflicts which may possibly arise due to differences of tax treatment or other considerations and to determine what action, if any, should be taken in response thereto. Such an action could include the withdrawal of a JHT Shareholder from investing in JHT or a particular fund.

Principal Holders. The tables below set forth the principal holders of the shares of each fund. Principal holders are those who own of record or are known by JHT to own beneficially 5% or more of a series of a fund’s outstanding shares.

As of March 31, 2009, four of the Manulife Insurance Companies — JHLICO (USA), “JHLICO New York”, JHLICO and JHLVICO — owned of record all of the outstanding Series I and II shares of JHT funds.

As of March 31, 2009, the Class NAV shares were held principally by the Lifestyle Trusts, Lifecycle Trusts, Index Allocation Trust, Franklin Templeton Founding Allocation Trust, American Fundamental Holdings Trust and American Global Diversification Trust. As of March 31, 2009, two of the Manulife Insurance Companies — JHLICO and JHVLICO owned of record 5% or more of the outstanding shares of the NAV class of the Funds indicated below:


	JHVLICO			JHLICO
FUNDS	% OF TOTAL			% OF TOTAL
JHT Emerging Small Co Trust		17.23	%		0.14	%
JHT Real Estate Securities Trust		62.27	%		31.99	%
JHT Pacific Rim Trust		56.84	%		1.26	%
JHT International Core Trust		1.89	%		0.02	%
JHT Real Return Bond Trust		1.22	%		0.05	%
JHT Natural Resources Trust		18.90	%		0.28	%
JHT Large Cap Value Trust		5.22	%		0.45	%
JHT Optimized All Cap Trust		67.65	%		31.93	%
JHT American Century Small Company Trust		81.26	%		18.22	%
JHT Core Equity Trust		64.57	%		0.69	%
JHT PIM Classic Value Trust		69.01	%		7.09	%
JHT Optimized Value Trust		0.87	%		0.00	%
JHT Strategic Income Trust		0.22	%		0.00	%
JHT International Equity Index		44.21	%		15.01	%
JHT Large Cap Trust		43.70	%		0.04	%
JHT International Opportunities Trust		4.10	%		0.16	%
JHT Wells Capital Core Bond Trust		2.20	%		0.09	%
JHT US High Yield Bond Trust		2.98	%		0.05	%
JHT Global Real Estate		0.12	%		0.02	%
JHT Small Cap Opportunities Trust		1.98	%		0.00	%
JHT Investment Quality Bond Trust		9.04	%		0.25	%
JHT US Government Securities Trust		2.44	%		1.57	%
JHT Income & Value Trust		50.15	%		0.00	%
JHT Blue Chip Growth Trust		26.52	%		12.41	%
JHT Equity Income Trust		17.03	%		8.88	%
JHT Global Bond Trust		9.36	%		4.80	%
JHT Strategic Bond Trust		0.72	%		0.01	%
JHT Global Trust		0.35	%		0.01	%
JHT All Cap Growth Trust		60.27	%		1.44	%
JHT International Small Cap Trust		7.98	%		0.16	%
JHT All Cap Core Trust		0.05	%		0.01	%
JHT Value Trust		77.55	%		0.18	%
JHT High Yield Trust		1.89	%		1.31	%
JHT Lifestyle Conservative Trust		29.68	%		0.62	%
JHT Lifestyle Moderate Trust		22.20	%		0.81	%
JHT Lifestyle Balanced Trust		52.36	%		39.36	%
JHT Lifestyle Growth Trust		29.65	%		1.30	%
JHT Lifestyle Aggressive Trust		17.41	%		0.64	%
JHT Small Company Value Trust		2.45	%		0.07	%
JHT US Large Cap Trust		53.27	%		0.06	%
JHT Mid Cap Stock Trust		28.34	%		10.90	%
JHT International Value Trust		2.16	%		0.08	%


	JHVLICO			JHLICO
FUNDS	% OF TOTAL			% OF TOTAL
JHT Total Return Trust		6.72	%		1.40	%
JHT Global Allocation Trust		83.49	%		0.00	%
JHT Small Cap Index Trust		4.30	%		1.54	%
JHT Mid Cap Index Trust		3.60	%		1.02	%
JHT Total Stock Market Index Trust		51.26	%		44.88	%
JHT Capital Appreciation Trust		10.56	%		6.80	%
JHT Health Science Trust		38.11	%		46.82	%
JHT Financial Services Trust		38.28	%		53.60	%
JHT Fundamental Value Trust		0.68	%		0.04	%
JHT Utilities Trust		73.97	%		1.07	%
JHT Mid Cap Value Trust		57.79	%		2.70	%
JHT All Cap Value Trust		57.82	%		0.27	%
JHT Emerging Markets Value Trust		2.03	%		0.01	%
JHT Mid Cap Intersection Trust		1.89	%		0.30	%
JHT Disciplined Diversification Trust		0.19	%		0.00	%
JHT Franklin Templeton Founding Allocation Trust		5.96	%		0.00	%
JHT Capital Appreciation Value Trust		2.90	%		0.00	%
JHT Science & Technology Trust		49.65	%		1.34	%
JHT Overseas Equity Trust B		49.52	%		41.70	%
JHT 500 Index Trust B		61.71	%		21.46	%
JHT Wellington Small Cap Growth Trust		41.83	%		14.67	%
JHT Money Market Trust B		60.18	%		18.40	%
JHT SHORT-TERM BOND TRUST		56.52	%		42.42	%
JHT Total Bond Market Trust B		55.58	%		38.41	%
JHT MID VALUE TRUST		17.21	%		8.95	%
JHT SMALL CAP VALUE TRUST		33.24	%		18.15	%
JHT ACTIVE BOND TRUST		19.95	%		15.32	%

Trustees and officers of JHT, in the aggregate, own or have the right to provide voting instructions for less than 1% of the outstanding shares of each share class of each fund.

HISTORY OF JHT

JHT Name Change. Prior to January 1, 2005, the name of JHT was Manufacturers Investment Trust. Prior to October 1, 1997, the name of JHT was NASL Series Trust.

Prior Names of the Funds. Some of the names of the funds have been changed at various times. The prior name of each such fund and the date of the name change are set forth below.


Existing Name	Prior Name	Date of Change
Blue Chip Growth	Pasadena Growth	October 1, 1996
Quantitative Equity	Common Stock	December 31, 1996
Equity-Income	Value Equity	December 31, 1996
Emerging Small Company	Emerging Growth	November 2, 1998
Large Cap Growth	Aggressive Asset Allocation	May 1, 1999
Income & Value	Moderate Asset Allocation	May 1, 1999
Diversified Bond	Conservative Asset Allocation	May 1, 1999

ORGANIZATION OF JHT

Organization of JHT. JHT was originally organized on August 3, 1984 as “NASL Series Fund, Inc.” (“NASL”), a Maryland corporation. Effective December 31, 1988, NASL was reorganized as a Massachusetts business trust. Pursuant to such reorganization, JHT assumed all the assets and liabilities of NASL and carried on its business and operations with the same investment management arrangements as were in effect for NASL at the time of the reorganization. The assets and liabilities of each of NASL’s separate portfolios were assumed by the corresponding fund.

Classification. JHT is a no-load, open-end management investment company registered with the SEC under the 1940 Act.

Powers of the Trustees of JHT. Under Massachusetts law and JHT’s Declaration of Trust and By-Laws, the management of the business and affairs of JHT is the responsibility of its Trustees.

The Declaration of Trust authorizes the Trustees of JHT without shareholder approval to do the following:


–		Issue an unlimited number of full and fractional shares of beneficial interest having a par value of $.01 per share;

–		Divide such shares into an unlimited number of series of shares and to designate the relative rights and preferences thereof;

–		Issue additional series of shares or separate classes of existing series of shares;

–		Approve fund mergers, to the extent consistent with applicable laws;

–		Designate a class of shares of a fund as a separate fund;

–		Approve mergers of series (to the extent consistent with applicable laws and regulations); and

–		Designate a class of shares of a series as a separate series.

Shares of JHT. The shares of each fund, when issued and paid for, will be fully paid and non-assessable and will have no preemptive or conversion rights. Shares of each fund have equal rights with regard to redemptions, dividends, distributions and liquidations with respect to that fund. Holders of shares of any fund are entitled to redeem their shares as set forth under “Redemption of Shares.”

Each issued and outstanding share is entitled to participate equally in dividends and distributions declared by the respective fund and upon liquidation in the net assets of such fund remaining after satisfaction of outstanding liabilities. For these purposes and for purposes of determining the sale and redemption prices of shares, any assets that are not clearly allocable to a particular fund will be allocated in the manner determined by the Trustees. Accrued liabilities that are not clearly allocable to one or more funds will also be allocated among the funds in the manner determined by the Trustees.

Shareholder Voting. Shareholders of each fund are entitled to one vote for each full share held (and fractional votes for fractional shares held) irrespective of the relative net asset values of the shares of the fund. All shares entitled to vote are voted by series. However, when voting for the election of Trustees and when otherwise permitted by the 1940 Act, shares are voted in the aggregate and not by series. Only shares of a particular fund are entitled to vote on matters determined by the Trustees to affect only the interests of that fund. Pursuant to the 1940 Act and the rules and regulations thereunder, certain matters approved by a vote of a majority of all the shareholders of JHT may not be binding on a fund whose shareholders have not approved such matter. There will normally be no meetings of shareholders for the purpose of electing Trustees unless and until less than a majority of the Trustees holding office has been elected by shareholders, at which time the Trustees then in office will call a shareholders’ meeting for the election of Trustees. Holders of not less than two-thirds of the outstanding shares of JHT may remove a Trustee by a vote cast in person or by proxy at a meeting called for such purpose. Shares of JHT do not have cumulative voting rights, which means that the holders of more than 50% of JHT’s shares voting for the election of Trustees can elect all of the Trustees if they so choose. In such event, the holders of the remaining shares would not be able to elect any Trustees.

Shareholder Liability. Under Massachusetts law, shareholders of JHT could, under certain circumstances, be held personally liable for the obligations of JHT. However, the Declaration of Trust contains an express disclaimer of shareholder liability for acts or obligations of JHT and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the Trustees or any officer of JHT. The Declaration of Trust also provides for indemnification out of the property of a

JHT fund for all losses and expenses of any shareholder held personally liable for the obligations of such portfolio. In addition, the Declaration of Trust provides that JHT shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of JHT and satisfy any judgment thereon, but only out of the property of the affected fund. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which a particular fund would be unable to meet its obligations.

ADDITIONAL INFORMATION CONCERNING TAXES

The following discussion is a general and abbreviated summary of certain additional tax considerations affecting a fund and its shareholders. No attempt is made to present a detailed explanation of all federal, state, local and foreign tax concerns, and the discussions set forth here and in the Prospectus do not constitute tax advice. Investors are urged to consult their own tax advisors with specific questions relating to federal, state, local or foreign taxes.

Since the funds’ shareholders are principally: (i) life insurance companies whose separate accounts invest in the funds for purposes of funding variable annuity and variable life insurance contracts and (ii) trustees of qualified pension and retirement plans, no discussion is included herein as to the U.S. federal income tax consequences to the holder of a variable annuity or life insurance contract who allocates investments to a fund. For information concerning the U.S. federal income tax consequences to such holders, see the prospectus for such contract. Holders of variable annuity or life insurance contracts should consult their tax advisors about the application of the provisions of the tax law described in this SAI in light of their particular tax situations.

JHT believes that each fund will qualify as a regulated investment company under Subchapter M of the Code. If any fund does not qualify as a regulated investment company, it will be subject to U.S. federal income tax on its net investment income and net capital gains. As a result of qualifying as a regulated investment company, no fund will be subject to U.S. federal income tax on its net investment income (i.e., its investment company taxable income, as that term is defined in the Code, determined without regard to the deduction for dividends paid) and net capital gain (i.e., the excess of its net realized long-term capital gain over its net realized short-term capital loss), if any, that it distributes to its shareholders in each taxable year, provided that it distributes to its shareholders at least 90% of its net investment income and 90% of its net tax-exempt interest income for such taxable year.

A fund will be subject to a non-deductible 4% excise tax to the extent that the fund does not distribute by the end of each calendar year: (a) at least 98% of its ordinary income for the calendar year; (b) at least 98% of its capital gain net income for the one-year period ending, as a general rule, on October 31 of each year; and (c) 100% of the undistributed ordinary income and capital gain net income from the preceding calendar years (if any). For this purpose, any income or gain retained by a fund that is subject to corporate tax will be considered to have been distributed by year-end. To the extent possible, each fund intends to make sufficient distributions to avoid the application of both corporate income and excise taxes. Under current law, distributions of net investment income and net capital gain are not taxed to a life insurance company to the extent applied to increase the reserves for the company’s variable annuity and life insurance contracts.

To qualify as a regulated investment company for income tax purposes, a fund must derive at least 90% of its annual gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in stock, securities and currencies, and net income derived from an interest in a qualified publicly traded partnership.

A “qualified publicly traded partnership” is a publicly traded partnership other than a publicly traded partnership that would satisfy the qualifying income requirements of Code Section 7704 if such qualifying income included only income derived from dividends, interest, payments with respect to securities loans, and gains from the sale or other disposition of stock, securities, or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived with respect to its business of investing in stock, securities and currencies (“regulated investment company-type income”). Qualified publicly traded partnerships therefore are publicly traded partnerships that derive more than 10% of their gross income from types of income, such as income derived from the buying and selling of commodities, or options, futures or forwards with respect to commodities, other than regulated investment company-type income. All of the income received by a fund from its investment in a qualified publicly traded partnership will be income satisfying the 90% qualifying income test. A fund investing in publicly traded partnerships might be required to recognize in its taxable year income in excess of its cash distributions from such publicly traded partnerships during that year. Such income, even if not reported to the fund by the publicly traded partnerships until after the end of that year, would nevertheless be subject to the regulated investment company income distribution requirements and would be taken into account for purposes of the 4% excise tax.

Under an Internal Revenue Service revenue ruling effective after September 30, 2006, income from certain commodities-linked derivatives in which certain funds invest is not considered qualifying income for purposes of the 90% qualifying income test. This ruling limits the extent to which a fund may receive income from such commodity-linked derivatives to a maximum of 10% of its annual gross income. Although certain commodity-linked notes are not affected by this revenue ruling, it is unclear what other types of commodity-linked derivatives are affected.

To qualify as a regulated investment company, a fund must also satisfy certain requirements with respect to the diversification of its assets. A fund must have, at the close of each quarter of the taxable year, at least 50% of the value of its total assets represented by cash, cash items, U.S. government securities, securities of other regulated investment companies, and other securities that, in respect of any one issuer, do not represent more than 5% of the value of the assets of the fund nor more than 10% of the voting securities of that issuer. In addition, at those times not more than 25% of the value of the fund’s assets may be invested in securities (other than United States Government securities or the securities of other regulated investment companies) of any one issuer, or of two or more issuers, which the fund controls and which are engaged in the same or similar trades or businesses or related trades or businesses, or of one or more qualified publicly traded partnerships.

If a fund failed to qualify as a regulated investment company, the fund would incur regular corporate income tax on its taxable income for that year, it would lose its deduction for dividends paid to shareholders, and it would be subject to certain gain recognition and distribution requirements upon requalification. Further distributions of income by the fund to its shareholders would be treated as dividend income, although such dividend income would constitute qualified dividend income subject to reduced federal income tax rates if the shareholder satisfies certain holding period requirements with respect to its shares in the fund. Compliance with the regulated investment company 90% qualifying income test and with the asset diversification requirements is carefully monitored by the Adviser and the subadvisers and it is intended that the funds will comply with the requirements for qualification as regulated investment companies.

Because JHT complies with the ownership restriction of U.S. Treasury Regulation Section 1.817-5(f), Rev. Rul. 81-225, IRS Revenue Ruling (“Rev. Rul.”) 2003-91, and Rev. Rul. 2003-92 (no direct ownership by the public), JHT expects each insurance company separate account to be treated as owning (as a separate investment) its proportionate share of each asset of any fund in which it invests, provided that the fund qualifies as a regulated investment company. Therefore, each fund intends and expects to meet the additional diversification requirements that are applicable to insurance company separate accounts under Subchapter L of the Code. These requirements generally provide that no more than 55% of the value of the assets of a fund may be represented by any one investment; no more than 70% by any two investments; no more than 80% by any three investments; and no more than 90% by any four investments. For these purposes, all securities of the same issuer are treated as a single investment and each United States government agency or instrumentality is treated as a separate issuer.

A fund may make investments that produce income that is not matched by a corresponding cash distribution to the fund, such as investments in pay-in-kind bonds or in obligations such as certain Brady Bonds and zero-coupon securities having original issue discount (i.e., an amount equal to the excess of the stated redemption price of the security at maturity over its issue price), or market discount (i.e., an amount equal to the excess of the stated redemption price at maturity of the security (appropriately adjusted if it also has original issue discount) over its basis immediately after it was acquired) if the fund elects to accrue market discount on a current basis. In addition, income may continue to accrue for federal income tax purposes with respect to a non-performing investment. Any such income would be treated as income earned by a fund and therefore would be subject to the distribution requirements of the Code. Because such income may not be matched by a corresponding cash distribution to a fund, such fund may be required to borrow money or dispose of other securities to be able to make distributions to its investors. In addition, if an election is not made to currently accrue market discount with respect to a market discount bond, all or a portion of any deduction for any interest expense incurred to purchase or hold such bond may be deferred until such bond is sold or otherwise disposed.

Certain of the funds may engage in hedging or derivatives transactions involving foreign currencies, forward contracts, options and futures contracts (including options, futures and forward contracts on foreign currencies) and short sales (see “Hedging and Other Strategic Transactions”). Such transactions will be subject to special provisions of the Code that, among other things, may affect the character of gains and losses realized by a fund (that is, may affect whether gains or losses are ordinary or capital), accelerate recognition of income of a Fund and defer recognition of certain of the fund’s losses. These rules could therefore affect the character, amount and timing of distributions to shareholders. In addition, these provisions (1) will require a fund to “mark-to-market” certain types of positions in its portfolio (that is, treat them as if they were closed out) and (2) may cause a fund to recognize income without receiving cash with which to pay dividends or make distributions in amounts necessary to satisfy the distribution requirement and avoid the 4% excise tax. Each fund intends to monitor its transactions, will make the appropriate tax elections and will make the

appropriate entries in its books and records when it acquires any option, futures contract, forward contract or hedged investment in order to mitigate the effect of these rules.

Funds investing in foreign securities or currencies may be subject to withholding or other taxes to foreign governments. Foreign tax withholding from dividends and interest, if any, is generally imposed at a rate between 10% and 35%. If a fund purchases shares in a “passive foreign investment company” (a “PFIC”), the fund may be subject to U.S. federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend by the fund to its shareholders. Additional charges in the nature of interest may be imposed on the fund in respect of deferred taxes arising from such distributions or gains. If a fund were to invest in a PFIC and elected to treat the PFIC as a “qualified electing fund” under the Code, in lieu of the foregoing requirements, the fund would be required to include in income each year a portion of the ordinary earnings and net capital gain of the qualified electing fund, even if not distributed to the fund. Alternatively, a fund can elect to mark-to-market at the end of each taxable year its shares in a PFIC; in this case, the fund would recognize as ordinary income any increase in the value of such shares, and as ordinary loss any decrease in such value to the extent it did not exceed prior increases included in income. Under either election, a fund might be required to recognize during a year income in excess of its distributions from PFICs and its proceeds from dispositions of PFIC stock during that year, and such income would nevertheless be subject to the distribution requirements and would be taken into account for purposes of the 4% excise tax.

Additional Tax Considerations. If a fund failed to qualify as a regulated investment company, (i) owners of contracts based on the fund would be treated as owning contract based solely on shares of the Fund (rather than on their proportionate share of the assets of such fund) for purposes of the diversification requirements under Subchapter L of the Code, and as a result might be taxed currently on the investment earnings under their contracts and thereby lose the benefit of tax deferral, and (ii) the fund would incur regular corporate federal income tax on its taxable income for that year and be subject to certain distribution requirements upon requalification. In addition, if a fund failed to comply with the diversification requirements of the regulations under Subchapter L of the Code, owners of contracts based on the fund might be taxed on the investment earnings under their contracts and thereby lose the benefit of tax deferral. Accordingly, compliance with the above rules is carefully monitored by the Adviser and the subadvisers and it is intended that the funds will comply with these rules as they exist or as they may be modified from time to time. Compliance with the tax requirements described above may result in a reduction in the return under a fund, since, to comply with the above rules, the investments utilized (and the time at which such investments are entered into and closed out) may be different from what the subadvisers might otherwise believe to be desirable.

Other Information. For more information regarding the tax implications for the purchaser of a variable annuity or life insurance contract who allocates investments to a fund, please refer to the prospectus for the contract.

The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations currently in effect. It is not intended to be a complete explanation or a substitute for consultation with individual tax advisors. For the complete provisions, reference should be made to the pertinent Code sections and the Treasury Regulations promulgated thereunder. The Code and Regulations are subject to change, possibly with retroactive effect.

LEGAL AND REGULATORY MATTERS

On June 25, 2007, John Hancock Investment Management Services, LLC (the “Adviser”) and John Hancock Distributors LLC (the “Distributor”) and two of their affiliates (collectively, the “John Hancock Affiliates”) reached a settlement with the SEC that resolved an investigation of certain practices relating to the John Hancock Affiliates’ variable annuity and mutual fund operations involving directed brokerage and revenue sharing. Under the terms of the settlement, each John Hancock Affiliate was censured and agreed to pay a $500,000 civil penalty to the United States Treasury. In addition, the Adviser and the Distributor agreed to pay disgorgement of $14,838,943 and prejudgment interest of $2,001,999 to the JHT funds that participated in the Adviser’s commission recapture program during the period from 2000 to April 2004. Collectively, all John Hancock Affiliates agreed to pay a total disgorgement of $16,926,420 and prejudgment interest of $2,361,460 to the entities advised or distributed by John Hancock Affiliates. The Adviser discontinued the use of directed brokerage in recognition of the sale of fund shares in April 2004.

Since February 2004, PIMCO, Allianz Global Investors of America L.P. (“AGI”) (formerly known as Allianz Dresdner Asset Management of America L.P.) (PIMCO’s parent company), and certain of their affiliates, trustees, and employees of PIMCO have been named as defendants in eleven lawsuits filed in various jurisdictions. These lawsuits concern “market timing,” and they have been transferred to and consolidated for pre-trial proceedings in a multi-district litigation proceeding in the U.S. District Court for the District of Maryland. The lawsuits have been commenced as putative class actions on behalf of investors who purchased, held or redeemed shares during specified periods, or as derivative actions. These lawsuits seek, among other things, unspecified compensatory damages plus interest and in some cases, punitive damages, the rescission of investment advisory contracts, the return of fees paid under those contracts and restitution.

These actions generally allege that certain hedge funds were allowed to engage in “market timing” in certain funds and this alleged activity was not disclosed. Pursuant to tolling agreements dated January 14, 2005 entered into with the derivative and class action plaintiffs, PIMCO, certain trustees and employees of PIMCO who were previously named as defendants have all been removed as defendants in the market timing actions.

Two nearly identical class action civil complaints have been filed in August 2005, in the Northern District of Illinois Eastern Division, alleging that the plaintiffs each purchased and sold a 10-year Treasury note futures contract and suffered damages from an alleged shortage when PIMCO held both physical and futures positions in 10-year Treasury notes for its client accounts. The two actions have been consolidated into one action, and the two separate complaints have been replaced by a consolidated complaint. PIMCO is a named defendant to the consolidated action. PIMCO strongly believes the complaint is without merit and intends to vigorously defend itself.

In April 2006, certain registered investment companies and other funds managed by PIMCO were served in an adversary proceeding brought by the Official Committee of Asbestos Claimants of G-I Holdings, Inc. in G-I Holdings, Inc.’s bankruptcy in the District of New Jersey. In July 2004, PIMCO was named in this lawsuit and remains a defendant. The plaintiff seeks to recover for the bankruptcy estate assets that were transferred by the predecessor entity of G-I Holdings, Inc. to a wholly-owned subsidiary in 1994. The subsidiary has since issued notes, of which certain registered investment companies and other funds managed by PIMCO are alleged to be holders. The complaint alleges that in 2000, more than two hundred noteholders—including certain registered investment companies and other funds managed by PIMCO—were granted a second priority lien on the assets of the subsidiary in exchange for their consent to a refinancing transaction and the granting of a first priority lien to the lending banks. The plaintiff is seeking invalidation of the lien in favor of the noteholders and/or the value of the lien. On June 21, 2006, the District of New Jersey overturned the Bankruptcy Court’s decision granting permission to file the adversary proceeding and remanded the matter to the Bankruptcy Court for further proceedings. Following a motion to reconsider, the District Court upheld its remand on August 7, 2006, and instructed the Bankruptcy Court to conduct a “cost-benefit” analysis of the Committee’s claims, including the claims against the noteholders. The Bankruptcy Court held a status conference on October 25, 2006 and set a briefing schedule relating to this cost-benefit analysis. To date, no briefs have been filed. This matter is not expected to have a material adverse effect on either the relevant registered investment companies and other funds or PIMCO.

It is possible that these matters and/or other developments resulting from these matters could result in increased fund redemptions or other adverse consequences. However, PIMCO and AGID believe that these matters are not likely to have a material adverse effect on a fund or on PIMCO’s or AGID’s ability to perform their respective investment advisory or distribution services relating to the funds.

The foregoing speaks only as of the date of this prospectus. While there may be additional litigation or regulatory developments in connection with the matters discussed above, the foregoing disclosure of litigation and regulatory matters will be updated only if those developments are material.

REPORTS TO SHAREHOLDERS

The financial statements of JHT at December 31, 2008, are incorporated herein by reference from JHT’s most recent Annual Report to Shareholders filed with the SEC on Form N-CSR pursuant to Rule 30b2-1 under the 1940 Act.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The financial statements of JHT at December 31, 2008, including the related financial highlights which appear in the Prospectus, have been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm as indicated in their report with respect thereto, and are included herein in reliance upon said report given on the authority of said firm as experts in accounting and auditing. PricewaterhouseCoopers LLP has offices at 125 High Street, Boston, MA 02110.

CUSTODIAN

State Street Bank and Trust Company (“State Street”), 2 Avenue de Lafayette, Boston, Massachusetts 02111, currently acts as custodian and bookkeeping agent of all the funds’ assets. State Street has selected various banks and trust companies in foreign countries to maintain custody of certain foreign securities. State Street is authorized to use the facilities of the Depository Trust Company, the Participants Trust Company and the book-entry system of the Federal Reserve Banks.

CODE OF ETHICS

JHT, the Adviser, the Distributor and each subadviser have adopted Codes of Ethics that comply with Rule 17j-1 under the 1940 Act. Each Code permits personnel subject to the Code to invest in securities including securities that may be purchased or held by JHT.

MANAGEMENT OF OTHER FUNDS BY THE ADVISER/SUBADVISER

The funds of JHT described this SAI are not retail mutual funds and are only available under variable annuity contracts or variable life policies, through participation in tax qualified retirement plans or to certain permitted entities. Although the Adviser or subadvisers may manage retail mutual funds with similar names and investment objectives, no representation is made, and no assurance is given, that any fund’s investment results will be comparable to the investment results of any other fund, including other funds with the same investment adviser or subadviser. Past performance is no guarantee of future results.

APPENDIX A

DESCRIPTION OF BOND RATINGS

The ratings of Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Group represent their opinions as to the quality of various debt instruments they undertake to rate. It should be emphasized that ratings are not absolute standards of quality. Consequently, debt instruments with the same maturity, coupon and rating may have different yields while debt instruments of the same maturity and coupon with different ratings may have the same yield.

MOODY’S INVESTORS SERVICE, INC.

Aaa: Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.

Aa: Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

A: Obligations rated A are considered upper-medium grade and are subject to low credit risk.

Baa: Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.

Ba: Obligations rated Ba are judged to have speculative elements are subject to substantial credit risk.

B: Obligations rated B are considered speculative elements and are subject to high credit risk.

Caa: Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.

Ca: Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

C: Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.

STANDARD & POOR’S RATINGS GROUP

AAA: An obligation rated ‘AAA’ has the highest rating assigned by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong.

AA: An obligation rated ‘AA’ differs from the highest-rated obligations only to a small degree. The obligor’s capacity to meet its financial commitment on the obligation is very strong.

A: An obligation rated ‘A’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.

BBB: An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

BB, B, CCC, CC and C: Obligations rated ‘BB’, ‘B’, ‘CCC’ ‘CC’ and ‘C’ are regarded as having significant speculative characteristics. ‘BB’ indicates the least degree of speculation and

A-1

‘C’ the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

BB: An obligation rated ‘BB’ is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions, which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

B: An obligation rated ‘B’ is more vulnerable to nonpayment than obligations rated ‘BB’, but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.

CCC: An obligation rated ‘CCC’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

CC: An obligation rated ‘CC’ is currently highly vulnerable to nonpayment.

C: The ‘C’ rating may be used to over a situation where a bankruptcy petition has been filed or similar action has been taken, but payments on this obligation are being continued.

D: An obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or taking of a similar action if payments on an obligation are jeopardized.

Plus (+) or minus (-): The ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

NR: This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy.

FITCH INVESTORS SERVICE (“Fitch”)

Investment Grade

AAA

Highest credit quality. ‘AAA’ ratings denote the lowest expectation of credit risk. They are assigned only in case of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

Very high credit quality. ‘AA’ ratings denote expectations of very low credit risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

High credit quality. ‘A’ ratings denote expectations of low credit risk. The capacity for payment

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of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings.

BBB

Good credit quality. ‘BBB’ ratings indicate that there are currently expectations of low credit risk. The capacity for payment of financial commitments is considered adequate but adverse changes in circumstances and economic conditions are more likely to impair this capacity. This is the lowest investment grade category.

Speculative Grade

Speculative. ‘BB’ ratings indicate that there is a possibility of credit risk developing, particularly as the result of adverse economic change over time; however, business or financial alternatives may be available to allow financial commitments to be met. Securities rated in this category are not investment grade.

Highly speculative.

• For issuers and performing obligations, ‘B’ ratings indicate that significant credit risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is contingent upon a sustained, favorable business and economic environment.

• For individual obligations, may indicate distressed or defaulted obligations with potential for extremely high recoveries. Such obligations would possess a Recovery Rating of ‘RR1’ (outstanding).

CCC

• For issuers and performing obligations, default is a real possibility. Capacity for meeting financial commitments is solely reliant upon sustained, favorable business or economic conditions.

• For individual obligations, may indicate distressed or defaulted obligations with potential for average to superior levels of recovery. Differences in credit quality may be denoted by plus/minus distinctions. Such obligations typically would possess a Recovery Rating of ‘RR2’ (superior), or ‘RR3’ (good) or ‘RR4’ (average).

• For issuers and performing obligations, default of some kind appears probable.

• For individual obligations, may indicate distressed or defaulted obligations with a Recovery Rating of ‘RR4’ (average) or ‘RR5’ (below average).

• For issuers and performing obligations, default is imminent.

• For individual obligations, may indicate distressed or defaulted obligations with potential for below-average to poor recoveries. Such obligations would possess a Recovery Rating of ‘RR6’ (poor).

A-3

Indicates an entity that has failed to make due payments (within the applicable grace period) on some but not all material financial obligations, but continues to honor other classes of obligations.

Indicates an entity or sovereign that has defaulted on all of its financial obligations. Default generally is defined as one of the following:

• Failure of an obligor to make timely payment of principal and/or interest under the contractual terms of any financial obligation;

• The bankruptcy filings, administration, receivership, liquidation or other winding-up or cessation of business of an obligor;

• The distressed or other coercive exchange of an obligation, where creditors were offered securities with diminished structural or economic terms compared with the existing obligation.

Default ratings are not assigned prospectively; within this context, non-payment on an instrument that contains a deferral feature or grace period will not be considered a default until after the expiration of the deferral or grace period.

Issuers will be rated ‘D’ upon a default. Defaulted and distressed obligations typically are rated along the continuum of ‘C’ to ‘B’ ratings categories, depending upon their recovery prospects and other relevant characteristics. Additionally, in structured finance transactions, where analysis indicates that an instrument is irrevocably impaired such that it is not expected to meet pay interest and/or principal in full in accordance with the terms of the obligation’s documentation during the life of the transaction, but where no payment default in accordance with the terms of the documentation is imminent, the obligation may be rated in the ‘B’ or ‘CCC-C’ categories.

Default is determined by reference to the terms of the obligations’ documentation. Fitch will assign default ratings where it has reasonably determined that payment has not been made on a material obligation in accordance with the requirements of the obligation’s documentation, or where it believes that default ratings consistent with Fitch’s published definition of default are the most appropriate ratings to assign.

CORPORATE AND TAX-EXEMPT COMMERCIAL PAPER RATINGS

Moody’s

Moody’s employs the following designations to indicate the relative repayment ability of rated issuers:

P-1

Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

P-2

Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

A-4

P-3

Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.

Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

Standard and Poor’s

Commercial Paper

A standard & Poor’s commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. Ratings are graded into several categories, ranging from ‘A’ for the highest-quality obligations to ‘D’ for the lowest. These categories are as follows:

A-1

This designation indicates that the degress of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted with a plus sign (+) designation.

A-2

Capacity for timely payment on issues with this designation is satisfactory. However, the relative degree of safety is not as high as for issues designated ‘A-1’.

A-3

Issues carrying this designation have an adequate capacity for timely payment. They are, however, more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.

A short-term obligation rated ‘B’ is regarded as having significant speculative characteristics. Ratings of ‘B-1’, ‘B-2’, and ‘B-3’ may be assigned to indicate finer distinctions within the ‘B’ category. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.

B-1. A short-term obligation rated ‘B-1’ is regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.

B-2. A short-term obligation rated ‘B-2’ is regarded as having significant speculative characteristics, and the obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.

B-3. A short-term obligation rated ‘B-3’ is regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.

A-5

A short-term obligation rated ‘C’ is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.

A short-term obligation rated ‘D’ is in payment default. The ‘D’ rating category is used when payments on an obligation are not made on the date due even if the applicable grace period has not expired, unless Standard & Poor’s believes that such payments will be made during such grace period. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action if payments on an obligation are jeopardized.

Dual Ratings

Standard & Poor’s assigns ‘dual’ rating to all debt issues that have a put option or demand feature as part of their structure.

The first rating addresses the likelihood of repayment of principal and interest as due, and the second rating addresses only the demand feature. The long-term debt rating symbols are used for bonds to denote the long-term maturity and the commercial paper rating symbols for the put option (for example, ‘AAA/A-1+’). With short-term demand debt, not rating symbols are used with the commercial paper rating symbols (for example, ‘SP-1+/A-1+’).

Other Considerations — The ratings of S&P, Moody’s, and Fitch represent their respective opinions of the quality of the municipal securities they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, municipal securities with the same maturity, coupon and ratings may have different yields and municipal securities of the same maturity and coupon with different ratings may have the same yield.

TAX-EXEMPT NOTE RATINGS

Moody’s

Short-Term Debt Ratings

There are three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (MIG) and are divided into three levels MIG 1 through MIG 3. In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. MIG ratings expire at the maturity of the obligation.

MIG 1

This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

MIG 2

This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

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APPENDIX II

STANDARD & POOR’S CORPORATION DISCLAIMERS

The Equity Index Trust, 500 Index Trust and Mid Cap Index Trust (collectively, the “S&P Index Trusts”) are not sponsored, endorsed, sold or promoted by Standard & Poor’s (“S&P”). S&P makes no representation or warranty, express or implied, to the shareholders of the S&P Index Trusts, or any member of the public regarding the advisability of investing in securities generally or in the S&P Index Trusts particularly or the ability of the S&P 500 Index to track general stock market performance. S&P’s only relationship to the Trust is the licensing of certain trademarks and trade names of S&P and of the S&P 500 Index which is determined, composed and calculated by S&P without regard to the Trust or the S&P Index Trusts. S&P has no obligation to take the needs of the Trust or the shareholders of the S&P Index Trusts into consideration in determining, composing or calculating the S&P 500 Index. S&P is not responsible for and has not participated in the determination of the prices and amount of shares of the S&P Index Trusts or the timing of the issuance or sale of the shares of the S&P Index Trusts or in the determination or calculation of the equation by which shares of the S&P Index Trusts are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the S&P Index Trusts.

S&P does not guarantee the accuracy and/or the completeness of the S&P 500 Index or any data included therein and S&P shall have no liability for any errors, omissions, or interruptions therein. S&P makes no warranty, express or implied, as to results to be obtained by the Trust, shareholders of the S&P Index Trusts, or any other person or entity from the use of the S&P 500 Index or any data included therein. S&P makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the S&P 500 Index or any data included therein. Without limiting any of the foregoing, in no event shall S&P have any liability for any special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages.

APPENDIX III

PORTFOLIO MANAGER INFORMATION

AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.

Vista Trust

The following chart reflects the portfolio managers’ investments in the fund that they manage. The chart also reflects information regarding accounts other than the fund for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) investment companies, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance (“performance-based fees”), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date.

The following table reflects information as of December 31, 2008:

Other Pooled

Other Registered

Investment

Investment Companies

Vehicles

Other Accounts

Number

Portfolio

Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

Bradley J. Eixmann

2.4 B

77.6 M

Glenn A. Fogle

2.4 B

77.6 M

Other Accounts Managed – Of total listed above, those for which advisory fee is based on performance


					Other Pooled
	Other Registered				Investment
	Investment Companies				Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Bradley J. Eixmann		0	$	0		0	$	0		0	$	0
Glenn A. Fogle		0	$	0		0	$	0		0	$	0

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

Certain conflicts of interest may arise in connection with the management of multiple portfolios. Potential conflicts include, for example, conflicts among investment strategies and conflicts in the allocation of investment opportunities. American Century has adopted policies and procedures that are designed to minimize the effects of these conflicts.

Responsibility for managing American Century client portfolios is organized according to investment discipline. Investment disciplines include, for example, core equity, small- and mid-cap growth, large-cap growth, value, international, fixed income, asset allocation, and sector funds. Within each discipline are one or more portfolio teams responsible for managing specific client portfolios. Generally, client portfolios with similar strategies are managed by the same team using the same objective, approach, and philosophy. Accordingly, portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar portfolios, which minimizes the potential for conflicts of interest.

For each investment strategy, one portfolio is generally designated as the “policy portfolio.” Other portfolios with similar investment objectives, guidelines and restrictions are referred to as “tracking portfolios.” When managing policy and tracking portfolios, a portfolio team typically purchases and sells securities across all portfolios that the team manages. American Century’s trading systems include various order entry programs that assist in the management of multiple portfolios, such as the ability to purchase or sell the same relative amount of one security across several funds. In some cases a tracking portfolio may have additional restrictions or limitations that cause it to be managed separately from the policy portfolio. Portfolio managers make purchase and sale decisions for such portfolios alongside the policy portfolio to the extent the overlap is appropriate, and separately, if the overlap is not. American Century may aggregate orders to purchase or sell the same security for multiple funds when it believes such aggregation is consistent with its duty to seek best execution on behalf of its clients. Orders of certain client portfolios may, by investment restriction or otherwise, be determined not available for aggregation. American Century has adopted policies and procedures to minimize the risk that a client portfolio could be systematically advantaged or disadvantaged in connection with the aggregation of orders. To the extent equity trades are aggregated, shares purchased or sold are generally allocated to the participating portfolios pro rata based on order size. Because initial public offerings (IPOs) are usually available in limited supply and in amounts too small to permit across-the-board pro rata allocations, American Century has adopted special procedures designed to promote a fair and equitable allocation of IPO securities among clients over time. Fixed income securities transactions are not executed through a centralized trading desk. Instead, fund teams are responsible for executing trades with broker/dealers in a predominantly dealer marketplace. Trade allocation decisions are made by the portfolio manager at the time of trade execution and orders entered on the fixed income order management system.

Finally, investment of American Century’s corporate assets in proprietary accounts may raise additional conflicts of interest. To mitigate these potential conflicts of interest, American Century has adopted policies and procedures intended to provide that trading in proprietary accounts is performed in a manner that does not give improper advantage to American Century to the detriment of client portfolios.

DESCRIPTION OF COMPENSATION STRUCTURE

American Century portfolio manager compensation is structured to align the interests of portfolio managers with those of the shareholders whose assets they manage. It includes the components described below, each of which is determined with reference to a number of factors such as overall performance, market competition, and internal equity. Compensation is not directly tied to the value of assets held in client portfolios.

BASE SALARY

Portfolio managers receive base pay in the form of a fixed annual salary.

BONUS

A significant portion of portfolio manager compensation takes the form of an annual incentive bonus tied to performance. Bonus payments are determined by a combination of factors. One factor is fund investment performance. For most American Century mutual funds, investment performance is measured by a combination of one- and three-year pre-tax performance relative to various benchmarks and/or internally-customized peer groups. In 2008, American Century began placing increased emphasis on long-term performance and is phasing in five-year performance comparison periods. The performance comparison periods may be adjusted based on a fund’s inception date or a portfolio manager’s tenure on the fund. Custom peer groups are constructed using all the funds in the indicated categories as a starting point. Funds are then eliminated from the peer group based on a standardized methodology

designed to result in a final peer group that is both more stable over the long term (i.e., has less peer turnover) and that more closely represents the fund’s true peers based on internal investment mandates.

Portfolio managers may have responsibility for multiple American Century mutual funds. In such cases, the performance of each is assigned a percentage weight appropriate for the portfolio manager’s relative levels of responsibility.

Portfolio managers also may have responsibility for portfolios that are managed in a fashion similar to that of other American Century mutual funds. This is the case for the Vista Trust. If the performance of a similarly managed account is considered for purposes of compensation, it is either measured in the same way as a comparable American Century mutual fund (i.e., relative to the performance of a benchmark and/or peer group) or relative to the performance of such mutual fund. Performance of Vista Trust is not separately considered in determining portfolio manager compensation.

A second factor in the bonus calculation relates to the performance of all American Century funds managed according to a particular investment style, such as U.S. growth, U.S. value, international, quantitative and fixed-income. Performance is measured for each product individually as described above and then combined to create an overall composite for the product group. These composites may measure one-year performance (equal weighted) or a combination of one- and three-year performance (asset weighted) depending on the portfolio manager’s responsibilities and products managed. This feature is designed to encourage effective teamwork among fund management teams in achieving long-term investment success for similarly styled portfolios.

A portion of some portfolio managers’ bonuses may be tied to individual performance goals, such as research projects and the development of new products.

RESTRICTED STOCK PLANS

Portfolio managers are eligible for grants of restricted stock of ACC. These grants are discretionary, and eligibility and availability can vary from year to year. The size of an individual’s grant is determined by individual and product performance as well as other product-specific considerations. Grants can appreciate/depreciate in value based on the performance of the ACC stock during the restriction period (generally three to four years).

DEFERRED COMPENSATION PLANS

Portfolio managers are eligible for grants of deferred compensation. These grants are used in limited situations, primarily for retention purposes. Grants are fixed and can appreciate/depreciate in value based on the performance of the American Century mutual funds in which the portfolio manager chooses to invest them.

BlackRock Investment Management, LLC

Large Cap Value Trust

The following chart reflects the portfolio manager’s investments in the fund that he manages. The chart also reflects information regarding accounts other than the fund for which the portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) investment companies, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance (“performance-based fees”), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date.

The following table reflects information as of December 31, 2008:

Other Registered

Investment

Other Pooled

Companies

Investment Vehicles

Other Accounts

Number

Portfolio

Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

Robert C. Doll, Jr., CFA

14.08 B

2.95 B

1.95 B

Daniel Hanson, CFA

14.08 B

2.95 B

1.95 B

Other Accounts Managed – Of total listed above, those for which advisory fee is based on performance


	Other Registered
	Investment				Other Pooled
	Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Robert C. Doll, Jr., CFA		0	$	0		2	$	152.7 M		0	$	0
Daniel Hanson, CFA		0	$	0		2	$	152.7 M		0	$	0

Ownership of fund shares. The portfolio manager listed in the above table did not beneficially own any shares of the fund that he managed as of December 31, 2008.

Portfolio Manager Compensation Overview

BlackRock’s financial arrangements with its portfolio managers, its competitive compensation and its career path emphasis at all levels reflect the value senior management places on key resources. Compensation may include a variety of components and may vary from year to year based on a number of factors. The principal components of compensation include a base salary, a performance-based discretionary bonus, participation in various benefits programs and one or more of the incentive compensation programs established by BlackRock such as its Long-Term Retention and Incentive Plan.

Due to Mr. Doll’s unique position (as Portfolio Manager, Vice Chairman and Director of BlackRock, Inc., Global Chief Investment Officer for Equities, Chairman of the BlackRock Retail Operating Committee, and member of the BlackRock Executive Committee), his compensation does not solely reflect his role as portfolio manager of the funds managed by him. The

performance of his fund(s) is included in the determination of his incentive compensation but, given his multiple roles and the various compensation components, the performance of his fund(s) is not the primary driver of his compensation.

Base compensation. Generally, portfolio managers receive base compensation based on their seniority and/or their position with the firm. Senior portfolio managers who perform additional management functions within the portfolio management group or within BlackRock may receive additional compensation for serving in these other capacities.

Discretionary Incentive Compensation

Discretionary incentive compensation is based on a formulaic compensation program. BlackRock’s formulaic portfolio manager compensation program includes: pre-tax investment performance relative to appropriate competitors or benchmarks over 1-, 3- and 5-year performance periods and a measure of operational efficiency. If a portfolio manager’s tenure is less than five years, performance periods will reflect time in position. In most cases, including for the portfolio managers of the Fund, these benchmarks are the same as the benchmark or benchmarks against which the performance of the Fund or other accounts managed by the portfolio managers are measured. BlackRock’s Chief Investment Officers determine the benchmarks against which the performance of funds and other accounts managed by each portfolio manager is compared and the period of time over which performance is evaluated. With respect to the portfolio managers, such benchmarks for the Large Cap Value Trust include the Lipper Multi-Cap Value Funds classification.

Portfolio managers who meet relative investment performance and financial management objectives during a specified performance time period are eligible to receive an additional bonus which may or may not be a large part of their overall compensation. A smaller element of portfolio manager discretionary compensation may include consideration of: financial results, expense control, profit margins, strategic planning and implementation, quality of client service, market share, corporate reputation, capital allocation, compliance and risk control, leadership, workforce diversity, supervision, technology and innovation. All factors are considered collectively by BlackRock management.

Distribution of Discretionary Incentive Compensation

Discretionary incentive compensation is distributed to portfolio managers in a combination of cash and BlackRock, Inc. restricted stock units which vest ratably over a number of years. The BlackRock, Inc. restricted stock units, if properly vested, will be settled in BlackRock, Inc. common stock. Typically, the cash bonus, when combined with base salary, represents more than 60% of total compensation for the portfolio managers. Paying a portion of annual bonuses in stock puts compensation earned by a portfolio manager for a given year “at risk” based on BlackRock’s ability to sustain and improve its performance over future periods.

Long-Term Retention and Incentive Plan (“LTIP”) — The LTIP is a long-term incentive plan that seeks to reward certain key employees. Beginning in 2006, awards are granted under the LTIP in the form of BlackRock, Inc. restricted stock units that, if properly vested and subject to the attainment of certain performance goals, will be settled in BlackRock, Inc. common stock. Messrs. Doll and Hanson have each received awards under the LTIP.

Deferred Compensation Program — A portion of the compensation paid to eligible BlackRock employees may be voluntarily deferred into an account that tracks the performance of certain of the firm’s investment products. Each participant in the deferred compensation program is permitted to allocate his deferred amounts among the various investment options. Messrs. Doll and Hanson have each participated in the deferred compensation program.

Other compensation benefits. In addition to base compensation and discretionary incentive compensation, portfolio managers may be eligible to receive or participate in one or more of the following:

Incentive Savings Plans — BlackRock, Inc. has created a variety of incentive savings plans in which BlackRock employees are eligible to participate, including a 401(k) plan, the BlackRock Retirement Savings Plan (RSP), and the BlackRock Employee Stock Purchase Plan (ESPP). The employer contribution components of the RSP include a company match equal to 50% of the first 6% of eligible pay contributed to the plan capped at $4,000 per year, and a company retirement contribution equal to 3-5% of eligible compensation. The RSP offers a range of investment options, including registered investment companies managed by the firm. BlackRock contributions follow the investment direction set by participants for their own contributions or, absent employee investment direction, are invested into a balanced portfolio. The ESPP allows for investment in BlackRock common stock at a 5% discount on the fair market value of the stock on the purchase date. Annual participation in the ESPP is limited to the purchase of 1,000 shares or a dollar value of $25,000. Each portfolio manager is eligible to participate in these plans.

Potential Material Conflicts of Interest

Real, potential or apparent conflicts of interest may arise when a portfolio manager has day-to-day portfolio management responsibilities with respect to more than one fund or account.

BlackRock has built a professional working environment, firm-wide compliance culture and compliance procedures and systems designed to protect against potential incentives that may favor one account over another. BlackRock has adopted policies and procedures that address the allocation of investment opportunities, execution of portfolio transactions, personal trading by employees and other potential conflicts of interest that are designed to ensure that all client accounts are treated equitably over time. Nevertheless, BlackRock furnishes investment management and advisory services to numerous clients in addition to the Fund, and BlackRock may, consistent with applicable law, make investment recommendations to other clients or accounts (including accounts which are hedge funds or have performance or higher fees paid to BlackRock, or in which portfolio managers have a personal interest in the receipt of such fees), which may be the same as or different from those made to the Funds. In addition, BlackRock, its affiliates and significant shareholders and any officer, director, stockholder or employee may or may not have an interest in the securities whose purchase and sale BlackRock recommends to the Fund. BlackRock, or any of its affiliates or significant shareholders, or any officer, director, stockholder, employee or any member of their families may take different actions than those recommended to the Fund by BlackRock with respect to the same securities. Moreover, BlackRock may refrain from rendering any advice or services concerning securities of companies of which any of BlackRock’s (or its affiliates’ or significant shareholders’) officers, directors or employees are directors or officers, or companies as to which BlackRock or any of its affiliates or significant shareholders or the officers, directors and employees of any of them has any substantial economic interest or possesses material non-public information. Each portfolio manager also may manage accounts whose investment strategies may at times be opposed to the strategy utilized for a fund. In this connection, it should be noted that Messrs. Doll and Hanson currently manage certain accounts that are subject to performance fees. In addition, a portfolio manager may assist in managing certain hedge funds and may be entitled to receive a portion of any incentive fees earned on such funds and a portion of such incentive fees may be voluntarily or involuntarily deferred. Additional portfolio managers may in the future manage other such accounts or funds and may be entitled to receive incentive fees.

As a fiduciary, BlackRock owes a duty of loyalty to its clients and must treat each client fairly. When BlackRock purchases or sells securities for more than one account, the trades must be allocated in a manner consistent with its fiduciary duties. BlackRock attempts to allocate investments in a fair and equitable manner among client accounts, with no account receiving preferential treatment. To this end, BlackRock has adopted a policy that is intended to ensure that investment opportunities are allocated fairly and equitably among client accounts over time. This policy also seeks to achieve reasonable efficiency in client transactions and provide BlackRock with sufficient flexibility to allocate investments in a manner that is consistent with the particular investment discipline and client base.

CAPITAL GUARDIAN TRUST COMPANY
OVERSEAS EQUITY TRUST

Capital Guardian Trust Company (“CGTC”) uses a multiple portfolio manager system in managing the fund’s assets. Under this approach, the portfolio of a fund is divided into segments managed by individual managers. Each manager’s role is to decide how their respective segment will be invested by selecting securities within the limits provided by the fund’s objectives and policies. CGTC’s investment committee oversees this process. In addition, CGTC’s investment analysts also may make investment decisions with respect to a portion of a fund’s portfolio. Certain portfolio managers may also have investment analyst responsibilities with respect to specific research coverage.


Portfolio Manager Title, Company Affiliation	Length of Service with Capital Guardian Trust Company (“CGTC”) or an Affiliate	Business Experience During the past 5 years

David I. Fisher Chairman of the Board, CGTC	39 years	Portfolio Manager responsible for selecting equity securities

Richard Havas Senior Vice President, Capital International, Inc., an affiliate of CGTC	22 years	Portfolio Manager responsible for selecting equity securities

Victor Kohn Director, CGTC	23 years	Portfolio Manager responsible for selecting equity securities

Nancy Kyle Director and Vice Chair, CGTC	18 years	Portfolio Manager responsible for selecting equity securities

Roger Mortimer Vice President, CGTC	4 years	Portfolio Manager responsible for selecting equity securities

Lionel Sauvage Senior Vice President, CGTC	21 years	Portfolio Manager responsible for selecting equity securities

JOHN HANCOCK TRUST/OVERSEAS EQUITY TRUST

STATEMENT OF ADDITIONAL INFORMATION

As of December 31, 2008

Other Accounts Managed


Portfolio Managers		The number of other accounts managed by each portfolio manager within each category below and the total assets in the accounts managed within each category below.


	Registered Investment				Other Pooled Investment
	Companies 1				Vehicles 2				Other Accounts 3, 4
	Number				Number				Number
	of				of				of
	Accounts		Total Assets		Accounts		Total Assets		Accounts		Total Assets
Fisher, David		9	$	9.72 B		22	$	16.63 B		165	$	35.19 B
Havas, Richard		6	$	1.46 B		20	$	12.76 B		152	$	30.68 B
Kohn, Victor		2	$	7.61 B		8	$	5.62 B		14	$	3.61 B
Kyle, Nancy		5	$	1.37 B		15	$	11.94 B		119	$	22.72 B
Mortimer, Roger		4	$	0.95 B		9	$	9.17 B		93	$	17.86 B
Sauvage, Lionel		5	$	1.37 B		20	$	14.63 B		192	$	37.95 B


1		Assets noted represent the total net assets of registered investment companies and are not indicative of the total assets managed by the individual which will be a substantially lower amount.

2		Assets noted represent the total net assets of other pooled investment vehicles and are not indicative of the total assets managed by the individual which will be a substantially lower amount.

3		Assets noted represent the total net assets of other accounts and are not indicative of the total assets managed by the individual which will be a substantially lower amount.

4		Reflects other professionally managed accounts held at CGTC or companies affiliated with CGTC. Personal brokerage accounts of portfolio manager and their families are not reflected.

JOHN HANCOCK TRUST/OVERSEAS EQUITY TRUST

As of December 31, 2008

Fee Based Accounts


Portfolio Managers		The number of accounts and the total assets in the accounts managed by each portfolio manager with respect to which the advisory fee is based on the performance of the account.


	Registered Investment					Other Pooled Investment
	Companies 1					Vehicles 2				Other Accounts 3,4
	Number					Number				Number
	of					of				of
	Accounts		Total Assets			Accounts		Total Assets		Accounts		Total Assets
Fisher, David		1	$	0.57	B		0	$	0		6		$	1.10	B
Havas, Richard		1	$	0.57	B		0	$	0		7		$	1.16	B
Kohn, Victor		0		0			0	$	0		0		$	0
Kyle, Nancy		1	$	0.57	B		0	$	0		4		$	0.95	B
Mortimer, Roger		1	$	0.57	B		0	$	0		2		$	0.39	B
Sauvage, Lionel		1	$	0.57	B		0	$	0		13		$	2.32	B


` 1		Assets noted represent the total net assets of registered investment companies and are not indicative of the total assets managed by the individual which will be a substantially lower amount.

2		Assets noted represent the total net assets of other pooled investment vehicles and are not indicative of the total assets managed by the individual which will be a substantially lower amount.

3		Assets noted represent the total net assets of other accounts and are not indicative of the total assets managed by the individual which will be a substantially lower amount.

4		Reflects other professionally managed accounts held at CGTC or companies affiliated with CGTC. Personal brokerage accounts of portfolio manager and their families are not reflected.

(a)		DESCRIPTION OF ANY MATERIAL CONFLICTS

		CGTC has adopted policies and procedures that address potential conflicts of interest that may arise between a portfolio manager’s management of the fund and his or her management of other funds and accounts, such as conflicts relating to the allocation of investment opportunities, personal investing activities, portfolio manager compensation and proxy voting of portfolio securities. While there is no guarantee that such policies and procedures will be effective in all cases, CGTC believes that all issues relating to potential material conflicts of interest involving this portfolio and its other managed accounts have been addressed.

(b)		COMPENSATION

At CGTC, portfolio managers and investment analysts are paid competitive salaries. In addition, they may receive bonuses based on their individual portfolio results and also may participate in profit-sharing plans. The relative mix of compensation represented by bonuses, salary and profit sharing will vary depending on the individual’s portfolio results, contributions to the organization and other factors. To encourage a long-term focus, bonuses based on investment results are calculated by comparing pretax total investment returns to relevant benchmarks over the most recent year, a four-year rolling average and an eight-year rolling average with much greater weight placed on the four-year and eight-year rolling averages. For portfolio managers, benchmarks may include both measures of the marketplaces in which the relevant fund invests and measures of the results of comparable mutual funds or consultant universe measures of comparable institutional accounts. For investment analysts, benchmarks include both relevant market measures and appropriate industry indices reflecting their areas of expertise. Analysts are also subjectively compensated for their contributions to the research process.

The benchmarks used to measure performance of the portfolio managers for the John Hancock Overseas Equity Trust include, as applicable, an adjusted MSCI All Country World ex US Index, an adjusted MSCI EAFE Index, an adjusted MSCI Emerging Markets Index, an adjusted Lipper International Index, and a customized index based on the information provided by third parties (Non-US & EM consultant Universe indices).

(c)

OWNERSHIP OF FUND SHARES

To our knowledge, based on the information available for the time period ending December 31, 2008, the portfolio managers of the John Hancock Overseas Equity Trust did not own any shares of that fund.

Columbia Management Advisors, LLC

Value & Restructuring Trust

Columbia Management Advisors, LLC (“Columbia Management”) manages the Value & Restructuring Fund. In rendering investment advisory services, Columbia Management may use the portfolio management and research resources of Columbia Management Pte. Ltd., an affiliate of Columbia Management. Columbia Management Pte. Ltd. is not registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended. Columbia Management Pte. Ltd. has entered into a Memorandum of Understanding (MOU) with Columbia Management pursuant to which Columbia Management Pte. Ltd. is considered a “participating affiliate” of Columbia Management as that term is used in relief granted by the staff of the SEC allowing U.S. registered investment advisers to use portfolio management or research resources of advisory affiliates subject to the supervision of a registered investment adviser. Investment professionals from Columbia Management Pte. Ltd. may render portfolio management or research services to clients of Columbia Management, including the fund, under the MOU, and are subject to supervision by Columbia Management.

Columbia Management is an indirect, wholly-owned subsidiary of Bank of America Corporation, a major financial services company engaged in a broad range of financial activities beyond the mutual fund-related activities of Columbia Management, including, among others, commercial banking, investment banking, broker/dealer (sales and trading), asset management, insurance and other financial activities. Regulatory restrictions applicable to Columbia Management and its affiliates may limit Columbia Management investment activities in various ways. For example, regulations regarding certain industries and markets, such as those in emerging or international markets, and certain transactions, such as those involving certain futures and derivatives, may impose a cap on the aggregate amount of investments that may be made by affiliated investors, including accounts managed by the same affiliated manager, in the aggregate or in individual issuers. At certain times, Columbia Management and its affiliates also may be restricted in the securities that can be bought or sold for their clients because of the investment banking, lending or other relationships Bank of America and its affiliates have with the issuers of securities. This could happen, for example, if clients desired to buy a security issued by a company for which Columbia Management or its affiliates served as underwriter. The internal policies and procedures of Columbia Management and its affiliates covering these types of regulatory restrictions and addressing similar issues also may at times restrict a client’s investment activities. A client not advised by Columbia Management and its affiliates would not be subject to many of these restrictions.

The following chart reflects information regarding accounts other than the fund for which the portfolio manager to the fund has day-to-day management responsibilities. Accounts are grouped into three categories: (i) other investment companies, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance (“performance-based fees”), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date. Also shown below the chart is each portfolio manager’s investments in the fund that he or she manages.

The following table reflects information as of December 31, 2008:


	Other Registered
	Investment				Other Pooled
	Companies				Investment Vehicles					Other Accounts
	Number				Number					Number
	of				of					of
Portfolio Manager	Accounts		Assets		Accounts		Assets			Accounts		Assets
David J. Williams		2	$	5.5 B		1	$	15	M		3	$	1.5 M
Guy W. Pope		2	$	5.5 B		0	$	0			12	$	5.5 M
J. Nicholas Smith		2	$	5.5 B		0	$	0			13	$	22.5 M

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio manager listed in the above table did not beneficially own any shares of the fund that he managed as of December 31, 2008.

DESCRIPTION OF COMPENSATION STRUCTURE

The portfolio managers receive their compensation from Columbia Management Advisors, LLC (“Columbia Management”) and its parent company, Columbia Management Group, LLC, in the form of salary, bonus, stock options, restricted stock, and notional investments through an incentive plan, the value of which is measured by reference to the performance of the Columbia Funds in which the account is invested. A portfolio manager’s bonus is variable and generally is based on (1) an evaluation of the portfolio manager’s investment performance and (2) the results of a peer and/or management review of the portfolio manager, which takes into account skills and attributes such as team participation, investment process, communication and professionalism. In evaluating investment performance, Columbia Management generally considers the one, three and five year performance of mutual funds and other accounts managed by the portfolio manager relative to the benchmarks and peer groups noted below, emphasizing the portfolio manager’s three and five year performance. Columbia Management also may consider a portfolio manager’s performance in managing client assets in sectors and industries assigned to the portfolio manager as part of his/ her investment team responsibilities, where applicable. For portfolio managers who also have group management responsibilities, another factor in their evaluation is an assessment of the group’s overall investment performance.

Performance Benchmarks


Primary Benchmark(s)		Peer Group
Russell 1000 Value Index		Lipper Multi-Cap Core
S&P 500 Index		Classification

The size of the overall bonus pool each year is determined by Columbia Management Group, LLC and depends on, among other factors, the levels of compensation generally in the investment management industry (based on market compensation data) and Columbia Management’s profitability for the year, which is largely determined by assets under management.

POTENTIAL CONFLICTS OF INTEREST

Like other investment professionals with multiple clients, a fund’s portfolio manager(s) may face certain potential conflicts of interest in connection with managing both the fund and other accounts at the same time. Columbia Management has adopted compliance policies and procedures that attempt to address certain of the potential conflicts that portfolio managers face in this regard. Certain of these conflicts of interest are summarized below.

The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance (performance fee accounts), may raise potential conflicts of interest for a portfolio manager by creating an incentive to favor higher fee accounts.

Potential conflicts of interest also may arise when a portfolio manager has personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to Columbia Management’s Code of Ethics and certain limited exceptions, Columbia Management’s investment professionals do not have the opportunity to invest in client accounts, other than the Columbia Funds. Similarly, the notional investments described above under “Compensation” may give rise to similar potential conflicts of interest to the extent that a portfolio manager may have an incentive to favor or devote more effort in managing accounts that impact his overall compensation.

A portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. The effects of this potential conflict may be more pronounced where funds and/or accounts managed by a particular portfolio manager have different investment strategies.

A portfolio manager may be able to select or influence the selection of the broker/dealers that are used to execute securities transactions for the fund. A portfolio manager’s decision as to the selection of broker/dealers could produce disproportionate costs and benefits among the fund and the other accounts the portfolio manager manages.

A potential conflict of interest may arise when a portfolio manager buys or sells the same securities for a fund and other accounts. On occasions when a portfolio manager considers the purchase or sale of a security to be in the best interests of a fund as well as other accounts, Columbia Management’s trading desk may, to the extent consistent with applicable laws and regulations, aggregate the securities to be sold or bought in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to a fund or another account if a portfolio manager favors one account over another in allocating the securities bought or sold.

“Cross trades,” in which a portfolio manager sells a particular security held by a fund to another account (potentially saving transaction costs for both accounts), could involve a potential conflict of interest if, for example, a portfolio manager is permitted to sell a security from one account to another account at a higher price than an independent third party would pay. Columbia Management has adopted compliance procedures that provide that any transactions between the fund and another account managed by Columbia Management are to be made at an independent current market price, consistent with applicable laws and regulation.

Another potential conflict of interest may arise based on the different investment objectives and strategies of a fund and other accounts managed by its portfolio manager(s). Depending on another account’s objectives and other factors, a portfolio manager may give advice to and make decisions for a fund that may differ from advice given, or the timing or nature of decisions made, with respect to another account. A portfolio manager’s investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a portfolio manager may buy or sell a particular security for certain accounts, and not for a fund, even though it could have been bought or sold for the fund at the same time. A portfolio manager also may buy a particular security for one or more accounts when one or more other accounts are selling the security (including short sales). There may be circumstances when a portfolio manager’s purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts, including the funds.

In addition to executing trades, some brokers and dealers provide portfolio managers with brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934), which may result in the payment of higher brokerage fees than might otherwise be available. These services may be more beneficial to certain

funds or accounts than to others. Although the payment of brokerage commissions is subject to the requirement that the portfolio manager determine in good faith that the commissions are reasonable in relation to the value of the brokerage and research services provided to the fund, a portfolio manager’s decision as to the selection of brokers and dealers could yield disproportionate costs and benefits among the funds and/or accounts that he or she manages.

Columbia Management or an affiliate may provide more services (such as distribution or recordkeeping) for some types of funds or accounts than for others. In such cases, a portfolio manager may benefit, either directly or indirectly, by devoting disproportionate attention to the management of fund and/or accounts that provide greater overall returns to Columbia Management and its affiliates.

Additional actual or potential conflicts of interest and certain investment activity limitations that could affect the fund may arise from the financial services activities of Bank of America and its affiliates, including the investment advisory/management services it provides for clients and customers other than the fund. In this regard, Bank of America is a major financial services company, engaged in a wide range of financial activities beyond the mutual fund-related activities of Columbia Management, including, among others, commercial banking, investment banking, broker/dealer (sales and trading), asset management, insurance and other financial activities. The broad range of financial services activities of Bank of America and its affiliates may involve multiple advisory, transactional, lending, financial and other interests in securities and other instruments, and in companies, that may be bought, sold or held by the fund.

Part 1A of Columbia Management’s Form ADV, which it must file the SEC as an investment adviser registered under the Investment Advisers Act of 1940, provides information about Columbia Management’s business, assets under management, affiliates and potential conflicts of interest. Part 1A of the Form ADV is available online through the SEC’s website at www.adviserinfo.sec.gov.

Portfolio managers may also face other potential conflicts of interest in managing the fund and the description above is not a complete description of every conflict that could be deemed to exist in managing both the fund and other accounts. In addition, portfolio managers may also manage other accounts (including their personal assets or the assets of family members) in their personal capacity. The management of these accounts may also involve certain of the potential conflicts described above.

DAVIS SELECTED ADVISERS, L.P.

Financial Services Trust
Fundamental Value Trust

The following chart reflects the portfolio managers’ investments in the funds that they manage. The chart also reflects information regarding accounts other than the funds for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) investment companies, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance (“performance-based fees”), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date.

The following table reflects information as of December 31, 2008:

Other Registered

Other Pooled

Investment

Companies

Vehicles

Other Accounts*

Number

Portfolio Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

Christopher C. Davis

47 B

815 M

141

8 B

Kenneth Charles Feinberg

47 B

778 M

119

7 B

Other Registered

Other Pooled

Investment

Companies

Vehicles

Other Accounts*

Number

Portfolio Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

Charles Cavanaugh

600 M

7 M

46 M

Kenneth Charles Feinberg

48 B

778 M

119

7 B


*		Managed Money/Wrap Accounts have been counted at the sponsor level.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one portfolio or other account. As each of the portfolio managers manage multiple portfolios and /or other accounts, they are presented with the following potential conflicts:

- The management of multiple portfolios and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each portfolio and/or other account. Davis Selected Advisers seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the portfolios.

- If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one portfolio or other account, a portfolio may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible portfolios and other accounts. To deal with these situations, Davis Selected Advisers has adopted procedures for allocating portfolio transactions across multiple accounts.

- With respect to securities transactions for the portfolios, Davis Selected Advisers determines which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts (such as mutual funds for which Davis Selected Advisers other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals), Davis Selected Advisers may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Davis Selected Advisers may place separate, non-simultaneous, transactions for a portfolio and another account which may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the portfolio or the other account.

- Finally, substantial investment of Davis Selected Advisers or Davis Family assets in certain mutual funds may lead to conflicts of interest. To mitigate these potential conflicts of interest, Davis Selected Advisers has adopted policies and procedures intended to ensure that all clients are treated fairly overtime. Davis Selected Advisers does not receive an incentive based fee on any account.

DESCRIPTION OF COMPENSATION STRUCTURE

Kenneth Feinberg’s compensation as a Davis Selected Advisers employee consists of (i) a base salary, (ii) an annual bonus equal to a percentage of growth in Davis Selected Advisers’ profits, (iii) awards of equity (“Units”) in Davis Selected Advisers including Units, options on Units, and/or phantom Units, and (iv) an incentive plan whereby Davis Selected Advisers purchases shares in selected funds managed by Davis Selected Advisers. At the end of specified periods, generally five-years following the date of purchase, some, all, or none of the fund shares will be registered in the employee’s name based on fund performance after expenses on a pre-tax basis versus the S&P 500 Index and versus peer groups as defined by Morningstar or Lipper. Davis Selected Advisers’ portfolio managers are provided benefits packages including life insurance, health insurance, and participation in company 401(k) plan comparable to that received by other company employees.

Christopher Davis’ annual compensation as an employee and general partner of Davis Selected Advisers consists of a base salary. Davis Selected Advisers’ portfolio managers are provided benefits packages including life insurance, health insurance, and participation in company 401(k) plan comparable to that received by other company employees.

DECLARATION MANAGEMENT & RESEARCH LLC

Active Bond Trust
Short-Term Bond Trust
Total Bond Market Trust A
Total Bond Market Trust B

The following table reflects information as of December 31, 2008:

Other Registered

Investment Companies

Other Pooled Investment Vehicles

Other Accounts

Number

Portfolio

Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

Peter Farley, CFA

811 M

152

3780 M

Joshua Kuhnert, CFA

811 M

1616 M

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

Each of the accounts managed by Peter M. Farley and Joshua Kuhnert seeks income and capital appreciation by investing primarily in a diversified mix of debt securities. While these accounts have many similarities, the investment performance of each account will be different due to differences in guidelines, fees, expenses and cash flows. Declaration has adopted compliance procedures to manage potential conflicts of interest such as allocation of investment opportunities and aggregated trading. Neither of the funds pays Declaration an incentive based fee.

DESCRIPTION OF COMPENSATION STRUCTURE

The compensation of Peter M. Farley and Joshua Kuhnert as Declaration employees consists of (i) a competitive base salary, (ii) eligibility for a discretionary bonus pursuant to an incentive compensation plan contingent on company profitability and performance, (iii) a deferred, profit sharing plan which is designed to be an equity ownership substitute, and (iv) eligibility for marketing incentives pursuant to the incentive compensation plan.

DEUTSCHE INVESTMENT MANAGEMENT AMERICAS INC.
All Cap Core Trust
Global Real Estate Trust
Real Estate Securities Trust

All Cap Core Trust

DESCRIPTION OF COMPENSATION STRUCTURE

Compensation of Portfolio Managers

Portfolio managers are eligible for total compensation comprised of base salary and variable compensation.

Base Salary — Base salary is linked to job functions, responsibilities and financial services industry peer comparison through the use of extensive market data surveys.

Variable Compensation — Generally, variable compensation comprises a greater proportion of total compensation as a portfolio manager’s seniority and compensation levels increase. Variable Compensation may include a cash bonus incentive, and potential participation in long-term incentive programs including but not limited to, Deutsche Bank equity, equity linked vehicle, and restricted cash. Variable compensation is determined based on an analysis of a number of factors, including among other things, the performance of Deutsche Bank, the performance of the Asset Management division, and the portfolio manager’s individual contribution. In evaluating individual contribution, management will consider a combination of quantitative and qualitative factors. Top performing investment professionals earn a total compensation package that is highly competitive. As variable compensation increases, the percentage awarded in long-term incentives also increases. Long-term incentives are subject to a clawback provision for unvested portions only during the three-year life of the plan should the individual engage in any conduct that is a significant breach of DB policies and procedures.

	•		The quantitative analysis of a portfolio manager’s individual performance is based on, among other factors, performance of all of the accounts managed by the portfolio manager (which includes the fund and any other accounts managed by the portfolio manager) over a one-, three-, and five-year period relative to the appropriate Morningstar and Lipper peer group universes and/or benchmark index(es) with respect to each account. Additionally, the portfolio manager’s retail/institutional asset mix is weighted, as appropriate for evaluation purposes. Generally the benchmark index used is a benchmark index set forth in the fund’s prospectus to which the fund’s performance is compared. Additional or different appropriate peer group or benchmark indices may also be used. Primary weight is given to pre-tax portfolio performance over three-year and five-year time periods (adjusted as appropriate if the portfolio manager has served for less than five years) with lesser consideration given to portfolio performance over a one-year period. The increase or decrease in a fund’s assets due to the purchase or sale of fund shares is not considered a material factor.

	•		The qualitative analysis of a portfolio manager’s individual performance is based on, among other things, the results of an annual management and internal peer review process, and management’s assessment of overall portfolio manager contributions to investor relations, the investment process and overall performance (distinct from fund and other account performance). Other factors, including contributions made to the investment team, as well as adherence to Compliance Policies and Procedures, Risk Management procedures, the firm’s Code of Ethics and “living the values” of the Advisor are also factors.

The quantitative analysis of a portfolio manager’s performance is given more weight in determining variable compensation than the qualitative portion.

Fund Ownership of Portfolio Managers

The following table shows the dollar range of shares owned beneficially and of record by each member of the Fund’s portfolio management team in the Fund including investments by their immediate family members sharing the same household and amounts invested through retirement and deferred compensation plans. This information is provided as of the Fund’s most recent fiscal year end.


Name of	Dollar Range of
Portfolio Manager	Fund Shares Owned
James Francis	$	0
Robert Wang	$	0
Julie Abbett	$	0

Conflicts of Interest

In addition to managing the assets of the Fund, the Fund’s portfolio managers may have responsibility for managing other client accounts of the subadvisor or its affiliates. The tables below show, for each portfolio manager, the number and asset size of (1) SEC registered investment companies (or series thereof) other than the Fund, (2) pooled investment vehicles that are not registered investment companies and (3) other accounts (e.g., accounts managed for individuals or organizations) managed by each portfolio manager. Total assets attributed to each portfolio manager in the tables below include total assets of each account managed by them, although the manager may only manage a portion of such account’s assets. The tables also show the number of performance based fee accounts, as well as the total assets of the accounts for which the advisory fee is based on the performance of the account. This information is provided as of the Fund’s most recent fiscal year end.

Other SEC Registered Investment Companies Managed:


					Number of
	Number of		Total Assets of		Investment
	Registered		Registered		Company Accounts		Total Assets of
Name of Portfolio	Investment		Investment		with Performance		Performance- Based
Manager	Companies		Companies		Based Fee		Fee Accounts
James Francis		22	$	5,809,304,409		0	$	0
Robert Wang		44	$	11,364,562,209		0	$	0
Julie Abbett		22	$	5,809,304,409		0	$	0

Other Pooled Investment Vehicles Managed:


					Number of Pooled
	Number of				Investment Vehicle		Total Assets of
	Pooled				Accounts with		Performance-
Name of Portfolio	Investment		Total Assets of Pooled		Performance-Based		Based Fee
Manager	Vehicles		Investment Vehicles		Fee		Accounts
James Francis		18	$	211,430,184		0	$	0
Robert Wang		38	$	1,528,682,925		1	$	4,184,315
Julie Abbett		18	$	211,430,184		0	$	0

Other Accounts Managed:


					Number of Other		Total Assets of
					Accounts with		Performance-
	Number of Other		Total Assets of		Performance-		Based Fee
Name of Portfolio Manager	Accounts		Other Accounts		Based Fee		Accounts
James Francis		4	$	372,201,540		0	$	0
Robert Wang		46	$	6,324,034,835		8	$	211,118,336
Julie Abbett		4	$	372,201,540		0	$	0

that, among other things, imposes restrictions on the ability of portfolio managers and other “access persons” to invest in securities that may be recommended or traded in the Fund and other client accounts.

Real, potential or apparent conflicts of interest may arise when a portfolio manager has day-to-day portfolio management responsibilities with respect to more than one fund or account, including the following:

	•		Certain investments may be appropriate for the Fund and also for other clients advised by the subadvisor, including other client accounts managed by the Fund’s portfolio management team. Investment decisions for the Fund and other clients are made with a view to achieving their respective investment objectives and after consideration of such factors as their current holdings, availability of cash for investment and the size of their investments generally. A particular security may be bought or sold for only one client or in different amounts and at different times for more than one but less than all clients. Likewise, because clients of the subadvisor may have differing investment strategies, a particular security may be bought for one or more clients when one or more other clients are selling the security. The investment results achieved for the Fund may differ from the results achieved for other clients of the subadvisor. In addition, purchases or sales of the same security may be made for two or more clients on the same day. In such event, such transactions will be allocated among the clients in a manner believed by the subadvisor to be most equitable to each client, generally utilizing a pro rata allocation methodology. In some cases, the allocation procedure could potentially have an adverse effect or positive effect on the price or amount of the securities purchased or sold by the Fund. Purchase and sale orders for the Fund may be combined with those of other clients of the subadvisor in the interest of achieving the most favorable net results to the Fund and the other clients.

	•		To the extent that a portfolio manager has responsibilities for managing multiple client accounts, a portfolio manager will need to divide time and attention among relevant accounts. The subadvisor attempts to minimize these conflicts by aligning its portfolio management teams by investment strategy and by employing similar investment models across multiple client accounts.

	•		In some cases, an apparent conflict may arise where the subadvisor has an incentive, such as a performance-based fee, in managing one account and not with respect to other accounts it manages. The subadvisor will not determine allocations based on whether it receives a performance-based fee from the client. Additionally, the subadvisor has in place supervisory oversight processes to periodically monitor performance deviations for accounts with like strategies.

	•		The subadvisor and its affiliates and the investment team of the Fund may manage other mutual funds and separate accounts on a long-short basis. The simultaneous management of long and short portfolios creates potential conflicts of interest including the risk that short sale activity could adversely affect the market value of the long positions (and vice versa), the risk arising from sequential orders in long and short positions, and the risks associated with receiving opposing orders at the same time. The subadvisor has adopted procedures that it believes are reasonably designed to mitigate these potential conflicts of interest. Included in these procedures are specific guidelines developed to ensure fair and equitable treatment for all clients whose accounts are managed by each Fund’s portfolio management team. The subadvisor and the portfolio management team have established monitoring procedures, a protocol for supervisory reviews, as well as compliance oversight to ensure that potential conflicts of interest relating to this type of activity are properly addressed.

The subadvisor is owned by Deutsche Bank AG, a multi-national financial services company. Therefore, the subadvisor is affiliated with a variety of entities that provide, and/or engage in commercial banking, insurance, brokerage, investment banking, financial advisory, broker-dealer activities (including sales and trading), hedge funds, real estate and private equity investing, in addition to the provision of investment management services to institutional and individual investors. Since Deutsche Bank AG, its affiliates, directors, officers and employees (the “Firm”) are engaged in businesses and have interests other than managing asset management accounts, such other activities involve real, potential or apparent conflicts of interest. These interests and activities include potential advisory, transactional and financial activities and other interests in securities and companies that may be directly or indirectly purchased or sold by the Firm for its clients’ advisory accounts. These are

Global Real Estate Trust

Compensation of Portfolio Managers

Portfolio managers are eligible for total compensation comprised of base salary and variable compensation.

Base Salary — Base salary is linked to job functions, responsibilities and financial services industry peer comparison through the use of extensive market data surveys.

	•		The quantitative analysis of a portfolio manager’s individual performance is based on, among other factors, performance of all of the accounts managed by the portfolio manager (which includes the fund and any other accounts managed by the portfolio manager) over a one-, three-, and five-year period relative to the appropriate Morningstar and Lipper peer group universes and/or benchmark index(es) with respect to each account. Additionally, the portfolio manager’s retail/institutional asset mix is weighted, as appropriate for evaluation purposes. Generally the benchmark index used is a benchmark index set forth in the fund’s prospectus to which the fund’s performance is compared. Additional or different appropriate peer group or benchmark indices may also be used. Primary weight is given to pre-tax portfolio performance over three-year and five-year time periods (adjusted as appropriate if the portfolio manager has served for less than five years) with lesser consideration given to portfolio performance over a one-year period. The increase or decrease in a fund’s assets due to the purchase or sale of fund shares is not considered a material factor.

	•		The qualitative analysis of a portfolio manager’s individual performance is based on, among other things, the results of an annual management and internal peer review process, and management’s assessment of overall portfolio manager contributions to investor relations, the investment process and overall performance (distinct from fund and other account performance). Other factors, including contributions made to the investment team, as well as adherence to Compliance Policies and Procedures, Risk Management procedures, the firm’s Code of Ethics and “living the values” of the Advisor are also factors.

The quantitative analysis of a portfolio manager’s performance is given more weight in determining variable compensation than the qualitative portion.

Fund Ownership of Portfolio Managers


Name of	Dollar Range of
Portfolio Manager	Fund Shares Owned
John F. Robertson	$	0
John W. Vojticek	$	0
Daniel Ekins	$	0
William Leung	$	0
John Hammond	$	0

Conflicts of Interest

companies (or series thereof) other than the Fund, (2) pooled investment vehicles that are not registered investment companies and (3) other accounts (e.g., accounts managed for individuals or organizations) managed by each portfolio manager. Total assets attributed to each portfolio manager in the tables below include total assets of each account managed by them, although the manager may only manage a portion of such account’s assets. The tables also show the number of performance based fee accounts, as well as the total assets of the accounts for which the advisory fee is based on the performance of the account. This information is provided as of the Fund’s most recent fiscal year end.

Other SEC Registered Investment Companies Managed:


					Number of
	Number of		Total Assets of		Investment
	Registered		Registered		Company Accounts		Total Assets of
Name of Portfolio	Investment		Investment		with Performance		Performance- Based
Manager	Companies		Companies		Based Fee		Fee Accounts
John F. Robertson		12	$	3,136,509,836		0	$	0
John W. Vojticek		11	$	3,077,207,604		0	$	0
Daniel Ekins		3	$	1,578,582,606		0	$	0
William Leung		3	$	1,578,582,606		0	$	0
John Hammond		3	$	1,578,582,606		0	$	0

Other Pooled Investment Vehicles Managed:


					Number of Pooled
	Number of				Investment Vehicle		Total Assets of
	Pooled				Accounts with		Performance-
Name of Portfolio	Investment		Total Assets of Pooled		Performance-Based		Based Fee
Manager	Vehicles		Investment Vehicles		Fee		Accounts
John F. Robertson		19	$	1,083,077,360		2	$	30,002,911
John W. Vojticek		9	$	513,674,648		2	$	30,002,911
Daniel Ekins		10	$	717,669,620		0	$	0
William Leung		9	$	474,068,150		0	$	0
John Hammond		9	$	371,439,225		0	$	0

Other Accounts Managed:


					Number of Other		Total Assets of
					Accounts with		Performance-
	Number of Other		Total Assets of		Performance-		Based Fee
Name of Portfolio Manager	Accounts		Other Accounts		Based Fee		Accounts
John F. Robertson		52	$	3,062,970,622		5	$	364,248,429
John W. Vojticek		44	$	2,433,349,053		5	$	364,248,429
Daniel Ekins		20	$	1,324,065,821		2	$	93,085,933
William Leung		16	$	830,760,776		2	$	93,085,933
John Hammond		15	$	816,150,581		2	$	93,085,933

In addition to the accounts above, an investment professional may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the Fund. The subadvisor has in place a Code of Ethics that is designed to address conflicts of interest and that, among other things, imposes restrictions on the ability of portfolio managers and other “access persons” to invest in securities that may be recommended or traded in the Fund and other client accounts.

	•		Certain investments may be appropriate for the Fund and also for other clients advised by the subadvisor, including other client accounts managed by the Fund’s portfolio management team. Investment decisions for the Fund and other clients are made with a view to achieving their respective investment objectives and after consideration of such factors as their current holdings, availability of cash for investment and the size of their investments generally. A particular security may be bought or sold for only one client or in different amounts and at different times for more than one but less than all clients. Likewise, because clients of the subadvisor may have differing investment strategies, a particular security may be bought for one or more clients when one or more other clients are selling the security. The investment results achieved for the Fund may differ from the results achieved for other clients of the subadvisor. In addition, purchases or sales of the same security may be made for two or more clients on the same day. In such event, such transactions will be allocated among the clients in a manner believed by the subadvisor to be most equitable to each client, generally utilizing a pro rata allocation methodology. In some cases, the allocation procedure could potentially have an adverse effect or positive effect on the price or amount of the securities purchased or sold by the Fund. Purchase and sale orders for the Fund may be combined with those of other clients of the subadvisor in the interest of achieving the most favorable net results to the Fund and the other clients.

	•		To the extent that a portfolio manager has responsibilities for managing multiple client accounts, a portfolio manager will need to divide time and attention among relevant accounts. The subadvisor attempts to minimize these conflicts by aligning its portfolio management teams by investment strategy and by employing similar investment models across multiple client accounts.

	•		In some cases, an apparent conflict may arise where the subadvisor has an incentive, such as a performance-based fee, in managing one account and not with respect to other accounts it manages. The subadvisor will not determine allocations based on whether it receives a performance-based fee from the client. Additionally, the subadvisor has in place supervisory oversight processes to periodically monitor performance deviations for accounts with like strategies.

	•		The subadvisor and its affiliates and the investment team of the Fund may manage other mutual funds and separate accounts on a long-short basis. The simultaneous management of long and short portfolios creates potential conflicts of interest including the risk that short sale activity could adversely affect the market value of the long positions (and vice versa), the risk arising from sequential orders in long and short positions, and the risks associated with receiving opposing orders at the same time. The subadvisor has adopted procedures that it believes are reasonably designed to mitigate these potential conflicts of interest. Included in these procedures are specific guidelines developed to ensure fair and equitable treatment for all clients whose accounts are managed by each Fund’s portfolio management team. The subadvisor and the portfolio management team have established monitoring procedures, a protocol for supervisory reviews, as well as compliance oversight to ensure that potential conflicts of interest relating to this type of activity are properly addressed.

Real Estate Securities Trust

Compensation of Portfolio Managers

Portfolio managers are eligible for total compensation comprised of base salary and variable compensation.

Base Salary — Base salary is linked to job functions, responsibilities and financial services industry peer comparison through the use of extensive market data surveys.

	•		The quantitative analysis of a portfolio manager’s individual performance is based on, among other factors, performance of all of the accounts managed by the portfolio manager (which includes the fund and any other accounts managed by the portfolio manager) over a one-, three-, and five-year period relative to the appropriate Morningstar and Lipper peer group universes and/or benchmark index(es) with respect to each account. Additionally, the portfolio manager’s retail/institutional asset mix is weighted, as appropriate for evaluation purposes. Generally the benchmark index used is a benchmark index set forth in the fund’s prospectus to which the fund’s performance is compared. Additional or different appropriate peer group or benchmark indices may also be used. Primary weight is given to pre-tax portfolio performance over three-year and five-year time periods (adjusted as appropriate if the portfolio manager has served for less than five years) with lesser consideration given to portfolio performance over a one-year period. The increase or decrease in a fund’s assets due to the purchase or sale of fund shares is not considered a material factor.

	•		The qualitative analysis of a portfolio manager’s individual performance is based on, among other things, the results of an annual management and internal peer review process, and management’s assessment of overall portfolio manager contributions to investor relations, the investment process and overall performance (distinct from fund and other account performance). Other factors, including contributions made to the investment team, as well as adherence to Compliance Policies and Procedures, Risk Management procedures, the firm’s Code of Ethics and “living the values” of the Advisor are also factors.

The quantitative analysis of a portfolio manager’s performance is given more weight in determining variable compensation than the qualitative portion.

Fund Ownership of Portfolio Managers


Name of	Dollar Range of
Portfolio Manager	Fund Shares Owned
Jerry W. Ehlinger	$	0
John F. Robertson	$	0
Asad Kazim	$	0
John W. Vojticek	$	0

Conflicts of Interest

account’s assets. The tables also show the number of performance based fee accounts, as well as the total assets of the accounts for which the advisory fee is based on the performance of the account. This information is provided as of the Fund’s most recent fiscal year end.

Other SEC Registered Investment Companies Managed:


					Number of
	Number of		Total Assets of		Investment
	Registered		Registered		Company Accounts		Total Assets of
Name of Portfolio	Investment		Investment		with Performance		Performance- Based
Manager	Companies		Companies		Based Fee		Fee Accounts
Jerry W. Ehlinger		7	$	1,193,365,079		0	$	0
John F. Robertson		12	$	3,642,637,349		0	$	0
Asad Kazim		7	$	1,193,365,079		0	$	0
John W. Vojticek		11	$	3,583,335,118		0	$	0

Other Pooled Investment Vehicles Managed:


					Number of Pooled
	Number of				Investment Vehicle		Total Assets of
	Pooled				Accounts with		Performance-
Name of Portfolio	Investment		Total Assets of Pooled		Performance-Based		Based Fee
Manager	Vehicles		Investment Vehicles		Fee		Accounts
Jerry W. Ehlinger		5	$	292,440,500		2	$	30,002,911
John F. Robertson		19	$	1,083,077,360		2	$	30,002,911
Asad Kazim		5	$	292,440,500		2	$	30,002,911
John W. Vojticek		9	$	513,674,648		2	$	30,002,911

Other Accounts Managed:


					Number of Other
					Accounts with		Total Assets of
Name of Portfolio	Number of Other		Total Assets of Other		Performance- Based		Performance- Based
Manager	Accounts		Accounts		Fee		Fee Accounts
Jerry W. Ehlinger		30	$	1,711,840,540		3	$	271,162,496
John F. Robertson		52	$	3,062,970,622		5	$	364,248,429
Asad Kazim		30	$	1,536,792,614		3	$	271,162,496
John W. Vojticek		44	$	2,433,349,053		5	$	364,248,429

•

Certain investments may be appropriate for the Fund and also for other clients advised by the subadvisor, including other client accounts managed by the Fund’s portfolio management team. Investment decisions for the Fund and other clients are made with a view to achieving their respective investment objectives and after consideration of such factors as their current holdings, availability of cash for investment and the size of their investments generally. A particular security may be bought or sold for only one client or in different amounts

and at different times for more than one but less than all clients. Likewise, because clients of the subadvisor may have differing investment strategies, a particular security may be bought for one or more clients when one or more other clients are selling the security. The investment results achieved for the Fund may differ from the results achieved for other clients of the subadvisor. In addition, purchases or sales of the same security may be made for two or more clients on the same day. In such event, such transactions will be allocated among the clients in a manner believed by the subadvisor to be most equitable to each client, generally utilizing a pro rata allocation methodology. In some cases, the allocation procedure could potentially have an adverse effect or positive effect on the price or amount of the securities purchased or sold by the Fund. Purchase and sale orders for the Fund may be combined with those of other clients of the subadvisor in the interest of achieving the most favorable net results to the Fund and the other clients.

	•		To the extent that a portfolio manager has responsibilities for managing multiple client accounts, a portfolio manager will need to divide time and attention among relevant accounts. The subadvisor attempts to minimize these conflicts by aligning its portfolio management teams by investment strategy and by employing similar investment models across multiple client accounts.

	•		In some cases, an apparent conflict may arise where the subadvisor has an incentive, such as a performance-based fee, in managing one account and not with respect to other accounts it manages. The subadvisor will not determine allocations based on whether it receives a performance-based fee from the client. Additionally, the subadvisor has in place supervisory oversight processes to periodically monitor performance deviations for accounts with like strategies.

	•		The subadvisor and its affiliates and the investment team of the Fund may manage other mutual funds and separate accounts on a long-short basis. The simultaneous management of long and short portfolios creates potential conflicts of interest including the risk that short sale activity could adversely affect the market value of the long positions (and vice versa), the risk arising from sequential orders in long and short positions, and the risks associated with receiving opposing orders at the same time. The subadvisor has adopted procedures that it believes are reasonably designed to mitigate these potential conflicts of interest. Included in these procedures are specific guidelines developed to ensure fair and equitable treatment for all clients whose accounts are managed by each Fund’s portfolio management team. The subadvisor and the portfolio management team have established monitoring procedures, a protocol for supervisory reviews, as well as compliance oversight to ensure that potential conflicts of interest relating to this type of activity are properly addressed.

DIMENSIONAL FUND ADVISORS LP

Disciplined Diversification Trust
Emerging Markets Value Trust
International Small Company Trust
Small Cap Opportunities Trust

Portfolio Managers

In accordance with the team approach used to manage the trusts referenced above (the “Portfolios”), the portfolio managers and portfolio traders implement the policies and procedures established by the Investment Committee of Dimensional Fund Advisors LP (“Dimensional”). The portfolio managers and portfolio traders also make daily investment decisions regarding the Portfolio, including running buy and sell programs based on the parameters established by the Investment Committee. The portfolio managers named below coordinate the efforts of all other portfolio managers with respect to the day-to-day management of the category of portfolios indicated:


Disciplined Diversification Trust		Stephen A. Clark
Small Cap Opportunities Trust		Stephen A. Clark
Emerging Markets Value Trust		Karen E. Umland
International Small Company Trust		Karen E. Umland

DESCRIPTION OF COMPENSATION STRUCTURE

Dimensional’s portfolio managers receive a base salary and a bonus. Compensation of a portfolio manager is determined by Dimensional and is based on a portfolio manager’s experience, responsibilities, the perception of the quality of his or her work efforts and other subjective factors. The compensation of portfolio managers is not directly based upon the performance of the Portfolios or other accounts that the portfolio managers manage. Dimensional reviews the compensation of each portfolio manager annually. Each portfolio manager’s compensation consists of the following:

	•		Base Salary. Each portfolio manager is paid a base salary. Dimensional considers the factors described above to determine each portfolio manager’s base salary.

	•		Semi-Annual Bonus. Each portfolio manager may receive a semi-annual bonus. The bonus is based on the factors described above.

Portfolio managers may be awarded the right to purchase restricted shares of Dimensional’s stock as determined from time to time by the Board of Directors of Dimensional or its delegees. Portfolio managers also participate in benefit and retirement plans and other programs available generally to all Dimensional employees.

In addition, portfolio managers are given the option of participating in Dimensional’s Long Term Incentive Plan. The level of participation for eligible employees may be dependent on overall level of compensation, among other considerations. Participation in this program is not based on or related to the performance of any individual strategies or any particular client accounts.

assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date.

The following table reflects information as of December 31, 2008:


	Other Registered				Other Pooled
	Investment Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Karen E. Umland		38	$	29,404,411,956		5	$	557,029,730		18	$	2,485,269,181
Stephen A. Clark		30	$	33,316,391,724		7	$	4,626,942,536		49	$	3,033,260,803

Other Accounts Managed — Of total listed above, those for which advisory fee is based on performance


	Other Registered
	Investment				Other Pooled
	Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Karen E. Umland		0	$	0		0	$	0		1	$	329,404,500
Stephen A. Clark		0	$	0		1	$	172,243,186		0	$	0

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the Portfolios that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

Actual or apparent conflicts of interest may arise when a portfolio manager has primary day-to-day oversight responsibilities with respect to multiple accounts. In addition to the Portfolios, these accounts may include registered mutual funds, other unregistered pooled investment vehicles, and other accounts managed for organizations and individuals (“Accounts”). An Account may have similar investment objectives to a Portfolio, or may purchase, sell or hold securities that are eligible to be purchased, sold or held by a Portfolio. Actual or apparent conflicts of interest include:

	•		Time Management. The management of the Portfolios and/or Accounts may result in a portfolio manager devoting unequal time and attention to the management of the Portfolios and/or Accounts. Dimensional seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most Accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the Portfolios.

	•		Investment Opportunities. It is possible that at times identical securities will be held by a Portfolio and one or more Accounts. However, positions in the same security may vary and the length of time that a Portfolio or an

			Account may choose to hold its investment in the same security may likewise vary. If a portfolio manager identifies a limited investment opportunity that may be suitable for a Portfolio and one or more Accounts, the Portfolio may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across the Portfolio and other eligible Accounts. To deal with these situations, Dimensional has adopted procedures for allocating portfolio transactions across the Portfolios and other Accounts.

	•		Broker Selection. With respect to securities transactions for the Portfolios, Dimensional determines which broker to use to execute each order, consistent with its duty to seek best execution of the transaction. However, with respect to certain Accounts (such as separate accounts), Dimensional may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, Dimensional or its affiliates may place separate, non-simultaneous, transactions for a Portfolio and another Account that may temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of a Portfolio or an Account.

	•		Performance-Based Fees. For some Accounts, Dimensional may be compensated based on the profitability of the Account, such as by a performance-based management fee. These incentive compensation structures may create a conflict of interest for Dimensional with regard to Accounts where Dimensional is paid based on a percentage of assets because the portfolio manager may have an incentive to allocate securities preferentially to the Accounts where Dimensional might share in investment gains.

	•		Investment in a Portfolio. A portfolio manager or his/her relatives may invest in an Account that he or she manages, and a conflict may arise where he or she may therefore have an incentive to treat an Account in which the portfolio manager or his/her relatives invest preferentially as compared to a Portfolio or other Accounts for which they have portfolio management responsibilities

Dimensional has adopted certain compliance procedures that are reasonably designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.

Franklin Advisers

Income Trust

The following table reflects information as of December 31, 2008:

Other Registered

Other Pooled

Investment Companies

Investment Vehicles

Other Accounts

Number

Portfolio

Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

Charles B. Johnson

44,569.6 M

383.2 M

Edward D. Perks, CFA

46,727.4 M

383.2 M

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

Conflicts

The management of multiple funds, including the fund, and accounts may also give rise to potential conflicts of interest if the funds and other accounts have different objectives, benchmarks, time horizons, and fees as the portfolio manager must allocate his or her time and investment ideas across multiple funds and accounts. The manager seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment strategies that are used in connection with the management of the fund. Accordingly, portfolio holdings, position sizes, and industry and sector exposures tend to be similar across similar portfolios, which may minimize the potential for conflicts of interest. As noted above, the separate management of the trade execution and valuation functions from the portfolio management process also helps to reduce potential conflicts of interest. However, securities selected for funds or accounts other than the fund may outperform the securities selected for the fund. Moreover, if a portfolio manager identifies a limited investment opportunity that may be suitable for more than one fund or other account, the fund may not be able to take full advantage of that opportunity due to an allocation of that opportunity across all eligible funds and other accounts. The manager seeks to manage such potential conflicts by using procedures intended to provide a fair allocation of buy and sell opportunities among funds and other accounts.

The structure of a portfolio manager’s compensation may give rise to potential conflicts of interest. A portfolio manager’s base pay and bonus tend to increase with additional and more complex responsibilities that include increased assets under management. As such, there may be an indirect relationship between a portfolio manager’s marketing or sales efforts and his or her bonus.

Finally, the management of personal accounts by a portfolio manager may give rise to potential conflicts of interest. While the funds and the manager have adopted a code of ethics which they believe contains provisions reasonably necessary to prevent a wide range of prohibited activities by portfolio managers and others with respect to their personal trading activities, there can be no assurance that the code of ethics addresses all individual conduct that could result in conflicts of interest.

The manager and the fund have adopted certain compliance procedures that are designed to address these, and other, types of conflicts. However, there is no guarantee that such procedures will detect each and every situation where a conflict arises.

Compensation

The manager seeks to maintain a compensation program that is competitively positioned to attract, retain and motivate top-quality investment professionals. Portfolio managers receive a base salary, a cash incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed annually and the level of compensation is based on individual performance, the salary range for a portfolio manager’s level of responsibility and Franklin Templeton guidelines. Portfolio managers are provided no financial incentive to favor one fund or account over another. Each portfolio manager’s compensation consists of the following three elements:

Base salary Each portfolio manager is paid a base salary.

Annual bonus Annual bonuses are structured to align the interests of the portfolio manager with those of the fund’s shareholders. Each portfolio manager is eligible to receive an annual bonus. Bonuses generally are split between cash (50% to 65%) and restricted shares of Resources stock (17.5% to 25%) and mutual fund shares (17.5% to 25%). The deferred equity-based compensation is intended to build a vested interest of the portfolio manager in the financial performance of both Resources and mutual funds advised by the manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving consistently strong investment performance, which aligns the financial incentives of the portfolio manager and fund shareholders. The Chief Investment Officer of the manager and/or other officers of the manager, with responsibility for the fund, have discretion in the granting of annual bonuses to portfolio managers in accordance with Franklin Templeton guidelines. The following factors are generally used in determining bonuses under the plan:

	•		Investment performance. Primary consideration is given to the historic investment performance over the 1, 3 and 5 preceding years of all accounts managed by the portfolio manager. The pre-tax performance of each fund managed is measured relative to a relevant peer group and/or applicable benchmark as appropriate.

	•		Non-investment performance. The more qualitative contributions of a portfolio manager to the manager’s business and the investment management team, including professional knowledge, productivity, responsiveness to client needs and communication, are evaluated in determining the amount of any bonus award.

	•		Responsibilities. The characteristics and complexity of funds managed by the portfolio manager are factored in the manager’s appraisal.

Additional long-term equity-based compensation Portfolio managers may also be awarded restricted shares or units of Resources stock or restricted shares or units of one or more mutual funds, and options to purchase common shares of

Franklin Mutual Advisers, LLC

Mutual Shares Trust

The following table reflects information as of December 31, 2008:


	Other Registered
	Investment Companies				Other Pooled Investment Vehicles				Other Accounts
	Number				Number				Number
	of				of				of
Portfolio Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Peter Langerman		8	$	19,042.6 M		3	$	1,264.4 M		0	$	0
F. David Segal, CFA		6	$	18,904.6 M		1	$	-0.1 M		0	$	0
Deborah A. Turner, CFA		6	$	18,904.6 M		2	$	27.3 M		0	$	0

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

Portfolio managers that provide investment services to the fund may also provide services to a variety of other investment products, including other funds, institutional accounts and private accounts. The advisory fees for some of such other products and accounts may be different than that charged to the fund and may include performance based compensation. This may result in fees that are higher (or lower) than the advisory fees paid by the fund. As a matter of policy, each fund or account is managed solely for the benefit of the beneficial owners thereof. As discussed below, the separation of the trading execution function from the portfolio management function and the application of objectively based trade allocation procedures helps to mitigate potential conflicts of interest that may arise as a result of the portfolio managers managing accounts with different advisory fees.

DESCRIPTION OF ANY MATERIAL CONFLICTS

position sizes, and industry and sector exposures tend to be similar across similar portfolios, which may minimize the potential for conflicts of interest. The separate management of the trade execution and valuation functions from the portfolio management process also helps to reduce potential conflicts of interest. However, securities selected for funds or accounts other than the fund may outperform the securities selected for the fund. Moreover, if a portfolio manager identifies a limited investment opportunity that may be suitable for more than one fund or other account, the fund may not be able to take full advantage of that opportunity due to an allocation of that opportunity across all eligible funds and other accounts. The manager seeks to manage such potential conflicts by using procedures intended to provide a fair allocation of buy and sell opportunities among funds and other accounts.

Franklin Templeton Investment Corp.

International Small Cap Trust

The following table reflects information as of December 31, 2008:

Other Registered

Other Pooled

Investment Companies

Investment Vehicles

Other Accounts

Number

Portfolio Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

Bradley Radin, CFA

2,993.4 M

8,358.6 M

3,630.0 M

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio manager listed in the above table did not beneficially own any shares of the fund that he managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

necessary to prevent a wide range of prohibited activities by portfolio managers and others with respect to their personal trading activities, there can be no assurance that the code of ethics addresses all individual conduct that could result in conflicts of interest.

DESCRIPTION OF COMPENSATION STRUCTURE

Franklin Templeton seeks to maintain a compensation program that is competitively positioned to attract, retain and motivate top-quality investment professionals. Portfolio managers receive a base salary, a cash incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed annually and the level of compensation is based on individual performance, the salary range for a portfolio manager’s level of responsibility and Franklin Templeton guidelines. Portfolio managers are provided no financial incentive to favor one fund or account over another. Each portfolio manager’s compensation consists of the following three elements:

Base salary Each portfolio manager is paid a base salary.

Annual bonus Annual bonuses are structured to align the interests of the portfolio manager with those of the fund’s shareholders. Each portfolio manager is eligible to receive an annual bonus. Bonuses generally are split between cash (50% to 65%) and restricted shares of Franklin Resources stock (17.5% to 25%) and mutual fund shares (17.5% to 25%). The deferred equity-based compensation is intended to build a vested interest of the portfolio manager in the financial performance of both Franklin Resources and mutual funds advised by the manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving consistently strong investment performance, which aligns the financial incentives of the portfolio manager and fund shareholders. The Chief Investment Officer of the manager and/or other officers of the manager, with responsibility for the fund, have discretion in the granting of annual bonuses to portfolio managers in accordance with Franklin Templeton guidelines. The following factors are generally used in determining bonuses under the plan:

	o		Investment performance. Primary consideration is given to the historic investment performance over the 1, 3 and 5 preceding years of all accounts managed by the portfolio manager. The pre-tax performance of each fund managed is measured relative to a relevant peer group and/or applicable benchmark as appropriate.

	o		Research Where the portfolio management team also has research responsibilities, each portfolio manager is evaluated on the number and performance of recommendations over time, productivity and quality of recommendations, and peer evaluation.

	o		Non-investment performance. For senior portfolio managers, there is a qualitative evaluation based on leadership and the mentoring of staff.

	o		Responsibilities. The characteristics and complexity of funds managed by the portfolio manager are factored in the manager’s appraisal.

Additional long-term equity-based compensation Portfolio managers may also be awarded restricted shares or units of Franklin Resources stock or restricted shares or units of one or more mutual funds, and options to purchase common shares of Franklin Resources stock. Awards of such deferred equity-based compensation typically vest over time, so as to create incentives to retain key talent.

Portfolio managers also participate in benefit plans and programs available generally to all employees of the manager.

Frontier Capital Management Company, LLC
(“Frontier”)

Smaller Company Growth Trust

The following table reflects information as of December 31, 2008:


	Other Registered				Other Pooled
	Investment Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
	of				of				of
Portfolio Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Michael A. Cavarretta		5	$	295,527,241		2	$	56,578,444		31	$	891,598,634
Christopher J. Scarpa		2	$	84,455,187		1	$	9,441,705		6	$	142,954,926

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

CONFLICTS OF INTEREST. Frontier generally manages all accounts noted in the table above with the same investment philosophy and using the same investment process, thus limiting contrary positions between accounts. In connection with its management of client accounts, Frontier is subject to a number of potential conflicts of interest. These potential conflicts include the allocation of securities among similar strategies; the allocation of IPOs; soft dollars and other brokerage practices; personal trading by employees and the management of proprietary accounts. Frontier believes that it has written policies and procedures in place that are reasonably designed to address these and other potential conflicts of interest.

DESCRIPTION OF COMPENSATION STRUCTURE. Frontier’s portfolio manager compensation structure is designed to align the interests of portfolio managers with those of the shareholders whose assets they manage. Frontier’s portfolio manager compensation program consists of a base salary, annual bonus and participation in company-funded retirement plans. In addition, all of Frontier’s portfolio managers are partners of Frontier, which entitle them to share in the firm’s profits and the long-term growth of the firm. The annual bonus is variable and based partially or primarily upon management fee revenues generated from client accounts.

GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC (“GMO”)

Growth Trust
Growth Opportunities Trust
International Core Trust
International Growth Trust
Intrinsic Value Trust
U.S. Multi Sector Trust
Value Opportunities Trust

The following table reflects information as of December 31, 2008:


	Other Registered				Other Pooled Investment
	Investment Companies				Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Tom Hancock		10	$	13,334,282,789.69		9	$	2,013,213,623.08		37	$	8,547,429,664.63
Sam Wilderman		14	$	12,868,742,885.09		5	$	2,397,762,581.52		18	$	3,205,829,091.49

Other Accounts Managed – Of total listed above, those for which advisory fee is based on performance


	Other Registered
	Investment				Other Pooled Investment
	Companies				Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Tom Hancock		0	$	0		0	$	0		6	$	2,068,114,607.08
Sam Wilderman		0	$	0		4	$	2,381,191,180.67		5	$	1,994,128,418.96

Ownership of fund shares. The portfolio manager listed in the above table did not beneficially own any shares of the fund that he managed as of December 31, 2008.

Description of material conflicts: Whenever a portfolio manager manages other accounts, including accounts that pay higher fees or accounts that pay performance-based fees, potential conflicts of interest exist, including potential

conflicts between the investment strategy of the fund and the investment strategy of the other accounts and potential conflicts in the allocation of investment opportunities between the fund and such other accounts. GMO believes several factors limit the conflicts between the fund and other similar stock accounts managed by the fund’s portfolio management team or individual members of the team. First, discipline and constraints are imposed because the investment programs of the fund and other similar accounts are determined based on quantitative models. Second, all portfolio management team members are aware of and abide by GMO’s trade allocation procedures, which seek to ensure fair allocation of investment opportunities among all accounts. Performance attribution with full transparency of holdings and identification of contributors to gains and losses act as important controls on conflicts that might otherwise exist. Performance dispersion among accounts employing the same investment strategy but with different fee structures is periodically examined by the fund’s portfolio management team and GMO’s Investment Analysis team to ensure that any divergence in expected performance is adequately explained by differences in the client’s investment guidelines and timing of cash flows.

Description of the structure of, and the method used to determine, the compensation of each member of the fund’s portfolio management team: The senior member of the fund’s portfolio management team is a member (partner) of GMO. Compensation for the senior member consists of a base salary, a partnership interest in the firm’s profits and possibly an additional, discretionary, bonus. Compensation does not disproportionately reward out-performance by higher fee/performance fee products. GMO’s Compensation Committee sets the senior member’s base salary taking into account current industry norms and market data to ensure that the base salary is competitive. The Compensation Committee also determines the senior member’s partnership interest, taking into account the senior member’s contribution to GMO and GMO’s mission statement. A discretionary bonus may be paid to recognize specific business contributions and to ensure that the total level of compensation is competitive with the market. Because each member’s compensation is based on his individual performance, GMO does not have a typical percentage split among base salary, bonus and other compensation. Partnership interests in GMO are the primary incentive for senior level persons to continue employment at GMO. GMO believes that partnership interests provide the best incentive to maintain stability of portfolio management personnel.

INVESCO AIM CAPITAL MANAGEMENT, INC.
(“Invesco Aim”)

The following chart reflects the portfolio managers’ investments in the funds that they manage. The chart also reflects information regarding accounts other than the funds for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) registered investment companies, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance (“performance-based fees”), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date.

The following table reflects information as of December 31, 2008:

All Cap Growth Trust

Other Registered

Other Pooled

Investment Companies

Investment Vehicles

Other Accounts

Number

Portfolio

Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

Ryan A. Amerman

5,508.4 M

16.0 M

Robert J. Lloyd

5,730.0 M

193.7 M

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

Small Cap Opportunities Trust


	Other Registered Investment				Other Pooled
	Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
	of				of				of
Portfolio Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Juliet S. Ellis		11	$	2,612.1 M		0	$	0		0	$	0
Juan R. Hartsfield		11	$	2,612.1 M		0	$	0		0	$	0

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

Small Company Growth Trust


	Other Registered Investment				Other Pooled
	Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Juliet S. Ellis		11	$	2,551.2 M		0	$	0		0	$	0
Juan R. Hartsfield		11	$	2,551.2 M		0	$	0		0	$	0
Clay Manley		5	$	1,697.0 M		0	$	0		0	$	0

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

There are no accounts that pay fees based upon performance.

POTENTIAL CONFLICTS OF INTEREST

We are not aware of any material actual conflicts of interest that have arisen in connection with the portfolio managers’ management of the fund’s investments and the investments of the other account(s) included in this response.

Actual or apparent conflicts of interest may arise when a portfolio manager has day-to-day management responsibilities with respect to more than one fund or other account. More specifically, portfolio managers who manage multiple funds and /or other accounts may be presented with one or more of the following potential conflicts:

	•		The management of multiple funds and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each fund and/or other account. Invesco Aim seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most other accounts managed by a portfolio manager are managed using the same investment models that are used in connection with the management of the funds.

	•		If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one fund or other account, a fund may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible funds and other accounts. To deal with these situations, Invesco Aim and the funds have adopted procedures for allocating portfolio transactions across multiple accounts.

	•		Invesco Aim determines which broker to use to execute each order for securities transactions for the Funds, consistent with its duty to seek best execution of the transaction. However, for certain other accounts (such as mutual funds for which Invesco Aim or an affiliate acts as sub-advisor, other pooled investment vehicles that are not registered mutual funds, and other accounts managed for organizations and individuals), Invesco Aim may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, trades for a fund in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions with respect

			to a security may temporarily affect the market price of the security or the execution of the transaction, or both, to the possible detriment of the fund or other account(s) involved.

	•		Finally, the appearance of a conflict of interest may arise where Invesco Aim has an incentive, such as a performance-based management fee, which relates to the management of one fund or account but not all funds and accounts with respect to which a portfolio manager has day-to-day management responsibilities.

Invesco Aim and the funds have adopted certain compliance procedures which are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.

DESCRIPTION OF COMPENSATION STRUCTURE

Invesco Aim seeks to maintain a compensation program that is competitively positioned to attract and retain high-caliber investment professionals. Portfolio managers receive a base salary, an incentive bonus opportunity and an equity compensation opportunity. Portfolio manager compensation is reviewed and may be modified each year as appropriate to reflect changes in the market, as well as to adjust the factors used to determine bonuses to promote good sustained fund performance. Invesco Aim evaluates competitive market compensation by reviewing compensation survey results conducted by an independent third party of investment industry compensation. Each portfolio manager’s compensation consists of the following three elements:

	•		Base salary. Each portfolio manager is paid a base salary. In setting the base salary, Invesco Aim’s intention is to be competitive in light of the particular portfolio manager’s experience and responsibilities.

	•		Annual bonus. The portfolio managers are eligible, along with other employees of Invesco Aim to participate in a discretionary year-end bonus pool. The Compensation Committee of Invesco Ltd. reviews and approves the amount of the bonus pool available for investment centers. The Compensation Committee considers investment performance and financial results in its review. In addition, while having no direct impact on individual bonuses, assets under management are considered when determining the starting bonus funding levels. Each portfolio manager is eligible to receive an annual cash bonus which is based on quantitative (i.e. investment performance) and non-quantitative factors (which may include, but are not limited to, individual performance, risk management and teamwork).

			Each portfolio manager’s compensation is linked to the pre-tax investment performance of the funds/accounts managed by the portfolio manager as described in Table 1 below. Table 1:


Sub-Advisor		Performance time period¹
Invesco Aim²		One-, Three- and Five-year performance against fund peer group identified below:
		All Cap Growth Trust – Lipper Multi-Cap Growth Funds Index
		Small Cap Opportunities Trust – Lipper Small-Cap Core Funds Index
		Small Company Growth Trust – Lipper Small Cap Growth Funds Index

High investment performance (against applicable peer group) would deliver compensation generally associated with top pay in the industry (determined by reference to the third-party provided compensation survey information) and poor investment performance (versus applicable peer group) would result in low bonus compared to the applicable peer group or no bonus at all. These decisions are reviewed and approved collectively by senior leadership which has responsibility for executing the compensation approach across the organization.


¹		Rolling time periods based on calendar year end.

²		Portfolio Managers may be granted a short-term award that vests on a pro-rata basis over a three year period and final payments are based on the performance of eligible funds selected by the manager at the time the award is granted.

JENNISON ASSOCIATES LLC

Capital Appreciation Trust

The following table reflects information as of December 31, 2008:


	Other Registered				Other Pooled
	Investment Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of		Assets (in		of		Assets (in		of			Assets (in
Manager	Accounts		thousands)		Accounts		thousands)		Accounts			thousands)
Michael A. Del Balso		11	$	5,771,171		5	$	745,861		6	*	$	477,935	*
Kathleen A. McCarragher		14	$	6,431,458		3	$	155,366		36		$	3,431,173
Spiros Segalas		15	$	12,519,821		4	$	200,848		10		$	1,392,714


*		Other Accounts excludes the assets and number of accounts in wrap fee programs that are managed using model portfolios.

Other Accounts Managed – Of total listed above, those for which advisory fee is based on performance


	Other Registered
	Investment						Other Pooled
	Companies						Investment Vehicles						Other Accounts
	Number						Number						Number
Portfolio	of			Assets (in			of			Assets (in			of			Assets (in
Manager	Accounts			thousands)			Accounts			thousands)			Accounts			thousands)
Michael A. Del Balso		0		$	0			0		$	0			0		$	0
Kathleen A. McCarragher		1	+	$	926,169	+		0		$	0			0		$	0
Spiros Segalas		0		$	0			2	+	$	47,492	+		1	+	$	22,148	+


+		The portfolio manager only manages a portion of the accounts subject to a performance fee. The market value shown reflects the portion of those accounts managed by the portfolio manager.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

In managing other portfolios (including affiliated accounts), certain potential conflicts of interest may arise. Potential conflicts include, for example, conflicts among investment strategies, conflicts in the allocation of investment opportunities, or conflicts due to different fees. As part of its compliance program, Jennison has adopted policies and procedures that seek to address and minimize the effects of these conflicts.

Jennison’s portfolio managers typically manage multiple accounts. These accounts may include, among others, mutual funds, separately managed advisory accounts (assets managed on behalf of institutions such as pension funds, colleges and universities, foundations), commingled trust accounts, other types of unregistered commingled accounts (including hedge funds), affiliated single client and commingled insurance separate accounts, model nondiscretionary portfolios, and model portfolios used for wrap fee programs. Portfolio managers make investment decisions for each portfolio based on the investment objectives, policies, practices and other relevant investment considerations that the managers believe are applicable to that portfolio. Consequently, portfolio managers may recommend the purchase (or sale) of certain securities for one portfolio and not another portfolio. Securities purchased in one portfolio may perform better than the securities purchased for another portfolio. Similarly, securities sold from one portfolio may result in better performance if the value of that security declines. Generally, however, portfolios in a particular product strategy (e.g., large cap growth equity) with similar objectives are managed similarly. Accordingly, portfolio holdings and industry and sector exposure tend to be similar across a group of accounts in a strategy that have similar objectives, which tends to minimize the potential for conflicts of interest. While these accounts have many similarities, the investment performance of each account will be different primarily due to differences in guidelines, timing of investments, fees, expenses and cash flows.

Furthermore, certain accounts (including affiliated accounts) in certain investment strategies may buy or sell securities while accounts in other strategies may take the same or differing, including potentially opposite, position. For example, certain strategies may short securities that may be held long in other strategies. The strategies that sell a security short held long by another strategy could lower the price for the security held long. Similarly, if a strategy is purchasing a security that is held short in other strategies, the strategies purchasing the security could increase the price of the security held short. Jennison has policies and procedures that seek to mitigate, monitor and manage this conflict.

In addition, Jennison has adopted trade aggregation and allocation procedures that seek to treat all clients (including affiliated accounts) fairly and equitably. These policies and procedures address the allocation of limited investment opportunities, such as IPOs and the allocation of transactions across multiple accounts. Some accounts have higher fees, including performance fees, than others. Fees charged to clients may differ depending upon a number of factors including, but not limited to, the particular strategy, the size of the portfolio being managed, the relationship with the client, the service requirements and the asset class involved. Fees may also differ based on the account type (e.g., commingled accounts, trust accounts, insurance company separate accounts or corporate, bank or trust-owned life insurance products). Some accounts, such as hedge funds and alternative strategies, have higher fees, including performance fees, than others. Based on these factors, a client may pay higher fees than another client in the same strategy. Also, clients with larger assets under management generate more revenue for Jennison than smaller accounts. These differences may give rise to a potential conflict that a portfolio manager may favor the higher fee-paying account over the other or allocate more time to the management of one account over another.

Furthermore, if a greater proportion of a portfolio manager’s compensation could be derived from an account or group of accounts, which include hedge fund or alternative strategies, than other accounts under the portfolio manager’s management, there could be an incentive for the portfolio manager to favor the accounts that could have a greater impact on the portfolio manager’s compensation. While Jennison does not monitor the specific amount of time that a portfolio manager spends on a single portfolio, senior Jennison personnel periodically review the performance of Jennison’s portfolio managers as well as periodically assess whether the portfolio manager has adequate resources to effectively manage the accounts assigned to that portfolio manager. Jennison also believes that its compensation structure tends to mitigate this conflict.

DESCRIPTION OF COMPENSATION STRUCTURE

Jennison seeks to maintain a highly competitive compensation program designed to attract and retain outstanding investment professionals, which include portfolio managers and research analysts, and to align the interests of its

investment professionals with those of its clients and overall firm results. Overall firm profitability determines the total amount of incentive compensation pool that is available for investment professionals. Investment professionals are compensated with a combination of base salary and cash bonus. In general, the cash bonus comprises the majority of the compensation for investment professionals. Additionally, senior investment professionals, including portfolio managers and senior research analysts, are eligible to participate in a deferred compensation program where all or a portion of the cash bonus can be invested in a variety of predominantly Jennison-managed investment strategies on a tax-deferred basis.

Investment professionals’ total compensation is determined through a subjective process that evaluates numerous qualitative and quantitative factors. There is no particular weighting or formula for considering the factors. Some portfolio managers may manage or contribute ideas to more than one product strategy and are evaluated accordingly. The factors reviewed for the portfolio managers are listed below in order of importance.

The following primary quantitative factor is reviewed for the portfolio managers:

One and three year pre-tax investment performance of groupings of accounts (a “Composite”) relative to market conditions, pre-determined passive indices, such as the Russell 1000® Growth Index, and industry peer group data for the product strategy (e.g., large cap growth, large cap value) for which the portfolio manager is responsible;

The qualitative factors reviewed for the portfolio managers may include:

	r		Historical and long-term business potential of the product strategies;

	r		Qualitative factors such as teamwork and responsiveness; and

	r		Other individual factors such as experience and other responsibilities such as being a team leader or supervisor may also affect an investment professional’s total compensation.

LORD, ABBETT & CO. LLC

All Cap Value Trust

INVESTMENT MANAGERS

Lord, Abbett & Co. LLC (“Lord Abbett”) manages the All Cap Value Trust through a team of experienced portfolio managers responsible for investment decisions together with a team of research analysts who provide company, industry, sector and macroeconomic research and analysis.

The portfolio management team for the All Cap Value Trust is headed by Robert P. Fetch. Assisting Mr. Fetch is Deepak Khanna. Messrs. Fetch and Khanna are jointly and primarily responsible for the day-to-day management of the All Cap Value Trust.

The following table reflects information as of December 31, 2008:

Other Registered

Other Pooled

Investment Companies

Investment Vehicles

Other Accounts

Number of

Portfolio Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

Robert P. Fetch

7,172.9 M

313.4 M

700

1,902.1 M

Deepak Khanna

2,353.7 M

313.4 M

578.1 M


*		Included in the number of accounts and total assets are 3 accounts with respect to which the management fee is based on the performance of the account; such accounts total approximately $411.0 million in total assets.

**		Included in the number of accounts and total assets is 1 account with respect to which the management fee is based on the performance of the account; such account totals approximately $302.6 million in total assets.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

Conflicts of interest may arise in connection with the portfolio managers’ management of the investments of the All Cap Value Trust and the investments of the other accounts included in the table above. Such conflicts may arise with respect to the allocation of investment opportunities among the fund and other accounts with similar investment objectives and policies. An portfolio manager potentially could use information concerning the fund’s transactions to the advantage of other accounts and to the detriment of the fund. To address these potential conflicts of interest, Lord Abbett has adopted and implemented a number of policies and procedures. Lord Abbett has adopted Policies and Procedures for Evaluating Best Execution of Equity Transactions, as well as Trading Practices/Best Execution Procedures. The objective of these policies and procedures is to ensure the fair and equitable treatment of transactions and allocation of investment opportunities on behalf of all accounts managed by Lord Abbett. In addition, Lord Abbett’s Code of Ethics sets forth general principles for the conduct of employee personal securities transactions in a manner that avoids any actual or potential conflicts of interest with the interests of Lord Abbett’s clients including the

fund. Moreover, Lord Abbett’s Insider Trading and Receipt of Material Non-Public Information Policy and Procedure sets forth procedures for personnel to follow when they have inside information. Lord Abbett is not affiliated with a full service broker-dealer and therefore does not execute any portfolio transactions through such an entity, a structure that could give rise to additional conflicts. Lord Abbett does not conduct any investment bank functions and does not manage any hedge funds. Lord Abbett does not believe that any material conflicts of interest exist in connection with the portfolio manager’s management of the investments of the fund and the investments of the other accounts referenced in the table above.

COMPENSATION OF PORTFOLIO MANAGERS

When used in this section, the term “fund” refers to the All Cap Value Trust as well as any other registered investment companies, pooled investment vehicles and accounts managed by a portfolio manager. Each portfolio manager receives compensation from Lord Abbett consisting of salary, bonus and profit sharing plan contributions. The level of base compensation takes into account the portfolio manager’s experience, reputation and competitive market rates.

Fiscal year-end bonuses, which can be a substantial percentage of overall compensation, are determined after an evaluation of various factors. These factors include the portfolio manager’s investment results and style consistency, the dispersion among funds with similar objectives, the risk taken to achieve the fund returns and similar factors. In considering the portfolio manager’s investment results, Lord Abbett’s senior management may evaluate the All Cap Value Trust’s performance against one or more benchmarks from among its primary benchmark and any supplemental benchmarks as disclosed in the prospectus, indexes disclosed as performance benchmarks by the portfolio manager’s other accounts, and other indexes within the one or more of the All Cap Value Trust’s peer group maintained by rating agencies, as well as its peer group. In particular, investment results are evaluated based on an assessment of the portfolio manager’s three- and five-year investment returns on a pre-tax basis versus both the benchmark and the peer groups. Finally, there is a component of the bonus that reflects leadership and management of the investment team. The evaluation does not follow a formulaic approach, but rather is reached following a review of these factors. No part of the bonus payment is based on the portfolio manager’s assets under management, the revenues generated by those assets, or the profitability of the portfolio manager’s team. Lord Abbett does not manage hedge funds. In addition, Lord Abbett may designate a bonus payment of a manager for participation in the firm’s senior incentive compensation plan, which provides for a deferred payout over a five-year period. The plan’s earnings are based on the overall asset growth of the firm as a whole. Lord Abbett believes this incentive focuses portfolio managers on the impact their fund’s performance has on the overall reputation of the firm as a whole and encourages exchanges of investment ideas among investment professionals managing different mandates.

Lord Abbett provides a 401(k) profit-sharing plan for all eligible employees. Contributions to a portfolio manager’s profit-sharing account are based on a percentage of the portfolio manager’s total base and bonus paid during the fiscal year, subject to a specified maximum amount. The assets of this profit-sharing plan are entirely invested in Lord Abbett-sponsored funds.

MARSICO CAPITAL MANAGEMENT, LLC

International Opportunities Trust

Portfolio Manager Disclosure

For any portfolio managed by a team or committee, the name of each committee member (or if there are more than five, the five persons with the most significant responsibility). In addition, appropriate five-year biographical information for each member of the committee disclosed should be provided in accordance with Item 5 of Form N-1A.

James G. Gendelman is the portfolio manager of the John Hancock Trust International Opportunities Trust. Prior to joining Marsico Capital in 2000, Mr. Gendelman spent thirteen years as a Vice President of International Sales for Goldman, Sachs & Co. He holds a bachelor’s degree in Accounting from Michigan State University and a MBA in Finance from the University of Chicago. Mr. Gendelman was a certified public accountant for Ernst & Young from 1983 to 1985.

The following table reflects information as of December 31, 2008:

Other Registered

Other Pooled

Investment Companies

Investment Vehicles

Other Accounts

Number

Portfolio

Manager

Accounts

Assets

Accounts

Assets

Accounts

Assets

James G. Gendelman

6,902 M

1,022 M

1,532 M

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio manager listed in the above table did not beneficially own any shares of the fund that he managed as of December 31, 2008.

Material Conflicts. A description of any material conflicts of interest that may arise in connection with the portfolio manager’s management of the fund’s investment, on the one hand, and the investments of the other accounts list in a. above , on the other. (This description would include, for example, material conflicts between the investment strategy on the fund and the investment strategy of other accounts managed by the portfolio manager and material conflicts in allocation of investment opportunities between the fund and other accounts managed by the portfolio manager.

As a general matter, MCM faces the same need to balance the interests of different clients that any investment adviser with multiple clients might experience. Portfolio managers make investment decisions for each portfolio based on the investment objectives, policies, practices and other relevant investment considerations that the managers believe are

applicable to that portfolio. Consequently, portfolio managers may or may not purchase (or sell) securities for one portfolio and not another portfolio, or may take similar actions for different portfolios at different times. As a result, the mix of securities purchased in one portfolio may perform better than the mix of securities purchased for another portfolio. Similarly, the sale of securities from one portfolio may cause that portfolio to perform better than others if the value of those securities subsequently decline. The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. Although MCM does not track the time a portfolio manager spends on a single portfolio, it does assess whether a portfolio manager has adequate time and resources to effectively manage all of the accounts for which he is responsible. MCM seeks to manage competing interests for the time and attention of portfolio managers.

The need to balance the interests of multiple clients may also arise when allocating and/or aggregating trades. MCM often aggregates into a single trade order several individual contemporaneous client trade orders in a single security. Under MCM’s Portfolio Management and Trade Management Policy and Procedures, when trades are aggregated on behalf of more than one account, MCM seeks to allocate such trades to participating client accounts in a fair and equitable manner. With respect to IPOs and other syndicated or limited offerings, it is MCM’s policy to seek to ensure that over the long term, accounts with the same or similar investment objectives or strategies will receive an equitable opportunity to participate meaningfully and will not be unfairly disadvantaged. To deal with these situations, MCM has adopted policies and procedures for allocating transactions across multiple accounts. MCM’s policies also seek to ensure that portfolio managers do not systematically allocate other types of trades in a manner that would be more beneficial to one account than another. MCM’s compliance department monitors transactions made on behalf of multiple clients to seek to ensure adherence to its policies.

MCM has adopted and implemented policies and procedures that seek to minimize potential conflicts of interest that may arise as a result of a portfolio manager advising multiple accounts. In addition, MCM monitors a variety of areas, including compliance with primary Fund guidelines, the allocation of securities, and compliance with its Code of Ethics.

Portfolio Manager Compensation. The structure of, and the method used to determine the compensation of each portfolio manager.

The compensation package for portfolio managers of MCM is structured as a combination of base salary (may be reevaluated at least annually), and periodic cash bonuses. Bonuses are typically based on a number of factors including MCM’s overall profitability for the period. Portfolio manager compensation takes into account, among other factors, the overall performance of all accounts for which the portfolio manager provides investment advisory services. In receiving compensation such as bonuses, portfolio managers do not receive special consideration based on the performance of particular accounts, and do not receive compensation from accounts charging performance-based fees. Exceptional individual efforts are rewarded through salary readjustments and greater participation in the bonus pool. No other special employee incentive arrangements are currently in place or being planned. In addition to salary and bonus, portfolio managers may participate in other MCM benefits to the same extent and on the same basis as other Marsico Capital employees. Portfolio manager compensation comes solely from MCM. In addition, MCM’s portfolio managers typically are offered equity interests in Marsico Management Equity, LLC, which indirectly owns MCM, and may receive distributions on those equity interests.

As a general matter, MCM does not tie portfolio manager compensation to specific levels of performance relative to fixed benchmarks. Although performance may be a relevant consideration, comparisons with fixed benchmarks may not always be useful. Relevant benchmarks vary depending on specific investment styles and client guidelines or restrictions, and comparisons to benchmark performance may at times reveal more about market sentiment than about a portfolio manager’s abilities. To encourage a long-term horizon for managing portfolios, MCM evaluates a portfolio manager’s performance over periods longer than the immediate compensation period, and may consider a variety of measures such as the performance of unaffiliated portfolios with similar strategies and other measurements. Other factors that may also be significant in determining portfolio manager compensation include, without limitation, the effectiveness of the manager’s leadership within MCM’s investment team, contributions to MCM’s overall

Massachusetts Financial Services Company (“MFS”)

Utilities Trust

The following table reflects information as of December 31, 2008:


						Other Pooled
	Other Registered					Investment
	Investment Companies					Vehicles					Other Accounts
	Number					Number					Number
Portfolio	of					of					of
Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Robert D. Persons		14	$	8.0	B		2	$	.024	B		4	$	.482	B
Maura A. Shaughnessy		6	$	4.4	B		0	$	0			0	$	0

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

MFS seeks to identify potential conflicts of interest resulting from a portfolio manager’s management of both the fund and other accounts and has adopted policies and procedures designed to address such potential conflicts.

The management of multiple funds and accounts (including proprietary accounts) gives rise to potential conflicts of interest if the funds and accounts have different objectives and strategies, benchmarks, time horizons and fees as a portfolio manager must allocate his or her time and investment ideas across multiple funds and accounts. In certain instances there are securities which are suitable for the fund’s portfolio as well as for accounts of MFS or its subsidiaries with similar investment objectives. A fund’s trade allocation policies may give rise to conflicts of interest if the fund’s orders do not get fully executed or are delayed in getting executed due to being aggregated with those of other accounts of MFS or its subsidiaries. A portfolio manager may execute transactions for another fund or account that may adversely impact the value of the fund’s investments. Investments selected for funds or accounts other than the fund may outperform investments selected for the fund.

When two or more clients are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed by MFS to be fair and equitable to each. It is recognized that in some cases this system could have a detrimental effect on the price or volume of the security as far as the fund is concerned. In most cases, however, MFS believes that the fund’s ability to participate in volume transactions will produce better executions for the fund.

As a result, MFS and/or a portfolio manager may have a financial incentive to allocate favorable or limited opportunity investments or structure the timing of investments to favor accounts other than the fund-for instance, those that pay a higher advisory fee and/or have a performance fee.

COMPENSATION

Portfolio manager total cash compensation is a combination of base salary and performance bonus:

–		Base Salary — Base salary represents a smaller percentage of portfolio manager total cash compensation (generally below 10%) than incentive compensation.

–		Performance Bonus — Generally, the performance bonus represents a majority of portfolio manager total cash compensation. The performance bonus is based on a combination of quantitative and qualitative factors, with more weight given to the former (generally over 60%) and less weight given to the latter.

The quantitative portion is based on the pre-tax performance of assets managed by the portfolio manager over one-, three-, and five-year periods relative to peer group universes and/or indices (“benchmarks”). As of December 31, 2008, the following benchmarks were used:


Portfolio Manager		Benchmark(s)
Robert D. Persons		Lipper Corporate Debt Funds BBB-Rated
		Lipper Corporate Debt Funds A-Rated
		Barclays Capital U.S. Aggregate Index
		Morningstar Dollar Bond Funds

Maura A. Shaughnessy		Lipper Utility Funds
		Standard & Poor’s Utilities Index

Additional or different benchmarks, including versions of indices and custom indices may also be used. Primary weight is given to portfolio performance over a three-year time period with lesser consideration given to portfolio performance over one-year and five-year periods (adjusted as appropriate if the portfolio manager has served for less than five years).

The qualitative portion is based on the results of an annual internal peer review process (conducted by other portfolio managers, analysts, and traders) and management’s assessment of overall portfolio manager contributions to investor relations and the investment process (distinct from fund and other account performance).

Portfolio managers also typically benefit from the opportunity to participate in the MFS Equity Plan. Equity interests and/or options to acquire equity interests in MFS or its parent company are awarded by management, on a discretionary basis, taking into account tenure at MFS, contribution to the investment process, and other factors.

Finally, portfolio managers are provided with a benefits package including a defined contribution plan, health coverage and other insurance, which are available to other employees of MFS on substantially similar terms. The percentage such benefits represent of any portfolio manager’s compensation depends upon the length of the individual’s tenure at MFS and salary level, as well as other factors.

MFC Global Investment Management (U.S.), LLC

Active Bond Trust
High Income Trust
Small Cap Instrinsic Value True
Strategic Income Trust
MFC Global Investment Management (U.S.), LLC

Portfolio Managers and Other Accounts Managed:

The portfolio managers of the Active Bond Trust are: Barry H. Evans, Howard C. Greene and Jeffrey N. Given .

The portfolio managers of the High Income Trust are: Arthur N. Calavritinos, John F. Iles, and Joseph E. Rizzo.

The portfolio managers of the Small Cap Intrinsic Value Trust are: Timothy M. Malloy and Roger C. Hamilton.

The portfolio managers of the Strategic Income Trust are: Barry H. Evans, Daniel S. Janis, III, and John F. Iles.

The following table reflects information as of December 31, 2008:


	Other Registered					Other Pooled
	Investment Companies					Investment Vehicles					Other Accounts
	Number					Number					Number
Portfolio	of					of					of
Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Arthur N. Calavritinos		2	$	528.8	M		0	$	0			2	$	344.6	M
Barry H. Evans		6	$	2,625.2	M		0	$	0			90	$	803.3	M
Jeffrey N. Given		8	$	4,736.9	M		2	$	69.3	M		18	$	3,176.9	M
Horward C. Greene		4	$	1,401.8	M		2	$	69.3	M		18	$	3,176.9	M
Roger C. Hamilton		5	$	2,980.3	M		2	$	4.7	M		7	$	102.3	M
John F. Iles		3	$	1,722.9	M		1	$	43.2	M		10	$	1,381.7	M
Daniel S. Janis, III		1	$	925.9	M		1	$	43.2	M		8	$	1,037.1	M
Timothy M. Malloy		4	$	2,686.3	M		2	$	4.7	M		7	$	102.3	M
Joseph E. Rizzo		1	$	528.1	M		0	$	0			2	$	344.6	M

Other Accounts Managed — Of total listed above, those for which advisory fee is based on performance — None

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

At MFC Global (U.S.) the structure of compensation of investment professionals is comprised of the following components: base salary, an annual investment bonus plan, a deferred performance award vested and paid in two installments as well as customary benefits that are offered generally to all full-time employees of MFC Global (U.S.). A limited number of senior portfolio managers who serve as officers of both MFC Global (U.S.) and its parent company, may also receive options or restricted stock grants of common shares of Manulife Financial.

The following describes each component of the compensation package for the investment management team including portfolio managers, research analysts and traders.

Base Salary. Base compensation is fixed and normally reevaluated on an annual basis. MFC Global (U.S.) seeks to set compensation at market rates, taking into account the experience and responsibilities of the investment professional.

Investment Bonus Plan. Under the plan, investment professionals are eligible for an annual bonus. The plan is intended to provide a competitive level of annual bonus compensation that is tied to the investment professional achieving superior investment performance and aligns the financial incentives of MFC Global (U.S.) and the investment professional. Any bonus under the plan is completely discretionary, with a maximum annual bonus that may be well in excess of base salary. While the amount of any bonus is discretionary, the following factors are generally used in determining bonuses under the plan:

Investment Performance: The majority of the bonus is calculated on investment performance of all accounts managed by the investment professional over one, three- and five-year periods are considered. The performance of each account is measured relative to an appropriate peer group benchmark. With respect to fixed income accounts, relative yields are also used to measure performance.

	Ø		Short Term Cash Payout — Paid out to investment professionals in February for the prior year’s performance.

	Ø		Long Term Deferred Compensation — Paid out to investment professionals in two installments in Years 4 and 5 of service. Based on three and five year performance periods relative to appropriate peer groups. Awards invested in MFC Global managed mutual funds during the vesting period.

	Ø		Financial Performance of MFC Global (U.S.): The financial performance of MFC Global (U.S.) and its parent company are also considered in determining bonus awards, with greater emphasis placed upon the profitability of MFC Global (U.S.).

	Ø		Non-Investment Performance: The more intangible contributions of an investment professional to MFC Global (U.S.) business, including the investment professional’s support of sales activities, new fund/strategy idea generation, professional growth and development, and management, where applicable, are evaluated in determining the amount of any bonus award.

Options and Stock Grants. A limited number of senior investment professionals may receive options to purchase shares of Manulife Financial stock. Generally, such options permit the investment professional to purchase a set amount of stock at the market price on the date of grant. Some investment professionals may receive restricted stock grants, where the investment professional is entitled to receive the stock at no or nominal cost, provided that the stock is forfeited if the investment professional’s employment is terminated prior to a vesting date.

MFC Global (U.S.) also permits investment professionals to participate on a voluntary basis in a deferred compensation plan, under which the investment professional may elect on an annual basis to defer receipt of a portion of their

MFC GLOBAL INVESTMENT MANAGEMENT (U.S.A.) LIMITED

(“MFC GLOBAL”)
Absolute Return Trust
American Diversified Growth & Income Trust
American Fundamental Holdings Trust
American Global Diversification Trust
Balanced Trust
Core Allocation Trust
Core Balanced Trust
Core Disciplined Diversification Trust
Core Fundamental Holdings Trust
Core Global Diversification Trust
Core Strategy Trust
500 Index Trust
500 Index Trust B
Franklin Templeton Founding Allocation Trust
International Index Trust
Lifecycle Trusts
Lifestyle Trusts
Mid Cap Index Trust
Money Market Trust
Money Market Trust B
Optimized All Cap Trust
Optimized Value Trust
Pacific Rim Trust
Short Term Government Income Trust
Small Cap Index Trust
Smaller Company Growth Trust
Total Stock Market Index Trust

The following table reflects information as of December 31, 2008:


	Registered					Pooled
	Investment					Investment
	Company					Vehicle
Trust Manager	Accounts		Assets			Accounts		Assets			Other		Assets
(Worldwide)	(Worldwide)		Managed			(Worldwide)		Managed			Accounts		Managed
Carson Jen & Narayan Ramani		10	$	7,158	M		3	$	181	M		5	$	596	M
Matthew Lee, Terrace Chum & Tahnoon Pasha		2	$	175	M		0	$	0			0	$	0
Harpreet Singh, Chris Hensen, Brett Hryb, Rhonda Chang & Noman Ali, Tina Hsiao		4	$	1,887	M		6	$	92	M		7	$	3,490	M
Steve Orlich & Scott Warlow		31	$	44,817	M		21	$	5,318	M		0	$	0
Maralyn Kobayashi & Faisal Rahman		2	$	6,200	M		5	$	2,051	M		0	$	0

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

While funds managed by each of the portfolio managers may have many similarities, MFC Global has adopted compliance procedures to manage potential conflicts of interest such as allocation of investment opportunities and aggregated trading.

DESCRIPTION OF COMPENSATION STRUCTURE

MFC Global portfolio managers receive a competitive compensation package that consists of base salary, performance based bonus and a Manulife share ownership plan. The magnitude of the performance based bonus and participation in equity ownership reflects to the seniority and role of each portfolio manager. MFC Global to ensure retention through competitive compensation that rewards both individual and team performance. The overall compensation package is targeted at the top of the second quartile against our competitors as deemed through industry surveys. By maximizing the performance bonus at the top of the second quartile, this structure ensures that the portfolio managers do not incur undue risk in the funds they manage.

MORGAN STANLEY INVESTMENT MANAGEMENT (VAN KAMPEN)

Value Trust

The following table reflects information as of December 31, 2008:


					Other Pooled
	Other Registered				Investment
	Investment Companies				Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Thomas Copper (Lead Manager)		4	$	932,181,553		0	$	0		0	$	0
John Mazanec		4	$	932,181,553		0	$	0		0	$	0
Thomas Bastian		13	$	21,223,322,093		0	$	0		9	$	2,282,898,489
Mary Jayne Maly		13	$	21,223,322,093		0	$	0		9	$	2,282,898,489
James Roeder		13	$	21,223,322,093		0	$	0		9	$	2,282,898,489
Sergio Marcheli		13	$	21,223,322,093		0	$	0		9	$	2,282,898,489
Mark Laskin		13	$	21,223,322,093		0	$	0		9	$	2,282,898,489

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

Because the portfolio managers may manage assets for other investment companies, pooled investment vehicles and/or other accounts (including institutional clients, pension plans and certain high net worth individuals), there may be an incentive to favor one client over another resulting in conflicts of interest. For instance, the Morgan Stanley Investment Management (“MSIM”) may receive fees from certain accounts that are higher than the fee it receives from the fund, or it may receive a performance-based fee on certain accounts. In those instances, the portfolio managers may have an incentive to favor the higher and/or performance-based fee accounts over the fund. In addition, a conflict of interest could exist to the extent that MSIM has proprietary investments in certain accounts, where portfolio managers have personal investments in certain accounts or when certain accounts are investment options in MSIM’s employee benefits and/or deferred compensation plans. The portfolio manager may have an incentive to favor these accounts over others. If MSIM manages accounts that engage in short sales of securities of the type in which the fund invests, MSIM could be seen as harming the performance of the fund for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall. MSIM has adopted trade allocation and other policies and procedures that it believes are reasonably designed to address these and other conflicts of interest.

PORTFOLIO MANAGER COMPENSATION STRUCTURE

Portfolio managers receive a combination of base compensation and discretionary compensation, comprising a cash bonus and several deferred compensation programs described below. The methodology used to determine portfolio manager compensation is applied across all funds/accounts managed by the portfolio managers.

BASE SALARY COMPENSATION. Generally, portfolio managers receive base salary compensation based on the level of their position with the Investment Adviser.

DISCRETIONARY COMPENSATION. In addition to base compensation, portfolio managers may receive discretionary compensation.

Discretionary compensation can include:

	•		Cash Bonus.

	•		Morgan Stanley’s Long Term Incentive Compensation awards — a mandatory program that defers a portion of discretionary year-end compensation into restricted stock units or other awards based on Morgan Stanley common stock or other investments that are subject to vesting and other conditions.

	•		Investment Management Alignment Plan (IMAP) awards — a mandatory program that defers a portion of discretionary year-end compensation and notionally invests it in designated funds advised by the Investment Adviser or its affiliates. The award is subject to vesting and other conditions. Portfolio managers must notionally invest a minimum of 25% to a maximum of 100% of the IMAP deferral into a combination of the designated funds they manage that are included in the IMAP fund menu, which may or may not include the Fund.

	•		Voluntary Deferred Compensation Plans — voluntary programs that permit certain employees to elect to defer a portion of their discretionary year-end compensation and directly or notionally invest the deferred amount: (1) across a range of designated investment funds, including funds advised by the Investment Adviser or its affiliates; and/or (2) in Morgan Stanley stock units.

PACIFIC INVESTMENT MANAGEMENT COMPANY LLC (“PIMCO”)

Global Bond Trust
Real Return Bond Trust
Total Return Trust

The following table reflects information as of December 31, 2008:


	Other Registered Investment					Other Pooled
	Companies					Investment Vehicles					Other Accounts
	Number					Number					Number
Portfolio	of					of					of
Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
William H. Gross		39	$	182,916.70	M		19	$	7,100.68	M		47	$	20,327.36	M
Scott Mather		13	$	9,752.62	M		57	$	23,614.65	M		61	$	10,907.49	M
Mihir Worah		21	$	33,867.21	M		27	$	3,920.90	M		65	$	17,388.13	M

Other Accounts Managed — Of total listed above, those for which advisory fee is based on performance


	Other Registered
	Investment				Other Pooled
	Companies				Investment Vehicles					Other Accounts
	Number				Number					Number
Portfolio	of				of					of
Manager	Accounts		Assets		Accounts		Assets			Accounts		Assets
William H. Gross		0	$	0		2	$	309.98	M		21	$	10,594.39	M
Scott Mather		0	$	0		2	$	764.53	M		14	$	3,927.70	M
Mihir Worah		0	$	0		0	$	0			15	$	4,622.12	M

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

From time to time, potential conflicts of interest may arise between a portfolio manager’s management of the investments of a fund, on the one hand, and the management of other accounts, on the other. The other accounts might have similar investment objectives or strategies as the funds, track the same index a fund tracks or otherwise hold, purchase, or sell securities that are eligible to be held, purchased or sold by the funds. The other accounts might also have different investment objectives or strategies than the funds.

Knowledge and Timing of Fund Trades. A potential conflict of interest may arise as a result of the portfolio manager’s day-to-day management of a fund. Because of their positions with the funds, the portfolio managers know the size, timing and possible market impact of a fund’s trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of a fund.

Investment Opportunities. A potential conflict of interest may arise as a result of the portfolio manager’s management of a number of accounts with varying investment guidelines. Often, an investment opportunity may be suitable for both a fund and other accounts managed by the portfolio manager, but may not be available in sufficient quantities for both the fund and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by a fund and another account. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.

Under PIMCO’s allocation procedures, investment opportunities are allocated among various investment strategies based on individual account investment guidelines and PIMCO’s investment outlook. PIMCO has also adopted additional procedures to complement the general trade allocation policy that are designed to address potential conflicts of interest due to the side-by-side management of the funds and certain pooled investment vehicles, including investment opportunity allocation issues.

Performance Fees. A portfolio manager may advise certain accounts with respect to which the advisory fee is based entirely or partially on performance. Performance fee arrangements may create a conflict of interest for the portfolio manager in that the portfolio manager may have an incentive to allocate the investment opportunities that he or she believes might be the most profitable to such other accounts instead of allocating them to a fund. PIMCO has adopted policies and procedures reasonably designed to allocate investment opportunities between the funds and such other accounts on a fair and equitable basis over time.

Portfolio Manager Compensation

PIMCO has adopted a “Total Compensation Plan” for its professional level employees, including its portfolio managers, that is designed to pay competitive compensation and reward performance, integrity and teamwork consistent with the firm’s mission statement. The Total Compensation Plan includes a significant incentive component that rewards high performance standards, work ethic and consistent individual and team contributions to the firm. The compensation of portfolio managers consists of a base salary, a bonus, and may include a retention bonus. Portfolio managers who are Managing Directors of PIMCO also receive compensation from PIMCO’s profits. Certain employees of PIMCO, including portfolio managers, may elect to defer compensation through PIMCO’s deferred compensation plan. PIMCO also offers its employees a non-contributory defined contribution plan through which PIMCO makes a contribution based on the employee’s compensation. PIMCO’s contribution rate increases at a specified compensation level, which is a level that would include portfolio managers.

Salary and Bonus. Base salaries are determined by considering an individual portfolio manager’s experience and expertise and may be reviewed for adjustment annually. Portfolio managers are entitled to receive bonuses, which may be significantly more than their base salary, upon attaining certain performance objectives based on predetermined measures of group or department success. These goals are specific to individual portfolio managers and are mutually agreed upon annually by each portfolio manager and his or her manager. Achievement of these goals is an important, but not exclusive, element of the bonus decision process.

In addition, the following non-exclusive list of qualitative criteria (collectively, the “Bonus Factors”) may be considered when determining the bonus for portfolio managers:

	•		3-year, 2-year and 1-year dollar-weighted and account-weighted, pre-tax investment performance as judged against the applicable benchmarks for each account managed by a portfolio manager (including the funds) and relative to applicable industry peer groups;

	•		Appropriate risk positioning that is consistent with PIMCO’s investment philosophy and the Investment Committee/CIO approach to the generation of alpha;

	•		Amount and nature of assets managed by the portfolio manager;

	•		Consistency of investment performance across portfolios of similar mandate and guidelines (reward low dispersion);

	•		Generation and contribution of investment ideas in the context of PIMCO’s secular and cyclical forums, portfolio strategy meetings, Investment Committee meetings, and on a day-to-day basis;

	•		Absence of defaults and price defaults for issues in the portfolios managed by the portfolio manager;

	•		Contributions to asset retention, gathering and client satisfaction;

	•		Contributions to mentoring, coaching and/or supervising; and

	•		Personal growth and skills added.

A portfolio manager’s compensation is not based directly on the performance of any fund or any other account managed by that portfolio manager. Final bonus award amounts are determined by the PIMCO Compensation Committee.

Investment professionals, including portfolio managers, are eligible to participate in a Long Term Cash Bonus Plan (“Cash Bonus Plan”), which provides cash awards that appreciate or depreciate based upon the performance of PIMCO’s parent company, Allianz Global Investors,

and PIMCO over a three-year period. The aggregate amount available for distribution to participants is based upon Allianz Global Investors’ profit growth and PIMCO’s profit growth. Participation in the Cash Bonus Plan is based upon the Bonus Factors, and the payment of benefits from the Cash Bonus Plan, is contingent upon continued employment at PIMCO.

Key employees of PIMCO, including certain Managing Directors, Executive Vice Presidents, and Senior Vice Presidents, are eligible to participate in the PIMCO Class M Unit Equity Participation Plan, a long-term equity plan. The Class M Unit Equity Participation Plan grants options on PIMCO equity that vest in years three, four and five. Upon vesting, the options will convert into PIMCO M Units, which are non-voting common equity of PIMCO. M Units pay out quarterly distributions equal to a pro-rata share of PIMCO’s net profits. There is no assured liquidity and they may remain outstanding perpetually.

Profit Sharing Plan. Instead of a bonus, portfolio managers who are Managing Directors of PIMCO receive compensation from a non-qualified profit sharing plan consisting of a portion of PIMCO’s net profits. Portfolio managers who are Managing Directors receive an amount determined by the Partner Compensation Committee, based upon an individual’s overall contribution to the firm and the Bonus Factors. Under his employment agreement, William Gross receives a fixed percentage of the profit sharing plan.

Allianz Transaction Related Compensation. In May 2000, a majority interest in the predecessor holding company of PIMCO was acquired by a subsidiary of Allianz AG (currently known as Allianz SE) (“Allianz”). In connection with the transaction, Mr. Gross received a grant of restricted stock of Allianz, the last of which vested on May 5, 2005.

Portfolio managers who are Managing Directors also have long-term employment contracts, which guarantee severance payments in the event of involuntary termination of a Managing Director’s employment with PIMCO.

Perimeter Capital Management

Smaller Company Growth Trust

The following table reflects information as of December 31, 2008:


						Other Pooled
	Other Registered					Investment
	Investment Companies					Vehicles				Other Accounts
	Number					Number				Number
	of					of				of
Portfolio Manager	Accounts		Assets			Accounts		Assets		Accounts		Assets
Mark D. Garfinkel		3	$	299.8	M		0	$	0		18	$	355.5	M
James N. Behre		3	$	299.8	M		0	$	0		18	$	355.5	M

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

Potential Conflicts of Interest. The portfolio managers’ management of other accounts may give rise to potential conflicts of interest in connection with their management of the fund’s investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby a portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers’ knowledge about the size, timing and possible market impact of fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the fund. However, the Adviser has established policies and procedures to ensure that the purchase and sale of securities among all accounts it manages are fairly and equitably allocated.

Rainier Investment Management
(“Rainier”)

Growth Equity Trust

The following table reflects information as of December 31, 2008:


	Other Registered					Other Pooled
	Investment Companies					Investment Vehicles					Other Accounts
						Number					Number
Portfolio	Number of					of					of
Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Daniel Brewer		11	$	5.48	B		2	$	383.32	M		163	$	5.48	B
Mark Broughton		11	$	5.48	B		2	$	383.32	M		163	$	5.48	B
Stacie Cowell		11	$	5.48	B		2	$	383.32	M		163	$	5.48	B
Mark Dawson		11	$	5.48	B		2	$	383.32	M		163	$	5.48	B
Andrea Durbin		11	$	5.48	B		2	$	383.32	M		163	$	5.48	B
James Margard		11	$	5.48	B		2	$	383.32	M		163	$	5.48	B
Peter Musser		11	$	5.48	B		2	$	383.32	M		163	$	5.48	B

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

The compensation paid to Rainier for managing the fund is based only on a percentage of assets under management. Portfolio managers benefit from Rainier’s revenues and profitability. But no Portfolio Managers are compensated based directly on fee revenue earned by Rainier on particular accounts in a way that would create a material conflict of interest in favoring particular accounts over other accounts.

Execution and research services provided by brokers may not always be utilized in connection with the fund or other client accounts that may have provided the commission or a portion of the commission paid to the broker providing the services. Rainier allocates brokerage commissions for these services in a manner that it believes is fair and equitable and consistent with its fiduciary obligations to each of its clients.

If a portfolio manager identifies a limited investment opportunity that may be suitable for more than one fund or other client account, the fund may not be able to take full advantage of that opportunity. To mitigate this conflict of interest, Rainier aggregates orders of the funds it advises with orders from each of its other client accounts in order to ensure that all clients are treated fairly and equitably over time and consistent with its fiduciary obligations to each of its clients.

COMPENSATION

All of Rainier’s portfolio managers are compensated by Rainier. All portfolio managers receive a fixed salary. Portfolio managers who are shareholders of Rainier receive a dividend based on number of Rainier shares owned. Portfolio managers who are principals, but not shareholders, of Rainier receive a bonus based on a specific percentage of Rainier’s net income.

RCM Capital Management LLC (“RCM”)

Emerging Small Company Trust
Science & Technology Trust

The following table reflects information as of December 31, 2008:


	Other Registered
	Investment					Other Pooled
	Companies					Investment Vehicles					Other Accounts
	Number					Number					Number
Portfolio	of					of					of
Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Louise M. Laufersweiler		4	$	116	M		3	$	14.6	M		16	$	358.53	M
Thomas J. Ross		3	$	148.8	M		4	$	92.6	M		13	$	182.4	M
Walter C. Price		6	$	1,273	M		6	$	171	M		11	$	283.3	M
Huachen Chen		5	$	1,263	M		0	$	0			17	$	290.8	M

Other Accounts Managed — Of total listed above, those for which advisory fee is based on performance


	Other Registered				Other Pooled
	Investment				Investment
	Companies				Vehicles					Other Accounts
	Number				Number					Number
Portfolio	of				of					of
Manager	Accounts		Assets		Accounts		Assets			Accounts		Assets
Louise M. Laufersweiler		0	$	0		0	$	0			0	$	0
Thomas J. Ross		0	$	0		0	$	0			0	$	0
Walter C. Price		0	$	0		2	$	6	M		0	$	0
Huachen Chen		0	$	0		0	$	0			0	$	0

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

Like other investment professionals with multiple clients, a portfolio manager for a fund may face certain potential conflicts of interest in connection with managing both a fund and other accounts at the same time. The paragraphs below describe some of these potential conflicts, which RCM believes are faced by investment professionals at most major financial firms. RCM has adopted compliance policies and procedures that attempt to address certain of these potential conflicts. The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance (“performance fee accounts”), may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts.

These potential conflicts may include, among others:

• The most attractive investments could be allocated to higher-fee accounts or performance fee accounts.

• The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.

• The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.

A potential conflict of interest may arise when a fund and other accounts purchase or sell the same securities. On occasions when a portfolio manager considers the purchase or sale of a security to be in the best interests of a fund as well as other accounts, RCM’s trading desk may, to the extent permitted by applicable laws and regulations, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to a fund or another account if one account is favored over another in allocating securities purchased or sold — for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account.

“Cross trades,” in which one RCM account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest. Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay. RCM has adopted compliance procedures that provide that any transaction between funds and another RCM-advised account are to be made at an independent current market price, as required by law.

Another potential conflict of interest may arise based on the different investment objectives and strategies of a fund and other accounts. For example, another account may have a shorter-term investment horizon or different investment objectives, policies or restrictions than a fund. Depending on another account’s objectives or other factors, a portfolio manager may give advice and make decisions that may differ from advice given, or the timing or nature of decisions made, with respect to a fund. In addition, investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time. More rarely, a particular security may be bought for one or more accounts managed by a portfolio manager when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts.

A fund’s portfolio manager who is responsible for managing multiple funds and/or accounts may devote unequal time and attention to the management of those funds and/or accounts. As a result, the portfolio manager may not be able to formulate as complete a strategy or identify equally attractive investment opportunities for each of those accounts as might be the case if he or she were to devote substantially more attention to the management of a single fund. The effects of this potential conflict may be more pronounced where funds and/or accounts overseen by a particular portfolio manager have different investment strategies.

A fund’s portfolio managers may be able to select or influence the selection of the brokers and dealers that are used to execute securities transactions for the funds. In addition to executing trades, some brokers and dealers provide portfolio managers with brokerage and research services (as those terms are defined in Section 28(c) of the Securities Exchange Act of 1934), which may result in the payment of higher brokerage fees than might have otherwise been available. These services may be more beneficial to certain funds or accounts than to others. Although the payment of brokerage commissions is subject to the requirement that the portfolio manager determine in good faith that the commissions are reasonable in relation to the value of the brokerage and research services provided to the fund, a portfolio manager’s decision as to the selection of brokers and dealers could yield disproportionate costs and benefits among the funds and/or accounts that he or she manages.

A fund’s portfolio managers may also face other potential conflicts of interest in managing a fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the funds and other accounts. In addition, a fund’s portfolio manager may also manage other accounts (including their personal assets or the assets of family members) in their personal capacity. The management of these accounts may also involve certain of the potential conflicts described above. RCM’s investment personnel, including each fund’s portfolio manager, are subject to restrictions on engaging in personal securities transactions, pursuant to Codes of Ethics adopted by RCM, which contain provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the funds. See “Code of Ethics”.

Pallas Investment Partners, L.P. (“Pallas”) and Related Entities. Pallas is an investment adviser registered with the SEC. Pallas is owned by Walter Price. Mr. Price is dually employed by Pallas and by RCM.

Pallas serves as investment manager to two unregistered investment companies (the “Pallas Hedge Funds”) — Pallas Global Technology Hedge Fund, L.P. and Pallas Investments II, L.P., each a Delaware limited partnership. The general partner of Pallas Investments II, L.P. and Pallas Global Technology Hedge Fund, L.P. is Pallas Investments, LLC, a Delaware limited liability company (the “General Partner”). Mr. Price owns a majority of the interests in the General Partner. RCM has the right to a minority percentage of the profits of Pallas that are derived from the Pallas Hedge Funds. RCM has a minority ownership interest in the General Partner. Each of the Pallas Hedge Funds pays a management fee and an incentive fee (based on a percentage of profits) to either Pallas or the General Partner. The management fee is 1.25% for Pallas Investments II, L.P. and 1.5% for Pallas Global Technology Hedge Fund, L.P. Mr. Price acts as portfolio manager for certain RCM client accounts including, among others, the Science and Technology Fund.

RCM and Pallas share common employees, facilities, and systems. Pallas may act as investment adviser to one or more of RCM’s affiliates, and may serve as sub-adviser for accounts or clients for which RCM or one of its affiliates serves as investment manager or investment adviser. RCM also may provide other services, including but not limited to investment advisory services or administrative services, to Pallas.

RCM, Pallas, and certain other Allianz investment management affiliates (“Allianz Advisory Affiliates”) all engage in proprietary research and all acquire investment information and research services from broker-dealers. RCM and the Allianz Advisory Affiliates share such research and investment information.

In addition, trades entered into by Pallas on behalf of Pallas’ clients are executed through RCM’s equity trading desk, and trades by Pallas on behalf of Pallas’ clients (including the Pallas Hedge Funds) are aggregated with trades by RCM on behalf of RCM’s clients. All trades on behalf of Pallas’ clients that are executed through RCM’s equity trading desk will be executed pursuant to procedures designed to ensure that all clients of both RCM and Pallas (including the Pallas Hedge Funds) is treated fairly and equitably over time. The General Partner and/or Pallas receive a participation in the profits of the Pallas Hedge Funds. Mr. Price also invested personally in one or more of the Pallas Hedge Funds. As a result, Mr. Price has a conflict of interest with respect to the management of the Pallas Hedge Funds and the other accounts that he manages, and he may have an incentive to favor the Pallas Hedge Funds over other accounts that he manages. RCM has adopted procedures reasonably designed to ensure that Mr. Price meets his fiduciary obligations to all clients for whom he acts as portfolio manager and treats all such clients fairly and equitably over time.

DESCRIPTION OF COMPENSATION STRUCTURE

RCM compensates its portfolio managers using one of two compensation programs. The first program consists of a base salary, a variable bonus opportunity, and a benefits package (the “Bonus Program”). The other program consists of profit sharing relating to the profits generated by the mutual fund managed by a particular portfolio manager (the “Profit Program”).

Bonus Program

Base Salary — Each Portfolio Manager is paid a fixed base salary set at a competitive level, taking into consideration the Portfolio Manager’s experience and responsibilities, as determined by RCM.

Annual Bonus and profit sharing opportunity — Each Portfolio Manager’s compensation is directly affected by the performance of the individual portfolios he or she manages, as well as the performance of the individual’s portfolio management team and the overall success of the firm. A target bonus amount is established at the beginning of the year based on peer data. The target bonus is subject to an increase or decrease at year-end based on firm profitability and individual performance. The individual performance criterion is derived from a calculation using both quantitative and qualitative factors. Approximately 70% of the individual’s performance rating is quantities, based on the pre-tax investment performance of the accounts managed by both the team and the individual, with 50% of the performance rating measured relative to the relevant portfolio/Fund’s benchmark and 50% of the rating measured relative to the performance of an appropriate peer group (either the relevant Fund’s Lipper or institutional peer group). Performance is calculated over a three year trailing period. The remaining 30% of the bonus is based on a qualitative review of the individual’s performance (with 10% from peer reviews and 20% from the appraisal by the individual’s manager).

Additional Incentives — Our key staff will benefit by the overall success of our business in both the short term (incentive bonus) and the long term (LTIP), ensuring that monetary reward is competitive and reflective of the investment results received by our clients over the various market cycles.

Profit Program

In the Profit Program portfolio managers share in the profits generated by the mutual fund they manage. In this program, portfolio managers receive compensation based on the revenues produced by a mutual fund less designated expenses incurred by RCM to manage the fund. Under this program portfolio managers also are eligible to participate in the LTIP program and the benefits package referenced above.

RiverSource Investments, LLC

Mid Cap Value Equity Trust

The following chart reflects the portfolio managers’ investments in the fund that RiverSource they manage. The chart also reflects information regarding accounts other than the fund for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) investment companies, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance (“performance-based fees”), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date.

The following table reflects information as of December 31, 2008:


	Other Registered Investment				Other Pooled Investment
	Companies				Vehicles				Other Accounts
Portfolio	Number of				Number of				Number of
Manager	Accounts		Assets		Accounts		Assets		Accounts			Assets
Steve Schroll		15	$	11,997,875,053		2	$	36,917,223		10	*	$	368,725,075
Laton Spahr		15	$	11,997,875,053		2	$	36,917,223		10	*	$	368,725,075
Warren Spitz		15	$	11,997,875,053		2	$	36,917,223		10	*	$	368,725,075
Paul Stocking		15	$	11,997,875,053		2	$	36,917,223		10	*	$	368,725,075


*		Reflects each wrap program as a single client rather than counting each participant in the program as a separate client.

Other Accounts Managed — Of total listed above, those for which advisory fee is based on performance


	Other Registered Investment				Other Pooled
	Companies				Investment Vehicles				Other Accounts
	Number of				Number of				Number of
Portfolio Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Steve Schroll		10	$	11,651,254,974		0	$	0		0	$	0
Laton Spahr		10	$	11,651,254,974		0	$	0		0	$	0
Warren Spitz		10	$	11,651,254,974		0	$	0		0	$	0
Paul Stocking		10	$	11,651,254,974		0	$	0		0	$	0

POTENTIAL CONFLICTS OF INTEREST

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

(1) RiverSource Investments portfolio managers may manage one or more mutual funds as well as other types of accounts, including hedge funds, proprietary accounts, separate accounts for institutions and individuals, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage another account whose fees may be materially greater than the management fees paid by the fund and may include a performance-based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, competing investment decisions made for different accounts and the aggregation and allocation of trades. In addition, RiverSource Investments monitors a variety of areas (e.g., allocation of investment opportunities) and compliance with the firm’s Code of Ethics, and places additional investment restrictions on portfolio managers who manage hedge funds and certain other accounts.

RiverSource Investments has a fiduciary responsibility to all of the clients for which it manages accounts. RiverSource Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and equitable basis over time. RiverSource Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients.

In addition to the accounts above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager’s Code of Ethics is designed to address conflicts and, among other things, imposes restrictions on the ability of the portfolio managers and other “investment access persons” to invest in securities that may be recommended or traded in the fund and other client accounts.

DESCRIPTION OF COMPENSATION STRUCTURE

(2) Portfolio manager compensation is typically comprised of a base salary, an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and in some cases an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus (and in certain cases the equity incentive award) is paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include RiverSource Funds, third-party mutual funds, wrap accounts, institutional portfolios and private funds. Funding for the bonus pool varies by portfolio management team but in most cases is based on the level of assets under management and investment performance relative to a peer group or benchmark, which may be a different benchmark than the one used to measure performance. Exceptions to this general approach to bonus pool funding include the Contrarian Equity Team, where one member of the team does not participate in the pool but instead receives a bonus based on management fees on one product and asset retention efforts associated with other products managed by the team. In addition, where a team manages long/short portfolios (including private funds), the bonus pool is also funded by a percentage of any performance fees generated.

Senior management of RiverSource Investments has the discretion to increase or decrease the size of the bonus pool and to determine the exact amount of each portfolio manager’s bonus based on his/her performance as an employee. In addition, RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level.

SSgA FUNDS MANAGEMENT, INC. (“SSgA FM”)

International Equity Index Trust A
International Equity Index Trust B

The following table reflects information as of December 31, 2008:


	Other Registered
	Investment Companies					Other Pooled Investment Vehicles					Other Accounts
	Number					Number					Number
Portfolio	of					of					of
Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Karl Schneider*		97	$	42.74	B		209	$	271.56	B		209	$	151.19	B
Thomas Coleman*		97	$	42.74	B		209	$	271.56	B		209	$	151.19	B


*		Please note that the passive equity assets are managed on a team basis. This table refers to accounts of State Street Global Advisors (“SSgA”). SSgA FM and other advisory affiliates of State Street Corporation make up SSgA, the investment arm of State Street Corporation.

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

A portfolio manager may be subject to potential conflicts of interest because he or she is responsible for other accounts in addition to the fund. Potential conflicts may arise out of (a) the Portfolio Manager’s execution of different investment strategies for various accounts or (b) the allocation of investment opportunities among the portfolio manager’s accounts with the same strategy.

A potential conflict of interest may arise as a result of a Portfolio Manager’s responsibility for multiple accounts with similar investment guidelines. Under these circumstances, a potential investment may be suitable for more than one of the portfolio manager’s accounts, but the quantity of the investment available for purchase is less than the aggregate amount the accounts would ideally devote to the opportunity. Similar conflicts may arise when multiple accounts seek to dispose of the same investment. A portfolio manager may also manage accounts whose objectives and policies

differ from that of the fund. These differences may be such that under certain circumstances, trading activity appropriate for one account managed by the portfolio manager may have adverse consequences for another account managed by the portfolio manager. For example, an account may sell a significant position in a security, which could cause the market price of that security to decrease, while the fund maintained its position in that security.

A potential conflict may arise when a portfolio manager is responsible for accounts that have different advisory fees — the difference in fees could create an incentive for the portfolio manager to favor one account over another, for example, in terms of access to investment opportunities. This conflict may be heightened if an account is subject to a performance-based fee. Another potential conflict may arise when a portfolio manager has an investment in one or more accounts that participates in transactions with other accounts. His or her investment(s) may create an incentive for the portfolio manager to favor one account over another. SSgA FM has adopted policies and procedures reasonably designed to address these potential material conflicts. For instance, portfolio managers within SSgA FM are normally responsible for all accounts within a certain investment discipline, and do not, absent special circumstances, differentiate among the various accounts when allocating resources. Special circumstances refers to specific guidelines and prohibitions applicable to one account, but not others. Additionally, SSgA FM and its advisory affiliates have processes and procedures for allocating investment opportunities among portfolios that are designed to provide a fair and equitable allocation.

DESCRIPTION OF COMPENSATION STRUCTURE

The compensation of SSgA’s FM investment professionals is based on a number of factors. The first factor considered is external market. Through a compensation survey process, SSgA FM seeks to understand what its competitors are paying people to perform similar roles. This data is then used to determine a competitive baseline in the areas of base pay, bonus, and other incentives. The second factor taken into consideration is the size of the pool available for compensation. SSgA FM is a part of State Street Corporation, and therefore works within its corporate environment on determining the overall level of its incentive compensation pool. Once determined, this pool is then allocated to the various locations and departments of SSgA FM and its affiliates. The discretionary determination of the allocation amounts to these locations and departments is influenced by the competitive market data, as well as the overall performance of the group. The pool is then allocated on a discretionary basis to individual employees based on their individual performance. There is no fixed formula for determining these amounts, nor is anyone’s compensation directly tied to the investment performance or asset value of a product or strategy. The same process is followed in determining equity incentive allocations.

TEMPLETON GLOBAL ADVISORS LIMITED

Global Trust

The following table reflects information as of December 31, 2008:


	Other Registered
	Investment Companies					Other Pooled Investment Vehicles					Other Accounts
	Number					Number					Number
Portfolio	of					of					of
Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Lisa Myers, CFA		9	$	29,796.4	M		8	$	8,382.6	M		7	$	1,078.4	M
Tucker Scott, CFA		15	$	32,615.9	M		8	$	8,913.4	M		13	$	3,308.5	M
Cindy Sweeting, CFA		7	$	23,637.8	M		2	$	4,830	M		4	$	1,587.8	M

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

The management of multiple funds and accounts may also give rise to potential conflicts of interest if the funds and accounts have different objectives, benchmarks, time horizons, and fees as the portfolio manager must allocate his time and investment ideas across multiple funds and accounts. Templeton Global Advisors Limited seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline, such as investing primarily in value-oriented equity securities of companies located anywhere in the world. Most other accounts managed by a portfolio manager are managed using the same investment strategies that are used in connection with the management of the fund. Accordingly, fund holdings, position sizes, and industry and sector exposures tend to be similar across similar portfolios, which may minimize the potential for conflicts of interest.

A portfolio manager may also execute transactions for another fund or account at the direction of such fund or account that may adversely impact the value of securities held by the fund. Securities selected for funds or accounts other than the fund may outperform the securities selected for the fund. Finally, if a portfolio manager identifies a limited investment opportunity that may be suitable for more than one fund or other account, the fund may not be able to take full advantage of that opportunity due to an allocation of that opportunity across all eligible funds and accounts. Franklin Templeton Investments seeks to manage such potential conflicts by having adopted procedures, approved by the fund boards, intended to provide a fair allocation of buy and sell opportunities among funds and other accounts.

The structure of a portfolio manager’s compensation may give rise to potential conflicts of interest. A portfolio manager’s base pay tends to increase with additional and more complex responsibilities that include increased assets under management and a portion of the bonus relates to marketing efforts, which together indirectly link compensation to sales.

Finally, the management of personal accounts by a portfolio manager may give rise to potential conflicts of interest; there is no assurance that a fund’s code of ethics will adequately address such conflicts.

Franklin Templeton Investments has adopted certain compliance procedures that are designed to address these, and other, types of conflicts. However, there is no guarantee that such procedures will detect each and every situation where a conflict arises.

DESCRIPTION OF COMPENSATION STRUCTURE

Base salary Each portfolio manager is paid a base salary.

Annual bonus Annual bonuses are structured to align the interests of the portfolio manager with those of the fund’s shareholders. Each portfolio manager is eligible to receive an annual bonus. Bonuses generally are split between cash (50% to 65%) and restricted shares of Franklin Resources stock (17.5% to 25%) and mutual fund shares (17.5% to 25%). The deferred equity-based compensation is intended to build a vested interest of the portfolio manager in the financial performance of both Franklin Resources and mutual funds advised by the manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving consistently strong investment performance, which aligns the financial incentives of the portfolio manager and fund shareholders. The Chief Investment Officer of the manager and/or other officers of the manager, with responsibility for the fund, have discretion in the granting of annual bonuses to portfolio managers in accordance with Franklin Templeton guidelines. The following factors are generally used in determining bonuses under the plan:

	•		Investment performance. Primary consideration is given to the historic investment performance over the 1, 3 and 5 preceding years of all accounts managed by the portfolio manager. The pre-tax performance of each fund managed is measured relative to a relevant peer group and/or applicable benchmark as appropriate.

	•		Research Where the portfolio management team also has research responsibilities, each portfolio manager is evaluated on the number and performance of recommendations over time, productivity and quality of recommendations, and peer evaluation.

	•		Non-investment performance. For senior portfolio managers, there is a qualitative evaluation based on leadership and the mentoring of staff.

	•		Responsibilities. The characteristics and complexity of funds managed by the portfolio manager are factored in the manager’s appraisal.

TEMPLETON INVESTMENT COUNSEL, LLC (subadviser)
TEMPLETON GLOBAL ADVISORS LIMITED (sub-subadviser)

International Value Trust

The following table reflects information as of December 31, 2008:


	Other Registered					Other Pooled
	Investment Companies					Investment Vehicles					Other Accounts
	Number					Number					Number
	of					of					of
Portfolio Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Neil Devlin		4	$	3,596.7	M		10	$	17,366.6	M		4	$	958.5	M
Peter Nori		11	$	11,045.9	M		3	$	882.5	M		30	$	3,419	M
Tucker Scott, CFA		15	$	32,615.9	M		8	$	8,913.4	M		13	$	3,308.5	M
Cindy Sweeting, CFA		7	$	23,637.8	M		2	$	4,830	M		4	$	1,587.8	M

Other Accounts Managed — Of Total listed above, those for which advisory fee is based on performance


	Other Registered				Other Pooled
	Investment				Investment
	Companies				Vehicles					Other Accounts
	Number				Number					Number
	of				of					of
Portfolio Manager	Accounts		Assets		Accounts		Assets			Accounts		Assets
Neil Devlin		0	$	0		1	$	68.1	M		0	$	0
Peter Nori		0	$	0		0	$	0			0	$	0
Tucker Scott, CFA		0	$	0		0	$	0			0	$	0
Cindy Sweeting, CFA		0	$	0		0	$	0			0	$	0

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

The management of multiple funds and accounts may also give rise to potential conflicts of interest if the funds and accounts have different objectives, benchmarks, time horizons, and fees as the portfolio manager must allocate his time and investment ideas across multiple funds and accounts. Templeton Investment Counsel LLC seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline, such as investing primarily in value-oriented equity securities of companies located outside the U.S. Most other accounts managed by a portfolio manager are managed using the same investment strategies that are used in connection with the management of the fund. Accordingly, fund holdings, position sizes, and industry and sector exposures tend to be similar across similar portfolios, which may minimize the potential for conflicts of interest.

DESCRIPTION OF COMPENSATION STRUCTURE

Base salary Each portfolio manager is paid a base salary.

Annual bonus Annual bonuses are structured to align the interests of the portfolio manager with those of the fund’s shareholders. Each portfolio manager is eligible to receive an annual bonus. Bonuses generally are split between cash (50% to 65%) and restricted shares of Franklin Resources stock (17.5% to 25%) and mutual fund shares (17.5% to 25%). The deferred equity-based compensation is intended to build a vested interest of the portfolio manager in the financial performance of both Franklin Resources and mutual funds advised by the manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving consistently strong investment performance, which aligns the financial incentives of the portfolio manager and fund shareholders. The Chief Investment Officer of the manager and/or other officers of the manager, with responsibility for the fund, have discretion in the granting of annual bonuses to portfolio managers in accordance with Franklin Templeton guidelines. The following factors are generally used in determining bonuses under the plan:

	o		Investment performance. Primary consideration is given to the historic investment performance over the 1, 3 and 5 preceding years of all accounts managed by the portfolio manager. The pre-tax performance of each fund managed is measured relative to a relevant peer group and/or applicable benchmark as appropriate.

	o		Research Where the portfolio management team also has research responsibilities, each portfolio manager is evaluated on the number and performance of recommendations over time, productivity and quality of recommendations, and peer evaluation.

	o		Non-investment performance. For senior portfolio managers, there is a qualitative evaluation based on leadership and the mentoring of staff.

	o		Responsibilities. The characteristics and complexity of funds managed by the portfolio manager are factored in the manager’s appraisal.

Portfolio managers also participate in benefit plans and programs available generally to all employees of the manager.

T. Rowe Price Associates, Inc.

Balanced Trust
Blue Chip Growth Trust
Capital Appreciation Value Trust
Equity-Income Trust
Health Sciences Trust
Mid Value Trust
Real Estate Equity Trust
Science & Technology Trust
Small Company Value Trust
Spectrum Income Trust

The following table reflects information as of December 31, 2008:


	Other Registered					Other Pooled
	Investment Companies					Investment Vehicles					Other Accounts
	Number					Number					Number
Portfolio	of					of					of
Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Preston G. Athey		7	$	5,112.5	M		1	$	6.6	M		9	$	479.9	M
Andrew McCormick		3	$	1,584.2	M		0	$	0			2	$	491.4	M
Ian Kelson		3	$	2,963.7	M		10	$	767.9	M		1	$	32.0	M
David Lee		3	$	1,819.3	M		1	$	2.1	M		1	$	12.1	M
Edmund M. Notzon III		25	$	40,644.4	M		57	$	4,151.9	M		16	$	1,454.2	M
Larry J. Puglia		15	$	11,301.9	M		3	$	527.1	M		12	$	962.3	M
Daniel O. Shackelford		9	$	8,237.5	M		0	$	0			6	$	848.9	M
Brian C. Rogers		14	$	18,909.7	M		2	$	687.2	M		9	$	511.2	M
Ken Allen		0	$	0			0	$	0			0	$	0
Mark J. Vaselvik		8	$	5,342.7	M		7	$	873.3	M		16	$	1,918.1	M
Kim DeDominicis		0	$	0			0	$	0			0	$	0
Charles Shriver		0	$	0			0	$	0			9	$	138.2	M
Kris H. Jenner		3	$	1,861.0	M		3	$	195.0	M		3	$	53.9	M
David R. Giroux		3	$	10,647.2	M		1	$	69.6	M		0	$	0
David J. Wallack		3	$	4,616.6	M		1	$	14.4	M		2	$	209.0	M

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

Potential Conflicts of Interest. We are not aware of any material conflicts of interest that may arise in connection with the portfolio manager’s management of the funds’ investments and the investments of the other account(s) included this response.

Portfolio managers at T. Rowe Price typically manage multiple accounts. These accounts may include, among others, mutual funds, separate accounts (assets managed on behalf of institutions such as pension funds, colleges and universities, foundations), offshore funds, and commingled trust accounts. Portfolio managers make investment decisions for each portfolio based on the investment objectives, policies, practices and other relevant investment considerations that the managers believe are applicable to that portfolio. Consequently, portfolio managers may purchase (or sell) securities for one portfolio and not another portfolio. T. Rowe Price has adopted brokerage and trade allocation policies and procedures which it believes are reasonably designed to address any potential conflicts associated with managing multiple accounts for multiple clients. Also, as disclosed under the “Portfolio Manager Compensation”, T. Rowe Price portfolio managers’ compensation is determined in the same manner with respect to all portfolios managed by the portfolio manager.

Portfolio Manager Compensation.

Portfolio manager compensation consists primarily of a base salary, a cash bonus, and an equity incentive that usually comes in the form of a stock option grant. Occasionally, portfolio managers will also have the opportunity to participate in certain investment partnerships. Compensation is variable and is determined based on the following factors:

Investment performance over one-, three-, five-, and 10-year periods is the most important input. We evaluate performance in absolute, relative, and risk-adjusted terms. Relative performance and risk-adjusted performance are determined with reference to the broad based index (ex. S&P500) and an applicable Lipper index (e.g., Large-Cap Growth), though other benchmarks may be used as well. Investment results are also compared to comparably managed funds of competitive investment management firms.

Performance is primarily measured on a pre-tax basis, though tax-efficiency is considered and is especially important for tax efficient funds. Compensation is viewed with a long-term time horizon. The more consistent a manager’s performance over time, the higher the compensation opportunity. The increase or decrease in a fund’s assets due to the purchase or sale of fund shares is not considered a material factor. In reviewing relative performance for fixed-income funds, a fund’s expense ratio is usually taken into account.

UBS GLOBAL ASSET MANAGEMENT

Global Allocation Trust
Large Cap Trust

The following table reflects information as of December 31, 2008:


	Other Registered				Other Pooled
	Investment Companies				Investment Vehicles				Other Accounts
	Number				Number
Portfolio	of				of				Number of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Thomas Cole		16	$	3,308 M		60	$	7,109 M		18	$	996 M
Curt Custard		12	$	6,275 M		17	$	11,184 M		13	$	2,557 M
Thomas Digenan		16	$	3,308 M		60	$	7,109 M		20	$	995 M
Scott Hazen		16	$	3,308 M		60	$	7,109 M		12	$	995 M
John Leonard		16	$	3,308 M		60	$	7,109 M		15	$	996 M

Other Accounts Managed – Of total listed above, those for which advisory fee is based on performance


	Other Registered
	Investment				Other Pooled
	Companies				Investment Vehicles				Other Accounts
	Number of				Number of				Number of
Portfolio Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Thomas Cole		0	$	0		4	$	748 M		0	$	0
Curt Custard		0	$	0		1	$	92 M		0	$	0
Thomas Digenan		0	$	0		4	$	748 M		0	$	0
Scott Hazen		0	$	0		4	$	748 M		0	$	0
John Leonard		0	$	0		4	$	748 M		0	$	0

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

The management of a portfolio and other accounts by a portfolio manager could result in potential conflicts of interest if the portfolio and other accounts have different objectives, benchmarks and fees because the portfolio manager and his team must allocate time and investment expertise across multiple accounts, including the portfolio. The portfolio manager and his team manage the portfolio and other accounts utilizing a model portfolio approach that groups similar accounts within a model portfolio. UBS Global Asset Management (Americas) Inc. manages accounts according to the appropriate model portfolio, including where possible, those accounts that have specific investment restrictions. Accordingly, portfolio holdings, position sizes, and industry and sector exposures tend to be similar across accounts, which may minimize the potential for conflicts of interest.

If a portfolio manager identifies a limited investment opportunity that may be suitable for more than one account or model portfolio, the portfolio may not be able to take full advantage of that opportunity due to an allocation or filled purchase or sale orders across all eligible model portfolios and accounts. To deal with these situations, UBS Global Asset Management (Americas) Inc. has adopted procedures for allocating portfolio trades among multiple accounts to provide fair treatment to all accounts.

The management of personal accounts by a portfolio manager may also give rise to potential conflicts of interest. UBS Global Asset Management (Americas) Inc. has adopted Codes of Ethics that govern such personal trading, but there is no assurance that the Codes will adequately address all such conflicts.

DESCRIPTION OF COMPENSATION STRUCTURE

The compensation received by the portfolio managers at UBS Global Asset Management, including the Funds’ portfolio managers, includes a base salary and incentive compensation, as detailed below. UBS Global Asset Management’s compensation and benefits programs are designed to provide its investment professionals with incentives to excel, and to promote an entrepreneurial, risk measured, performance-oriented culture. Overall compensation can be grouped into three categories:

•		A fixed component — base salary and benefit — reflecting an individual’s skills and experience,

•		Variable cash compensation, which is determined annually on a discretionary basis and is correlated with the performance of UBS, UBS Global Asset Management, the respect asset class, investment strategy, function and an individual’s (financial and non-financial) contribution to UBS Global Asset Management’s results, and

•		A variable equity component that reinforces the critical importance of creating long-term business value whilst serving as an effective retention tool as shares typically vest over a number of years.

Portfolio manager’s variable compensation is tied to the performance of relevant client portfolios/funds. For analysts, variable compensation is, in general, tied to the performance of some combination of model and/or client/fund portfolios, generally evaluated over multiple-year periods and coupled with a qualitative assessment of their contribution. This ensures that the interests of the investment professionals are aligned with those of clients.

UBS is committed to the principle of employee share ownership, believing accountability for decisions and actions is encouraged through equity-based awards that vest and/or become unrestricted over time. Positions with a large scope of responsibility and a significant potential impact on the firm have higher equity exposure. UBS also has stringent share ownership requirements for senior executives.

A number of equity ownership plans are available to UBS employees, which vary by rank, performance and location. These plan rules may be amended from time to time in all or some jurisdictions. Some of these plans include:

Equity Plus Plan (Equity Plus): Equity Plus is a voluntary plan that provides employees with an opportunity to purchase UBS shares at fair market value and generally receive, at no additional cost, two UBS options for each share purchased, up to a maximum annual limit. Shares purchased under Equity Plus are restricted from sale for two years from the date of purchase and the options are forfeitable in certain circumstances. The options have a strike price equal to the fair market value of a UBS share on the date the option is granted, a two-year vesting period and generally expire ten years from the date of grant.

Equity Ownership Plan (EOP): Selected employees receive between 10% and 45% of their annual performance-related compensation in UBS shares or notional shares instead of cash on a mandatory basis. A small proportion of EOP awards is granted over Alternative Investment vehicles (AIVs) to reflect the performance of certain funds. EOP awards generally vest in one-third increments over a three year vesting period and are forfeitable in certain circumstances.

Key Employee Stock Appreciation Rights Plan (KESAP) and Key Employee Stock Option Plan (KESOP): Key and high potential employees are granted discretionary UBS options or stock appreciation rights with a strike price not less than the fair market value of a UBS share on the date the option or stock appreciation right is granted. The options or stock appreciation rights have a three-year vesting period, are forfeitable in certain circumstances and generally expire ten years from the date of grant.

WELLINGTON MANAGEMENT COMPANY, LLP

Alpha Opportunities Trust
Core Allocation Plus Trust
Investment Quality Bond Trust
Mid Cap Intersection Trust
Mid Cap Stock Trust
Natural Resources Trust
Small Cap Growth Trust
Small Cap Value Trust

The following table reflects information as of December 31, 2008:


	Other Registered				Other Pooled Investment
	Investment Companies				Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Mario E. Abularach, CFA		14	$	5,234,539,314		2	$	79,400,965		8	$	683,901,719
Steven C. Angeli, CFA		6	$	1,059,702,454		13	$	611,995,714		31	$	978,387,986
Karl E. Bandtel		5	$	7,860,140,456		27	$	6,771,416,443		6	$	285,031,213
James A. Bevilacqua		5	$	7,860,140,456		27	$	7,365,158,942		6	$	295,083,616
Michael T. Carmen, CFA		8	$	4,194,323,334		11	$	486,912,445		8	$	520,072,434
Mammen Chally, CFA		7	$	2,303,375,611		11	$	559,303,871		10	$	2,625,125,569
David J. Elliott, CFA		6	$	734,649,745		5	$	84,776,902		9	$	1,135,110,379
Scott M. Elliott		4	$	451,850,633		35	$	10,614,078,762		12	$	3,201,863,679
Evan S. Grace		4	$	451,850,633		20	$	479,806,051		7	$	2,152,556,618
Christopher L. Gootkind, CFA		8	$	3,394,047,710		0	$	0		0	$	0


	Other Registered				Other Pooled Investment
	Investment Companies				Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Christopher A. Jones, CFA		7	$	268,885,984		8	$	2,037,347,619		9	$	2,380,143,366
Timothy J. McCormack, CFA		7	$	400,003,825		3	$	126,323,581		18	$	745,201,857
Stephen Mortimer		11	$	2,221,426,136		1	$	78,535,494		5	$	420,621,329
Thomas L. Pappas, CFA		3	$	29,368,670,195		6	$	542,563,127		18	$	24,942,748,848
Shaun F. Pedersen		8	$	424,193,480		7	$	356,551,097		18	$	745,201,857
Kent M. Stahl		1	$	316,903,255		1	$	11,573		0	$	0
Gregg R. Thomas		1	$	316,903,255		0	$	0		0	$	0
Rick A. Wurster		0	$	0		6	$	73,093,981		1	$	59,442,000

Other Accounts Managed – Of total listed above, those for which advisory fee is based on performance


	Other Registered				Other Pooled
	Investment Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Mario E. Abularach, CFA		0	$	0		0	$	0		1	$	80,993,827
Steven C. Angeli, CFA		0	$	0		4	$	312,697,357		1	$	80,993,827
Karl E. Bandtel		1	$	7,098,207,731		12	$	3,625,141,734		1	$	18,645,232
James A. Bevilacqua		1	$	7,098,207,731		12	$	4,200,118,947		1	$	25,728,015
Michael T. Carmen, CFA		0	$	0		4	$	285,548,450		0	$	0
Mammen Chally, CFA		0	$	0		0	$	0		1	$	94,924,228
David J. Elliott, CFA		0	$	0		0	$	0		1	$	107,758,224


	Other Registered				Other Pooled
	Investment Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
Portfolio	of				of				of
Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Scott M. Elliott		0	$	0		7	$	1,428,861,018		2	$	600,201,193
Evan S. Grace		0	$	0		1	$	143,646,702		0	$	0
Christopher L. Gootkind, CFA		2	$	445,324,995		0	$	0		0	$	0
Christopher A. Jones, CFA		0	$	0		0	$	0		4	$	299,517,983
Timothy J. McCormack, CFA		0	$	0		0	$	0		1	$	31,866,810
Stephen Mortimer		0	$	0		0	$	0		1	$	80,993,827
Thomas L. Pappas, CFA		0	$	0		0	$	0		1	$	837,894,757
Shaun F. Pedersen		0	$	0		2	$	59,566,326		1	$	31,866,810
Kent M. Stahl		0	$	0		0	$	0		0	$	0
Gregg R. Thomas		0	$	0		0	$	0		0		0
Rick A. Wurster		0	$	0		0	$	0		0		0

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

Individual investment professionals at Wellington Management manage multiple accounts for multiple clients. These accounts may include mutual funds, separate accounts (assets managed on behalf of institutions, such as pension funds, insurance companies, foundations, or separately managed account programs sponsored by financial intermediaries), bank common trust accounts, and hedge funds. The Investment Professionals generally manage accounts in several different investment styles. These accounts may have investment objectives, strategies, time horizons, tax considerations and risk profiles that differ from those of the relevant Fund. The Investment Professionals make investment decisions for each account, including the relevant Fund, based on the investment objectives, policies, practices, benchmarks, cash flows, tax and other relevant investment considerations applicable to that account. Consequently, the Investment Professionals may purchase or sell securities, including IPOs, for one account and not another account, and the performance of securities purchased for one account may vary from the performance of securities purchased for other accounts. Alternatively, these accounts may be managed in a similar fashion to the relevant Fund and thus the accounts may have similar, and in some cases nearly identical, objectives, strategies and/or holdings to that of the relevant Fund.

An Investment Professional or other investment professionals at Wellington Management may place transactions on behalf of other accounts that are directly or indirectly contrary to investment decisions made on behalf of the relevant

Fund, or make investment decisions that are similar to those made for the relevant Fund, both of which have the potential to adversely impact the relevant Fund depending on market conditions. For example, an investment professional may purchase a security in one account while appropriately selling that same security in another account. Similarly, an Investment Professional may purchase the same security for the relevant Fund and one or more other accounts at or about the same time, and in those instances the other accounts will have access to their respective holdings prior to the public disclosure of the relevant Fund’s holdings. In addition, some of these accounts have fee structures, including performance fees, which are or have the potential to be higher, in some cases significantly higher, than the fees Wellington Management receives for managing the Funds. Messrs. Angeli, Bandtel, Bevilacqua and Carmen also manage hedge funds, which pay performance allocations to Wellington Management or its affiliates. Because incentive payments paid by Wellington Management to the Investment Professionals are tied to revenues earned by Wellington Management and, where noted, to the performance achieved by the manager in each account, the incentives associated with any given account may be significantly higher or lower than those associated with other accounts managed by a given Investment Professional. Finally, the Investment Professionals may hold shares or investments in the other pooled investment vehicles and/or other accounts identified above.

Wellington Management’s goal is to meet its fiduciary obligation to treat all clients fairly and provide high quality investment services to all of its clients. Wellington Management has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures, which it believes address the conflicts associated with managing multiple accounts for multiple clients. In addition, Wellington Management monitors a variety of areas, including compliance with primary account guidelines, the allocation of IPOs, and compliance with the firm’s Code of Ethics, and places additional investment restrictions on investment professionals who manage hedge funds and certain other accounts. Furthermore, senior investment and business personnel at Wellington Management periodically review the performance of Wellington Management’s investment professionals. Although Wellington Management does not track the time an investment professional spends on a single account, Wellington Management does periodically assess whether an investment professional has adequate time and resources to effectively manage the investment professional’s various client mandates.

DESCRIPTION OF COMPENSATION STRUCTURE

Wellington Management receives a fee based on the assets under management of each Fund as set forth in the Investment Subadvisory Agreements between Wellington Management and the Adviser on behalf of each Fund. Wellington Management pays its investment professionals out of its total revenues and other resources, including the advisory fees earned with respect to each Fund. The following information relates to the fiscal year ended December 31, 2008.

Wellington Management’s compensation structure is designed to attract and retain high-caliber investment professionals necessary to deliver high quality investment management services to its clients. Wellington Management’s compensation of each Fund’s managers listed in the prospectuses who are primarily responsible for the day-to-day management of the Funds (the “Investment Professionals”) includes a base salary and incentive components. The base salary for each Investment Professional who is a partner of Wellington Management, is determined by the Managing Partners of the firm. A partner’s base salary is generally a fixed amount that may change as a result of an annual review. The base salaries for the other Investment Professionals are determined by the Investment Professionals’ experience and performance in their roles as Investment Professionals. Base salaries for Wellington Management’s employees are reviewed annually and may be adjusted based on the recommendation of an Investment Professional’s manager, using guidelines established by Wellington Management’s Compensation Committee, which has final oversight responsibility for base salaries of employees of the firm. Each Investment Professional is eligible to receive an incentive payment based on the revenues earned by Wellington Management from the Fund managed by the Investment Professional and generally each other account managed by such Investment Professional. Each equity Investment Professional’s incentive payment relating to the relevant Fund is linked to the gross pre-tax performance of the portion of the Fund managed by the Investment Professional compared to the benchmark index and/or peer group identified below over one and three year periods, with an emphasis on three year results. Wellington Management applies similar incentive compensation structures (although the benchmark or peer groups, time periods and rates may differ) to other accounts managed by these Investment Professionals, including

accounts with performance fees. The incentive paid to fixed income Investment Professionals is based on the revenues earned by Wellington Management, which have no performance-related component.

Portfolio-based incentives across all accounts managed by an investment professional can, and typically do, represent a significant portion of an investment professional’s overall compensation; incentive compensation varies significantly by individual and can vary significantly from year to year. The Investment Professionals may also be eligible for bonus payments based on their overall contribution to Wellington Management’s business operations. Senior management at Wellington Management may reward individuals as it deems appropriate based on factors other than account performance. Each partner of Wellington Management is eligible to participate in a partner-funded tax qualified retirement plan, the contributions to which are made pursuant to an actuarial formula, as a partner of the firm. Messrs. Angeli, Bandtel, Bevilacqua, Carmen, Scott M. Elliott, McCormack, Mortimer, Pappas, and Stahl are partners of the firm.


Fund		INCENTIVE BENCHMARK(S) / PEER GROUPS
Alpha Opportunities Trust		N/A

Core Allocation Plus Trust		MSCI World Index/Barclays Aggregate Index

Investment Quality Bond Trust		Not Applicable

Mid Cap Intersection Trust		S&P 400 Mid Cap Index

Mid Cap Stock Trust		Russell Mid Cap Growth Index/ Lipper Mid Cap Growth Average

Natural Resources Trust		MSCI S&P World Energy Index/MSCI S&P World Metals & Mining Index/MSCI S&P World Paper & Forest Products Index

Small Cap Growth Trust		Russell 2000 Growth Index

Small Cap Value Trust		Russell 2000 Value Index

WELLS CAPITAL MANAGEMENT, INCORPORATED
(“WellsCap”)

Core Bond Trust
U.S. High Yield Bond Trust

The following chart reflects the portfolio managers’ investments in the Funds that they manage. The chart also reflects information regarding accounts other than the Funds for which each portfolio manager has day-to-day management responsibilities. Accounts are grouped into three categories: (i) investment companies, (ii) other pooled investment vehicles, and (iii) other accounts. To the extent that any of these accounts pay advisory fees that are based on account performance (“performance-based fees”), information on those accounts is specifically broken out. In addition, any assets denominated in foreign currencies have been converted into U.S. Dollars using the exchange rates as of the applicable date.

The following table reflects information as of December 31, 2008:


	Other Registered
	Investment					Other Pooled
	Companies					Investment Vehicles					Other Accounts
	Number of					Number of					Number of
Portfolio Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Troy Ludgood		6	$	4.3	B		2	$	1.2	B		33	$	10.4	B
Niklas Nordenfelt		2	$	456	M		4	$	451	M		18	$	691	M
Thomas O’Connor		7	$	4.8	B		2	$	1.2	B		35	$	10.6	B
Lynne Royer		6	$	4.3	B		2	$	1.2	B		35	$	10.4	B
William C. Stevens		7	$	4.8	B		2	$	1.2	B		39	$	10.6	B
Phil Susser		2	$	456	M		4	$	451	M		27	$	691	M

Other Accounts Managed – Of total listed above, those for which advisory fee is based on performance


	Other Registered
	Investment				Other Pooled
	Companies				Investment Vehicles					Other Accounts
	Number of				Number of					Number of
Portfolio Manager	Accounts		Assets		Accounts		Assets			Accounts		Assets
Troy Ludgood		0	$	0		0	$	0			2	$	2.5	B
Niklas Nordenfelt		0	$	0		1	$	201	M		2	$	119	M
Thomas O’Connor		0	$	0		0	$	0			2	$	2.5	B
Lynne Royer		0	$	0		0	$	0			2	$	2.5	B
William C. Stevens		0	$	0		0	$	0			2	$	2.5	B
Phil Susser		0	$	0		1	$	201	M		2	$	119	M

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

POTENTIAL CONFLICTS OF INTEREST

Wells Capital Management’s Portfolio Managers often provide investment management for separate accounts advised in the same or similar investment style as that provided to mutual funds. While management of multiple accounts could potentially lead to conflicts of interest over various issues such as trade allocation, fee disparities and research acquisition, Wells Capital Management has implemented policies and procedures for the express purpose of ensuring that clients are treated fairly and that potential conflicts of interest are minimized.

DESCRIPTION OF COMPENSATION STRUCTURE

The compensation structure for Wells Capital Management’s Portfolio Managers includes a competitive fixed base salary plus variable incentives (Wells Capital Management utilizes investment management compensation surveys as confirmation). Incentive bonuses are typically tied to pre-tax relative investment performance of all accounts under his or her management within acceptable risk parameters. Relative investment performance is generally evaluated for 1, 3, and 5 year performance results, with a predominant weighting on the 3- and 5- year time periods, versus the relevant benchmarks and/or peer groups consistent with the investment style. This evaluation takes into account relative performance of the accounts to each account’s individual benchmark and/or the relative composite performance of all accounts to one or more relevant benchmarks consistent with the overall investment style. In the case of each Fund, the benchmark(s) against which the performance of the Fund’s portfolio may be compared for these purposes generally are indicated in the “Performance” sections of the Prospectuses.

Western Asset Management Company
(“Western Asset”)
Western Asset Management Company Limited is sub-sub adviser*

Floating Rate Income Trust*
High Yield Trust*
Strategic Bond Trust*
U.S. Government Securities Trust

Portfolio Managers

Floating Rate Income Trust

A team of investment professionals at Western Asset Management Company, led by Chief Investment Officer Stephen A. Walsh, Chief Investment Officer Emeritus and Investment Strategist S. Kenneth Leech, and portfolio managers Michael C. Buchanan and Timothy J. Settel manages the portfolio.

High Yield Trust

Strategic Bond Trust

A team of investment professionals at Western Asset Management Company, led by Chief Investment Officer Stephen A. Walsh, Chief Investment Officer Emeritus and Investment Strategist S. Kenneth Leech, and portfolio managers Keith J. Gardner, Mark S. Lindbloom and Michael C. Buchanan, manages the portfolio.

U.S. Government Securities Trust

A team of investment professionals at Western Asset Management Company, led by Chief Investment Officer Stephen A. Walsh, Chief Investment Officer Emeritus and Investment Strategist S. Kenneth Leech, and portfolio managers Mark Lindbloom and Fredrick Marki, manages the portfolio.

The following table reflects information as of December 31, 2008:


	Other Registered				Other Pooled
	Investment Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
	of				of				of
Portfolio Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Michael C. Buchanan		17	$	6,818,941,981		7	$	3,280,146,219		18	$	1,595,499,619
Keith J. Gardner		6	$	930,260,956		8	$	878,794,855		0	$	0
S. Kenneth Leech		111	$	100,485,718,368		281	$	195,319,138,291		969	$	217,490,220,115
Mark S. Lindbloom		4	$	2,432,465,533		4	$	190,965,232		30	$	7,159,439,689
Frederick R. Marki		1	$	150,564,944		4	$	1,491,843,831		11	$	2,258,322,960
Timothy J. Settel		2	$	1,673,169,363		3	$	457,472,513		0	$	0
Steven A. Walsh		111	$	100,485,718,368		281	$	195,319,138,291		969	$	217,490,220,115

Other Accounts Managed – Of Total listed above, those for which advisory fee is based on performance


	Other Registered				Other Pooled
	Investment Companies				Investment Vehicles				Other Accounts
	Number				Number				Number
	of				of				of
Portfolio Manager	Accounts		Assets		Accounts		Assets		Accounts		Assets
Michael C. Buchanan		0	$	0		0	$	0		—	$	0
Keith J. Gardner		0	$	0		0	$	0		—	$	0
S. Kenneth Leech		0	$	0		0	$	0		94	$	22,992,729,662
Mark S. Lindbloom		0	$	0		0	$	0		3	$	1,260,177,973
Frederick R. Marki		0	$	0		0	$	0		6	$	1,918,993,933
Timothy J. Settel		0	$	0		0	$	0		—	$	0
Steven A. Walsh		0	$	0		0	$	0		94	$	22,992,729,662

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the funds that they managed as of December 31, 2008.

Note: The numbers above reflect the overall number of portfolios managed by Western Asset. Mr. Walsh and Mr. Leech are involved in the management of all the firm’s portfolios, but they are not solely responsible for particular portfolios. Western’s investment discipline emphasizes a team approach that combines the efforts of groups of specialists working in different market sectors. The individuals that have been identified are responsible for overseeing implementation of the firm’s overall investment ideas and coordinating the work of the various sector teams. This structure ensures that client portfolios benefit from a consensus that draws on the expertise of all team members.

POTENTIAL CONFLICTS OF INTEREST

Western has identified several potential conflicts of interest that could directly impact client portfolios. For example, potential conflicts of interest may arise in connection with the management of multiple portfolios (including portfolios managed in a personal capacity). These could include potential conflicts of interest related to the knowledge and timing of a portfolio’s trades, investment opportunities and broker selection. Portfolio managers are privy to the size, timing, and possible market impact of a portfolio’s trades.

It is possible that an investment opportunity may be suitable for both a portfolio and other accounts managed by a portfolio manager, but may not be available in sufficient quantities for both the portfolio and the other accounts to participate fully. Similarly, there may be limited opportunity to sell an investment held by a portfolio and another account. A conflict may arise where the portfolio manager may have an incentive to treat an account preferentially as compared to a portfolio because the account pays a performance-based fee or the portfolio manager, the Advisers or an affiliate has an interest in the account. The Firm has adopted procedures for allocation of portfolio transactions and investment opportunities across multiple client accounts on a fair and equitable basis over time. All eligible accounts that can participate in a trade share the same price on a pro-rata allocation basis to ensure that no conflict of interest occurs. Trades are allocated among similarly managed accounts to maintain consistency of portfolio strategy, taking into account cash availability, investment restrictions and guidelines, and portfolio composition versus strategy.

With respect to securities transactions for mutual funds, the Adviser determines which broker or dealer to use to execute each order, consistent with their duty to seek best execution of the transaction. However, with respect to certain other accounts (such as pooled investment vehicles that are not registered investment companies and other accounts managed for organizations and individuals), the Firm may be limited by the client with respect to the selection of brokers or dealers or may be instructed to direct trades through a particular broker or dealer. In these cases, trades for a portfolio in a particular security may be placed separately from, rather than aggregated with, such other accounts. Having separate transactions with respect to a security may temporarily affect the market price of the security or the execution of the transaction, or both, to the possible detriment of a portfolio or the other account(s) involved. Additionally, the management of multiple portfolios and/or other accounts may result in a portfolio manager devoting unequal time and attention to the management of each portfolio and/or other account. Western’s team approach to portfolio management and block trading approach works to limit this potential risk.

The Firm also maintains a gift and entertainment policy to address the potential for a business contact to give gifts or host entertainment events that may influence the business judgment of an employee. Employees are permitted to retain gifts of only a nominal value and are required to make reimbursement for entertainment events above a certain value. All gifts (except those of a de minimums value) and entertainment events that are given or sponsored by a business contact are required to be reported in a gift and entertainment log which is reviewed on a regular basis for possible issues.

Employees of the Firm have access to transactions and holdings information regarding client accounts and the Firm’s overall trading activities. This information represents a potential conflict of interest because employees may take advantage of this information as they trade in their personal accounts. Accordingly, the Firm maintains a Code of Ethics that is compliant with Rule 17j-1 and Rule 204A-1 to address personal trading. In addition, the Code of Ethics seeks to establish broader principles of good conduct and fiduciary responsibility in all aspects of the Firm’s business. The Code of Ethics is administered by the Legal and Compliance Department and monitored through the Firm’s compliance monitoring program.

The Firm may also face other potential conflicts of interest with respect to managing client assets, and the description above is not a complete description of every conflict of interest that could be deemed to exist. As a general matter, the Firm has adopted compliance policies and procedures to address a wide range of potential conflicts of interest. As discussed in other parts of this questionnaire, the Firm also maintains a compliance monitoring program and engages independent auditors to conduct a SAS 70 audit on an annual basis. These steps help to ensure that potential conflicts of interest have been addressed.

DESCRIPTION OF COMPENSATION STRUCTURE

At Western, one compensation methodology covers all products and functional areas.

The Firm’s methodology assigns each position a total compensation “target” which is derived from annual market surveys that benchmark each role with their job function and peer universe. This method is designed to reward employees with total compensation reflective of the external market value of their skills, experience, and ability to produce desired results.

Standard compensation includes competitive base salaries, generous employee benefits, and a retirement plan which includes an employer match and discretionary profit sharing.

In addition, employees are eligible for bonuses. These are structured to reward sector specialists for contributions to the Firm as well as relative performance of their specific portfolios/product and are determined by the professional’s job function and performance as measured by a formal review process. All bonuses are completely discretionary, and usually distributed in May. This is described in more details below:

•		Incentive compensation is based on individual performance, team performance and the performance of the company. Western’s philosophy is to reward its employees through Total Compensation. Total Compensation is reflective of the external market value for skills, experience, ability to produce results, and the performance of one’s group and the Firm as a whole.

•		Incentive compensation is the primary focus of management decisions when determining Total Compensation. The components of Total Compensation include benefits, base salary, incentive compensation and assets under management (AUM) bonuses. Incentive Compensation is based on the success of the Firm and one’s team, and personal contribution to that success. Incentive compensation is paid annually and is fully discretionary. AUM bonuses are discretionary awards paid to eligible employees on an annual basis. AUM bonuses are calculated according to the company’s annual AUM growth.

•		Western offers a Long Term Incentive Plan, which affords eligible employees the opportunity to earn additional long-term compensation from discretionary contributions which will be made on their behalf. These contributions are made by Western Asset and are paid to the employee if he/she remains employed with Western Asset until the discretionary contributions become vested. The Discretionary Contributions allocated to the employee will be credited with tax-deferred investment earnings indexed against mutual fund options or other investment options selected by Western Asset. Discretionary Contributions made to the Plan will be placed in a special trust (known as a rabbi trust) that restricts management’s use and of access to the money.

•		Under certain pre-existing arrangements, key professionals are paid incentives in recognition of outstanding performance. These incentives may include Legg Mason stock options.

Appendix IV

JOHN HANCOCK FUNDS

PROXY VOTING POLICIES AND PROCEDURES

POLICY:

General

The Board of Trustees (the “Board”) of each registered investment company in the John Hancock family of funds listed on Schedule A (collectively, the “Trust”), including a majority of the Trustees who are not “interested persons” (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the Trust (the “Independent Trustees”), adopts these proxy voting policies and procedures.

Each fund of the Trust or any other registered investment company (or series thereof) (each, a “fund”) is required to disclose its proxy voting policies and procedures in its registration statement and, pursuant to Rule 30b1-4 under the 1940 Act, file annually with the Securities and Exchange Commission and make available to shareholders its actual proxy voting record. In this regard, the Trust Policy is set forth below.

Delegation of Proxy Voting Responsibilities

It is the policy of the Trust to delegate the responsibility for voting proxies relating to portfolio securities held by a fund to the fund’s investment adviser (“adviser”) or, if the fund’s adviser has delegated portfolio management responsibilities to one or more investment subadviser(s), to the fund’s subadviser(s), subject to the Board’s continued oversight. The subadviser for each fund shall vote all proxies relating to securities held by each fund and in that connection, and subject to any further policies and procedures contained herein, shall use proxy voting policies and procedures adopted by each subadviser in conformance with Rule 206(4)-6 under the Investment Advisers Act of 1940, as amended (the “Advisers Act”).

Except as noted below under Material Conflicts of Interest, the Trust Policy with respect to a fund shall incorporate that adopted by the fund’s subadviser with respect to voting proxies held by its clients (the “Subadviser Policy”). Each Subadviser Policy, as it may be amended from time to time, is hereby incorporated by reference into the Trust Policy. Each subadviser to a fund is directed to comply with these policies and procedures in voting proxies relating to portfolio securities held by a fund, subject to oversight by the fund’s adviser and by the Board. Each adviser to a fund retains the responsibility, and is directed, to oversee each subadviser’s compliance with these policies and procedures, and to adopt and implement such additional policies and procedures as it deems necessary or appropriate to discharge its oversight responsibility. Additionally, the Trust’s Chief Compliance Officer (“CCO”) shall conduct such monitoring and supervisory activities as the CCO or the Board deems necessary or appropriate in order to appropriately discharge the CCO’s role in overseeing the subadvisers’ compliance with these policies and procedures.

The delegation by the Board of the authority to vote proxies relating to portfolio securities of the funds is entirely voluntary and may be revoked by the Board, in whole or in part, at any time.

IV-1

Voting Proxies of Underlying Funds of a Fund of Funds

A. Where the Fund of Funds is not the Sole Shareholder of the Underlying Fund
With respect to voting proxies relating to the shares of an underlying fund (an “Underlying Fund”) held by a fund of the Trust operating as a fund of funds (a “Fund of Funds”) in reliance on Section 12(d)(1)(G) of the 1940 Act where the Underlying Fund has shareholders other than the Fund of Funds which are not other Fund of Funds, the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the vote of all other holders of such Underlying Fund shares.

B. Where the Fund of Funds is the Sole Shareholder of the Underlying Fund
In the event that one or more Funds of Funds are the sole shareholders of an Underlying Fund, the adviser to the Fund of Funds (the “Adviser”) or the Trust will vote proxies relating to the shares of the Underlying Fund as set forth below unless the Board elects to have the Fund of Funds seek voting instructions from the shareholders of the Funds of Funds in which case the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the instructions timely received from such shareholders.

1. Where Both the Underlying Fund and the Fund of Funds are Voting on Substantially Identical Proposals

In the event that the Underlying Fund and the Fund of Funds are voting on substantially identical proposals (the “Substantially Identical Proposal”), then the Adviser or the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the vote of the shareholders of the Fund of Funds on the Substantially Identical Proposal.

2. Where the Underlying Fund is Voting on a Proposal that is Not Being Voted on By the Fund of Funds

a. Where there is No Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser Relating to the Proposal

In the event that the Fund of Funds is voting on a proposal of the Underlying Fund and the Fund of Funds is not also voting on a substantially identical proposal and there is no material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal, then the Adviser will vote proxies relating to the shares of the Underlying Fund pursuant to its Proxy Voting Procedures.

b. Where there is a Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser Relating to the Proposal

In the event that the Fund of Funds is voting on a proposal of the Underlying Fund and the Fund of Funds is not also voting on a substantially identical proposal and there is a material conflict of interest between the interests of the shareholders of the Underlying Fund and the Adviser relating to the Proposal, then the Fund of Funds will seek voting instructions from the shareholders of the Fund of Funds on the proposal and will vote proxies relating to shares of the Underlying Fund in the same proportion as the instructions timely received from such shareholders. A material conflict is generally defined as a proposal involving a matter in which the Adviser or one of its affiliates has a material economic interest.

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Material Conflicts of Interest

If: (1) a subadviser to a fund becomes aware that a vote presents a material conflict between the interests of: (a) shareholders of the fund; and (b) the fund’s adviser, subadviser, principal underwriter, or any of their affiliated persons, and (2) the subadviser does not propose to vote on the particular issue in the manner prescribed by its Subadviser Policy or the material conflict of interest procedures set forth in its Subadviser Policy are otherwise triggered, then the subadviser will follow the material conflict of interest procedures set forth in its Subadviser Policy when voting such proxies.

If a Subadviser Policy provides that in the case of a material conflict of interest between fund shareholders and another party, the subadviser will ask the Board to provide voting instructions, the subadviser shall vote the proxies, in its discretion, as recommended by an independent third party, in the manner prescribed by its Subadviser Policy or abstain from voting the proxies.

Securities Lending Program

Certain of the funds participate in a securities lending program with the Trust through an agent lender. When a fund’s securities are out on loan, they are transferred into the borrower’s name and are voted by the borrower, in its discretion. Where a subadviser determines, however, that a proxy vote (or other shareholder action) is materially important to the client’s account, the subadviser should request that the agent recall the security prior to the record date to allow the subadviser to vote the securities.

Disclosure of Proxy Voting Policies and Procedures in the Trust’s Statement of Additional Information (“SAI”)

The Trust shall include in its SAI a summary of the Trust Policy and of the Subadviser Policy included therein. (In lieu of including a summary of these policies and procedures, the Trust may include each full Trust Policy and Subadviser Policy in the SAI.)

Disclosure of Proxy Voting Policies and Procedures in Annual and Semi-Annual Shareholder Reports

The Trust shall disclose in its annual and semi-annual shareholder reports that a description of the Trust Policy, including the Subadviser Policy, and the Trust’s proxy voting record for the most recent 12 months ended June 30 are available on the Securities and Exchange Commission’s (“SEC”) website, and without charge, upon request, by calling a specified toll-free telephone number. The Trust will send these documents within three business days of receipt of a request, by first-class mail or other means designed to ensure equally prompt delivery.

Filing of Proxy Voting Record on Form N-PX

The Trust will annually file its complete proxy voting record with the SEC on Form N-PX. The Form N-PX shall be filed for the twelve months ended June 30 no later than August 31 of that year.

PROCEDURES:

Review of Subadvisers’ Proxy Voting

The Trust has delegated proxy voting authority with respect to fund portfolio securities in accordance with the Trust Policy, as set forth above.

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Consistent with this delegation, each subadviser is responsible for the following:

1)		Implementing written policies and procedures, in compliance with Rule 206(4)-6 under the Advisers Act, reasonably designed to ensure that the subadviser votes portfolio securities in the best interest of shareholders of the Trust.

2)		Providing the adviser with a copy and description of the Subadviser Policy prior to being approved by the Board as a subadviser, accompanied by a certification that represents that the Subadviser Policy has been adopted in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, providing the adviser with notice of any amendment or revision to that Subadviser Policy or with a description thereof. The adviser is required to report all material changes to a Subadviser Policy quarterly to the Board. The CCO’s annual written compliance report to the Board will contain a summary of the material changes to each Subadviser Policy during the period covered by the report.

3)		Providing the adviser with a quarterly certification indicating that the subadviser did vote proxies of the funds and that the proxy votes were executed in a manner consistent with the Subadviser Policy. If the subadviser voted any proxies in a manner inconsistent with the Subadviser Policy, the subadviser will provide the adviser with a report detailing the exceptions.

Adviser Responsibilities

Proxy Voting Procedures

Implementing written policies and procedures, in compliance with Rule 206(4)-6 under the Advisers Act, reasonably designed to ensure that the adviser votes shares of an Underling Fund consistent with these proxy voting policies and procedures and in the best interest of shareholders of the Trust.

Providing the Board of the Trust with a copy and description of the Adviser Policy, accompanied by a certification that represents that the Adviser Policy has been adopted in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, providing the Board with notice of any amendment or revision to that Adviser Policy or with a description thereof. The Adviser is required to report all material changes to the Adviser Policy quarterly to the Board. The CCO’s annual written compliance report to the Board will contain a summary of the material changes to Adviser Policy during the period covered by the report.

Providing the Board with a quarterly certification indicating that the Adviser did vote proxies of the funds and that the proxy votes were executed in a manner consistent with the Adviser Policy and these proxy voting policies and procedures. If the Adviser voted any proxies in a manner inconsistent with the Subadviser Policy, the Adviser will provide the adviser with a report detailing the exceptions.

Proxy Voting Service

The Trust has retained a proxy voting service to coordinate, collect, and maintain all proxy-related information, and to prepare and file the Trust’s reports on Form N-PX with the SEC.

The adviser, in accordance with its general oversight responsibilities, will periodically review the voting records maintained by the proxy voting service in accordance with the following procedures:

Receive a file with the proxy voting information directly from each subadviser on a quarterly basis.

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Schedule A
PROXY VOTING POLICIES AND PROCEDURES


JOHN HANCOCK FUNDS:	Adopted:	Amended:
John Hancock Trust	September 28, 2007
John Hancock Funds II	September 28, 2007
John Hancock Funds III	September 11, 2007
John Hancock Bond Trust	September 11, 2007
John Hancock California Tax-Free Income Fund	September 11, 2007
John Hancock Capital Series	September 11, 2007
John Hancock Current Interest	September 11, 2007
John Hancock Equity Trust	September 11, 2007
John Hancock Investment Trust	September 11, 2007
John Hancock Investment Trust II	September 11, 2007
John Hancock Investment Trust III	September 11, 2007
John Hancock Institutional Series Trust	September 11, 2007
John Hancock Municipal Securities Trust	September 11, 2007
John Hancock Series Trust	September 11, 2007
John Hancock Sovereign Bond Fund	September 11, 2007
John Hancock Strategic Series	September 11, 2007
John Hancock Tax-Exempt Series	September 11, 2007
John Hancock World Fund	September 11, 2007
John Hancock Preferred Income Fund	September 11, 2007
John Hancock Preferred Income Fund II	September 11, 2007
John Hancock Preferred Income Fund III	September 11, 2007
John Hancock Patriot Select Dividend Fund	September 11, 2007
John Hancock Patriot Premium Dividend Fund II	September 11, 2007
John Hancock Bank & Thrift Opportunity Fund	September 11, 2007
John Hancock Income Securities Trust	September 11, 2007
John Hancock Investors Trust	September 11, 2007
John Hancock Tax-Advantaged Dividend Income Fund	September 11, 2007
John Hancock Financial Trends	September 11, 2007
John Hancock Tax-Advantaged Global Shareholder Yield Fund	September 11, 2007

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AIM Capital Management Inc.

PROXY POLICIES AND PROCEDURES
(As Amended October 1, 2005)

Proxy Policies

Each of A I M Advisors, Inc., A I M Capital Management, Inc. and AIM Private Asset Management, Inc. (each an “AIM Advisor” and collectively “AIM”) has the fiduciary obligation to, at all times, make the economic best interest of advisory clients the sole consideration when voting proxies of companies held in client accounts. As a general rule, each AIM Advisor shall vote against any actions that would reduce the rights or options of shareholders, reduce shareholder influence over the board of directors and management, reduce the alignment of interests between management and shareholders, or reduce the value of shareholders’ investments. At the same time, AIM believes in supporting the management of companies in which it invests, and will accord proper weight to the positions of a company’s board of directors, and the AIM portfolio managers who chose to invest in the companies. Therefore, on most issues, our votes have been cast in accordance with the recommendations of the company’s board of directors, and we do not currently expect that trend to change. Although AIM’s proxy voting policies are stated below, AIM’s proxy committee considers all relevant facts and circumstances, and retains the right to vote proxies as deemed appropriate.

Boards Of Directors

A board that has at least a majority of independent directors is integral to good corporate governance. Key board committees, including audit, compensation and nominating committees, should be completely independent. There are some actions by directors that should result in votes being withheld. These instances include directors who:

• Are not independent directors and (a) sit on the board’s audit, compensation or nominating committee, or (b) sit on a board where the majority of the board is not independent;

• Attend less than 75 percent of the board and committee meetings without a valid excuse;

• It is not clear that the director will be able to fulfill his function;

• Implement or renew a dead-hand or modified dead-hand poison pill;

• Enacted egregious corporate governance or other policies or failed to replace management as appropriate;

• Have failed to act on takeover offers where the majority of the shareholders have tendered their shares; or

• Ignore a shareholder proposal that is approved by a majority of the shares outstanding.

Votes in a contested election of directors must be evaluated on a case-by-case basis, considering the following factors:

• Long-term financial performance of the target company relative to its industry;

• Management’s track record;

• Portfolio manager’s assessment;

• Qualifications of director nominees (both slates);

• Evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met; and

• Background to the proxy contest.

II.

Independent Registered Public Accounting Firm

A company should limit its relationship with its auditors to the audit engagement, and certain closely related activities that do not, in the aggregate, raise an appearance of

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impaired independence. We will support the reappointment of the company’s auditors unless:

• It is not clear that the auditors will be able to fulfill their function;

• There is reason to believe the independent auditors have rendered an opinion that is neither accurate nor indicative of the company’s financial position; or

• The auditors have a significant professional or personal relationship with the issuer that compromises the auditors’ independence.

III.

Compensation Programs

Appropriately designed equity-based compensation plans, approved by shareholders, can be an effective way to align the interests of long-term shareholders and the interests of management, employees and directors. Plans should not substantially dilute shareholders’ ownership interests in the company, provide participants with excessive awards or have objectionable structural features. We will consider all incentives, awards and compensation, and compare them to a company-specific adjusted allowable dilution cap and a weighted average estimate of shareholder wealth transfer and voting power dilution.

• We will generally vote against equity-based plans where the total dilution (including all equity-based plans) is excessive.

• We will support the use of employee stock purchase plans to increase company stock ownership by employees, provided that shares purchased under the plan are acquired for no less than 85% of their market value.

• We will vote against plans that have any of the following structural features: ability to re-price underwater options without shareholder approval, ability to issue options with an exercise price below the stock’s current market price, ability to issue reload options, or automatic share replenishment (“evergreen”) feature.

• We will vote for proposals to reprice options if there is a value-for-value (rather than a share-for-share) exchange.

• We will generally support the board’s discretion to determine and grant appropriate cash compensation and severance packages.

IV.

Corporate Matters

We will review management proposals relating to changes to capital structure, reincorporation, restructuring and mergers and acquisitions on a case by case basis, considering the impact of the changes on corporate governance and shareholder rights, anticipated financial and operating benefits, portfolio manager views, level of dilution, and a company’s industry and performance in terms of shareholder returns.

• We will vote for merger and acquisition proposals that the proxy committee and relevant portfolio managers believe, based on their review of the materials, will result in financial and operating benefits, have a fair offer price, have favorable prospects for the combined companies, and will not have a negative impact on corporate governance or shareholder rights.

• We will vote against proposals to increase the number of authorized shares of any class of stock that has superior voting rights to another class of stock.

• We will vote for proposals to increase common share authorization for a stock split, provided that the increase in authorized shares would not result in excessive dilution given a company’s industry and performance in terms of shareholder returns.

• We will vote for proposals to institute open-market share repurchase plans in which all shareholders participate on an equal basis.

Shareholder Proposals

Shareholder proposals can be extremely complex, and the impact on share value can rarely be anticipated with any high degree of confidence. The proxy committee reviews shareholder proposals on a case-by-case basis, giving careful consideration to such factors as: the proposal’s impact on the company’s short-term and long-term share value, its effect on the company’s reputation, the economic effect of the proposal, industry and regional norms applicable to the company, the company’s overall corporate governance provisions, and the reasonableness of the request.

• We will generally abstain from shareholder social and environmental proposals.

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• We will generally support the board’s discretion regarding shareholder proposals that involve ordinary business practices.

• We will generally vote for shareholder proposals that are designed to protect shareholder rights if the company’s corporate governance standards indicate that such additional protections are warranted.

• We will generally vote for proposals to lower barriers to shareholder action.

• We will generally vote for proposals to subject shareholder rights plans to a shareholder vote. In evaluating these plans, we give favorable consideration to the presence of “TIDE” provisions (short-term sunset provisions, qualified bid/permitted offer provisions, and/or mandatory review by a committee of independent directors at least every three years).

VI.

Other

• We will vote against any proposal where the proxy materials lack sufficient information upon which to base an informed decision.

• We will vote against any proposals to authorize the proxy to conduct any other business that is not described in the proxy statement.

• We will vote any matters not specifically covered by these proxy policies and procedures in the economic best interest of advisory clients. AIM’s proxy policies, and the procedures noted below, may be amended from time to time.

Proxy Committee Procedures

The proxy committee currently consists of representatives from the Legal and Compliance Department, the Investments Department and the Finance Department. The committee members review detailed reports analyzing the proxy issues and have access to proxy statements and annual reports. Committee members may also speak to management of a company regarding proxy issues and should share relevant considerations with the proxy committee. The committee then discusses the issues and determines the vote. The committee shall give appropriate and significant weight to portfolio managers’ views regarding a proposal’s impact on shareholders. A proxy committee meeting requires a quorum of three committee members, voting in person or by e-mail.

AIM’s proxy committee shall consider its fiduciary responsibility to all clients when addressing proxy issues and vote accordingly. The proxy committee may enlist the services of reputable outside professionals and/or proxy evaluation services, such as Institutional Shareholder Services or any of its subsidiaries (“ISS”), to assist with the analysis of voting issues and/or to carry out the actual voting process. To the extent the services of ISS or another provider are used, the proxy committee shall periodically review the policies of that provider. The proxy committee shall prepare a report for the Funds’ Board of Trustees on a periodic basis regarding issues where AIM’s votes do not follow the recommendation of ISS or another provider because AIM’s proxy policies differ from those of such provider.

In addition to the foregoing, the following shall be strictly adhered to unless contrary action receives the prior approval of the Funds’ Board of Trustees:

1. Other than by voting proxies and participating in Creditors’ committees, AIM shall not engage in conduct that involves an attempt to change or influence the control of a company.

2. AIM will not publicly announce its voting intentions and the reasons therefore.

3. AIM shall not participate in a proxy solicitation or otherwise seek proxy-voting authority from any other public company shareholder.

4. All communications regarding proxy issues between the proxy committee and companies or their agents, or with fellow shareholders shall be for the sole purpose of expressing and discussing AIM’s concerns for its advisory clients’ interests and not for an attempt to influence or control management.

Business/Disaster Recovery

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If the proxy committee is unable to meet due to a temporary business interruption, such as a power outage, a sub-committee of the proxy committee, even if such subcommittee does not constitute a quorum of the proxy committee, may vote proxies in accordance with the policies stated herein. If the sub-committee of the proxy committee is not able to vote proxies, the sub-committee shall authorize ISS to vote proxies by default in accordance with ISS’ proxy policies and procedures, which may vary slightly from AIM’s.

Restrictions Affecting Voting

If a country’s laws allow a company in that country to block the sale of the company’s shares by a shareholder in advance of a shareholder meeting, AIM will not vote in shareholder meetings held in that country, unless the company represents that it will not block the sale of its shares in connection with the meeting. Administrative or other procedures, such as securities lending, may also cause AIM to refrain from voting. Although AIM considers proxy voting to be an important shareholder right, the proxy committee will not impede a portfolio manager’s ability to trade in a stock in order to vote at a shareholder meeting.

Conflicts of Interest

The proxy committee reviews each proxy to assess the extent to which there may be a material conflict between AIM’s interests and those of advisory clients. A potential conflict of interest situation may include where AIM or an affiliate manages assets for, administers an employee benefit plan for, provides other financial products or services to, or otherwise has a material business relationship with, a company whose management is soliciting proxies, and failure to vote proxies in favor of management of the company may harm AIM’s relationship with the company. In order to avoid even the appearance of impropriety, the proxy committee will not take AIM’s relationship with the company into account, and will vote the company’s proxies in the best interest of the advisory clients, in accordance with these proxy policies and procedures.

If AIM’s proxy policies and voting record do not guide the proxy committee’s vote in a situation where a conflict of interest exists, the proxy committee will vote the proxy in the best interest of the advisory clients, and will provide information regarding the issue to the Funds’ Board of Trustees in the next quarterly report.

If a committee member has any conflict of interest with respect to a company or an issue presented, that committee member should inform the proxy committee of such conflict and abstain from voting on that company or issue.

Fund of Funds

When an AIM Fund (an “Investing Fund”) that invests in another AIM Fund(s) (an “Underlying Fund”) has the right to vote on the proxy of the Underlying Fund, the Investing Fund will echo the votes of the other shareholders of the Underlying AIM Fund.

Conflict In These Policies

If following any of the policies listed herein would lead to a vote that the proxy committee deems to be not in the best interest of AIM’s advisory clients, the proxy committee will vote the proxy in the manner that they deem to be the best interest of AIM’s advisory clients and will inform the Funds’ Board of Trustees of such vote and the circumstances surrounding it promptly thereafter.

IV-10

American Century Investments

PROXY VOTING POLICIES

American Century Investment Management, Inc. and American Century Global Investment Management, Inc. (collectively, the “Adviser”) are the investment managers for a variety of clients, including the American Century family of mutual funds. As such, the Adviser has been delegated the authority to vote proxies with respect to investments held in the accounts it manages. The following is a statement of the proxy voting policies that have been adopted by the Adviser.

General Principles

In voting proxies, the Adviser is guided by general fiduciary principles. It must act prudently, solely in the interest of our clients, and for the exclusive purpose of providing benefits to them. The Adviser will attempt to consider all factors of its vote that could affect the value of the investment. We will not subordinate the interests of clients in the value of their investments to unrelated objectives. In short, the Adviser will vote proxies in the manner that we believe will do the most to maximize shareholder value.

Specific Proxy Matters

A. Routine Matters

Election of Directors

	a.		*Generally. The Adviser* will generally support the election of directors that result in a board made up of a majority of independent directors. In general, the Adviser will vote in favor of management’s director nominees if they are running unopposed. The Adviser believes that management is in the best possible position to evaluate the qualifications of directors and the needs and dynamics of a particular board. The Adviser of course maintains the ability to vote against any candidate whom it feels is not qualified. For example, we will generally vote for management’s director nominees unless there are specific concerns about the individual, such as criminal wrongdoing or breach of fiduciary responsibilities. Conversely, we will vote against individual directors if they do not provide an adequate explanation for repeated absences at board meetings. When management’s nominees are opposed in a proxy contest, the Adviser will evaluate which nominees’ publicly-announced management policies and goals are most likely to maximize shareholder value, as well as the past performance of the incumbents. In cases where the Adviser’s clients are significant holders of a company’s voting securities, management’s recommendations will be reviewed with the client or an appropriate fiduciary responsible for the client (e.g., a committee of the independent directors of a fund, the trustee of a retirement plan).

	b.		*Committee Service.* The Adviser will withhold votes for non-independent directors who serve on the audit, compensation and/or nominating committees of the board.

	c.		*Classification of Boards.* The Adviser will support proposals that seek to declassify boards. Conversely, the Adviser will oppose efforts to adopt classified board structures.

	d.		*Majority Independent Board.* The Adviser will support proposals calling for a majority of independent directors on a board. We believe that a majority of independent directors can helps to facilitate objective decision making and enhances accountability to shareholders.

	e.		*Withholding Campaigns.* The Adviser will support proposals calling for shareholders to withhold votes for directors where such actions will advance the principles set forth in paragraphs (a) through (d) above.

2.		Ratification of Selection of Auditors

		The Adviser will generally rely on the judgment of the issuer’s audit committee in selecting the independent auditors who will provide the best service to the company. The Adviser

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believes that independence of the auditors is paramount and will vote against auditors whose independence appears to be impaired. We will vote against proposed auditors in those circumstances where (1) an auditor has a financial interest in or association with the company, and is therefore not independent; (2) non-audit fees comprise more than 50% of the total fees paid by the company to the audit firm; or (3) there is reason to believe that the independent auditor has previously rendered an opinion to the issuer that is either inaccurate or not indicative of the company’s financial position.

B.		*Equity-Based Compensation Plans*

		The Adviser believes that equity-based incentive plans are economically significant issues upon which shareholders are entitled to vote. The Adviser recognizes that equity-based compensation plans can be useful in attracting and maintaining desirable employees. The cost associated with such plans must be measured if plans are to be used appropriately to maximize shareholder value. The Adviser will conduct a case-by-case analysis of each stock option, stock bonus or similar plan or amendment, and generally approve management’s recommendations with respect to adoption of or amendments to a company’s equity-based compensation plans, provided that the total number of shares reserved under all of a company’s plans is reasonable and not excessively dilutive.

		The Adviser will review equity-based compensation plans or amendments thereto on a case-by-case basis. Factors that will be considered in the determination include the company’s overall capitalization, the performance of the company relative to its peers, and the maturity of the company and its industry; for example, technology companies often use options broadly throughout its employee base which may justify somewhat greater dilution.

		Amendments which are proposed in order to bring a company’s plan within applicable legal requirements will be reviewed by the Adviser’s legal counsel; amendments to executive bonus plans to comply with IRS Section 162(m) disclosure requirements, for example, are generally approved.

		The Adviser will generally vote against the adoption of plans or plan amendments that:

	•		provide for immediate vesting of all stock options in the event of a change of control of the company (see “Anti-Takeover Proposals” below);

	•		reset outstanding stock options at a lower strike price unless accompanied by a corresponding and proportionate reduction in the number of shares designated. The Adviser will generally oppose adoption of stock option plans that explicitly or historically permit repricing of stock options, regardless of the number of shares reserved for issuance, since their effect is impossible to evaluate;

	•		establish restriction periods shorter than three years for restricted stock grants;

	•		do not reasonably associate awards to performance of the company; and

	•		are excessively dilutive to the company.

Anti-Takeover Proposals

In general, the Adviser will vote against any proposal, whether made by management or shareholders, which the Adviser believes would materially discourage a potential acquisition or takeover. In most cases an acquisition or takeover of a particular company will increase share value. The adoption of anti-takeover measures may prevent or frustrate a bid from being made, may prevent consummation of the acquisition, and may have a negative effect on share price when no acquisition proposal is pending. The items below discuss specific anti-takeover proposals.

1.		Cumulative Voting

		The Adviser will vote in favor of any proposal to adopt cumulative voting and will vote against any proposal to eliminate cumulative voting that is already in place, except in cases

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where a company has a staggered board. Cumulative voting gives minority shareholders a stronger voice in the company and a greater chance for representation on the board. The Adviser believes that the elimination of cumulative voting constitutes an anti-takeover measure.

2.		Staggered Board

		If a company has a “staggered board,” its directors are elected for terms of more than one year and only a segment of the board stands for election in any year. Therefore, a potential acquiror cannot replace the entire board in one year even if it controls a majority of the votes. Although staggered boards may provide some degree of continuity and stability of leadership and direction to the board of directors, the Adviser believes that staggered boards are primarily an anti-takeover device and will vote against them. However, the Adviser does not necessarily vote against the re-election of staggered boards.

3.		“Blank Check” Preferred Stock

		Blank check preferred stock gives the board of directors the ability to issue preferred stock, without further shareholder approval, with such rights, preferences, privileges and restrictions as may be set by the board. In response to a hostile take-over attempt, the board could issue such stock to a friendly party or “white knight” or could establish conversion or other rights in the preferred stock which would dilute the common stock and make an acquisition impossible or less attractive. The argument in favor of blank check preferred stock is that it gives the board flexibility in pursuing financing, acquisitions or other proper corporate purposes without incurring the time or expense of a shareholder vote. Generally, the Adviser will vote against blank check preferred stock. However, the Adviser may vote in favor of blank check preferred if the proxy statement discloses that such stock is limited to use for a specific, proper corporate objective as a financing instrument.

4.		Elimination of Preemptive Rights

		When a company grants preemptive rights, existing shareholders are given an opportunity to maintain their proportional ownership when new shares are issued. A proposal to eliminate preemptive rights is a request from management to revoke that right.

		While preemptive rights will protect the shareholder from having its equity diluted, it may also decrease a company’s ability to raise capital through stock offerings or use stock for acquisitions or other proper corporate purposes. Preemptive rights may therefore result in a lower market value for the company’s stock. In the long term, shareholders could be adversely affected by preemptive rights. The Adviser generally votes against proposals to grant preemptive rights, and for proposals to eliminate preemptive rights.

5.		Non-targeted Share Repurchase

		A non-targeted share repurchase is generally used by company management to prevent the value of stock held by existing shareholders from deteriorating. A non-targeted share repurchase may reflect management’s belief in the favorable business prospects of the company. The Adviser finds no disadvantageous effects of a non-targeted share repurchase and will generally vote for the approval of a non-targeted share repurchase subject to analysis of the company’s financial condition.

6.		Increase in Authorized Common Stock

		The issuance of new common stock can also be viewed as an anti-takeover measure, although its effect on shareholder value would appear to be less significant than the adoption of blank check preferred. The Adviser will evaluate the amount of the proposed increase and the purpose or purposes for which the increase is sought. If the increase is not excessive and is sought for proper corporate purposes, the increase will be approved. Proper corporate purposes might include, for example, the creation of additional stock to accommodate a stock split or stock dividend, additional stock required for a proposed acquisition, or

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additional stock required to be reserved upon exercise of employee stock option plans or employee stock purchase plans. Generally, the Adviser will vote in favor of an increase in authorized common stock of up to 100%; increases in excess of 100% are evaluated on a case-by-case basis, and will be voted affirmatively if management has provided sound justification for the increase.

7.		“Supermajority” Voting Provisions or Super Voting Share Classes

		A “supermajority” voting provision is a provision placed in a company’s charter documents which would require a “supermajority” (ranging from 66 to 90%) of shareholders and shareholder votes to approve any type of acquisition of the company. A super voting share class grants one class of shareholders a greater per-share vote than those of shareholders of other voting classes. The Adviser believes that these are standard anti-takeover measures and will vote against them. The supermajority provision makes an acquisition more time-consuming and expensive for the acquiror. A super voting share class favors one group of shareholders disproportionately to economic interest. Both are often proposed in conjunction with other anti-takeover measures.

8.		“Fair Price” Amendments

		This is another type of charter amendment that would require an offeror to pay a “fair” and uniform price to all shareholders in an acquisition. In general, fair price amendments are designed to protect shareholders from coercive, two-tier tender offers in which some shareholders may be merged out on disadvantageous terms. Fair price amendments also have an anti-takeover impact, although their adoption is generally believed to have less of a negative effect on stock price than other anti-takeover measures. The Adviser will carefully examine all fair price proposals. In general, the Adviser will vote against fair price proposals unless it can be determined from the proposed operation of the fair price proposal that it is likely that share price will not be negatively affected and the proposal will not have the effect of discouraging acquisition proposals.

9.		Limiting the Right to Call Special Shareholder Meetings.

		The incorporation statutes of many states allow minority shareholders at a certain threshold level of ownership (frequently 10%) to call a special meeting of shareholders. This right can be eliminated (or the threshold increased) by amendment to the company’s charter documents. The Adviser believes that the right to call a special shareholder meeting is significant for minority shareholders; the elimination of such right will be viewed as an anti-takeover measure and we will vote against proposals attempting to eliminate this right and for proposals attempting to restore it.

10.		Poison Pills or Shareholder Rights Plans

		Many companies have now adopted some version of a poison pill plan (also known as a shareholder rights plan). Poison pill plans generally provide for the issuance of additional equity securities or rights to purchase equity securities upon the occurrence of certain hostile events, such as the acquisition of a large block of stock.

		The basic argument against poison pills is that they depress share value, discourage offers for the company and serve to “entrench” management. The basic argument in favor of poison pills is that they give management more time and leverage to deal with a takeover bid and, as a result, shareholders may receive a better price. The Adviser believes that the potential benefits of a poison pill plan are outweighed by the potential detriments. The Adviser will generally vote against all forms of poison pills.

		We will, however, consider on a case-by-case basis poison pills that are very limited in time and preclusive effect. We will generally vote in favor of such a poison pill if it is linked to a business strategy that will – in our view – likely result in greater value for shareholders, if the term is less than three years, and if shareholder approval is required to reinstate the expired plan or adopt a new plan at the end of this term.

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11.		Golden Parachutes

		Golden parachute arrangements provide substantial compensation to executives who are terminated as a result of a takeover or change in control of their company. The existence of such plans in reasonable amounts probably has only a slight anti-takeover effect. In voting, the Adviser will evaluate the specifics of the plan presented.

12.		Reincorporation

		Reincorporation in a new state is often proposed as one part of a package of anti-takeover measures. Several states (such as Pennsylvania, Ohio and Indiana) now provide some type of legislation that greatly discourages takeovers. Management believes that Delaware in particular is beneficial as a corporate domicile because of the well-developed body of statutes and case law dealing with corporate acquisitions.

		We will examine reincorporation proposals on a case-by-case basis. If the Adviser believes that the reincorporation will result in greater protection from takeovers, the reincorporation proposal will be opposed. We will also oppose reincorporation proposals involving jurisdictions that specify that directors can recognize non-shareholder interests over those of shareholders. When reincorporation is proposed for a legitimate business purpose and without the negative effects identified above, the Adviser will vote affirmatively.

13.		Confidential Voting

		Companies that have not previously adopted a “confidential voting” policy allow management to view the results of shareholder votes. This gives management the opportunity to contact those shareholders voting against management in an effort to change their votes.

		Proponents of secret ballots argue that confidential voting enables shareholders to vote on all issues on the basis of merit without pressure from management to influence their decision. Opponents argue that confidential voting is more expensive and unnecessary; also, holding shares in a nominee name maintains shareholders’ confidentiality. The Adviser believes that the only way to insure anonymity of votes is through confidential voting, and that the benefits of confidential voting outweigh the incremental additional cost of administering a confidential voting system. Therefore, we will vote in favor of any proposal to adopt confidential voting.

14.		Opting In or Out of State Takeover Laws

		State takeover laws typically are designed to make it more difficult to acquire a corporation organized in that state. The Adviser believes that the decision of whether or not to accept or reject offers of merger or acquisition should be made by the shareholders, without unreasonably restrictive state laws that may impose ownership thresholds or waiting periods on potential acquirors. Therefore, the Adviser will vote in favor of opting out of restrictive state takeover laws.

C.		*Other Matters*

1.		Shareholder Proposals Involving Social, Moral or Ethical Matters

		The Adviser will generally vote management’s recommendation on issues that primarily involve social, moral or ethical matters, such as the MacBride Principles pertaining to operations in Northern Ireland. While the resolution of such issues may have an effect on shareholder value, the precise economic effect of such proposals, and individual shareholder’s preferences regarding such issues is often unclear. Where this is the case, the Adviser believes it is generally impossible to know how to vote in a manner that would accurately reflect the views of the Adviser’s clients, and therefore will review management’s assessment of the economic effect of such proposals and rely upon it if we believe its assessment is not unreasonable.

IV-15

		Shareholders may also introduce social, moral or ethical proposals which are the subject of existing law or regulation. Examples of such proposals would include a proposal to require disclosure of a company’s contributions to political action committees or a proposal to require a company to adopt a non-smoking workplace policy. The Adviser believes that such proposals are better addressed outside the corporate arena, and will vote with management’s recommendation; in addition, the Adviser will generally vote against any proposal which would require a company to adopt practices or procedures which go beyond the requirements of existing, directly applicable law.

2.		Anti-Greenmail Proposals

		“Anti-greenmail” proposals generally limit the right of a corporation, without a shareholder vote, to pay a premium or buy out a 5% or greater shareholder. Management often argues that they should not be restricted from negotiating a deal to buy out a significant shareholder at a premium if they believe it is in the best interest of the company. Institutional shareholders generally believe that all shareholders should be able to vote on such a significant use of corporate assets. The Adviser believes that any repurchase by the company at a premium price of a large block of stock should be subject to a shareholder vote. Accordingly, it will vote in favor of anti-greenmail proposals.

3.		Indemnification

		The Adviser will generally vote in favor of a corporation’s proposal to indemnify its officers and directors in accordance with applicable state law. Indemnification arrangements are often necessary in order to attract and retain qualified directors. The adoption of such proposals appears to have little effect on share value.

4.		Non-Stock Incentive Plans

		Management may propose a variety of cash-based incentive or bonus plans to stimulate employee performance. In general, the cash or other corporate assets required for most incentive plans is not material, and the Adviser will vote in favor of such proposals, particularly when the proposal is recommended in order to comply with IRC Section 162(m) regarding salary disclosure requirements. Case-by-case determinations will be made of the appropriateness of the amount of shareholder value transferred by proposed plans.

5.		Director Tenure

		These proposals ask that age and term restrictions be placed on the board of directors. The Adviser believes that these types of blanket restrictions are not necessarily in the best interests of shareholders and therefore will vote against such proposals, unless they have been recommended by management.

6.		Directors’ Stock Options Plans

		The Adviser believes that stock options are an appropriate form of compensation for directors, and the Adviser will vote for director stock option plans which are reasonable and do not result in excessive shareholder dilution. Analysis of such proposals will be made on a case-by-case basis, and will take into account total board compensation and the company’s total exposure to stock option plan dilution.

7.		Director Share Ownership

		The Adviser will vote against shareholder proposals which would require directors to hold a minimum number of the company’s shares to serve on the Board of Directors, in the belief that such ownership should be at the discretion of Board members.

Monitoring Potential Conflicts of Interest

Corporate management has a strong interest in the outcome of proposals submitted to shareholders. As a consequence, management often seeks to influence large shareholders to vote with their recommendations on particularly controversial matters. In the vast majority of cases, these communications with large shareholders amount to little more than advocacy for management’s positions and give the Adviser’s staff the opportunity to ask additional questions about the matter

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being presented. Companies with which the Adviser has direct business relationships could theoretically use these relationships to attempt to unduly influence the manner in which the Adviser votes on matters for its clients. To ensure that such a conflict of interest does not affect proxy votes cast for the Adviser’s clients, our proxy voting personnel regularly catalog companies with whom the Adviser has significant business relationships; all discretionary (including case-by-case) voting for these companies will be voted by the client or an appropriate fiduciary responsible for the client (e.g., a committee of the independent directors of a fund or the trustee of a retirement plan).

In addition, to avoid any potential conflict of interest that may arise when one American Century mutual fund owns shares of another American Century mutual fund, the Advisor will “echo vote” such shares, if possible. Echo voting means the Advisor will vote the shares in the same proportion as the vote of all of the other holders of the fund’s shares. So for example, if shareholders of a fund cast 80% of their votes in favor of a proposal and 20% against the proposal, any American Century fund that owns shares of such fund will cast 80% of its shares in favor of the proposal and 20% against. When this is not possible (as in the case of the “NT” funds, where the LIVESTRONG funds are the sole shareholder), the shares of the underlying fund (e.g. the “NT” fund) will be voted in the same proportion as the vote of the shareholders of the corresponding American Century policy portfolio for proposals common to both funds. For example, NT Growth Fund shares will be echo voted in accordance with the votes of the Growth Fund shareholders. In the case where the policy portfolio does not have a common proposal, shares will be voted in consultation with a committee of the independent directors.

************************************************************

The voting policies expressed above are of course subject to modification in certain circumstances and will be reexamined from time to time. With respect to matters that do not fit in the categories stated above, the Adviser will exercise its best judgment as a fiduciary to vote in the manner which will most enhance shareholder value.

Case-by-case determinations will be made by the Adviser’s staff, which is overseen by the General Counsel of the Adviser, in consultation with equity managers. Electronic records will be kept of all votes made.

Original 6/1/1989

Revised 12/05/1991

Revised 2/15/1997

Revised 8/1/1999

Revised 7/1/2003

Revised 12/13/2005

Revised 11/29/2006

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Proxy Voting Policies and Procedures

These Proxy Voting Policies and Procedures (“Policy”) for BlackRock Advisors, LLC and its affiliated U.S. registered investment advisers¹ (“BlackRock”) reflect our duty as a fiduciary under the Investment Advisers Act of 1940 (the “Advisers Act”) to vote proxies in the best interests of our clients. BlackRock serves as the investment manager for investment companies, other commingled investment vehicles and/or separate accounts of institutional and other clients. The right to vote proxies for securities held in such accounts belongs to BlackRock’s clients. Certain clients of BlackRock have retained the right to vote such proxies in general or in specific circumstances.² Other clients, however, have delegated to BlackRock the right to vote proxies for securities held in their accounts as part of BlackRock’s authority to manage, acquire and dispose of account assets.

When BlackRock votes proxies for a client that has delegated to BlackRock proxy voting authority, BlackRock acts as the client’s agent. Under the Advisers Act, an investment adviser is a fiduciary that owes each of its clients a duty of care and loyalty with respect to all services the adviser undertakes on the client’s behalf, including proxy voting. BlackRock is therefore subject to a fiduciary duty to vote proxies in a manner BlackRock believes is consistent with the client’s best interests,³ whether or not the client’s proxy voting is subject to the fiduciary standards of the Employee Retirement Income Security Act of 1974 (“ERISA”).⁴ When voting proxies for client accounts (including investment companies), BlackRock’s primary objective is to make voting decisions solely in the best interests of clients and ERISA clients’ plan beneficiaries and participants. In fulfilling its obligations to clients, BlackRock will seek to act in a manner that it believes is most likely to enhance the economic value of the underlying securities held in client accounts.⁵ It is imperative that BlackRock considers the interests of its clients, and not the interests of BlackRock, when voting proxies and that real (or perceived) material conflicts that may arise between BlackRock’s interest and those of BlackRock’s clients are properly addressed and resolved.


¹		The Policy does not apply to BlackRock Asset Management U.K. Limited and BlackRock Investment Managers International Limited, which are U.S. registered investment advisers based in the United Kingdom.

²		In certain situations, a client may direct BlackRock to vote in accordance with the client’s proxy voting policies. In these situations, BlackRock will seek to comply with such policies to the extent it would not be inconsistent with other BlackRock legal responsibilities.

³		Letter from Harvey L. Pitt, Chairman, SEC, to John P.M. Higgins, President, Ram Trust Services (February 12, 2002) (Section 206 of the Investment Advisers Act imposes a fiduciary responsibility to vote proxies fairly and in the best interests of clients); SEC Release No. IA-2106 (February 3, 2003).

⁴		DOL Interpretative Bulletin of Sections 402, 403 and 404 of ERISA at 29 C.F.R. 2509.94-2

⁵		Other considerations, such as social, labor, environmental or other policies, may be of interest to particular clients. While BlackRock is cognizant of the importance of such considerations, when voting proxies it will generally take such matters into account only to the extent that they have a direct bearing on the economic value of the underlying securities. To the extent that a BlackRock client desires to pursue a particular social, labor, environmental or other agenda through the proxy votes made for its securities held through BlackRock as investment adviser, BlackRock encourages the client to consider retaining direct proxy voting authority or to appoint independently a special proxy voting fiduciary other than BlackRock.

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I. Scope of Committee Responsibilities

The Committee shall have the responsibility for determining how to address proxy votes made on behalf of all BlackRock clients, except for clients who have retained the right to vote their own proxies, either generally or on any specific matter. In so doing, the Committee shall seek to ensure that proxy votes are made in the best interests of clients, and that proxy votes are determined in a manner free from unwarranted or inappropriate influences. The Committee shall also oversee the overall administration of proxy voting for BlackRock accounts.⁷

The Committee shall establish BlackRock’s proxy voting guidelines, with such advice, participation and research as the Committee deems appropriate from portfolio managers, proxy voting services or other knowledgeable interested parties. As it is anticipated that there will not necessarily be a “right” way to vote proxies on any given issue applicable to all facts and circumstances, the Committee shall also be responsible for determining how the proxy voting guidelines will be applied to specific proxy votes, in light of each issuer’s unique structure, management, strategic options and, in certain circumstances, probable economic and other anticipated consequences of alternative actions. In so doing, the Committee may determine to vote a particular proxy in a manner contrary to its generally stated guidelines.

The Committee may determine that the subject matter of certain proxy issues are not suitable for general voting guidelines and requires a case-by-case determination, in which case the Committee may elect not to adopt a specific voting guideline applicable to such issues. BlackRock believes that certain proxy voting issues — such as approval of mergers and other significant corporate transactions — require investment analysis akin to investment decisions, and are therefore not suitable for general guidelines. The Committee may elect to adopt a common BlackRock position on certain proxy votes that are akin to investment decisions, or determine to permit portfolio managers to make individual decisions on how best to maximize economic value for the accounts for which they are responsible (similar to normal buy/sell investment decisions made by such portfolio managers).⁸

While it is expected that BlackRock, as a fiduciary, will generally seek to vote proxies over which BlackRock exercises voting authority in a uniform manner for all BlackRock clients, the Committee, in conjunction with the portfolio manager of an account, may determine that the specific circumstances of such account require that such account’s proxies be voted differently due to such account’s investment objective or other factors that differentiate it from other accounts. In addition, on proxy votes that are akin to investment decisions, BlackRock believes portfolio managers may from time to time


⁷		The Committee may delegate day-to-day administrative responsibilities to other BlackRock personnel and/or outside service providers, as appropriate.

⁸		The Committee will normally defer to portfolio managers on proxy votes that are akin to investment decisions except for proxy votes that involve a material conflict of interest, in which case it will determine, in its discretion, the appropriate voting process so as to address such conflict.

legitimately reach differing but equally valid views, as fiduciaries for BlackRock’s clients, on how best to maximize economic value in respect of a particular investment.

The Committee will also be responsible for ensuring the maintenance of records of each proxy vote, as required by Advisers Act Rule 204-2.⁹ All records will be maintained in accordance with applicable law. Except as may be required by applicable legal requirements, or as otherwise set forth herein, the Committee’s determinations and records shall be treated as proprietary, nonpublic and confidential.

The Committee shall be assisted by other BlackRock personnel, as may be appropriate. In particular, the Committee has delegated to the BlackRock Operations Department responsibility for monitoring corporate actions and ensuring that proxy votes are submitted in a timely fashion. The Operations Department shall ensure that proxy voting issues are promptly brought to the

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Committee’s attention and that the Committee’s proxy voting decisions are appropriately disseminated and implemented.

To assist BlackRock in voting proxies, the Committee may retain the services of a firm providing such services. BlackRock has currently retained Institutional Shareholder Services (“ISS”) in that role. ISS is an independent adviser that specializes in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided to BlackRock may include, but are not limited to, in-depth research, voting recommendations (which the Committee is not obligated to follow), vote execution, and recordkeeping.


⁹		The Committee may delegate the actual maintenance of such records to an outside service provider. Currently, the Committee has delegated the maintenance of such records to Institutional Shareholder Services.

II. Special Circumstances

Routine Consents. BlackRock may be asked from time to time to consent to an amendment to, or grant a waiver under, a loan agreement, partnership agreement, indenture or other governing document of a specific financial instrument held by BlackRock clients. BlackRock will generally treat such requests for consents not as “proxies” subject to these Proxy Voting Policies and Procedures but as investment matters to be dealt with by the responsible BlackRock investment professionals would, provided that such consents (i) do not relate to the election of a board of directors or appointment of auditors of a public company, and (ii) either (A) would not otherwise materially affect the structure, management or control of a public company, or (B) relate to a company in which BlackRock clients hold only interests in bank loans or debt securities and are consistent with customary standards and practices for such instruments.

Securities on Loan. Registered investment companies that are advised by BlackRock as well as certain of our advisory clients may participate in securities lending programs. Under most securities lending arrangements, securities on loan may not be voted by the lender (unless the loan is recalled). BlackRock believes that each client has the right to determine whether participating in a securities lending program enhances returns, to contract with the securities lending agent of its choice and to structure a securities lending program, through its lending agent, that balances any tension between loaning and voting securities in a matter that satisfies such client. If client has decided to participate in a securities lending program, BlackRock will therefore defer to the client’s determination and not attempt to seek recalls solely for the purpose of voting routine proxies as this could impact the returns received from securities lending and make the client a less desirable lender in a marketplace. Where a client retains a lending agent that is unaffiliated with BlackRock, BlackRock will generally not seek to vote proxies relating to securities on loan because BlackRock does not have a contractual right to recall such loaned securities for the purpose of voting proxies. Where BlackRock or an affiliate acts as the lending agent, BlackRock will also generally not seek to recall loaned securities for proxy voting purposes, unless the portfolio manager responsible for the account or the Committee determines that voting the proxy is in the client’s best interest and requests that the security be recalled.

Voting Proxies for Non-US Companies. While the proxy voting process is well established in the United States, voting proxies of non-US companies frequently involves logistical issues which can affect BlackRock’s ability to vote such proxies, as well as the desirability of voting such proxies. These issues include (but are not limited to): (i) untimely notice of shareholder meetings, (ii) restrictions on a foreigner’s ability to exercise votes, (iii) requirements to vote proxies in person, (iv) “shareblocking” (requirements that investors who exercise their voting rights surrender the right to dispose of their holdings for some specified period in proximity to the shareholder meeting), (v) potential difficulties in translating the proxy, and (vi) requirements to provide local agents with unrestricted powers of attorney to facilitate voting instructions.

As a consequence, BlackRock votes proxies of non-US companies only on a “best-efforts” basis. In addition, the Committee may determine that it is generally in the best interests of BlackRock clients not to vote proxies of companies in certain countries if the Committee determines that the

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costs (including but not limited to opportunity costs associated with shareblocking constraints) associated with exercising a vote generally are expected to outweigh the benefit the client will derive by voting on the issuer’s proposal. If the Committee so determines in the case of a particular country, the Committee (upon advice from BlackRock portfolio managers) may override such determination with respect to a particular issuer’s shareholder meeting if the Committee believes the benefits of seeking to exercise a vote at such meeting outweighs the costs, in which case BlackRock will seek to vote on a best-efforts basis.

Securities Sold After Record Date. With respect to votes in connection with securities held on a particular record date but sold from a client account prior to the holding of the related meeting, BlackRock may take no action on proposals to be voted on in such meeting.

Conflicts of Interest. From time to time, BlackRock may be required to vote proxies in respect of an issuer that is an affiliate of BlackRock (a “BlackRock Affiliate”), or a money management or other client of BlackRock (a “BlackRock Client”).¹⁰ In such event, provided that the Committee is aware of the real or potential conflict, the following procedures apply:

1. The Committee intends to adhere to the voting guidelines set forth herein for all proxy issues including matters involving BlackRock Affiliates and BlackRock Clients. The Committee may, in its discretion for the purposes of ensuring that an independent determination is reached, retain an independent fiduciary to advise the Committee on how to vote or to cast votes on behalf of BlackRock’s clients; and

1. if the Committee determines not to retain an independent fiduciary, or does not desire to follow the advice of such independent fiduciary, the Committee shall determine how to vote the proxy after consulting with the BlackRock Legal and Compliance Department and concluding that the vote cast is in the client’s best interest notwithstanding the conflict.

10 Such issuers may include investment companies for which BlackRock provides investment advisory, administrative and/or other services.

III. Voting Guidelines

The Committee has determined that it is appropriate and in the best interests of BlackRock’s clients to adopt the following voting guidelines, which represent the Committee’s usual voting position on certain recurring proxy issues that are not expected to involve unusual circumstances. With respect to any particular proxy issue, however, the Committee may elect to vote differently than a voting guideline if the Committee determines that doing so is, in the Committee’s judgment, in the best interest of its clients. The guidelines may be reviewed at any time upon the request of any Committee member and may be amended or deleted upon the vote of a majority of voting Committee members present at a Committee meeting for which there is a quorum.

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A. Boards of Directors

These proposals concern those issues submitted to shareholders relating to the composition of the Board of Directors of companies other than investment companies. As a general matter, the Committee believes that a company’s Board of Directors (rather than shareholders) is most likely to have access to important, nonpublic information regarding a company’s business and prospects, and is therefore best-positioned to set corporate policy and oversee management. The Committee therefore believes that the foundation of good corporate governance is the election of qualified, independent corporate directors who are likely to diligently represent the interests of shareholders and oversee management of the corporation in a manner that will seek to maximize shareholder value over time. In individual cases, the Committee may look at a Director nominee’s history of representing shareholder interests as a director of other companies, or other factors to the extent the Committee deems relevant.

The Committee’s general policy is to vote:


#		VOTE and DESCRIPTION
A.1		FOR nominees for director of United States companies in uncontested elections, except for nominees who

		n have missed at least two meetings and, as a result, attended less than 75% of meetings of the Board of Directors and its committees the previous year, unless the nominee missed the meeting(s) due to illness or company business

		n voted to implement or renew a “dead-hand” poison pill

		n ignored a shareholder proposal that was approved by either a majority of the shares outstanding in any year or by the majority of votes cast for two consecutive years

		n failed to act on takeover offers where the majority of the shareholders have tendered their shares

		n are corporate insiders who serve on the audit, compensation or nominating committees or on a full Board that does not have such committees composed exclusively of independent directors

		n on a case-by-case basis, have served as directors of other companies with allegedly poor corporate governance

		n sit on more than six boards of public companies

A.2		FOR nominees for directors of non-U.S. companies in uncontested elections, except for nominees from whom the Committee determines to withhold votes due to the nominees’ poor records of representing shareholder interests, on a case-by-case basis

A.3		FOR proposals to declassify Boards of Directors, except where there exists a legitimate purpose for classifying boards

A.4		AGAINST proposals to classify Boards of Directors, except where there exists a legitimate purpose for classifying boards

A.5		AGAINST proposals supporting cumulative voting

A.6		FOR proposals eliminating cumulative voting

A.7		FOR proposals supporting confidential voting

A.8		FOR proposals seeking election of supervisory board members

A.9		AGAINST shareholder proposals seeking additional representation of women and/or minorities generally (i.e., not specific individuals) to a Board of Directors


#		VOTE and DESCRIPTION
A.10		AGAINST shareholder proposals for term limits for directors

A.11		FOR shareholder proposals to establish a mandatory retirement age for directors who attain the age of 72 or older

A.12		AGAINST shareholder proposals requiring directors to own a minimum amount of company stock

A.13		FOR proposals requiring a majority of independent directors on a Board of Directors

A.14		FOR proposals to allow a Board of Directors to delegate powers to a committee or committees

A.15		FOR proposals to require audit, compensation and/or nominating committees of a Board of Directors to consist exclusively of independent directors

A.16		AGAINST shareholder proposals seeking to prohibit a single person from occupying the roles of chairman and chief executive officer

A.17		FOR proposals to elect account inspectors

A.18		FOR proposals to fix the membership of a Board of Directors at a specified size

A.19		FOR proposals permitting shareholder ability to nominate directors directly

A.20		AGAINST proposals to eliminate shareholder ability to nominate directors directly

A.21		FOR proposals permitting shareholder ability to remove directors directly

A.22		AGAINST proposals to eliminate shareholder ability to remove directors directly

B. Auditors

These proposals concern those issues submitted to shareholders related to the selection of auditors. As a general matter, the Committee believes that corporate auditors have a responsibility to represent the interests of shareholders and provide an independent view on the propriety of financial reporting decisions of corporate management. While the Committee will generally defer to a corporation’s choice of auditor, in individual cases, the Committee may look at an auditors’ history of representing shareholder interests as auditor of other companies, to the extent the Committee deems relevant.

The Committee’s general policy is to vote:


B.1		FOR approval of independent auditors, except for

		¨ auditors that have a financial interest in, or material association with, the company they are auditing, and are therefore believed by the Committee not to be independent

		¨ auditors who have rendered an opinion to any company which in the Committee’s opinion is either not consistent with best accounting practices or not indicative of the company’s financial situation

		¨ on a case-by-case basis, auditors who in the Committee’s opinion provide a significant amount of non-audit services to the company

B.2		FOR proposals seeking authorization to fix the remuneration of auditors


B.3		FOR approving internal statutory auditors

B.4		FOR proposals for audit firm rotation, except for proposals that would require rotation after a period of less than 5 years

C. Compensation and Benefits

These proposals concern those issues submitted to shareholders related to management compensation and employee benefits. As a general matter, the Committee favors disclosure of a company’s compensation and benefit policies and opposes excessive compensation, but believes that compensation matters are normally best determined by a corporation’s board of directors, rather than shareholders. Proposals to “micro-manage” a company’s compensation practices or to set arbitrary restrictions on compensation or benefits will therefore generally not be supported.

The Committee’s general policy is to vote:


C.1		IN ACCORDANCE WITH THE RECOMMENDATION OF ISS on compensation plans if the ISS recommendation is based solely on whether or not the company’s plan satisfies the allowable cap as calculated by ISS. If the recommendation of ISS is based on factors other than whether the plan satisfies the allowable cap the Committee will analyze the particular proposed plan. This policy applies to amendments of plans as well as to initial approvals.

C.2		FOR proposals to eliminate retirement benefits for outside directors

C.3		AGAINST proposals to establish retirement benefits for outside directors

C.4		FOR proposals approving the remuneration of directors or of supervisory board members

C.5		AGAINST proposals to reprice stock options

C.6		FOR proposals to approve employee stock purchase plans that apply to all employees. This policy applies to proposals to amend ESPPs if the plan as amended applies to all employees.

C.7		FOR proposals to pay retirement bonuses to directors of Japanese companies unless the directors have served less than three years

C.8		AGAINST proposals seeking to pay outside directors only in stock

C.9		FOR proposals seeking further disclosure of executive pay or requiring companies to report on their supplemental executive retirement benefits

C.10		AGAINST proposals to ban all future stock or stock option grants to executives

C.11		AGAINST option plans or grants that apply to directors or employees of “related companies” without adequate disclosure of the corporate relationship and justification of the option policy

C.12		FOR proposals to exclude pension plan income in the calculation of earnings used in determining executive bonuses/compensation

D. Capital Structure

These proposals relate to various requests, principally from management, for approval of amendments that would alter the capital structure of a company, such as an increase in authorized shares. As a general matter, the Committee will support requests that it believes enhance the rights of common shareholders and oppose requests that appear to be unreasonably dilutive.

The Committee’s general policy is to vote:


D.1		AGAINST proposals seeking authorization to issue shares without preemptive rights except for issuances up to 10% of a non-US company’s total outstanding capital

D.2		FOR management proposals seeking preemptive rights or seeking authorization to issue shares with preemptive rights

D.3		FOR management proposals approving share repurchase programs

D.4		FOR management proposals to split a company’s stock

D.5		FOR management proposals to denominate or authorize denomination of securities or other obligations or assets in Euros

D.6		FOR proposals requiring a company to expense stock options (unless the company has already publicly committed to do so by a certain date).

E. Corporate Charter and By-Laws

These proposals relate to various requests for approval of amendments to a corporation’s charter or by-laws, principally for the purpose of adopting or redeeming “poison pills”. As a general matter, the Committee opposes poison pill provisions.

The Committee’s general policy is to vote:


E.1		AGAINST proposals seeking to adopt a poison pill

E.2		FOR proposals seeking to redeem a poison pill

E.3		FOR proposals seeking to have poison pills submitted to shareholders for ratification

E.4		FOR management proposals to change the company’s name

F. Corporate Meetings

These are routine proposals relating to various requests regarding the formalities of corporate meetings.

The Committee’s general policy is to vote:


F.1		AGAINST proposals that seek authority to act on “any other business that may arise”

F.2		FOR proposals designating two shareholders to keep minutes of the meeting

F.3		FOR proposals concerning accepting or approving financial statements and statutory reports

F.4		FOR proposals approving the discharge of management and the supervisory board

F.5		FOR proposals approving the allocation of income and the dividend

F.6		FOR proposals seeking authorization to file required documents/other formalities

F.7		FOR proposals to authorize the corporate board to ratify and execute approved resolutions

F.8		FOR proposals appointing inspectors of elections

F.9		FOR proposals electing a chair of the meeting

F.10		FOR proposals to permit “virtual” shareholder meetings over the Internet

F.11		AGAINST proposals to require rotating sites for shareholder meetings

G. Investment Companies

These proposals relate to proxy issues that are associated solely with holdings of shares of investment companies, including, but not limited to, investment companies for which BlackRock provides investment advisory, administrative and/or other services. As with other types of companies, the Committee believes that a fund’s Board of Directors (rather than its shareholders) is best-positioned to set fund policy and oversee management. However, the Committee opposes granting Boards of Directors authority over certain matters, such as changes to a fund’s investment objective, that the Investment Company Act of 1940 envisions will be approved directly by shareholders.

The Committee’s general policy is to vote:


G.1		FOR nominees for director of mutual funds in uncontested elections, except for nominees who

		¨ have missed at least two meetings and, as a result, attended less than 75% of meetings of the Board of Directors and its committees the previous year, unless the nominee missed the meeting due to illness or fund business

		¨ ignore a shareholder proposal that was approved by either a majority of the shares outstanding in any year or by the majority of votes cast for two consecutive years

		¨ are interested directors who serve on the audit or nominating committees or on a full Board that does not have such committees composed exclusively of independent directors

		¨ on a case-by-case basis, have served as directors of companies with allegedly poor corporate governance

G.2		FOR the establishment of new series or classes of shares

G.3		AGAINST proposals to change a fund’s investment objective to nonfundamental

G.4		FOR proposals to establish a master-feeder structure or authorizing the Board to approve a master-feeder structure without a further shareholder vote

G.5		AGAINST a shareholder proposal for the establishment of a director ownership requirement

G.6		FOR classified boards of closed-end investment companies

H. Environmental and Social Issues

These are shareholder proposals to limit corporate conduct in some manner that relates to the shareholder’s environmental or social concerns. The Committee generally believes that annual shareholder meetings are inappropriate forums for the discussion of larger social issues, and opposes shareholder resolutions “micromanaging” corporate conduct or requesting release of information that would not help a shareholder evaluate an investment in the corporation as an economic matter. While the Committee is generally supportive of proposals to require corporate disclosure of matters that seem relevant and material to the economic interests of shareholders, the Committee is generally not supportive of proposals to require disclosure of corporate matters for other purposes.

The Committee’s general policy is to vote:


H.1		AGAINST proposals seeking to have companies adopt international codes of conduct

H.2		AGAINST proposals seeking to have companies provide non- required reports on:


		n environmental liabilities;

		n bank lending policies;

		n corporate political contributions or activities;

		n alcohol advertising and efforts to discourage drinking by minors;

		n costs and risk of doing business in any individual country;

		n involvement in nuclear defense systems

H.3		AGAINST proposals requesting reports on Maquiladora operations or on CERES principles

H.4		AGAINST proposals seeking implementation of the CERES principles

Notice to Clients

BlackRock will make records of any proxy vote it has made on behalf of a client available to such client upon request.¹¹ BlackRock will use its best efforts to treat proxy votes of clients as confidential, except as it may decide to best serve its clients’ interests or as may be necessary to effect such votes or as may be required by law.

BlackRock encourage clients with an interest in particular proxy voting issues to make their views known to BlackRock, provided that, in the absence of specific written direction from a client on how to vote that client’s proxies, BlackRock reserves the right to vote any proxy in a manner it deems in the best interests of its clients, as it determines in its sole discretion.

These policies are as of the date indicated on the cover hereof. The Committee may subsequently amend these policies at any time, without notice.

11 Such request may be made to the client’s portfolio or relationship manager or addressed in writing to Secretary, BlackRock Equity Investment Policy Oversight Committee, Legal and Compliance Department, BlackRock Inc., 40 East 52^ndStreet, New York, New York 10022.

CAPITAL GUARDIAN TRUST COMPANY

PROXY VOTING POLICY AND PROCEDURES

Policy

Capital Guardian Trust Company (“CGTC”) provides investment management services to clients that include, among others, corporate and public pension plans, foundations and endowments, and registered investment companies. CGTC’s Personal Investment Management Division (“PIM”) provides investment management and fiduciary services, including trust and estate administration, primarily to high net-worth individuals and families. CGTC considers proxy voting an important part of those management services, and as such, CGTC seeks to vote the proxies of securities held by clients in accounts for which it has proxy voting authority in the best interest of those clients. The procedures that govern this activity are reasonably designed to ensure that proxies are voted in the best interest of CGTC’s clients.

Fiduciary Responsibility and Long-term Shareholder Value

CGTC’s fiduciary obligation to manage its accounts in the best interest of its clients extends to proxy voting. When voting proxies, CGTC considers those factors that would affect the value of its clients’ investment and acts solely in the interest of, and for the exclusive purpose of providing benefits to, its clients. As required by ERISA, CGTC votes proxies solely in the interest of the participants and beneficiaries of retirement plans and does not subordinate the interest of participants and beneficiaries in their retirement income to unrelated objectives.

CGTC believes the best interests of clients are served by voting proxies in a way that maximizes long-term shareholder value. Therefore, the investment professionals responsible for voting proxies have the discretion to make the best decision given the individual facts and circumstances of each issue. Proxy issues are evaluated on their merits and considered in the context of the analyst’s knowledge of a company, its current management, management’s past record, and CGTC’s general position on the issue. In addition, many proxy issues are reviewed and voted on by a proxy voting committee comprised primarily of investment professionals, bringing a wide range of experience and views to bear on each decision.

As the management of a portfolio company is responsible for its day-to-day operations, CGTC believes that management, subject to the oversight of the relevant board of directors, is often in the best position to make decisions that serve the interests of shareholders. However, CGTC votes against management on proposals where it perceives a conflict may exist between management and client interests, such as those that may insulate management or diminish shareholder rights. CGTC also votes against management in other cases where the facts and circumstances indicate that the proposal is not in its clients’ best interests.

Special Review

From time to time CGTC may vote a) on proxies of portfolio companies that are also clients of CGTC or its affiliates, b) on shareholder proposals submitted by clients, or c) on proxies for which clients have publicly supported or actively solicited CGTC or its affiliates to support a particular position. When voting these proxies, CGTC analyzes the issues on their merits and does not consider any client relationship in a way that interferes with its responsibility to vote proxies in the best interest of its clients. The CGTC Special Review Committee reviews certain of these proxy decisions for improper influences on the decision-making process and takes appropriate action, if necessary.

Procedures

Proxy Review Process

Associates in CGTC’s proxy voting department are responsible for coordinating the voting of proxies. These associates work with outside proxy voting service providers and custodian banks and are responsible for coordinating and documenting the internal review of proxies.

The proxy voting department reviews each proxy ballot for standard and non-standard items. Standard proxy items are typically voted with management unless the research analyst who follows the company or a member of an investment or proxy voting committee requests additional review. Standard items currently include the uncontested election of directors, ratifying auditors, adopting reports and accounts, setting dividends and allocating profits for the prior year, and certain other administrative items.

All other items are voted in accordance with the decision of the analyst, portfolio managers, the appropriate proxy voting committee or the full investment committee(s) depending on parameters determined by those investment committee(s) from time to time. Various proxy voting committees specialize in regional mandates and review the proxies of portfolio companies within their mandates. The proxy voting committees are typically comprised primarily of members of CGTC’s and its institutional affiliates’ investment committees and their activity is subject to oversight by those committees.

CGTC seeks to vote all of its clients’ proxies. In certain circumstances, CGTC may decide not to vote a proxy because the costs of voting outweigh the benefits to its clients (e.g., when voting could lead to share blocking where CGTC wishes to retain flexibility to trade shares). In addition, proxies with respect to securities on loan through client directed lending programs are not available to CGTC to vote and therefore are not voted.

CGTC will periodically review voting reports to ascertain, where possible, that votes were cast in accordance with voting instructions.

Proxy Voting Guidelines

CGTC has developed proxy voting guidelines that reflect its general position and practice on various issues. To preserve the ability of decision makers to make the best decision in each case, these guidelines are intended only to provide context and are not intended to dictate how the issue must be voted. The guidelines are reviewed and updated as necessary, but at least annually, by the appropriate proxy voting and investment committees.

CGTC’s general positions related to corporate governance, capital structure, stock option and compensation plans and social and corporate responsibility issues are reflected below.

•		Corporate governance. CGTC supports strong corporate governance practices. It generally votes against proposals that serve as anti-takeover devices or diminish shareholder rights, such as poison pill plans and supermajority vote requirements, and generally supports proposals that encourage responsiveness to shareholders, such as initiatives to declassify the board or establish a majority voting standard for the election of the board of directors. Mergers and acquisitions, reincorporations and other corporate restructurings are considered on a case-by-case basis, based on the investment merits of the proposal.

•		Capital structure. CGTC generally supports increases to capital stock for legitimate financing needs. It generally does not support changes in capital stock that can be used as anti-takeover devices, such as the creation of or increase in blank-check preferred stock or of a dual class capital structure with different voting rights.

•		Stock-related compensation plans. CGTC supports the concept of stock-related compensation plans as a way to align employee and shareholder interests. However, plans that include features which undermine the connection between employee and shareholder interests generally are not supported. When voting on proposals related to new plans or changes to existing plans, CGTC considers, among other things, the following information, to the extent it is available: the exercise price of the options, the size of the overall plan and/or the size of the increase, the historical dilution rate, whether the plan permits option repricing, the duration of the plan, and the needs of the company. Additionally, CGTC supports option expensing in theory and will generally support shareholder proposals on option expensing if such proposal language is non-binding and does not require the company to adopt a specific expensing methodology.

•		Corporate social responsibility. CGTC votes on these issues based on the potential impact to the value of its clients’ investment in the portfolio company.

Special Review Procedures

If a research analyst has a personal conflict in making a voting recommendation on a proxy issue, he or she must disclose such conflict, along with his or her recommendation. If a member of the proxy voting committee has a personal conflict in voting the proxy, he or she must disclose such conflict to the appropriate proxy voting committee and must not vote on the issue.

Clients representing 0.0025 or more of assets under investment management across all affiliates owned by The Capital Group Companies, Inc. (CGTC’s indirect parent company), are deemed to be “Interested Clients”. Each proxy is reviewed to determine whether the portfolio company, a proponent of a shareholder proposal, or a known supporter of a particular proposal is an Interested Client. If the voting decision for a proxy involving an Interested Client is against such client, then it is presumed that there was no undue influence in favor of the Interested Client. If the decision is in favor of the Interested Client, then the decision, the rationale for such decision, information about the client relationship and all other relevant information is reviewed by the Special Review Committee (“SRC”). The SRC reviews such information in order to identify whether there were improper influences on the decision-making process so that it may determine whether the decision was in the best interest of CGTC’s clients. Based on its review, the SRC may accept or override the decision, or determine another course of action. The SRC is comprised of senior representatives from CGTC’s and its institutional affiliates’ investment and legal groups and does not include representatives from the marketing department.

Any other proxy will be referred to the SRC if facts or circumstances warrant further review.

In cases where CGTC has discretion to vote proxies for shares issued by an affiliated mutual fund, CGTC will instruct that the shares be voted in the same proportion as votes cast by shareholders for whom CGTC does not have discretion to vote proxies.

CGTC’s Proxy Voting Record

Upon client request, CGTC will provide reports of its proxy voting record as it relates to the securities held in the client’s account(s) for which CGTC has proxy voting authority.

Annual Assessment

CGTC will conduct an annual assessment of this proxy voting policy and related procedures and will notify clients for which it has proxy voting authority of any material changes to the policy and procedures.

Effective Date

This policy is effective as of November 21, 2007.

American Funds

PROXY VOTING PROCEDURES AND PRINCIPLES

The following summarizes American Funds’ internal operating procedures with respect to the voting of proxies of portfolio companies. These procedures and principles, which have been in effect in substantially their current form for many years, are publicly disclosed in accordance with a U.S. Securities and Exchange Commission requirement that all investment companies (mutual funds) make public how they handle their proxy voting process.

SUMMARY

American Funds are committed to acting in the best interests of their shareholders. We view proxies of companies held in the funds’ portfolios as significant assets and proxy voting as an integral part of the investment process. These Proxy Voting Procedures and Principles provide an important framework for analysis and decision-making; however, they are not exhaustive and do not address all potential issues. These are “principles” rather than “rules.” While we generally adhere to these principles, we have the flexibility to vote each proposal based on the specific circumstances that we believe are relevant. As a result, each proxy received is analyzed and voted on a case-by-case basis. The voting process reflects our understanding of a company’s business, its management and its relationship with shareholders over time. In all cases, the investment objectives and policies of the funds remain the focus. As a matter of policy, we will not be influenced by outside sources or business relationships involving interests that may conflict with those of the funds and their shareholders.

PROXY VOTING PROCESS

All U.S. proxies are voted. Proxies for companies outside the U.S. also are voted, provided there is sufficient time and information available. After a proxy is received, Capital Research and Management Company (CRMC), investment adviser to the American Funds, prepares a summary of the proposals contained in the proxy. Voting recommendations and a discussion of potential conflicts of interest are also included in the summary. One or more investment analysts in the appropriate equity investment division of CRMC familiar with the industry, the particular company and the company’s management make the initial voting recommendation. A proxy coordinator (one of several CRMC investment professionals experienced in proxy-voting matters) from the same investment division makes a second voting recommendation, based on knowledge of these principles and familiarity with proxy-related issues.

The proxy summary and voting recommendations are sent to the appropriate proxy voting committee for a final voting decision. Certain funds’ boards have established separate proxy committees that vote proxies or delegate to a voting officer the authority to vote on behalf of those funds. Proxies for all other funds are voted by the appropriate investment committee of the equity investment divisions of CRMC under delegated authority from each fund’s board. (References to “proxy committees” include the various

investment committees and the individual fund proxy committees.) Therefore, if more than one fund invests in the same company, certain funds may vote differently on the same proposal.¹

SPECIAL REVIEW PROCEDURES

The analyst and proxy coordinator who make voting recommendations are responsible for noting any situation that might appear to give rise to a potential conflict of interest. One example might be where a fund director is also a director of a company whose proxy is being voted. In such instances, proxy committee members are alerted to the situation. The proxy committee may then elect to vote the proxy or seek a third-party recommendation or vote of an ad hoc group of committee members. In the event the proxy committee cannot vote in accordance with these Principles and without the appearance of a conflict of interest, then the proxy proposal will be presented to each affected fund’s board for review.

PRINCIPLES

The following principles are organized according to types of proposals usually presented to shareholders in proxy statements.

Director Matters

Election of Directors

We generally support the annual election of a company’s nominees for director. We may, however, oppose all or some of the company’s nominees if we believe it to be in the best interest of shareholders.

Separation of chairman and CEO

We generally leave the choice of chairman to the board’s discretion. However, we may support shareholder proposals to separate the chairman and CEO positions or appoint an independent chairman if we are aware of leadership issues that could negatively impact a company’s operations.

Shareholder Access to the Proxy

Shareholder proposals frequently require the company to amend its bylaws to allow a qualifying shareholder or group of shareholders to nominate up to two directors on the company’s proxy ballot. To qualify, a group must have owned a certain percentage of the company’s shares for a minimum period of time.

We review access proposals on a case-by-case basis. In general, we are not opposed to such proposals, but want to ensure that the ownership threshold is set at a level sufficient to avoid misuse of this access by those with objectives not aligned with the best interests of long-term shareholders. In addition, the required holding period is equally important; length of ownership demonstrates a commitment that is more likely to be aligned with our interests as long-term shareholders.

Governance Provisions

1 Proxies for Washington Mutual Investors Fund (“WMIF”) are voted by the president of the fund under delegated authority. The WMIF Procedures and Policy is substantially similar to the American Funds Procedures and Principles.

Classified Boards

A “classified” board is one that elects only a percentage of the board members each year (usually one-third of directors are elected to serve a three-year term). Generally we support proposals declassifying boards. We believe that declassification (the annual election of all directors) increases a board’s sense of accountability to shareholders.

Cumulative Voting

Under cumulative voting, each shareholder has a number of votes equal to the number of shares owned multiplied by the number of directors up for election. A shareholder can cast all of his/her votes for a single director, thus allowing minority shareholders to elect a director. We generally support proposals for cumulative voting in order to promote management and board accountability and opportunity for leadership change.

Majority Vote Requirement

Generally we support proposals designed to make director elections more meaningful, either by requiring a majority vote in director elections (more ‘for’ votes than ‘against’), or by requiring any director receiving more withhold votes to tender his or her resignation.

While we generally support each of these governance proposals in isolation, we carefully consider situations where a company has already adopted one or more of the governance features described above. In such situations (for example a proposal to add cumulative voting in cases where directors are elected annually and there is a majority vote provision) we seek to determine whether the additional proposed protection is necessary or if the combination of these governance features could make the company vulnerable to coercive actions by shareholders with short-term investment horizons.

Anti-Takeover Provisions, Shareholder Rights & Reincorporations

Shareholder Rights Plans (commonly called “Poison Pills”)

Poison pills are a defense against unwelcome takeover offers. These plans allow shareholders (other than the shareholder making the unwelcome takeover offer) to purchase stock at significantly discounted prices under certain circumstances. The plans force would-be acquirers to negotiate with the board, giving the board an effective veto power over any offer. Poison pills can be detrimental to the creation of shareholder value and can help entrench management by thwarting or deterring acquisition offers that are not favored by the board but that may be beneficial to shareholders.

We generally support the elimination of existing poison pills and proposals that would require shareholder approval to adopt prospective poison pills. There may be a few select circumstances, however, where the analyst feels a need for the company to maintain anti-takeover protection. Additionally, if a company has crafted a shareholder-friendly pill (i.e. the Canadian model, which requires review and ultimate consideration of any offer by shareholders), we may not support the shareholder proposal.

Change of Corporate Domicile

	•		Reincorporation within the U.S.: We generally leave the state domicile decision to the discretion of company management and its board.

	•		Reincorporation outside the U.S.: We generally do not support a change of corporate domicile from the U.S. to another country where the probable intent is to avoid U.S. taxes.

Elimination of Action by Written Consent

The shareholder right to act by written consent (without calling a formal meeting of shareholders) can be a powerful tool for shareholders especially in a proxy fight. We generally oppose proposals that would prevent shareholders from taking action without a formal meeting and, in some instances, take away the shareholder’s right to call a special meeting. When considering shareholder proposals to add this right,

we consider the details of the proposal. Allowing a lower threshold (i.e. 10%) of shareholders to call a meeting may be too low a limit to prevent actions that are not in the best interests of the majority of a company’s shareholders.

Capitalization

Authorization of New Common Shares

We generally support reasonable increases in authorized shares when the company has articulated a need (for example, a stock split or recapitalization). Even so, we are aware that new shares may dilute the ownership interest of shareholders. Consequently, we generally oppose proposals that would more than double the number of authorized shares.

Authorization of Blank Check Preferred Shares

“Blank check” preferred shares give the board complete discretion to set terms (including voting rights). Such shares may have voting rights far in excess of those held by common stockholders. We generally oppose proposals that allow a board to issue preferred shares without prior shareholder approval, as well as proposals that allow the board to set the terms and voting rights of preferred shares at their discretion. A request for preferred shares where the voting rights are equal to existing common stock shares, however, would generally be supported.

Compensation and Benefit Plans

Option Plans

Option plans are complicated and many factors are considered when evaluating a plan. No factor is determinative; the proxy committees weigh each plan based on protecting shareholder interests and our historical knowledge of the company and its management. These include:

	§		Pricing: We believe options should be priced at 100% of fair market value on the date they are granted (the price shareholders would pay on the open market). We do not generally support options priced at a discount to the market.

	§		Repricing: An “out-of-the-money” option is an option whose exercise price is higher than the current price of the stock. We generally have not supported replacing “out-of-the-money” options with new options at a lower exercise price (generally known as “repricing”) because

			it is not consistent with the purpose of offering options as compensation. However, there may be circumstances under which we would consider a limited exchange program.

	§		Dilution: Dilution is the reduction of voting power, and/or economic interest of existing shareholders due to an increase in shares available for distribution to company employees in lieu of cash compensation. We consider several kinds of dilution: the historical annual dilution of the current plan, the potential dilution of the proposed plan and the cumulative dilution of all option plans. We tend to oppose plans that result in “excessive” dilution for existing shareholders. Acceptable dilution levels are not rigidly defined, but will be a function of: (i) the stage of the company’s lifecycle (embryonic to mature), (ii) the size of the company in terms of market capitalization, (iii) the historical growth rate of sales and earnings and (iv) extenuating circumstances related to the company’s industry. In addition, greater dilution can be tolerated when options are awarded to all employees, instead of limiting awards to top-level management. We generally oppose evergreen plans (which provide for an automatic annual increase of shares available for award without shareholder approval).

Restricted Stock Plans

We support restricted stock plans when such grants replace cash compensation without increasing the historical cash award and when the amount of restricted stock available for distribution represents a reasonable percentage of overall equity awards.

Non-Employee Director Compensation

We generally support equity-based compensation for non-employee directors that aligns their interests with shareholders. Such plans must be reasonable in size, have fair market value option grants and not create excess total compensation (subject to the same limitations as executive incentive plans). We also review the mix of options or stock awards to cash compensation. We believe that compensation packages should be structured to attract, motivate and retain qualified directors, and that excessive board compensation can undermine the board’s independence.

Employee Stock Purchase Plans

These plans are designed to allow employees to purchase stock at a discount price and to receive favorable tax treatment when the stock is sold. In many cases, the price is 85% of the market value of the stock. These plans are broad-based and have relatively low caps on the amount of stock that may be purchased by a single employee. We generally support these types of plans.

Shareholder Proposals Regarding Executive Compensation

Advisory Vote on Executive Compensation

Executive compensation is an area which receives much scrutiny. A number of shareholder proposals ask companies to provide for a non-binding (advisory) vote on executive compensation. While we understand the intent of such proposals, we are concerned that a vote for or against the compensation disclosure does not indicate specific issues to company management. There appear to be more effective ways of conveying concerns about compensation (including voting against incentive plans which provide for excessive compensation or withholding votes from compensation committee members).

We typically do not support shareholder proposals asking for such an advisory vote. There may be instances, however, where support of this proposal might be used to convey a message of dissatisfaction in cases of extremely aggressive compensation or where direct feedback to management has not resulted in any changes.

Caps on Executive Pay

In general, we oppose shareholder proposals that seek to set limits on executive compensation because competitive compensation packages are necessary to attract, motivate and retain executives. Shareholder proposals on this issue tend to specify arbitrary compensation criteria.

Performance-Based Senior Executive Stock Option Grants

From time-to-time, shareholder proposals attempt to link performance-based options to an industry or peer group index rather than the market as a whole. Generally, we support the concept of linking pay to the company’s stock performance. However, we typically do not support shareholder requests to link stock option grants to the performance of a specific peer group or an industry index. We believe that such proposals may actually weaken the alignment of shareholder and management interests (i.e. depending on the benchmark, executives could profit even if a company’s performance declines). We prefer that compensation committees retain the flexibility to propose an appropriate index.

Executive Pay Restrictions or Freezes

We generally oppose proposals specifying restrictions on executive pay because they take away compensation committee flexibility. Such proposals include: terminating the company’s option or restricted stock programs; freezing executive pay during periods of large layoffs; establishing a maximum ratio between the highest paid executive and lowest paid employee; and linking executive pay to social criteria.

Executive Severance Agreements (“Golden Parachutes”)

Generally, we support proposals that require shareholder approval of executive severance agreements, largely because of the trend toward excessive severance benefits (known as “golden parachutes”). If an executive leaves for reasons related to poor performance, allowing a generous “parting gift” seems contrary to good corporate governance. While we typically support proposals asking that such severance be limited to 2.99 times pay and bonus (amounts over this threshold are subject to a 20% excise tax), we may vote against proposals which request a lower limitation.

Other Shareholder Proposals

Social Issues

We know that social issues involving the environment and human rights are important to many of our shareholders. At the same time, as investment professionals, we have a fiduciary responsibility to base our investment decisions solely on the financial objectives stated in the funds’ prospectuses. We do consider social concerns within the context of the impact on a company’s investment merits. Thus, the possible impact of social issues on a company’s long-term success is among the things we consider when making investment decisions.

When evaluating proxy proposals relating to issues such as human rights, labor and employment, and smoking and tobacco, decisions are made on a case-by-case basis. We consider each of these proposals based on the impact to the company’s shareholders, the specific circumstances at each individual company, and the current policies and practices of the company.

We generally vote against proposals concerning social issues because many are phrased in a way that excessively constrains management flexibility or are difficult to implement. However, we may support proposals related to specific areas of concern, or where we feel the shareholder’s request is necessary for the success of the business or provides value to the company and its shareholders.

Environmental Issues

As with other types of proposals, when reviewing proposals related to environmental issues we take into account the investment implications and are required to vote in a manner consistent with the objectives of the fund. We examine each issue within the context of each specific company’s situation, including any potential adverse economic implications for the company’s business or operations that we feel have not been properly addressed. We will continue to review and vote these issues on a case-by-case basis.

Issuers Outside the U.S.

We vote proxies for companies outside the U.S. whenever practicable, and consider the benefits of voting against the costs. While the procedures for proxies of companies outside the U.S. are similar to those for U.S. proxies, we utilize an expedited review process for these proxies. This is because we typically receive proxies from companies outside the U.S. just prior to the meeting, although progress has been made in increasing the amount of time given to consider and cast a vote. In addition, certain countries impose restrictions on the ability of shareholders to sell shares during the proxy voting period. We may choose, due to liquidity issues, not to subject shares to such restrictions and thus may not vote some shares.

Votes are based on principles for each country and type of proposal. Also, an analyst from an appropriate CRMC investment division is consulted whenever an issue is not standard. Proxy summaries are prepared and circulated to the proxy committees if there is sufficient time and information available. We make a special effort to prepare summaries for proxies that contain controversial issues. In voting these proxies, we take into consideration differences in practice, regulations and laws of the various countries. We generally will abstain from voting when there is not sufficient information to allow an informed decision.

CMA Policy: Proxy Voting

Proxy Voting Policy


Last Review Date:		March 2009
Applicable Regulatory Authority:		Rule 206(4)-6 under the Investment Advisers Act of 1940
		Form N-PX
		ERISA Department of Labor Bulletin 08-2 Institutional Shareholder Services, Inc. (SEC No Action Letter dated September 15, 2004)

Explanation/Summary of Regulatory Requirements

An investment adviser that exercises voting authority over clients’ proxies must adopt written policies and procedures that are reasonably designed to ensure that those proxies are voted in the best economic interests of clients. An adviser’s policies and procedures must address how the adviser resolves material conflicts of interest between its interests and those of its clients. An investment adviser must comply with certain record keeping and disclosure requirements with respect to its proxy voting responsibilities. In addition, an investment adviser to Employee Retirement Income Security Act (“ERISA”) accounts has an affirmative obligation to vote proxies for an ERISA account, unless the client expressly retains proxy voting authority.

Policy Summary

Columbia Management Advisors, LLC (“CMA”) has adopted and implemented the following policy, which it believes is reasonably designed to: (1) ensure that proxies are voted in the best economic interest of clients; and (2) address material conflicts of interest that may arise. This policy applies primarily to the Global Wealth and Investment Management (“GWIM”) Investment Operations Group, the Investment groups (particularly, Equity and Chief Investment Officer’s Office), as well as to Compliance Risk Management (“CRM”) and Legal. CRM and Business groups to which this policy directly applies must adopt written procedures to implement this Policy.

Policy

All proxies regarding client securities for which CMA has authority to vote will, unless CMA determines in accordance with policies stated below to refrain from voting, be voted in a manner considered by CMA to be in the best interest of CMA’s clients without regard to any resulting benefit or detriment to CMA, its associates, or its affiliates. The best interest of clients is defined for this purpose as the interest of enhancing or protecting the economic value of client accounts, considered as a group rather than individually, as CMA determines in its sole and absolute discretion. In the event a client believes that its other interests require a different vote, CMA will vote as the client clearly instructs, provided CMA receives such instructions in time to act

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

accordingly. Information regarding CMA’s proxy voting decisions is confidential. Therefore, the information may be shared on a need to know basis only, including within CMA and with CMA affiliates. Advisory clients, including mutual funds’ and other funds’ boards, may obtain information on how their proxies were voted by CMA. However, CMA will not selectively disclose its investment company clients’ proxy voting records to third parties. Rather, the investment company clients’ proxy records will be disclosed to shareholders by publicly-available annual filings for 12-month periods ending each year on June 30^th on Form N-PX.

CMA endeavors to vote, in accordance with this Policy, all proxies of which it becomes aware prior to the vote deadline date, subject to certain general exceptions described below.

CMA seeks to avoid the occurrence of actual or apparent material conflicts of interest in the proxy voting process by voting in accordance with predetermined voting guidelines and observing other procedures that are intended to prevent where practicable and manage conflicts of interest (refer to Conflicts of Interest section below). CMA’s proxy voting policy and practices are summarized in its Form ADV. Additionally, CMA will provide clients with a copy of its policies, as they may be updated from time to time, upon request.

Means of Achieving Compliance

The Proxy Group within GWIM Investment Operations is primarily responsible for overseeing the day-to-day operations of the proxy voting process. The Proxy Group’s monitoring will take into account the following elements: (1) periodic review of the proxy vendor’s votes to ensure that the proxy vendor is accurately voting consistent with CMA’s Voting Guidelines; and (2) review of the Columbia Funds’ fund website to ensure that annual proxy voting reports are posted in a timely and accurate manner. CMA has established a Proxy Committee which is responsible for overseeing the proxy voting process.

The specific responsibilities of the Proxy Committee and scope of its oversight are described in the Proxy Committee’s charter.

CMA’S INVESTMENT ASSOCIATES’RESPONSIBILITIES

Under CMA’s Voting Guidelines, certain matters must be determined on a case-by-case basis. In general, the Proxy Group within GWIM Investment Operations will refer these matters first to the relevant CMA research analyst after first confirming that the proxy matter does not present a potential conflict to CMA. If there is not a research analyst assigned to the particular security, the matter will be referred to the appropriate portfolio manager.

In considering a particular proxy matter, the research analyst or portfolio manager must vote in the clients’ best interest as defined above. Information regarding CMA’s proxy voting decisions is confidential information. Therefore, research analysts and portfolio managers generally must not discuss proxy votes with any person outside of CMA and within CMA except on a need to know basis only.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



Bank of America: Confidential		Page 2 of 22

CMA Policy: Proxy Voting

Research analysts and portfolio managers must discharge their responsibilities consistent with the obligations set forth below (refer to Management of Conflicts of Interest – Additional Procedures). A research analyst or portfolio manager must disclose in writing any inappropriate attempt to influence their recommendation or any other personal interest that they have with the issuer (see Appendix B — Conflicts of Interest Disclosure and Certification Form). For each Proxy Referral (defined below), the research analyst or portfolio manager is responsible for memorializing their recommendation on the Proxy Voting Recommendation Form (see Appendix C) and communicating their recommendation to the Proxy Group.

Research analysts and portfolio managers should seek advice from CRM or Legal with respect to any questions that they have regarding personal conflicts of interests, communications regarding proxies, or other related matters.

CONFLICTS OF INTEREST

For purposes of this policy, a material conflict of interest is a relationship or activity engaged in by CMA, a CMA affiliate¹, or a CMA associate that creates an incentive (or appearance thereof) to favor the interests of CMA, the affiliate, or associate, rather than the clients’ interests. However, a material conflict of interest is not automatically created when there is a relationship or activity engaged in by a CMA affiliate, but there is a possibility that a CMA affiliate could cause a conflict. CMA may have a conflict of interest if either CMA has a significant business relationship with a company that is soliciting a proxy, or if a CMA associate involved in the proxy voting decision-making process has a significant personal or family relationship with the particular company. A conflict of interest is considered to be “material” to the extent that a reasonable person could expect the conflict to influence CMA’s decision on the particular vote at issue. In all cases where there is deemed to be a material conflict of interest, CMA will seek to resolve said conflict in the clients’ best interests.

For those proxy proposals that: (1) are not addressed by CMA’s proxy voting guidelines; (2) the guidelines specify the issue must be evaluated and determined on a case-by-case basis; or (3) a CMA investment associate believes that an exception to the guidelines may be in the best economic interest of CMA’s clients (collectively, “Proxy Referrals”), CMA may vote the proxy, subject to the conflicts of interest procedures set forth below.

In the case of Proxy Referrals, CRM identifies companies with which CMA has a significant business relationships and Proxy Referrals of such companies will be voted consistent with CMA’s conflicts management procedures described below. For Proxy Referrals that do not involve companies with which CMA has a significant business relationship the relevant CMA investment personnel (i.e. research analyst, portfolio manager, members of Proxy Committee) involved in the particular Proxy Referral must report any personal conflict of interest


¹		Bank of America Corporation (“BAC”), the ultimate corporate parent of CMA, Bank of America, N.A. and all of their numerous affiliates owns, operates and has interests in many lines of business that may create or give rise to the appearance of a conflict of interest between BAC or its affiliates and those of CMA-advised clients. For example, the commercial and investment banking business lines may have interests with respect to issuers of voting securities that could appear to or even actually conflict with CMA’s duty, in the proxy voting process, to act in the best economic interest of its clients.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

circumstances (e.g., relationships with nominees for directorship, members of an issuer’s or dissident’s management or otherwise, unusual communications with parties outside the investment organization concerning a proxy matter) to Columbia Management’s Conflicts of Interest Officer in writing (see Appendix B). In the event any member of the Proxy Committee has a conflict of interest regarding a given matter, he or she will abstain from participating in the Committee’s determination of whether and/or how to vote in the matter.

If the Proxy Committee, the Chairperson of the Proxy Committee, or the Conflicts Officer determines that a proxy matter presents a material conflict of interest, CMA will invoke one or more of the following conflict management procedures:

	•		Causing the proxies to be voted in accordance with the recommendations of an independent third party (which generally will be CMA’s proxy voting agent);

	•		Causing the proxies to be delegated to a qualified, independent third party, which may include CMA’s proxy voting agent; or

	•		In unusual cases, with the Client’s consent and upon ample notice, forwarding the proxies to CMA’s clients so that they may vote the proxies directly.

Affiliate Investment Companies and Public Companies

CMA considers (1) proxies solicited by open-end and closed-end investment companies for which CMA or an affiliate serves as an investment adviser or principal underwriter; and (2) proxies solicited by Bank of America Corporation (“BAC”) or other public companies within the BAC organization to present a material conflict of interest for CMA. Consequently, the proxies of such affiliates will be voted following one of the conflict management practices discussed above.

Management of Conflicts of Interest – Additional Procedures

In certain circumstances, CMA follows the proxy guidelines and uses other research services provided by the proxy vendor or another independent third party. CMA reviews its proxy vendor’s conflicts of interest procedures as part of its oversight of the proxy vendor’s services.

CMA and other BAC affiliates have adopted various other policies and procedures that help reinforce this Policy. Please see any associated documents.

Ownership Limits – Delegation of Proxy Voting to an Independent Third Party

From time to time, CMA may face regulatory or compliance limits on the types or amounts of voting securities that it may purchase or hold for client accounts. Among other limits, federal, state, foreign regulatory restrictions, or company-specific ownership limits may restrict the total percentage of an issuer’s voting securities that CMA can hold for clients (collectively, “Ownership Limits”).

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

The regulations or company-specific documents governing a number of these Ownership Limits often focus upon holdings in voting securities. As a result, in limited circumstances in order to comply with such Ownership Limits and/or internal policies designed to comply with such limits, CMA may delegate proxy voting in certain issuers to a qualified, independent third party, who may be CMA’s proxy voting agent.

PROXY VOTING GUIDELINES

A. CMA’s Proxy Voting Guidelines – General Practices.

The Proxy Committee has adopted the guidelines for voting proxies specified in Appendix A of this policy. CMA uses an independent, third-party proxy vendor to implement its proxy voting process as CMA’s proxy voting agent. In general, whenever a vote is solicited, the proxy vendor will execute the vote according to CMA’s Voting Guidelines.

B. Ability to Vote Proxies Other than as Provided by Voting Guidelines.

A Portfolio Manager or other party involved with a client’s account may conclude that the best interest of the firm’s client, as defined above, requires that a proxy be voted in a manner that differs from the predetermined proxy Voting Guidelines. In this situation, he or she will request in writing that the Proxy Committee consider voting the proxy other than according to such Guidelines and provide information as the Proxy Committee may request. The Proxy Committee may consider the matter, subject to the conflicts of interest procedures discussed above.

C. Other Proxy Matters

For the following categories, proxies will be voted as stated below:

1. New Proposals. For certain new proposals that are expected to be proposed to shareholders of multiple companies, the Proxy Committee may develop a Voting Guideline which will be incorporated into this Policy.

2. Accounts Adhering to Taft Hartley Principles. All proposals for accounts adhering to Taft Hartley principles will be voted according to the Taft Hartley Guidelines developed by the proxy vendor.

3. Accounts Adhering to Socially Responsible Principles. All proposals for accounts adhering to socially responsible principles will be voted according to the Socially Responsible Guidelines developed by the proxy vendor or as specified by the client.

4. Proxies of International Issuers. In general, CMA will refrain from voting securities in cases where international issuers impose share blocking restrictions. However, in the exceptional circumstances that CMA determines that it would be appropriate to vote such securities, all proposals for these securities will be voted only on the specific instruction of the Proxy Committee and to the extent practicable in accordance with the Voting Guidelines set forth in this Policy. Additionally, proxies will typically not be voted in markets where powers of attorney are required to be executed in order to vote shares.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

5. Proxies of Investment Company Shares. Proposals on issues other than affiliated investment companies (previously described) will be voted on the specific instruction of the Proxy Committee.

6. Proxy Referrals for Passive Index Accounts. Proxy Referrals for a security that is held only within a passive index account managed by CMA’s Quantitative Strategies Group and not in any other account within CMA, shall be voted according to the guidelines developed by the proxy vendor or as specified by the client. However, if a security is held within a passive index account managed by CMA’s Quantitative Strategies Group and within another CMA-managed account (including without limitation an account actively managed by CMA’s Quantitative Strategies Group), all proposals, including Proxy Referrals, will be voted in accordance with the Voting Guidelines, subject to the other provisions of this Policy.

7. Proxy Voting for Securities on Loan. CMA generally votes in cases where shares have been loaned from actively managed Columbia Funds as long as the shares have been recalled in a timely manner. However, CMA generally does not vote shares that have been loaned from passively managed Columbia Index Funds. Other CMA clients may have their own stock loan programs and may or may not recall their shares for proxy voting.

Supervision

Managers and supervisory personnel are responsible for ensuring that their associates understand and follow this policy and any applicable procedures adopted by the business group to implement the policy. The Proxy Committee has ultimate responsibility for the implementation of this Policy.

Escalation

With the exception of conflicts of interest-related matters, issues arising under this policy should be escalated to the Proxy Committee. Issues involving potential or actual conflicts of interest should be promptly communicated to the Columbia Management Conflicts Officer.

Monitoring/Oversight

CRM and/or Corporate Internal Audit Group perform periodic reviews and assessments of various lines of businesses, including a review of Columbia Management’s compliance with the Proxy Voting Policy.

Recordkeeping

CMA will create and maintain records of each investment company’s proxy record for 12-month periods ended June 30^th. CMA will compile the following information for each matter relating to

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

a portfolio security considered at any shareholder meeting during the period covered by the annual report and for which CMA was entitled to vote:

	•		The name of the issuer of the security;

	•		The exchange ticker symbol of the portfolio security (if symbol is available through reasonably practicable means);

	•		The Council on Uniform Securities Identification Procedures number for the portfolio security (if number is available through reasonably practicable means);

	•		The shareholder meeting date;

	•		A brief identification of the matter voted on;

	•		Whether the matter was proposed by the issuer or by a security holder;

	•		Whether the company cast its vote on the matter;

	•		How the company cast its vote (e.g., for or against proposal, or abstain; for or withhold regarding the election of directors); and

	•		Whether the company cast its vote for or against management.

Business groups and support partners are responsible for maintaining all records necessary to evidence compliance with this policy. The records must be properly maintained and readily accessible in order to evidence compliance with this policy.

These records include:


Document		Responsible Party
Proxy Committee Meeting Minutes and Related Materials		Proxy Group in GWIM Investment Operations

Proxy Vote Recommendation Form and Supporting Materials of Investment Management Personnel Concerning Proxy Decisions and Recommendations (or any other document created by CMA that was material to making a voting decision or that memorializes the basis for the voting decision)		Proxy Group in GWIM Investment Operations

Conflicts of Interest Review Documentation, including Conflicts of Interest Forms		Compliance Risk Management

Client Communications Regarding Proxy Matters		Client Service Group

Copy of Each Applicable Proxy Statement Unless it has been Filed with the SEC and may be Obtained from the SEC’s EDGAR System		Proxy Group in GWIM Investment Operations

Records should be retained for a period of not less than six years plus the current year. Records must be retained in an appropriate office of CM for the first three years.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

APPENDIX A – CMA’s Proxy Voting Policy
CMA’S VOTING GUIDELINES

A. The Proxy Committee has adopted the following guidelines for voting proxies:

1. Matters Relating to the Board of Directors/Corporate Governance

CMA generally will vote FOR:

•

Proposals for the election of directors or for an increase or decrease in the number of directors, provided that no more than one-third of the Board of Directors would, presently or at any time during the previous three-year period, be from management. However, CMA generally will WITHHOLD votes from pertinent director nominees if:

	(i)		the board as proposed to be constituted would have more than one-third of its members from management;

	(ii)		the board does not have audit, nominating, and compensation committees composed solely of directors who qualify as being regarded as “independent,” i.e. having no material relationship, directly or indirectly, with the Company, as CMA’s proxy voting agent may determine (subject to the Proxy Committee’s contrary determination of independence or non-independence);

	(iii)		the nominee, as a member of the audit committee, permitted the company to incur excessive non-audit fees (as defined below regarding other business matters — ratification of the appointment of auditors);

	(iv)		a director serves on more than six public company boards;

	(v)		the CEO serves on more than two public company boards other than the company’s board.

			On a CASE-BY-CASE basis, CMA may WITHHOLD votes for a director nominee who has failed to observe good corporate governance practices or, through specific corporate action or inaction (e.g. failing to implement policies for which a majority of shareholders has previously cast votes in favor), has demonstrated a disregard for the interests of shareholders.

	•		Proposals requesting that the board audit, compensation and/or nominating committee be composed solely of independent directors. The Audit Committee must satisfy the independence and experience requirements established by the Securities and Exchange Commission (“SEC”) and the New York Stock Exchange, or appropriate local requirements for foreign securities. At least one member of the Audit Committee must qualify as a “financial expert” in accordance with SEC rules.

	•		Proposals to declassify a board, absent special circumstances that would indicate that shareholder interests are better served by a classified board structure.

CMA generally will vote FOR:

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

•

Proposals to create or eliminate positions or titles for senior management. CMA generally prefers that the role of Chairman of the Board and CEO be held by different persons unless there are compelling reasons to vote AGAINST a proposal to separate these positions, such as the existence of a counter-balancing governance structure that includes at least the following elements in addition to applicable listing standards:

	o		Established governance standards and guidelines.

	o		Full board composed of not less than two-thirds “independent” directors, as defined by applicable regulatory and listing standards.

	o		Compensation, as well as audit and nominating (or corporate governance) committees composed entirely of independent directors.

	o		A designated or rotating presiding independent director appointed by and from the independent directors with the authority and responsibility to call and preside at regularly and, as necessary, specially scheduled meetings of the independent directors to be conducted, unless the participating independent directors otherwise wish, in executive session with no members of management present.

	o		Disclosed processes for communicating with any individual director, the presiding independent director (or, alternatively, all of the independent directors, as a group) and the entire board of directors, as a group.

	o		The pertinent class of the Company’s voting securities has out-performed, on a three-year basis, both an appropriate peer group and benchmark index, as indicated in the performance summary table of the Company’s proxy materials. This requirement shall not apply if there has been a change in the Chairman/CEO position within the three-year period.

	•		Proposals that grant or restore shareholder ability to remove directors with or without cause.

	•		Proposals to permit shareholders to elect directors to fill board vacancies.

	•		Proposals that encourage directors to own a minimum amount of company stock.

	•		Proposals to provide or to restore shareholder appraisal rights.

	•		Proposals to adopt cumulative voting.

	•		Proposals for the company to adopt confidential voting.

CMA will generally vote FOR shareholder proposals calling for majority voting thresholds for director elections unless the company has adopted formal corporate governance principles that present a meaningful alternative to the majority voting standard and/or provides an adequate response to both new nominees as well as incumbent nominees who fail to receive a majority of votes cast.

CMA generally will vote AGAINST:

	•		Proposals to classify boards, absent special circumstances indicating that shareholder interests would be better served by a classified board structure.

	•		Proposals that give management the ability to alter the size of the board without shareholder approval.

	•		Proposals that provide directors may be removed only by supermajority vote.

	•		Proposals to eliminate cumulative voting.

	•		Proposals which allow more than one vote per share in the election of directors.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

	•		Proposals that provide that only continuing directors may elect replacements to fill board vacancies.

	•		Proposals that mandate a minimum amount of company stock that directors must own.

	•		Proposals to limit the tenure of non-management directors.

CMA will vote on a CASE-BY-CASE basis in contested elections of directors.

CMA generally will vote on a CASE-BY-CASE basis on board approved proposals relating to corporate governance. Such proposals include, but are not limited to:

	•		Reimbursement of proxy solicitation expenses taking into consideration whether or not CMA was in favor of the dissidents.

	•		Proxy contest advance notice. CMA generally will vote FOR proposals that allow shareholders to submit proposals as close to the meeting date as possible while allowing for sufficient time for Company response, SEC review, and analysis by other shareholders.

	•		CMA will vote on a CASE-BY-CASE basis to indemnify directors and officers, and AGAINST proposals to indemnify external auditors.

	•		CMA will vote FOR the indemnification of internal auditors, unless the costs associated with the approval are not disclosed.

2. Compensation

CMA generally will vote FOR management sponsored compensation plans (such as bonus plans, incentive plans, stock option plans, pension and retirement benefits, stock purchase plans or thrift plans) if they are consistent with industry and country standards. However, CMA generally is opposed to compensation plans that substantially dilute ownership interest in a company, provide participants with excessive awards, or have objectionable structural features. Specifically, for equity-based plans, if the proposed number of shares authorized for option programs (excluding authorized shares for expired options) exceeds an average of 5% of the currently outstanding shares over the previous three years or an average of 3% over the previous three years for directors only, the proposal should be referred to the Proxy Committee. The Committee will then consider the circumstances surrounding the issue and vote in the best interest of CMA’s clients. CMA requires that management provide substantial justification for the repricing of options.

CMA generally will vote FOR:

	•		Proposals requiring that executive severance arrangements be submitted for shareholder ratification.

	•		Proposals asking a company to expense stock options.

	•		Proposals to put option repricings to a shareholder vote.

	•		Employee stock purchase plans that have the following features: (i) the shares purchased under the plan are acquired for no less than 85% of their market value, (ii) the offering period under the plan is 27 months or less, and (iii) dilution is 10% or less.

	•		Proposals for the remuneration of auditors if no more than 25% of the compensation costs comes from non audit activity.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

CMA generally will vote AGAINST:

	•		Stock option plans that permit issuance of options with an exercise price below the stock’s current market price, or that permit replacing or repricing of out-of-the money options.

	•		Proposals to authorize the replacement or repricing of out-of-the money options.

	•		Proposals requesting that plan administrators have advance authority to amend the terms of a plan without detailed disclosure of the specific amendments. When sufficient details are provided on the amendments permitted by the advance authority, CMA will recommend on such proposals on a CASE-BY-CASE basis

CMA will vote on a CASE-BY-CASE basis proposals regarding approval of specific executive severance arrangements.

3. Capitalization

CMA generally will vote FOR:

	•		Proposals to increase the authorized shares for stock dividends, stock splits (and reverse stock splits) or general issuance, unless proposed as an anti-takeover measure or a general issuance proposal increases the authorization by more than 30% without a clear need presented by the company. Proposals for reverse stock splits should include an overall reduction in authorization.

			For companies recognizing preemptive rights for existing shareholders, CMA generally will vote FOR general issuance proposals that increase the authorized shares by more than 30%. CMA will vote on a CASE-BY-CASE basis all such proposals by companies that do not recognize preemptive rights for existing shareholders.

	•		Proposals for the elimination of authorized but unissued shares or retirement of those shares purchased for sinking fund or treasury stock.

	•		Proposals to institute/renew open market share repurchase plans in which all shareholders may participate on equal terms.

	•		Proposals to reduce or change the par value of common stock, provided the number of shares is also changed in order to keep the capital unchanged.

CMA will evaluate on a CASE-BY-CASE basis proposals regarding:

•

Management proposals that allow listed companies to de-list and terminate the registration of their common stock. CMA will determine whether the transaction enhances shareholder value by giving consideration to:

	o		Whether the company has attained benefits from being publicly traded.

	o		Cash-out value

	o		Balanced interests of continuing vs. cashed-out shareholders

	o		Market reaction to public announcement of transaction

4. Mergers, Restructurings and Other Transactions

CMA will review, on a CASE-BY-CASE basis, business transactions such as mergers, acquisitions, reorganizations, liquidations, spinoffs, buyouts and sale of all or substantially all of a company’s assets.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

5. Anti-Takeover Measures

CMA generally will vote AGAINST proposals intended largely to avoid acquisition prior to the occurrence of an actual event or to discourage acquisition by creating a cost constraint. With respect to the following measures, CMA generally will vote as follows:

Poison Pills

	•		CMA votes FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification.

	•		CMA generally votes FOR shareholder proposals to eliminate a poison pill.

	•		CMA generally votes AGAINST management proposals to ratify a poison pill.

Greenmail

•

CMA will vote FOR proposals to adopt anti-greenmail charter or bylaw amendments or to otherwise restrict a company’s ability to make greenmail payments.

Supermajority vote

•

CMA will vote AGAINST board-approved proposals to adopt anti-takeover measures such as supermajority voting provisions, issuance of blank check preferred stock, the creation of a separate class of stock with disparate voting rights and charter amendments adopting control share acquisition provisions.

Control Share Acquisition Provisions

•

CMA will vote FOR proposals to opt out of control share acquisition statutes.

6. Other Business Matters

CMA generally will vote FOR:

	•		Bylaw amendments giving holders of at least 25% of outstanding common stock the ability to call a special meeting of stockholders.

	•		Board governance document amendments or other proposals which give the lead independent director the authority to call special meetings of the independent directors at any time.

CMA generally will vote FOR:

	•		Proposals to approve routine business matters such as changing the company’s name and procedural matters relating to the shareholder meeting such as approving the minutes of a prior meeting.

	•		Proposals to ratify the appointment of auditors, unless any of the following apply in which case CMA will generally vote AGAINST the proposal:

Credible reason exists to question:

	§		The auditor’s independence, as determined by applicable regulatory requirements.

	§		The accuracy or reliability of the auditor’s opinion as to the company’s financial position.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

Fees paid to the auditor or its affiliates for “non-audit” services were excessive, i.e., in excess of the total fees paid for “audit,” “audit-related” and “tax compliance” and/or “tax return preparation” services, as disclosed in the company’s proxy materials.

	•		Bylaw or charter changes that are of a housekeeping nature (e.g., updates or corrections).

	•		Proposals to approve the annual reports and accounts provided the certifications required by the Sarbanes Oxley Act of 2002 have been provided.

CMA generally will vote AGAINST:

	•		Proposals to eliminate the right of shareholders to act by written consent or call special meetings.

	•		Proposals providing management with authority to adjourn an annual or special shareholder meeting absent compelling reasons, or to adopt, amend or repeal bylaws without shareholder approval, or to vote unmarked proxies in favor of management.

	•		Shareholder proposals to change the date, time or location of the company’s annual meeting of shareholders.

CMA will vote AGAINST:

•

Authorization to transact other unidentified substantive (as opposed to procedural) business at a meeting.

CMA will vote on a CASE-BY-CASE basis:

	•		Proposals to change the location of the company’s state of incorporation. CMA considers whether financial benefits (e.g., reduced fees or taxes) likely to accrue to the company as a result of a reincorporation or other change of domicile outweigh any accompanying material diminution of shareholder rights.

	•		Proposals on whether and how to vote on “bundled” or otherwise conditioned proposals, depending on the overall economic effects upon shareholders.

CMA generally will ABSTAIN from voting on shareholder proposals predominantly involving social, socio-economic, environmental, political or other similar matters on the basis that their impact on share value can rarely be anticipated with any high degree of confidence. CMA may, on a CASE-BY-CASE basis, vote:

	•		FOR proposals seeking inquiry and reporting with respect to, rather than cessation or affirmative implementation of, specific policies where the pertinent issue warrants separate communication to shareholders; and

	•		FOR or AGAINST the latter sort of proposal in light of the relative benefits and detriments (e.g. distraction, costs, other burdens) to share value which may be expected to flow from passage of the proposal.

7. Other Matters Relating to Foreign Issues

CMA generally will vote FOR:

•

Most stock (scrip) dividend proposals. CMA votes AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

	•		Proposals to capitalize the company’s reserves for bonus issues of shares or to increase the par value of shares.

	•		Proposals to approve control and profit transfer agreements between a parent and its subsidiaries.

	•		Management proposals seeking the discharge of management and supervisory board members, unless there is concern about the past actions of the company’s auditors/directors and/or legal action is being taken against the board by other shareholders.

	•		Management proposals concerning allocation of income and the distribution of dividends, unless the proxy vendor would vote against such proposal in accordance with its guidelines, in which case CMA will evaluate the proposal on a CASE-BY-CASE basis.

	•		Proposals for the adoption of financing plans if they are in the best economic interests of shareholders.

CMA will generally vote FOR proposals to approve Directors’ Fees, unless the proxy vendor would vote against such proposal in accordance with its guidelines, in which case CMA will evaluate the proposal on a CASE-BY-CASE basis.

CMA will evaluate management proposals to approve protective preference shares for Netherlands located company-friendly foundations proposals on a CASE-BY-CASE basis and will only support resolutions if:

	•		The supervisory board needs to approve an issuance of shares while the supervisory board is independent within the meaning of CMA’ categorization rules and the Dutch Corporate Governance Code.

	•		No call/put option agreement exists between the company and the foundation.

	•		There is a qualifying offer clause or there are annual management and supervisory board elections.

	•		The issuance authority is for a maximum of 18 months.

	•		The board of the company-friendly foundation is independent.

	•		The company has disclosed under what circumstances it expects to make use of the possibility to issue preference shares.

	•		There are no priority shares or other egregious protective or entrenchment tools.

	•		The company releases its proxy circular, with details of the poison pill proposal, at least three weeks prior to the meeting.

	•		Art 2:359c Civil Code of the legislative proposal has been implemented.

8. Investment Company Matters

Election of Directors:

CMA will vote on a CASE-BY-CASE basis proposals for the election of directors, considering the following factors:

	•		Board structure

	•		Attendance at board and committee meetings.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

CMA will WITHHOLD votes from directors who:

	•		Attend less than 75 percent of the board and committee meetings without a valid excuse for the absences. Valid reasons include illness or absence due to company business. Participation via telephone is acceptable. In addition, if the director missed only one meeting or one day’s meetings, votes should not be withheld even if such absence dropped the director’s attendance below 75 percent.

	•		Ignore a shareholder proposal that is approved by a majority of shares outstanding;

	•		Ignore a shareholder proposal this is approved by a majority of the votes cast for two consecutive years;

	•		Are interested directors and sit on the audit or nominating committee; or

	•		Are interested directors and the full board serves as the audit or nominating committee or the company does not have one of these committees.

Proxy Contests:

CMA will vote on a CASE-BY-CASE basis proposals for proxy contests, considering the following factors:

	•		Past performance relative to its peers

	•		Market in which fund invests

	•		Measures taken by the board to address the pertinent issues (e.g., closed-end fund share market value discount to NAV)

	•		Past shareholder activism, board activity and votes on related proposals

	•		Strategy of the incumbents versus the dissidents

	•		Independence of incumbent directors; director nominees

	•		Experience and skills of director nominees

	•		Governance profile of the company

	•		Evidence of management entrenchment

Converting Closed-end Fund to Open-end Fund:

CMA will vote conversion proposals on a CASE-BY-CASE basis, considering the following factors:

	•		Past performance as a closed-end fund

	•		Market in which the fund invests

	•		Measures taken by the board to address the discount

	•		Past shareholder activism, board activity, and votes on related proposals.

Investment Advisory Agreements:

CMA will vote investment advisory agreements on a CASE-BY-CASE basis, considering the following factors:

	•		Proposed and current fee schedules

	•		Fund category/investment objective

	•		Performance benchmarks

	•		Share price performance as compared with peers

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



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CMA Policy: Proxy Voting

	•		Resulting fees relative to peers

	•		Assignments (where the adviser undergoes a change of control)

Approving New Classes or Series of Shares:

CMA will vote FOR the establishment of new classes or series of shares.

Preferred Stock Proposals:

CMA will vote on a CASE-BY-CASE basis proposals for the authorization for or increase in the preferred shares, considering the following factors:

	•		Stated specific financing purpose

	•		Possible dilution for common shares

	•		Whether the shares can be used for anti-takeover purposes

Policies Addressed by the Investment Company Act of 1940 (“1940 Act”):

CMA will vote proposals regarding adoption or changes of policies addressed by the 1940 Act on a CASE-BY-CASE basis, considering the following factors:

	•		Potential competitiveness

	•		Regulatory developments

	•		Current and potential returns

	•		Current and potential risk

CMA generally will vote FOR these amendments as long as the proposed changes do not fundamentally alter the investment focus of the fund and do comply with current SEC interpretations.

Changing a Fundamental Restriction to a Non-fundamental Restriction:

CMA will vote on a CASE-BY-CASE basis proposals to change a fundamental restriction to a non-fundamental restriction, considering the following factors:

	•		Fund’s target investments

	•		Reasons given by the fund for the change

	•		Projected impact of the change on the portfolio

Change Fundamental Investment Objective to Non-fundamental:

CMA will vote AGAINST proposals to change a fund’s investment objective from fundamental to non-fundamental unless management acknowledges meaningful limitations upon its future requested ability to change the objective

Name Change Proposals:

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



Bank of America: Confidential		Page 16 of 22

CMA Policy: Proxy Voting

CMA will vote on a CASE-BY-CASE basis proposals to change a fund’s name, considering the following factors:

	•		Political/economic changes in the target market

	•		Consolidation in the target market

	•		Current asset composition

Change in Fund’s Subclassification:

CMA will vote on a CASE-BY-CASE basis proposals to change a fund’s subclassification, considering the following factors:

	•		Potential competitiveness

	•		Current and potential returns

	•		Risk of concentration

	•		Consolidation in target industry

Disposition of Assets/Termination/Liquidation:

CMA will vote on a CASE-BY-CASE basis these proposals, considering the following factors:

	•		Strategies employed to salvage the company

	•		Past performance of the fund

	•		Terms of the liquidation

Changes to the Charter Document:

CMA will vote on a CASE-BY-CASE basis proposals to change the charter document, considering the following factors:

	•		The degree of change implied by the proposal

	•		The efficiencies that could result

	•		The state of incorporation; net effect on shareholder rights

	•		Regulatory standards and implications

CMA will vote FOR:

	•		Proposals allowing the Board to impose, without shareholder approval, fees payable upon redemption of fund shares, provided imposition of such fees is likely to benefit long-term fund investors (e.g., by deterring market timing activity by other fund investors)

	•		Proposals enabling the Board to amend, without shareholder approval, the fund’s management agreement(s) with its investment adviser(s) or sub-advisers, provided the amendment is not required by applicable law (including the Investment Company Act of 1940) or interpretations thereunder to require such approval

CMA will vote AGAINST:

•

Proposals enabling the Board to:

	o		Change, without shareholder approval the domicile of the fund

	o		Adopt, without shareholder approval, material amendments of the fund’s declaration of trust or other organizational document

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



Bank of America: Confidential		Page 17 of 22

CMA Policy: Proxy Voting

Changing the Domicile of a Fund:

CMA will vote on a CASE-BY-CASE basis proposals to reincorporate, considering the following factors:

	•		Regulations of both states

	•		Required fundamental policies of both states

	•		The increased flexibility available

Authorizing the Board to Hire and Terminate Subadvisors Without Shareholder Approval:

CMA will vote FOR proposals to enable the Board or Investment Adviser to hire and terminate sub-advisers, without shareholder approval, in accordance with applicable rules or exemptive orders under the Investment Company Act of 1940
Distribution Agreements:

CMA will vote these proposals on a CASE-BY-CASE basis, considering the following factors:

	•		Fees charged to comparably sized funds with similar objectives

	•		The proposed distributor’s reputation and past performance

	•		The competitiveness of the fund in the industry

	•		Terms of the agreement

Master-Feeder Structure:

CMA will vote FOR the establishment of a master-feeder structure.

Mergers:

CMA will vote merger proposals on a CASE-BY-CASE basis, considering the following factors:

	•		Resulting fee structure

	•		Performance of both funds

	•		Continuity of management personnel

	•		Changes in corporate governance and their impact on shareholder rights

Shareholder Proposals to Establish Director Ownership Requirement:

CMA will generally vote AGAINST shareholder proposals that mandate a specific minimum amount of stock that directors must own in order to qualify as a director or to remain on the board. While CMA favors stockownership on the part of directors, the company should determine the appropriate ownership requirement.

Shareholder Proposals to Reimburse Shareholder for Expenses Incurred:

CMA will vote on a CASE-BY-CASE basis proposals to reimburse proxy solicitation expenses.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



Bank of America: Confidential		Page 18 of 22

CMA Policy: Proxy Voting

APPENDIX B

Conflicts of Interest Disclosure and Certification Form

Conflict Review Questionnaire for Proxy Voting Working Group Members and Other Individuals

Participating in the Proxy Voting Decision-Making Process.

Instructions: Please complete each of the questions. Please provide an explanation for any affirmative responses. Return the completed questionnaire to Columbia Management Conflicts of Interest Officer.


Issuer and Proxy Matter:

	1.		Do you or any member of your immediate family have an existing (or potential) business, financial, personal or other relationship with any management personnel of the issuer¹?





	2.		Do you or any member of your immediate family have an existing (or potential) business, financial, personal or other relationship with any person participating, supporting, opposing or otherwise connected with the particular proxy proposal (e.g., principals of the issuer; director nominees of issuer company; shareholder activists)?





	3.		Have you discussed this particular proxy proposal with anyone outside of Columbia Management’s investment group²?


¹		Personal investing in the issuer by you or a member of your immediate family does not require an affirmative response to this item.

²		Communications with issuer or solicitors in the regular course of business would not have to be disclosed on this form.

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



Bank of America: Confidential		Page 20 of 22

Document Name:

APPENDIX C

CMA Proxy Vote Recommendation/Proxy Committee Request Form


Name of Investment Associate:


Company Name:


Overview of Proxy Vote and Meeting Date:




Proxy Agenda Item(s)


Description of Item:



(The above information will be pre-populated by the Proxy Department.)


Recommendation (FOR , AGAINST, ABSTAIN) including brief rationale:











Please attach any supporting information other than analysis or reports provided by the Proxy Department.


Signed

By signing, I am certifying that I either have no conflicts of interest-related information to report or have sent a completed “Conflicts of Interest Disclosure and Certification Form” to Compliance Risk Management (Conflicts Officer).

Send Completed Forms to:

GWIM Investment Operations – Proxy Department

In the case of Proxy Votes to be referred to the Proxy Committee, submit this form and materials to the Chair of the Proxy Committee

This document is current as of the last review date but subject to change thereafter. Please consult the online version to verify that this policy has not been updated or otherwise changed.



Bank of America: Confidential		Page 22 of 22

Davis Selected Advisers, LP
(“Davis Advisors”)
Proxy Voting Policies and Procedures

Amended as of June 2, 2006

Table of Contents

I. Introduction

II. Guiding Principles

III. Fiduciary Duties of Care and Loyalty

IV. Detailed Proxy Voting Policies

V. Ensuring Proxies are Voted

VI. Identifying and Resolving Potential Conflicts of Interest

VII. Proxy Oversight Group

VIII. Shareholder Activism

IX. Obtaining Copies of Davis Advisors’ Proxy Voting Policies and Procedures and/or How Proxies Were Voted

X. Summary of Proxy Voting Policies and Procedures

XI. Records

XII. Amendments

Exhibit A, “Detailed Proxy Voting Policies”

I. Introduction

Davis Advisors votes on behalf of its clients in matters of corporate governance through the proxy voting process. Davis Advisors takes its ownership responsibilities very seriously and believes the right to vote proxies for its clients’ holdings is a significant asset of the clients. Davis Advisors exercises its voting responsibilities as a fiduciary, solely with the goal of maximizing the value of its clients’ investments.

Davis Advisors votes proxies with a focus on the investment implications of each issue. For each proxy vote, Davis Advisors takes into consideration its duty to clients and all other relevant facts available to Davis Advisors at the time of the vote. Therefore, while these guidelines provide a framework for voting, votes are ultimately cast on a case-by-case basis.

Davis Advisors has established a Proxy Oversight Group to oversee voting policies and deal with potential conflicts of interest. In evaluating issues, the Proxy Oversight Group may consider information from many sources, including the portfolio manager for each client account, management of a company presenting a proposal, shareholder groups, and independent proxy research services.

II. Guiding Principles

Proxy voting is a valuable right of company shareholders. Through the voting mechanism, shareholders are able to protect and promote their interests by communicating views directly to the company’s board, as well as exercise their right to grant or withhold approval for actions proposed by the board of directors or company management. The interests of shareholders are best served by the following principles when considering proxy proposals:

Creating Value for Existing Shareholders. The most important factors that we consider in evaluating proxy issues are: (i) the Company’s or management’s long-term track record of creating value for shareholders. In general, we will consider the recommendations of a management with a good record of creating value for shareholders as more credible than the recommendations of managements with a poor record; (ii) whether, in our estimation, the current proposal being considered will significantly enhance or detract from long-term value for existing shareholders; and (iii) whether a poor record of long term performance resulted from poor management or from factors outside of managements control.

Other factors which we consider may include:

(a) Shareholder Oriented Management. One of the factors that Davis Advisors considers in selecting stocks for investment is the presence of shareholder-oriented management. In general, such managements will have a large ownership stake in the company. They will also have a record of taking actions and supporting policies designed to increase the value of the company’s shares and thereby enhance shareholder wealth. Davis Advisors’ research analysts are active in meeting with top management of portfolio companies and in discussing their views on policies or actions which could enhance shareholder value. Whether management shows evidence of responding to reasonable shareholder suggestions, and otherwise improving general corporate governance, is a factor which may be taken into consideration in proxy voting.

(b) Allow responsible management teams to run the business. Because we try generally to invest with “owner oriented” managements (see above), we vote with the recommendation of management on most routine matters, unless circumstances such as long standing poor performance or a change from our initial assessment indicate otherwise. Examples include the election of directors and ratification of auditors. Davis Advisors supports policies, plans and structures that give management teams appropriate latitude to run the business in the way that is most likely to maximize value for owners. Conversely, Davis Advisors opposes proposals that limit management’s ability to do this. Davis Advisors will generally vote with management on shareholder social and environmental proposals on the basis that their impact on share value is difficult to judge and is therefore best done by management.

(c) Preserve and expand the power of shareholders in areas of corporate governance — Equity shareholders are owners of the business, and company boards and management teams are ultimately accountable to them. Davis Advisors supports policies, plans and structures that promote accountability of the board and management to owners, and align the interests of the board and management with owners. Examples include: annual election of all board members and incentive plans that are contingent on delivering value to shareholders. Davis Advisors generally

opposes proposals that reduce accountability or misalign interests, including but not limited to classified boards, poison pills, excessive option plans, and repricing of options.

(d) Support compensation policies that reward management teams appropriately for performance. We believe that well thought out incentives are critical to driving long-term shareholder value creation. Management incentives ought to be aligned with the goals of long-term owners. In our view, the basic problem of skyrocketing executive compensation is not high pay for high performance, but high pay for mediocrity or worse. In situations where we feel that the compensation practices at companies we own are not acceptable, we will exercise our discretion to vote against compensation committee members and specific compensation proposals.

Davis Advisors exercises its professional judgment in applying these principles to specific proxy votes. Exhibit A, “Detailed Proxy Voting Policies” provides additional explanation of the analysis which Davis Advisors may conduct when applying these guiding principles to specific proxy votes.

III. Fiduciary Duties of Care and Loyalty

Advisers are fiduciaries. As fiduciaries, advisers must act in the best interests of their clients. Thus, when voting portfolio securities, Davis Advisors must act in the best interest of the client and not in its own interest.

When Davis Advisors has been granted the authority to vote client proxies, Davis Advisors owes the client the duties of “care” and “loyalty”:

(1) The duty of care requires Davis Advisors to monitor corporate actions and vote client proxies if it has undertaken to do so.

(2) The duty of loyalty requires Davis Advisors to cast the proxy votes in a manner that is consistent with the best interests of the client and not subrogate the client’s interest to Davis Advisors’ own interests.

IV. Detailed Proxy Voting Policies

Section II, “Guiding Principles” describe Davis Advisors’ pre-determined proxy voting policies. Exhibit A, Detailed Proxy Voting Policies provides greater insight into specific factors which Davis Advisors may sometimes consider.

V. Ensuring Proxies are Voted

The Chief Compliance Officer is responsible for monitoring corporate actions and voting client proxies if Davis Advisors has been assigned the right to vote the proxies.

Scope. If a client has not authorized Davis Advisors to vote its proxies, then these Policies and Procedures shall not apply to that client’s account. The scope of Davis Advisors’ responsibilities with respect to voting proxies are ordinarily determined by Davis Advisors’ contracts with its clients, the disclosures it has made to its clients, and the investment policies and objectives of its clients.

Cost/Benefit Analysis. Davis Advisors is NOT required to vote every proxy. There may be times when refraining from voting a proxy is in the client’s best interest, such as when Davis Advisors determines that the cost of voting the proxy exceeds the expected benefit to the client. Davis Advisors shall not, however, ignore or be negligent in fulfilling the obligation it has assumed to vote client proxies.

Davis Advisors is not expected to expend resources if it has no reasonable expectation that doing so will provide a net benefit to its clients. For example, if clients hold only a small position in a company, or if the company’s shares are no longer held by Davis Advisors clients at the time of the meeting, a decision to not vote the proxies, engage management in discussions, or to sell the

securities rather than fight the corporate action, may be appropriate, particularly if the issue involved would not significantly affect the value of clients’ holdings.

Practical Limitations Relating To Proxy Voting While Davis Advisors uses it best efforts to vote proxies, it may not be practical or possible to vote every client proxy. For example, (i) when a client has loaned securities to a third party and Davis Advisors or the client is unable to recall the securities before record date; (ii) if Davis does not receive the proxy ballot/statement in time to vote the proxy; or (iii) if Davis is unable to meet the requirements necessary to vote foreign securities (e.g., shareblocking).

Errors by Proxy Administrators. Davis Advisors may use a proxy administrator or administrators to cast its proxy votes. Errors made by these entities may be beyond Davis’ Advisors’ control to prevent or correct.

Record of Voting

The Chief Compliance Officer shall maintain records of how client proxies were voted. The Chief Compliance Officer shall also maintain a record of all votes which are inconsistent with Guiding Principles.

VI. Identifying and Resolving Potential Conflicts of Interest
Potential Conflicts of Interest
A potential conflict of interest arises when Davis Advisors has business interests that may not be consistent with the best interests of its client. In reviewing proxy issues to identify any potential material conflicts between Davis Advisors’ interests and those of its clients, Davis Advisors will consider:

(1) Whether Davis Advisors has an economic incentive to vote in a manner that is not consistent with the best interests of its clients. For example, Davis Advisors may have an economic incentive to vote in a manner that would please corporate management in the hope that doing so might lead corporate management to direct more business to Davis Advisors. Such business could include managing company retirement plans or serving as sub-adviser for funds sponsored by the company; or

(2) Whether there are any business or personal relationships between a Davis Advisors employee and the officers or directors of a company whose securities are held in client accounts that may create an incentive to vote in a manner that is not consistent with the best interests of its clients.

Identifying Potential Conflicts of Interest

The Chief Compliance Officer is responsible for identifying potential material conflicts of interest and voting the proxies in conformance with direction received from the Proxy Oversight Group. The Chief Compliance Officer shall bring novel or ambiguous issues before the Proxy Oversight Group for guidance.

Assessing Materiality. Materiality will be defined as the potential to have a significant impact on the outcome of a proxy vote. A conflict will be deemed material If (i) Davis Advisors’ clients control more than 2 ¹/2% of the voting company’s eligible vote; and (ii) more than 2 ¹/2% of Davis Advisors’ assets under management are controlled by the voting company. If either part of this two part test is not met, then the conflict will be presumed to be immaterial. Materiality will be judged by facts reasonably available to Davis Advisors at the time the materiality determination is made and Davis Advisors is not required to investigate remote relationships or affiliations.

Resolving Potential Conflicts of Interest

The Proxy Oversight Group is charged with resolving material potential conflicts of interest which it becomes aware of. It is charged with resolving conflicts in a manner that is consistent with the

best interests of clients. There are many acceptable methods of resolving potential conflicts, and the Proxy Oversight Group shall exercise its judgment and discretion to determine an appropriate means of resolving a potential conflict in any given situation:

(1) Votes consistent with the Guiding Principles listed in Section II. are presumed to be consistent with the best interests of clients;

(2) Davis Advisors may disclose the conflict to the client and obtain the client’s consent prior to voting the proxy;

(3) Davis Advisors may obtain guidance from an independent third party;

(4) The potential conflict may be immaterial; or

(5) Other reasonable means of resolving potential conflicts of interest which effectively insulate the decision on how to vote client proxies from the conflict.

VII. Proxy Oversight Group

Davis Advisors has established a Proxy Oversight Group, a committee of senior Davis Advisors officers, to oversee voting policies and decisions for clients. The Proxy Oversight Group:

(1) Establishes, amends, and interprets proxy voting policies and procedures; and

(2) Resolves conflicts of interest identified by the Compliance Department.

Composition of the Proxy Oversight Group

The following are the members of the Proxy Oversight Group. Davis Advisors’:

(1) A Proxy Analyst as designated by the Chief Investment Officer from time to time;

(2) Davis Advisors’ Chief Compliance Officer; and

(3) Davis Advisors’ Chief Legal Officer.

Two or more members shall constitute a quorum. Meetings may be held by telephone. A vote by a majority of the Proxy Oversight Group shall be binding. Action may be taken without a meeting by memorandum signed by two or more members.

VIII. Shareholder Activism

Davis Advisors’ fiduciary duties to its clients do not necessarily require Davis Advisors to become a “shareholder activist.” As a practical matter, Davis Advisors will determine whether to engage in management discussion based upon its costs and expected benefits to clients.

Prior to casting a single vote, Davis Advisors may use its influence as a large shareholder to highlight certain management practices. Consistent with its fiduciary duties, Davis Advisors may discuss with company management its views on key issues that affect shareholder value. Opening lines of communication with company management to discuss these types of issues can often prove beneficial to Davis Advisors’ clients.

IX. Obtaining Copies of Davis Advisors’ Proxy Voting Policies and Procedures and/or How Proxies Were Voted

Davis Advisors’ clients may obtain a copy of Davis Advisors’ Proxy Voting Policies and Procedures and/or a record of how their own proxies were voted by writing to:

Davis Selected Advisers, L.P.
Attn: Chief Compliance Officer
2949 East Elvira Road, Suite 101
Tucson, Arizona, 85706

Information regarding how mutual funds managed by Davis Advisors voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available through the Funds’ website (http://www.davisfunds.com, http://www.selectedfunds.com, and http://www.clipperfund.com) and also on the SEC’s website at http://www.sec.gov.

Exhibit A
Davis Selected Advisers, L.P.
Detailed Proxy Voting Policies

As Amended: June 2, 2006

The Guiding Principles control Davis Advisors’ Proxy Voting. Davis Advisors attempts to votes proxies in conformance with the Guiding Principles articulated in Section II of the Proxy Voting Policies and Procedures.

Following is additional explanation of the analysis which Davis Advisors may conduct when applying these Guiding Principles to specific proxy votes. We will NOT vote as indicated below if, in our judgment, the result would be contrary to our Guiding Principles.

I. The Board of Directors

II. Executive Compensation

III. Tender Offer Defenses

IV. Proxy Contests

V. Proxy Contest Defenses

VI. Auditors

VII. Miscellaneous Governance Provisions

VIII.State of Incorporation

IX. Mergers and Corporate Restructuring

X. Social and Environmental Issues

XI. Capital Structure

I. The Board of Directors

A. Voting on Director Nominees in Uncontested Elections

(1) We generally vote with management in the routine election of Directors. As Directors are elected to represent the economic interests of shareholders, our voting on Director Nominees may be shaped by our assessment of a director’s record in representing the interests of shareholders. The most important responsibility of a director is the selection, evaluation and compensation of senior management, and we pay particular attention to directors’ performance in this area. In assessing a director’s performance in selecting and evaluating management, the primary consideration is the company’s long-term track record of creating value for shareholders. In terms of their record on compensation, long-term results will also be a key consideration. Philosophically, we look for directors to construct long-term compensation plans that do not allow for senior executives to be excessively compensated if long-term returns to shareholders are poor. We prefer directors to specify the benchmarks or performance hurdles by which they are evaluating management’s performance. Appropriate hurdles may include the company’s performance relative to its peers and the S&P 500 as well as its cost of equity capital. We expect directors to construct plans such that incentive compensation will not be paid if performance is below these hurdles.

(2) In addition, we believe that stock option re-pricings and exchanges sever the alignment of employee and shareholder interests. Therefore, we will generally withhold votes for any director of any company that has allowed stock options to be re-priced or exchanged at lower prices in the previous year.

(3) Directors also bear responsibility for the presentation of a company’s financial statements and for the choice of broad accounting policies. We believe directors should favor conservative policies. Such policies may include reasonable pension return assumptions and appropriate accounting for stock based compensation, among others.

(4) In voting on director nominees, we may also consider the following factors in order of importance:

(i) long-term corporate performance:;

(ii) nominee’s business background and experience;

(iii) nominee’s investment in the company:

(iv) nominee’s ethical track record:

(v) whether a poor record of long term performance resulted from poor management or from factors outside of managements control:

(vi) corporate governance provisions and takeover activity (discussed in Sections III and IV):

(vii) interlocking directorships: and

(viii) other relevant information

B. Majority Voting.

We will generally vote for proposals that require a majority vote standard whereby directors must submit their resignation for consideration by the board of directors when they receive less than a majority of the vote cast.

We will review on a case-by-case basis proposals that require directors to receive greater than a majority of the vote cast in order to remain on the board.

C. Cumulative Voting.

We may either support or vote against cumulative voting depending on the specific facts and circumstances.

B. Classification/Declassification of the Board

We generally vote against proposals to classify the board.

We generally vote for proposals to repeal classified boards and to elect all directors annually.

II. Executive Compensation

A. Stock Options, Bonus Plans.

In general, we consider executive compensation such as stock option plans and bonus plans to be ordinary business activity. We analyze stock option plans, paying particular attention to their dilutive effects. While we generally support management proposals, we oppose compensation plans which we consider to be excessive.

We believe in paying for performance. We recognize that compensation levels must be competitive and realistic and that under a fair system exceptional managers deserve to be paid exceptionally well. Our test to determine whether or not a proposal for long-term incentive compensation is appropriate is based on the following two questions.

1. Over the long-term, what is the minimum level of shareholder returns below which management’s performance would be considered poor?

	•		Performance below that of the S&P 500.

	•		Performance below a pre-selected group of competitors.

	•		Performance below the company’s cost of equity capital.

2. Does the company’s proposed incentive compensation plan (including options and restricted stock) allow for the management to receive significant incentive compensation if long-term returns to shareholders fall below the answer specified above?

In most cases, the answer to the first question is unspecified. In virtually all cases, the answer to the second question is “yes,” as most companies use non-qualified stock options and restricted stock for the bulk of their long-term compensation. These options and shares will become enormously valuable even if the shares compound at an unacceptably low rate — or actually do not go up at all but are simply volatile — over the long term. A fair system of long-term incentive compensation should include a threshold rate of performance below which incentive compensation is not earned. To the extent that long-term incentive compensation proposals are put to a vote, we will examine the long-term track record of the management team, past compensation history, and use of appropriate performance hurdles.

We will generally vote against any proposal to allow stock options to be re-priced or exchanged at lower prices. We will generally vote against multi-year authorizations of shares to be used for compensation unless the company’s past actions have been consistent with these policies. We will generally vote in favor of shareholder proposals advocating the addition of performance criteria to long-term compensation plans.

B. Positive Compensation Practices.

Examples of the positive compensation practices we look for in both selecting companies and deciding how to cast our proxy votes include:

(1) A high proportion of compensation derived from variable, performance-based incentives;

(2) Incentive formulas that cut both ways , allowing for outsized pay for outsized performance but ensuring undersized pay when performance is poor;

(3) Base salaries that are not excessive;

(4) Company-wide stock-based compensation grants that are capped at reasonable levels to limit dilution;

(5) Stock-based compensation that appropriately aligns management incentives with shareholders, with a strong preference for equity plans that have a cost-of-capital charge or escalating strike price feature as opposed to ordinary restricted stock or plain vanilla options;

(6) Appropriate performance targets and metrics, spelled out in detail in advance of the performance period;

(7) Full and clear disclosure of all forms of management compensation and stock ownership (including full listing of the dollar value of perquisites, value of CEO change of control and termination provisions, pensions, and detail on management’s direct ownership of stock vs. option holdings, ideally presented in a format that is easy to compare and tally rather than tucked away in footnotes);

(8) Compensation committee members with the experience and wherewithal to make the tough decisions that frequently need to be made in determining CEO compensation;

(9) Policies that require executives to continue holding a meaningful portion of their equity compensation after vesting/exercise;

(10) Appropriate cost allocation of charges for stock-based compensation;

(11) Thoughtful evaluation of the present value tradeoff between options, restricted stock and other types of compensation; and

(12) Compensation targets that do not seek to provide compensation above the median of the peer group for mediocre performance. We believe this has contributed to the unacceptably high rates of CEO pay inflation.

III. Tender Offer Defenses

A. Poison Pills

We will generally vote against management proposals to ratify a poison pill.

We will generally vote for shareholder proposals to redeem a poison pill.

B. Fair Price Provisions

We will generally vote for fair price proposals, as long as the shareholder vote requirement embedded in the provision is no more than a majority of disinterested shares.

We will generally vote for shareholder proposals to lower the shareholder vote requirement in existing fair price provisions.

C. Greenmail

We will generally vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments.

We review on a case-by-case basis anti-greenmail proposals when they are bundled with other charter or bylaw amendments.

D. Pale Greenmail

We review on a case-by-case basis restructuring plans that involve the payment of pale greenmail.

E. Unequal Voting Rights

We will generally vote against dual class exchange offers.

We will generally vote against dual class recapitalizations.

F. Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws

We will generally vote against management proposals to require a supermajority shareholder vote to approve charter and bylaw amendments.

We will generally vote for shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw amendments.

G. Supermajority Shareholder Vote Requirement to Approve Mergers

We will generally vote against management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations.

We will generally vote for shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations.

H. White Squire Placements

We will generally vote for shareholder proposals to require approval of blank check preferred stock issues for other than general corporate purposes.

IV. Proxy Contests

A. Voting for Director Nominees in Contested Elections

Votes in a contested election of directors are evaluated on a case-by-case basis, considering the following factors:

	•		long-term financial performance of the target company relative to its industry

	•		management’s track record

	•		background to the proxy contest

	•		qualifications of director nominees (both slates)

	•		evaluation of what each side is offering shareholders as well as the likelihood that the proposed objectives and goals can be met

	•		stock ownership positions

B. Reimburse Proxy Solicitation Expenses

Decisions to provide full reimbursement for dissidents waging a proxy contest are made on a case-by-case basis.

V. Proxy Contest Defenses

A. Board Structure: Staggered vs. Annual Elections

We will generally vote against proposals to classify the board.

We will generally vote for proposals to repeal classified boards and to elect all directors annually.

B. Shareholder Ability to Remove Directors

We will generally vote against proposals that provide that directors may be removed only for cause.

We will generally vote for proposals to restore shareholder ability to remove directors with or without cause.

We will generally vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies.

We will generally vote for proposals that permit shareholders to elect directors to fill board vacancies.

C. Cumulative Voting

See discussion under “The Board of Directors”.

D. Shareholder Ability to Call Special Meetings

We will generally vote against proposals to restrict or prohibit shareholder ability to call special meetings.

We will generally vote for proposals that remove restrictions on the right of shareholders to act independently of management.

E. Shareholder Ability to Act by Written Consent

We will generally vote against proposals to restrict or prohibit shareholder ability to take action by written consent.

We will generally vote for proposals to allow or make easier shareholder action by written consent.

F. Shareholder Ability to Alter the Size of the Board

We will generally vote for proposals that seek to fix the size of the board.

We will generally vote against proposals that give management the ability to alter the size of the board without shareholder approval.

VI. Auditors

A. Ratifying Auditors

We will generally vote for proposals to ratify auditors, unless any of the following apply:

• An auditor has a financial interest in or association with the company (other than to receive reasonable compensation for services rendered), and is therefore not independent,

• Fees for non-audit services are excessive, or

• There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company’s financial position.

We vote case-by-case on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services.

We will generally vote for shareholder proposals asking for audit firm rotation or partner rotation within an audit firm, unless the rotation period is so short (less than five years) that it would be unduly burdensome to the company (Sarbanes-Oxley mandates that the partners on a company’s audit engagement be subject to five-year term limits).

VII. Miscellaneous Governance Provisions

A. Confidential Voting

We will generally vote for shareholder proposals that request corporations to adopt confidential voting, use independent tabulators and use independent inspectors of election as long as the proposals include clauses for proxy contests as follows: In the case of a contested election, management is permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents do not agree, the confidential voting policy is waived.

We will generally vote for management proposals to adopt confidential voting.

B. Equal Access

We will generally vote for shareholder proposals that would allow significant company shareholders equal access to management’s proxy material in order to evaluate and propose voting recommendations on proxy proposals and director nominees, and in order to nominate their own candidates to the board.

C. Bundled Proposals

G. Director and Officer Indemnification and Liability Protection

Proposals concerning director and officer indemnification and liability protection are evaluated on a case-by-case basis.

We will generally vote against proposals to limit or eliminate entirely director and officer liability for monetary damages for violating the duty of care.

We will generally vote against indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligations than mere carelessness.

We will generally vote for only those proposals that provide such expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if: (1) the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and (2) only if the director’s legal expenses would be covered.

H. Charitable Contributions

We will generally vote against shareholder proposals to eliminate, direct or otherwise restrict charitable contributions.

I. Age Limits

We will generally vote against shareholder proposals to impose a mandatory retirement age for outside directors.

J. Board Size

We will generally vote for proposals seeking to fix the board size or designate a range for the board size.

We will generally vote against proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.

K. Establish/Amend Nominee Qualifications

We vote case-by-case on proposals that establish or amend director qualifications. Votes should be based on how reasonable the criteria are and to what degree they may preclude dissident nominees from joining the board.

We will generally vote against shareholder proposals requiring two candidates per board seat.

L. Filling Vacancies/Removal of Directors

We will generally vote against proposals that provide that directors may be removed only for cause.

We will generally vote for proposals to restore shareholder ability to remove directors with or without cause.

We will generally vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies.

We will generally vote for proposals that permit shareholders to elect directors to fill board vacancies.

M. OBRA-Related Compensation Proposals

•

Amendments that Place a Cap on Annual Grant or Amend Administrative Features

We will generally vote for plans that simply amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m) of OBRA.

•

Amendments to Added Performance-Based Goals

We will generally vote for amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of OBRA.

•

Amendments to Increase Shares and Retain Tax Deductions Under OBRA

Votes on amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatment under the provisions of Section 162(m) are evaluated on a case-by-case basis.

•

Approval of Cash or Cash-and-Stock Bonus Plans

We will generally vote for cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of OBRA where the compensation plans have been historically consistent with our principles described in Section II of this document.

N. Shareholder Proposals to Limit Executive and Director Pay

We will generally vote for shareholder proposals that seek additional disclosure of executive and director pay information.

We review on a case-by-case basis all other shareholder proposals that seek to limit executive and director pay.

O. Golden and Tin Parachutes

We will generally vote for shareholder proposals to have golden and tin parachutes submitted for shareholder ratification.

We will generally review on a case-by-case basis all proposals to ratify or cancel golden or tin parachutes.

P. Employee Stock Ownership Plans (ESOPs)

We will generally vote for proposals that request shareholder approval in order to implement an ESOP or to increase authorized shares for existing ESOPs, except in cases when the number of shares allocated to the ESOP is “excessive” (i.e., generally greater than five percent of outstanding shares).

Q. 401(k) Employee Benefit Plans

We will generally vote for proposals to implement a 401(k) savings plan for employees.

R. Stock Plans in Lieu of Cash

We review plans which provide participants with the option of taking all or a portion of their cash compensation in the form of stock on a case-by-case basis.

VIII. State of Incorporation

A. Voting on State Takeover Statutes

We review on a case-by-case basis proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freeze out provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions).

B. Voting on Reincorporation Proposals

Proposals to change a company’s state of incorporation are examined on a case-by-case basis.

IX. Mergers and Corporate Restructurings

A. Mergers and Acquisitions

Votes on mergers and acquisitions are considered on a case-by-case basis, taking into account at least the following:

	•		anticipated financial and operating benefits

	•		offer price (cost vs. premium)

	•		prospects of the combined companies

	•		how the deal was negotiated

	•		changes in corporate governance and their impact on shareholder rights

B. Corporate Restructuring

Votes on corporate restructuring proposals, including minority squeeze outs, leveraged buyouts, spin-offs, liquidations, and asset sales are considered on a case-by-case basis.

C. Spin-offs

Votes on spin-offs are considered on a case-by-case basis depending on the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives.

D. Asset Sales

Votes on asset sales are made on a case-by-case basis after considering the impact on the balance sheet/working capital, value received for the asset, and potential elimination of diseconomies.

E. Liquidations

Votes on liquidations are made on a case-by-case basis after reviewing management’s efforts to pursue other alternatives, appraisal value of assets, and the compensation plan for executives managing the liquidation.

F. Appraisal Rights

We will generally vote for proposals to restore, or provide shareholders with, rights of appraisal.

G. Changing Corporate Name

We will generally vote for changing the corporate name.

X. Social and Environmental Issues

Davis Advisors will generally vote with management on shareholder social and environmental proposals on the basis that their impact on share value is difficult to judge and is therefore best done by management.

XI. Capital Structure

A. Common Stock Authorization

We review on a case-by-case basis proposals to increase the number of shares of common stock authorized for issue.

We use quantitative criteria that measure the number of shares available for issuance after analyzing the company’s industry and performance. Our first step is to determine the number of shares available for issuance (shares not outstanding and not reserved for issuance) as a percentage of the total number of authorized shares after accounting for the requested increase. Shares reserved for legitimate business purposes, such as stock splits or mergers, are subtracted from the pool of shares available. We then compare this percentage to the allowable cap developed for the company’s peer group to determine if the requested increase is reasonable. Each peer group is broken down into four quartiles and within each quartile an “allowable increase” for the company is set. The top quartile performers will have the largest allowable increase.

If the requested increase is greater than the “allowable increase” we will generally vote against the proposal.

B. Reverse Stock Splits

We will review management proposals to implement a reverse stock split on a case-by-case basis. We will generally support a reverse stock split if management provides a reasonable justification for the split.

C. Blank Check Preferred Authorization

We will generally vote for proposals to create blank check preferred stock in cases when the company expressly states that the stock will not be used as a takeover defense or carry superior voting rights.

We review on a case-by-case basis proposals that would authorize the creation of new classes of preferred stock with unspecified voting, conversion, dividend and distribution, and other rights.

We review on a case-by-case basis proposals to increase the number of authorized blank check preferred shares. If the company does not have any preferred shares outstanding we will generally vote against the requested increase. If the company does have preferred shares outstanding we will use the criteria set forth herein.

D. Shareholder Proposals Regarding Blank Check Preferred Stock

We will generally vote for shareholder proposals to have blank check preferred stock placements, other than those shares issued for the purpose of raising capital or making acquisitions in the normal course of business, submitted for shareholder ratification.

E. Adjust Par Value of Common Stock

We will generally vote for management proposals to reduce the par value of common stock.

F. Preemptive Rights

We review on a case-by-case basis proposals to create or abolish preemptive rights. In evaluating proposals on preemptive rights, we look at the size of a company and the characteristics of its shareholder base.

G. Debt Restructurings

We review on a case-by-case basis proposals to increase common and/or preferred shares and to issue shares as part of a debt-restructuring plan. We consider the following issues:

	•		Dilution - How much will ownership interest of existing shareholders be reduced, and how extreme will dilution to any future earnings be?

	•		Change in Control - Will the transaction result in a change in control of the company?

	•		Bankruptcy - Is the threat of bankruptcy, which would result in severe losses in shareholder value, the main factor driving the debt restructuring?

Generally, we approve proposals that facilitate debt restructurings unless there are clear signs of self-dealing or other abuses.

H. Share Repurchase Programs

We will generally vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.

I. Dual-class Stock

We will generally vote against proposals to create a new class of common stock with superior voting rights.

We will generally vote for proposals to create a new class of nonvoting or subvoting common stock if:

	•		It is intended for financing purposes with minimal or no dilution to current shareholders.

	•		It is not designed to preserve the voting power of an insider or significant shareholder.

J. Issue Stock for Use with Rights Plan

We will generally vote against proposals that increase authorized common stock for the explicit purpose of implementing a shareholder rights plan (poison pill).

K. Preferred Stock

We will generally vote against proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (“blank check” preferred stock).

We will generally vote for proposals to create “declawed” blank check preferred stock (stock that cannot be used as a takeover defense).

We will generally vote for proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable.

We will generally vote against proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose.

We vote case-by-case on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company’s industry and performance in terms of shareholder returns.

L. Recapitalization

We vote case-by-case on recapitalizations (reclassifications of securities), taking into account the following: more simplified capital structure, enhanced liquidity, fairness of conversion terms, impact on voting power and dividends, reasons for the reclassification, conflicts of interest, and other alternatives considered.

M. Reverse Stock Splits

We will generally vote for management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced.

We will generally vote for management proposals to implement a reverse stock split to avoid delisting.

Declaration Management & Research LLC

Proxy Voting Policy and Procedures

Declaration Management & Research LLC (“Declaration”) is a fixed income manager and the securities we purchase for client accounts are predominantly fixed income securities. Accordingly, we are seldom if ever called upon to vote equity securities on our clients’ behalf. However, in the event we were granted the discretion to vote proxies for a client’s account and an occasion arose where an equity security needed to be voted, we would follow the following proxy voting policy in carrying out our responsibilities to that client.

I. General Principles

In order to set a framework within which proxy questions should be considered and voted, the following general principles should be applied:

1) As a fiduciary under ERISA or otherwise, the discretion to vote proxies for a client’s account should be exercised keeping in mind a fiduciary’s duty to use its best efforts to preserve or enhance the value of the client’s account. We should vote on proxy questions with the goal of fostering the interests of the client (or the participants and beneficiaries in the case of an ERISA account).

2) Proxy questions should be considered within the individual circumstances of the issuer. It is possible that individual circumstances might mean that a given proxy question could be voted differently than what is generally done in other cases.

3) If a proxy question clearly has the capability of affecting the economic value of the issuer’s stock, the question should be voted in a way that attempts to preserve, or give the opportunity for enhancement of, the stock’s economic value.

4) In certain circumstances, even though a proposal might appear to be beneficial or detrimental in the short term, our analysis will conclude that over the long term greater value may be realized by voting in a different manner.

5) It is our policy that when we are given authority to vote proxies for a client’s account, we must be authorized to vote all proxies for the account in our discretion. We do not accept partial voting authority nor do we accept instructions from clients on how to vote on specific issues, except in the case of registered investment companies. Clients may wish to retain proxy voting authority and vote their own proxies if necessary in order to satisfy their individual social, environmental or other goals.

Since we cannot currently anticipate circumstances in which Declaration would be called upon to vote an equity security for a client’s account, it is difficult to specify in advance how we would vote on particular questions. For routine matters, we would expect to vote in accordance with the recommendation of the issuer’s management. For all other matters, we would decide how to vote on a case-by-case basis considering the relevant circumstances of the issuer.

We will from time to time review this proxy voting policy and procedures and may adopt changes from time to time. Clients may contact Carole Parker, our Chief Compliance Officer, by calling 703-749-8240 or via e-mail at cparker@declaration.com to obtain a record of how we voted the proxies for their account.

II. Process

At Declaration, the investment research analysts are responsible for performing research on the companies in which we invest. The same analysts would be responsible for decisions regarding proxy voting, as they would be the most familiar with company-specific issues. Portfolio managers may also provide input when appropriate. Proxy voting mechanics are the responsibility of the analyst.

We may abstain from voting a client proxy if we conclude that the effect on the client’s economic interests or the value of the portfolio holding is indeterminable or insignificant. We may also abstain from voting a client proxy for cost reasons (e.g., costs associated with voting proxies of non-U.S. securities). In accordance with our fiduciary duties, we would weigh the costs and benefits of voting proxy proposals relating to foreign securities and make an informed decision with respect to whether voting a given proxy proposal is prudent. Our decision would take into account the effect that the vote of our client, either by itself or together with other votes, was expected to have on the value of our client’s investment and whether this expected effect would outweigh the cost of voting.

We will maintain the records required to be maintained by us with respect to proxies in accordance with the requirements of the Investment Advisers Act of 1940 and, with respect to our registered investment company clients, the Investment Company Act of 1940. We may, but need not, maintain proxy statements that we receive regarding client securities to the extent that such proxy statements are available on the SEC’s Edgar system. We may also rely upon a third party to maintain certain records required to be maintained by the Advisors Act or the Investment Company Act.

III. Conflicts of Interest

We manage the assets of various public and private company clients, and may invest in the securities of certain of these companies on behalf of our clients. As noted above, we invest principally in fixed income securities with respect to which proxies are not required to be voted. However, in the event we were to be granted the discretion to vote proxies by a client, and an equity security were to be held in that client’s portfolio with respect to which a vote was required, we would be responsible for voting proxies for that security. We recognize that the potential for conflicts of interest could arise in situations where we have discretion to vote client proxies and where we have material business relationships² or material personal/family relationships³ with an issuer (or with a potential target or acquirer,


²		For purposes of this proxy voting policy, a “material business relationship” is considered to arise in the event a client has contributed more than 5% of Declaration’s annual revenues for the most recent fiscal year or is reasonably expected to contribute this amount for the current fiscal year.

³		For purposes of this proxy voting policy, a “material personal/family relationship” is one that would be reasonably likely to influence how we vote proxies. To identify any such relationships, the Proxy Voting Committee will in connection with each proxy vote obtain information about (1) personal and/or family relationships between any Declaration employee involved in the proxy vote (e.g., analyst, portfolio manager and/or members of the Proxy Voting Committee, as applicable), and directors or senior executives of the issuer, and (ii) personal and/or immediate family investments of such employees in issuers which exceed 5% of the outstanding stock of the issuer.

in the case of a proxy vote in connection with a takeover). To address these potential conflicts we have established a Proxy Voting Committee (the “Committee”). The Committee consists of the President, the Senior Vice President — Director of Portfolio Management, and the Chief Compliance Officer. The Committee will use reasonable efforts to determine whether a potential conflict may exist, including screening proxies against a list of clients with whom we have a material business relationship. However, a potential conflict shall be deemed to exist only if one or more of the members of the Committee actually know of the potential conflict. The Committee will work with the analyst assigned to the specific security to oversee the proxy voting process for securities where we believe we may have potential conflicts.

The Committee will meet to decide how to vote the proxy of any security with respect to which we have identified a potential conflict. The Committee will consider the analyst’s recommendation, make a decision on how to vote the proxy and document the Committee’s rationale for its decision.

Declaration is an indirect wholly owned subsidiary of Manulife Financial Corporation (“MFC”), a public company. It is our general policy not to acquire or hold MFC stock on behalf of our clients. However, in the event that a client were to hold MFC stock in a portfolio which we managed, and we were responsible for voting a MFC proxy on behalf of the client, the Committee would decide how to vote the MFC proxy in a manner that it believes will maximize shareholder value. The Committee will document the rationale for its decision.

It is Declaration’s policy not to accept any input from any other person or entity, including its affiliates, when voting proxies for any security. In the event that a Declaration employee was contacted by any affiliate or any other person or entity, other than by means of standard materials available to all shareholders, with a recommendation on how to vote a specific proxy, the event would be reported to the Compliance Officer and would be documented. The Committee would then decide how to vote the proxy in question and would document the rationale for its decision.

If there is controversy or uncertainty about how any particular proxy question should be voted, or if an analyst or a Committee member believes that he or she has been pressured to vote in a certain way, he or she will consult with the Committee or with the Compliance Officer, and a decision will be made whether to refer the proxy to the Committee for voting. Final decisions on proxy voting will ultimately be made with the goal of enhancing the value of our clients’ investments.

Adopted 07/03
Revised 09/04


Effective Date:		May 5, 2003
Approver:		John Robbins
Owner:		DeAM Compliance
Functional Applicability:		Asset Management
Geographic Applicability:		U.S.
Last Reviewed Date:		February 22, 2006
Last Revision Date:		March 03, 2006
Next Review Date:		February 2007
Version:		5

I. INTRODUCTION

Deutsche Asset Management (DeAM)⁴ has adopted and implemented the following policies and procedures, which it believes are reasonably designed to ensure that proxies are voted in the best economic interest of clients, in accordance with its fiduciary duties and SEC Rule 206(4)-6 under the Investment Advisers Act of 1940. In addition to SEC requirements governing advisers, DeAM’s proxy policies reflect the fiduciary standards and responsibilities for ERISA accounts set out in Department of Labor Bulletin 94-2, 29 CFR 2509.94-2 (July 29,1994).

II. DEAM’S PROXY VOTING RESPONSIBILITIES

Proxy votes are the property of DeAM’s advisory clients.⁵ As such, DeAM’s authority and responsibility to vote such proxies depend upon its contractual relationships with its clients. DeAM has delegated responsibility for affecting its advisory clients’ proxy votes to Institutional Shareholder Services (“ISS”), an independent third-party proxy voting specialist. ISS votes DeAM’s advisory clients’ proxies in accordance with DeAM’s proxy guidelines or DeAM’s specific instructions. Where a client has given specific instructions as to how a proxy should be voted, DeAM will notify ISS to carry out those instructions. Where no specific instruction exists, DeAM will follow the procedures in voting the proxies set forth in this document.

DeAM may have proxy voting responsibilities for investment companies and other clients for which it serves as investment adviser. With respect to client accounts that are sub-advised by an affiliated or unaffiliated investment adviser, DeAM may have proxy voting responsibilities, or such responsibilities may be delegated to the sub-adviser. Similarly, DeAM may have proxy voting responsibilities with respect to advisory client accounts for which it serves as investment sub-adviser.


⁴		DeAM refers to Deutsche Investment Management Americas Inc. and Deutsche Asset Management, Inc., each an investment adviser registered under the Investment Advisers Act of 1940. These Policies and Procedures also may apply to other entities within the Deutsche Bank organization for which the Proxy Vendor Oversight and the Proxy Voting Sub-Committee votes proxies, as listed on Exhibit 1.

⁵		For purposes of these Policies and Procedures, “clients” refers to persons or entities: for which DeAM serves as investment adviser or sub-adviser; for which DeAM votes proxies; and that have an economic or beneficial ownership interest in the portfolio securities of issuers soliciting such proxies.

III. POLICIES

1. Proxy voting activities are conducted in the best economic interest of clients

DeAM has adopted the following policies and procedures to ensure that proxies are voted in accordance with the best economic interest of its clients, as determined by DeAM in good faith after appropriate review.

2. The Proxy Voting Sub-Committee

The Proxy Voting Sub-Committee (the “PVSC”) is an internal working group established by DeAM’s Investment Risk Oversight Committee pursuant to a written charter. The PVSC is responsible for overseeing DeAM’s proxy voting activities, including:

(i) adopting, monitoring and updating guidelines, attached as Exhibit A (the “Guidelines”), that provide how DeAM will generally vote proxies pertaining to a comprehensive list of common proxy voting matters;

(ii) voting proxies where (A) the issues are not covered by specific client instruction or the Guidelines; (B) the Guidelines specify that the issues are to be determined on a case-by-case basis; or (C) where an exception to the Guidelines may be in the best economic interest of DeAM’s clients; and

(iii) monitoring the Proxy Vendor Oversight’s proxy voting activities (see below): DeAM’s Proxy Vendor Oversight, a function of DeAM’s Asset Management Operations Group, is responsible for coordinating with ISS to administer DeAM’s proxy voting process and for voting proxies in accordance with any specific client instructions or, if there are none, the Guidelines, and overseeing ISS’ proxy responsibilities in this regard.

3. Availability of Proxy Voting Policies and Procedures and proxy voting record

Copies of these Policies and Procedures, as they may be updated from time to time, are made available to clients as required by law and otherwise at DeAM’s discretion. Clients may also obtain information on how their proxies were voted by DeAM as required by law and otherwise at DeAM’s discretion; however, DeAM must not selectively disclose its investment company clients’ proxy voting records. The Proxy Vendor Oversight will make proxy voting reports available to advisory clients upon request. The investment companies’ proxy voting records will be disclosed to shareholders by means of publicly-available annual filings of each company’s proxy voting record for 12-month periods ended June 30 (see “Recordkeeping” below).

IV. PROCEDURES

The key aspects of DeAM’s proxy voting process are as follows:

1. The PVSC’s Proxy Voting Guidelines

The Guidelines set forth the PVSC’s standard voting positions on a comprehensive list of common proxy voting matters. The PVSC has developed, and continues to update the Guidelines based on consideration of current corporate governance principles, industry standards, client feedback, and the impact of the matter on issuers and the value of the investments.

The PVSC will review the Guidelines as necessary to support the best economic interests of DeAM’s clients and, in any event, at least annually. The PVSC will make changes to the Guidelines, whether as a result of the annual review or otherwise, taking solely into account the best economic interests of clients. Before changing the Guidelines, the PVSC will thoroughly review and evaluate the proposed change and the reasons therefor, and the PVSC Chair will ask PVSC members whether anyone outside of the DeAM organization (but within Deutsche Bank

and its affiliates) or any entity that identifies itself as a DeAM advisory client has requested or attempted to influence the proposed change and whether any member has a conflict of interest with respect to the proposed change. If any such matter is reported to the PVSC Chair, the Chair will promptly notify the Conflicts of Interest Management Sub-Committee (see below) and will defer the approval, if possible. Lastly, the PVSC will fully document its rationale for approving any change to the Guidelines.

The Guidelines may reflect a voting position that differs from the actual practices of the public company (ies) within the Deutsche Bank organization or of the investment companies for which DeAM or an affiliate serves as investment adviser or sponsor. Investment companies, particularly closed-end investment companies, are different from traditional operating companies. These differences may call for differences in voting positions on the same matter. Further, the manner in which DeAM votes investment company proxies may differ from proposals for which a DeAM-advised or sponsored investment company solicits proxies from its shareholders. As reflected in the Guidelines, proxies solicited by closed-end (and open-end) investment companies are generally voted in accordance with the pre-determined guidelines of ISS. See Section IV.3.B.

2. Specific proxy voting decisions made by the PVSC

The Proxy Vendor Oversight will refer to the PVSC all proxy proposals (i) that are not covered by specific client instructions or the Guidelines; or (ii) that, according to the Guidelines, should be evaluated and voted on a case-by-case basis.

Additionally, if, the Proxy Vendor Oversight, the PVSC Chair or any member of the PVSC, a portfolio manager, a research analyst or a sub-adviser believes that voting a particular proxy in accordance with the Guidelines may not be in the best economic interests of clients, that individual may bring the matter to the attention of the PVSC Chair and/or the Proxy Vendor Oversight.⁶

If the Proxy Vendor Oversight refers a proxy proposal to the PVSC or the PVSC determines that voting a particular proxy in accordance with the Guidelines is not in the best economic interests of clients, the PVSC will evaluate and vote the proxy, subject to the procedures below regarding conflicts.

The PVSC endeavors to hold meetings to decide how to vote particular proxies sufficiently before the voting deadline so that the procedures below regarding conflicts can be completed before the PVSC’s voting determination.

3. Certain proxy votes may not be cast

In some cases, the PVSC may determine that it is in the best economic interests of its clients not to vote certain proxies. For example, it is DeAM’s policy not to vote proxies of issuers subject to laws of those jurisdictions that impose restrictions upon selling shares after proxies are voted, in order to preserve liquidity. In other cases, it may not be possible to vote certain proxies, despite good faith efforts to do so. For example, some jurisdictions do not provide adequate notice to shareholders so that proxies may be voted on a timely basis. Voting rights on securities that have been loaned to third-parties transfer to those third-parties, with loan termination often being the


⁶		The Proxy Vendor Oversight generally monitors upcoming proxy solicitations for heightened attention from the press or the industry and for novel or unusual proposals or circumstances, which may prompt the Proxy Vendor Oversight to bring the solicitation to the attention of the PVSC Chair. DeAM portfolio managers, DeAM research analysts and sub-advisers also may bring a particular proxy vote to the attention of the PVSC Chair, as a result of their ongoing monitoring of portfolio securities held by advisory clients and/or their review of the periodic proxy voting record reports that the PVSC Chair distributes to DeAM portfolio managers and DeAM research analysts.

only way to attempt to vote proxies on the loaned securities. Lastly, the PVSC may determine that the costs to the client(s) associated with voting a particular proxy or group of proxies outweighs the economic benefits expected from voting the proxy or group of proxies.

The Proxy Vendor Oversight will coordinate with the PVSC Chair regarding any specific proxies and any categories of proxies that will not or cannot be voted. The reasons for not voting any proxy shall be documented.

4. Conflict of Interest Procedures

A. Procedures to Address Conflicts of Interest and Improper Influence

Overriding Principle. In the limited circumstances where the PVSC votes proxies,⁷ the PVSC will vote those proxies in accordance with what it, in good faith, determines to be the best economic interests of DeAM’s clients.⁸

Independence of the PVSC. As a matter of Compliance policy, the PVSC and the Proxy Vendor Oversight are structured to be independent from other parts of Deutsche Bank. Members of the PVSC and the employee responsible for Proxy Vendor Oversight are employees of DeAM. As such, they may not be subject to the supervision or control of any employees of Deutsche Bank Corporate and Investment Banking division (“CIB”). Their compensation cannot be based upon their contribution to any business activity outside of DeAM without prior approval of Legal and Compliance. They can have no contact with employees of Deutsche Bank outside of the Private Client and Asset Management division (“PCAM”) regarding specific clients, business matters or initiatives without the prior approval of Legal and Compliance. They furthermore may not discuss proxy votes with any person outside of DeAM (and within DeAM only on a need to know basis).

Conflict Review Procedures. There will be a committee (the “Conflicts of Interest Management Sub-Committee”) established within DeAM that will monitor for potential material conflicts of interest in connection with proxy proposals that are to be evaluated by the PVSC. Promptly upon a determination that a vote shall be presented to the PVSC, the PVSC Chair shall notify the Conflicts of Interest Management Sub-Committee. The Conflicts of Interest Management Sub-Committee shall promptly collect and review any information deemed reasonably appropriate to evaluate, in its reasonable judgment, if DeAM or any person participating in the proxy voting process has, or has the appearance of, a material conflict of interest. For the purposes of this policy, a conflict of interest shall be considered “material” to the extent that a reasonable person could expect the conflict to influence, or appear to influence, the PVSC’s decision on the particular vote at issue.

The information considered by the Conflicts of Interest Management Sub-Committee may include without limitation information regarding (i) DeAM client relationships; (ii) any relevant personal conflict known by the Conflicts of Interest Management Sub-Committee or brought to the attention of that sub-committee; (iii) and any communications with members of the PVSC (or anyone participating or providing information to the PVSC) and any person outside of the DeAM organization (but within Deutsche Bank and its affiliates) or any entity that identifies itself as a DeAM advisory client regarding the vote at issue. In the context of any determination, the


⁷		As mentioned above, the PVSC votes proxies (i) where neither a specific client instruction nor a Guideline directs how the proxy should be voted, (ii) where the Guidelines specify that an issue is to be determined on a case by case basis or (iii) where voting in accordance with the Guidelines may not be in the best economic interests of clients.

⁸		The Proxy Vendor Oversight, who serves as the non-voting secretary of the PVSC, may receive routine calls from proxy solicitors and other parties interested in a particular proxy vote. Any contact that attempts to exert improper pressure or influence shall be reported to the Conflicts of Interest Management Sub-Committee.

Conflicts of Interest Management Sub-Committee may consult with, and shall be entitled to rely upon, all applicable outside experts, including legal counsel.

Upon completion of the investigation, the Conflicts of Interest Management Sub-Committee will document its findings and conclusions. If the Conflicts of Interest Management Sub-Committee determines that (i) DeAM has a material conflict of interest that would prevent it from deciding how to vote the proxies concerned without further client consent or (ii) certain individuals should be recused from participating in the proxy vote at issue, the Conflicts of Interest Management Sub-Committee will so inform the PVSC chair.

If notified that DeAM has a material conflict of interest as described above, the PVSC chair will obtain instructions as to how the proxies should be voted either from (i) if time permits, the affected clients, or (ii) ISS. If notified that certain individuals should be recused from the proxy vote at issue, the PVSC Chair shall do so in accordance with the procedures set forth below.

Procedures to be followed by the PVSC. At the beginning of any discussion regarding how to vote any proxy, the PVSC Chair (or his or her delegate) will inquire as to whether any PVSC member (whether voting or ex officio) or any person participating in the proxy voting process has a personal conflict of interest or has actual knowledge of an actual or apparent conflict that has not been reported to the Conflicts of Interest Management Sub-Committee.

The PVSC Chair also will inquire of these same parties whether they have actual knowledge regarding whether any director, officer or employee outside of the DeAM organization (but within Deutsche Bank and its affiliates) or any entity that identifies itself as a DeAM advisory client, has: (i) requested that DeAM, the Proxy Vendor Oversight (or any member thereof) or a PVSC member vote a particular proxy in a certain manner; (ii) attempted to influence DeAM, the Proxy Vendor Oversight(or any member thereof), a PVSC member or any other person in connection with proxy voting activities; or (iii) otherwise communicated with a PVSC member or any other person participating or providing information to the PVSC regarding the particular proxy vote at issue, and which incident has not yet been reported to the Conflicts of Interest Management Sub- Committee.

If any such incidents are reported to the PVSC Chair, the Chair will promptly notify the Conflicts of Interest Management Sub-Committee and, if possible, will delay the vote until the Conflicts of Interest Management Sub-Committee can complete the conflicts report. If a delay is not possible, the Conflicts of Interest Management Sub-Committee will instruct the PVSC whether anyone should be recused from the proxy voting process, or whether DeAM should seek instructions as to how to vote the proxy at issue from ISS or, if time permits, affected clients. These inquiries and discussions will be properly reflected in the PVSC’s minutes.

Duty to Report. Any DeAM employee, including any PVSC member (whether voting or ex officio), that is aware of any actual or apparent conflict of interest relevant to, or any attempt by any person outside of the DeAM organization (but within Deutsche Bank and its affiliates) or any entity that identifies itself as a DeAM advisory client to influence, how DeAM votes its proxies has a duty to disclose the existence of the situation to the PVSC Chair (or his or her designee) and the details of the matter to the Conflicts of Interest Management Sub-Committee. In the case of any person participating in the deliberations on a specific vote, such disclosure should be made before engaging in any activities or participating in any discussion pertaining to that vote.

Recusal of Members. The PVSC will recuse from participating in a specific proxy vote any PVSC members (whether voting or ex officio) and/or any other person who (i) are personally involved in a material conflict of interest; or (ii) who, as determined by the Conflicts of Interest Management Sub-Committee, have actual knowledge of a circumstance or fact that could affect their independent judgment, in respect of such vote. The PVSC will also exclude from consideration the views of any person (whether requested or volunteered) if the PVSC or any member thereof knows, or if the Conflicts of Interest Management Sub-Committee has determined, that such other

person has a material conflict of interest with respect to the particular proxy, or has attempted to influence the vote in any manner prohibited by these policies.

If, after excluding all relevant PVSC voting members pursuant to the paragraph above, there are three or more PVSC voting members remaining, those remaining PVSC members will determine how to vote the proxy in accordance with these Policies and Procedures. If there are fewer than three PVSC voting members remaining, the PVSC Chair will obtain instructions as to how to have the proxy voted from, if time permits, the affected clients and otherwise from ISS.

B. Investment Companies and Affiliated Public Companies

Investment Companies. As reflected in the Guidelines, all proxies solicited by open-end and closed-end investment companies are voted in accordance with the pre-determined guidelines of ISS, unless the investment company client directs DeAM to vote differently on a specific proxy or specific categories of proxies. However, regarding investment companies for which DeAM or an affiliate serves as investment adviser or principal underwriter, such proxies are voted in the same proportion as the vote of all other shareholders (i.e., “mirror” or “echo” voting). Master fund proxies solicited from feeder funds are voted in accordance with applicable provisions of Section 12 of the Investment Company Act of 1940.

Affiliated Public Companies. For proxies solicited by non-investment company issuers of or within the Deutsche Bank organization, e.g., Deutsche bank itself, these proxies will be voted in the same proportion as the vote of other shareholders (i.e., “mirror” or “echo” voting).

C. Other Procedures That Limit Conflicts of Interest

DeAM and other entities in the Deutsche Bank organization have adopted a number of policies, procedures and internal controls that are designed to avoid various conflicts of interest, including those that may arise in connection with proxy voting, including:

• Deutsche Bank Americas Restricted Activities Policy. This policy provides for, among other things, independence of DeAM employees from CIB, and information barriers between DeAM and other affiliates. Specifically, no DeAM employee may be subject to the supervision or control of any employee of CIB. No DeAM employee shall have his or her compensation based upon his or her contribution to any business activity within the Bank outside of the business of DeAM, without the prior approval of Legal or Compliance. Further, no employee of CIB shall have any input into the compensation of a DeAM employee without the prior approval of Legal or Compliance. Under the information barriers section of this policy, as a general rule, DeAM employees who are associated with the investment process should have no contact with employees of Deutsche Bank or its affiliates, outside of PCAM, regarding specific clients, business matters, or initiatives. Further, under no circumstances should proxy votes be discussed with any Deutsche Bank employee outside of DeAM (and should only be discussed on a need-to-know basis within DeAM).

• Deutsche Bank Americas Information Barriers for Sections 13 and 16, and Reg. M Policy. This policy establishes information barriers between Deutsche Bank employees from CIB, on the one hand, and Deutsche Bank employees from PCAM. The information barriers depend upon PCAM and CIB personnel adhering to the certain limitations. For example, PCAM and CIB personnel may not share between themselves non-public, proprietary or confidential information. Further, PCAM and CIB personnel may not coordinate or seek to coordinate decision making with respect to particular securities transactions or groups of transactions, or with respect to the voting of particular securities. The policy also states that PCAM (particularly Deutsche Asset Management) and CIB do not employ common managing directors, officers and employees as a general policy matter, and imposes certain restrictions in the event that there are any such common directors, officers or employees

Other relevant internal policies include the Deutsche Bank Americas Code of Professional Conduct, the Deutsche Bank Americas Confidential and Inside Information Policy, the Deutsche Asset Management Code of Ethics, the Sarbanes-Oxley Senior Officer Code of Ethics, and the Deutsche Bank Group Code of Conduct. The PVSC expects that these policies, procedures and internal controls will greatly reduce the chance that the PVSC (or, its members) would be involved in, aware of or influenced by, an actual or apparent conflict of interest.

V. RECORDKEEPING

DeAM will maintain a record of each vote cast by DeAM that includes among other things, company name, meeting date, proposals presented, vote cast and shares voted. In addition, the Proxy Vendor Oversight maintains records for each of the proxy ballots it votes. Specifically, the Department’s records include, but are not limited to:

• The proxy statement (and any additional solicitation materials) and relevant portions of annual statements.

• Any additional information considered in the voting process that may be obtained from an issuing company, its agents or proxy research firms.

• Analyst worksheets created for stock option plan and share increase analyses

• Proxy Edge print-screen of actual vote election. In addition, DeAM will retain these Policies and Procedures and the Guidelines; will maintain records of client requests for proxy voting information; and will retain any documents the Proxy Vendor Oversight or the PVSC prepared that were material to making a voting decision or that memorialized the basis for a proxy voting decision.

The PVSC also will create and maintain appropriate records documenting its compliance with these Policies and Procedures, including records of its deliberations and decisions regarding conflicts of interest and their resolution.

DeAM will maintain the above records in an easily accessible place for no less than six years from the end of the fiscal year during which the last entry was made on such record, the first three years in an appropriate DeAM office.

With respect to DeAM’s investment company clients, ISS will create and maintain records of each company’s proxy voting record for 12-month periods ended June 30. DeAM will compile the following information for each matter relating to a portfolio security considered at any shareholder meeting held during the period covered by the report and with respect to which the company was entitled to vote:

• The name of the issuer of the portfolio security;

• The exchange ticker symbol of the portfolio security (if symbol is available through reasonably practicable means);

• The Council on Uniform Securities Identification Procedures number for the portfolio security (if the number is available through reasonably practicable means);

• The shareholder meeting date;

• A brief identification of the matter voted on;

• Whether the matter was proposed by the issuer or by a security holder; Whether the company cast its vote on the matter;

• How the company cast its vote (e.g., for or against proposal, or abstain; for or withhold regarding election of directors); and

• Whether the company cast its vote for or against management.

VI. THE PVSC’S OVERSIGHT ROLE

These Guidelines may reflect a voting position that differs from the actual practices of the public company (ies) within the Deutsche Bank organization or of the investment companies for which DeAM or an affiliate serves as investment adviser or sponsor.

I. Board of Directors and Executives

A. Election of Directors

Routine: DeAM Policy is to vote “for” the uncontested election of directors. Votes for a director in an uncontested election will be withheld in cases where a director has shown an inability to perform his/her duties in the best interests of the shareholders.

Proxy contest: In a proxy contest involving election of directors, a case-by-case voting decision will be made based upon analysis of the issues involved and the merits of the incumbent and dissident slates of directors. DeAM will incorporate the decisions of a third party proxy research vendor, currently, Institutional Shareholder Services (“ISS”) subject to review by the Proxy Voting Sub-Committee (PVSC) as set forth in the Deutsche Asset Management (DeAM)’s Proxy Voting Policies and Procedures.

Rationale: The large majority of corporate directors fulfill their fiduciary obligation and in most cases support for management’s nominees is warranted. As the issues relevant to a contested election differ in each instance, those cases must be addressed as they arise.

B. Classified Boards of Directors

DeAM policy is to vote against proposals to classify the board and for proposals to repeal classified boards and elect directors annually.

Rationale: Directors should be held accountable on an annual basis. By entrenching the incumbent board, a classified board may be used as an anti-takeover device to the detriment of the shareholders in a hostile take-over situation.

C. Board and Committee Independence

DeAM policy is to vote:

1. “For” proposals that require that a certain percentage (majority up to 66 2/3%) of members of a board of directors be comprised of independent or unaffiliated directors.

2. “For” proposals that require all members of a company’s compensation, audit, nominating, or other similar committees be comprised of independent or unaffiliated directors.

3. “Against” shareholder proposals to require the addition of special interest, or constituency, representatives to boards of directors.

4. “For” separation of the Chairman and CEO positions.

5. “Against” proposals that require a company to appoint a Chairman who is an independent director.

Rationale: Board independence is a cornerstone of effective governance and accountability. A board that is sufficiently independent from management assures that shareholders’ interests are adequately represented. However, the Chairman of the board must have sufficient involvement in and experience with the operations of the company to perform the functions required of that position and lead the company.

D. Liability and Indemnification of Directors

DeAM policy is to vote “for” management proposals to limit directors’ liability and to broaden the indemnification of directors, unless broader indemnification or limitations on directors’ liability would affect shareholders’ interests in pending litigation.

Rationale: While shareholders want directors and officers to be responsible for their actions, it is not in the best interests of the shareholders for them to be to risk averse. If the risk of personal liability is too great, companies may not be able to find capable directors willing to serve. We support expanding liability only for actions taken in good faith and not for serious violations of fiduciary obligation or negligence.

E. Qualifications of Directors

DeAM policy is to follow management’s recommended vote on either management or shareholder proposals that set retirement ages for directors or require specific levels of stock ownership by directors.

Rationale: As a general rule, the board of directors, and not the shareholders, is most qualified to establish qualification policies.

F. Removal of Directors and Filling of Vacancies

DeAM policy is to vote “against” proposals that include provisions that directors may be removed only for cause or proposals that include provisions that only continuing directors may fill board vacancies.

Rationale: Differing state statutes permit removal of directors with or without cause. Removal of directors for cause usually requires proof of self-dealing, fraud or misappropriation of corporate assets, limiting shareholders’ ability to remove directors except under extreme circumstances. Removal without cause requires no such showing.

Allowing only incumbent directors to fill vacancies can serve as an anti-takeover device, precluding shareholders from filling the board until the next regular election.

G. Proposals to Fix the Size of the Board

DeAM policy is to vote:

1. “For” proposals to fix the size of the board unless: (a) no specific reason for the proposed change is given; or (b) the proposal is part of a package of takeover defenses.

2. “Against” proposals allowing management to fix the size of the board without shareholder approval.

Rationale: Absent danger of anti-takeover use, companies should be granted a reasonable amount of flexibility in fixing the size of its board.

H. Proposals to Restrict Chief Executive Officer’s Service on Multiple Boards

DeAM policy is to vote “For” proposals to restrict a Chief Executive Officer from serving on more than three outside boards of directors.

Rationale: Chief Executive Officer must have sufficient time to ensure that shareholders’ interests are represented adequately.

II. Capital Structure

A. Authorization of Additional Shares

DeAM policy is to vote “for” proposals to increase the authorization of existing classes of stock that do not exceed a 3:1 ratio of shares authorized to shares outstanding for a large cap company, and do not exceed a 4:1 ratio of shares authorized to shares outstanding for a small-midcap company (companies having a market capitalization under one billion U.S. dollars.).

Rationale: While companies need an adequate number of shares in order to carry on business, increases requested for general financial flexibility must be limited to protect shareholders from their potential use as an anti-takeover device. Requested increases for specifically designated, reasonable business purposes (stock split, merger, etc.) will be considered in light of those purposes and the number of shares required.

B. Authorization of “Blank Check” Preferred Stock

DeAM policy is to vote:

1. “Against” proposals to create blank check preferred stock or to increase the number of authorized shares of blank check preferred stock unless the company expressly states that the

stock will not be used for anti-takeover purposes and will not be issued without shareholder approval.

2. “For” proposals mandating shareholder approval of blank check stock placement.

Rationale: Shareholders should be permitted to monitor the issuance of classes of preferred stock in which the board of directors is given unfettered discretion to set voting, dividend, conversion and other rights for the shares issued.

C. Stock Splits/Reverse Stock Splits

DeAM policy is to vote “for” stock splits if a legitimate business purpose is set forth and the split is in the shareholders’ best interests. A vote is cast “for” a reverse stock split only if the number of shares authorized is reduced in the same proportion as the reverse split or if the effective increase in authorized shares (relative to outstanding shares) complies with the proxy guidelines for common stock increases (see, Section II.A, above.)

Rationale: Generally, stock splits do not detrimentally affect shareholders. Reverse stock splits, however, may have the same result as an increase in authorized shares and should be analyzed accordingly.

D. Dual Class/Supervoting Stock

DeAM policy is to vote “against” proposals to create or authorize additional shares of super-voting stock or stock with unequal voting rights.

Rationale: The “one share, one vote” principal ensures that no shareholder maintains a voting interest exceeding their equity interest in the company.

E. Large Block Issuance

DeAM policy is to address large block issuances of stock on a case-by-case basis, incorporating the recommendation of an independent third party proxy research firm (currently ISS) subject to review by the PVSC as set forth in DeAM’s Proxy Policies and Procedures. Additionally, DeAM supports proposals requiring shareholder approval of large block issuances.

Rationale: Stock issuances must be reviewed in light of the business circumstances leading to the request and the potential impact on shareholder value.

F. Recapitalization into a Single Class of Stock

DeAM policy is to vote “for” recapitalization plans to provide for a single class of common stock, provided the terms are fair, with no class of stock being unduly disadvantaged.

Rationale: Consolidation of multiple classes of stock is a business decision that may be left to the board and/management if there is no adverse effect on shareholders.

G. Share Repurchases

DeAM policy is to vote “for” share repurchase plans provided all shareholders are able to participate on equal terms.

Rationale: Buybacks are generally considered beneficial to shareholders because they tend to increase returns to the remaining shareholders.

H. Reductions in Par Value

DeAM policy is to vote “for” proposals to reduce par value, provided a legitimate business purpose is stated (e.g., the reduction of corporate tax responsibility.)

Rationale: Usually, adjustments to par value are a routine financial decision with no substantial impact on shareholders.

III. Corporate Governance Issues

A. Confidential Voting

DeAM policy is to vote “for” proposals to provide for confidential voting and independent tabulation of voting results and to vote “against” proposals to repeal such provisions.

Rationale: Confidential voting protects the privacy rights of all shareholders. This is particularly important for employee-shareholders or shareholders with business or other affiliations with the company, who may be vulnerable to coercion or retaliation when opposing management. Confidential voting does not interfere with the ability of corporations to communicate with all shareholders, nor does it prohibit shareholders from making their views known directly to management.

B. Cumulative Voting

DeAM policy is to vote “for” shareholder proposals requesting cumulative voting and “against” management proposals to eliminate it. However, the protections afforded shareholders by cumulative voting are not necessary when a company has a history of good performance and does not have a concentrated ownership interest. Accordingly, a vote is cast “for” cumulative voting and “against” proposals to eliminate it unless:

a) The company has a five year return on investment greater than the relevant industry index,

b) All directors and executive officers as a group beneficially own less than 10% of the outstanding stock, and

c) No shareholder (or voting block) beneficially owns 15% or more of the company.

Thus, failure of any one of the three criteria results in a vote for cumulative voting in accordance with the general policy.

Rationale: Cumulative voting is a tool that should be used to ensure that holders of a significant number of shares may have board representation; however, the presence of other safeguards may make their use unnecessary.

C. Supermajority Voting Requirements

DeAM policy is to vote “against” management proposals to require a supermajority vote to amend the charter or bylaws and to vote “for” shareholder proposals to modify or rescind existing supermajority requirements.

*Exception made when company holds a controlling position and seeks to lower threshold to maintain control and/or make changes to corporate by-laws.

Rationale: Supermajority voting provisions violate the democratic principle that a simple majority should carry the vote. Setting supermajority requirements may make it difficult or impossible for shareholders to remove egregious by-law or charter provisions. Occasionally, a company with a significant insider held position might attempt to lower a supermajority threshold to make it easier for management to approve provisions that may be detrimental to shareholders. In that case, it may not be in the shareholders interests to lower the supermajority provision.

D. Shareholder Right to Vote

DeAM policy is to vote “against” proposals that restrict the right of shareholders to call special meetings, amend the bylaws, or act by written consent. Policy is to vote “for” proposals that remove such restrictions.

Rationale: Any reasonable means whereby shareholders can make their views known to management or affect the governance process should be supported.

IV. Compensation

Annual Incentive Plans or Bonus Plans are often submitted to shareholders for approval. These plans typically award cash to executives based on company performance. Deutsche Bank believes that the responsibility for executive compensation decisions rest with the board of directors and/or the compensation committee, and its policy is not to second-guess the board’s award of cash compensation amounts to executives unless a particular award or series of awards is deemed excessive. If stock options are awarded as part of these bonus or incentive plans, the

provisions must meet Deutsche Bank’s criteria regarding stock option plans, or similar stock-based incentive compensation schemes, as set forth below.

A. Executive and Director Stock Option Plans

DeAM policy is to vote “for” stock option plans that meet the following criteria:

(1) The resulting dilution of existing shares is less than (a) 15 percent of outstanding shares for large capital corporations or (b) 20 percent of outstanding shares for small-mid capital companies (companies having a market capitalization under one billion U.S. dollars.)

(2) The transfer of equity resulting from granting options at less than FMV is no greater than 3% of the over-all market capitalization of large capital corporations, or 5% of market cap for small-mid capital companies.

(3) The plan does not contain express repricing provisions and, in the absence of an express statement that options will not be repriced; the company does not have a history of repricing options.

(4) The plan does not grant options on super-voting stock.

DeAM will support performance-based option proposals as long as a) they do not mandate that all options granted by the company must be performance based, and b) only certain high-level executives are subject to receive the performance based options.

DeAM will support proposals to eliminate the payment of outside director pensions.

Rationale: Determining the cost to the company and to shareholders of stock-based incentive plans raises significant issues not encountered with cash-based compensation plans. These include the potential dilution of existing shareholders’ voting power, the transfer of equity out of the company resulting from the grant and execution of options at less than FMV and the authority to reprice or replace underwater options. Our stock option plan analysis model seeks to allow reasonable levels of flexibility for a company yet still protect shareholders from the negative impact of excessive stock compensation. Acknowledging that small mid-capital corporations often rely more heavily on stock option plans as their main source of executive compensation and may not be able to compete with their large capital competitors with cash compensation, we provide slightly more flexibility for those companies.

B. Employee Stock Option/Purchase Plans

DeAM policy is to vote for employee stock purchase plans (ESPP’s) when the plan complies with Internal Revenue Code 423, allowing non-management employees to purchase stock at 85% of FMV.

DeAM policy is to vote “for” employee stock option plans (ESOPs) provided they meet the standards for stock option plans in general. However, when computing dilution and transfer of equity, ESOPs are considered independently from executive and director option plans.

Rationale: ESOPs and ESPP’s encourage rank-and-file employees to acquire an ownership stake in the companies they work for and have been shown to promote employee loyalty and improve productivity.

C. Golden Parachutes

DeAM policy is to vote “for” proposals to require shareholder approval of golden parachutes and for proposals that would limit golden parachutes to no more than three times base compensation. Policy is to vote “against” more restrictive shareholder proposals to limit golden parachutes.

Rationale: In setting a reasonable limitation, DeAM considers that an effective parachute should be less attractive than continued employment and that the IRS has opined that amounts greater than three times annual salary, are excessive.

D. Proposals to Limit Benefits or Executive Compensation

DeAM policy is to vote “against”

1. Proposals to limit benefits, pensions or compensation and

2. Proposals that request or require disclosure of executive compensation greater than the disclosure required by Securities and Exchange Commission (SEC) regulations.

Rationale: Levels of compensation and benefits are generally considered to be day-to-day operations of the company, and are best left unrestricted by arbitrary limitations proposed by shareholders.

E. Option Expensing

DeAM policy is to support proposals requesting companies to expense stock options.

Rationale: Although companies can choose to expense options voluntarily, the Financial Accounting Standards Board (FASB) does not yet require it, instead allowing companies to disclose the theoretical value of options as a footnote. Because the expensing of stock options lowers earnings, most companies elect not to do so. Given the fact that options have become an integral component of compensation and their exercise results in a transfer of shareholder value, DeAM agrees that their value should not be ignored and treated as “no cost” compensation. The expensing of stock options would promote more modest and appropriate use of stock options in executive compensation plans and present a more accurate picture of company operational earnings.

V. Anti-Takeover Related Issues

A. Shareholder Rights Plans (“Poison Pills”)

DeAM policy is to vote “for” proposals to require shareholder ratification of poison pills or that request boards to redeem poison pills, and to vote “against” the adoption of poison pills if they are submitted for shareholder ratification.

Rationale: Poison pills are the most prevalent form of corporate takeover defenses and can be (and usually are) adopted without shareholder review or consent. The potential cost of poison pills to shareholders during an attempted takeover outweighs the benefits.

B. Reincorporation

DeAM policy is to examine reincorporation proposals on a case-by-case basis. The voting decision is based on: (1) differences in state law between the existing state of incorporation and the proposed state of incorporation; and (2) differences between the existing and the proposed charter/bylaws/articles of incorporation and their effect on shareholder rights. If changes resulting from the proposed reincorporation violate the corporate governance principles set forth in these guidelines, the reincorporation will be deemed contrary to shareholder’s interests and a vote cast “against.”

Rationale: Reincorporations can be properly analyzed only by looking at the advantages and disadvantages to their shareholders. Care must be taken that anti-takeover protection is not the sole or primary result of a proposed change.

C. Fair-Price Proposals

DeAM policy is to vote “for” management fair-price proposals, provided that: (1) the proposal applies only to two-tier offers; (2) the proposal sets an objective fair-price test based on the highest price that the acquirer has paid for a company’s shares; (3) the supermajority requirement for bids that fail the fair-price test is no higher than two-thirds of the outstanding shares; (4) the proposal contains no other anti-takeover provisions or provisions that restrict shareholders rights. A vote is cast for shareholder proposals that would modify or repeal existing fair-price requirements that do not meet these standards.

Rationale: While fair price provisions may be used as anti-takeover devices, if adequate provisions are included, they provide some protection to shareholders who have some say in their application and the ability to reject those protections if desired.

D. Exemption from state takeover laws

DeAM policy is to vote “for” shareholder proposals to opt out of state takeover laws and to vote “against” management proposals requesting to opt out of state takeover laws.

Rationale: Control share statutes, enacted at the state level, may harm long-term share value by entrenching management. They also unfairly deny certain shares their inherent voting rights.

E. Non-financial Effects of Takeover Bids

Policy is to vote “against” shareholder proposals to require consideration of non-financial effects of merger or acquisition proposals.

Rationale: Non-financial effects may often be subjective and are secondary to DeAM’s stated purpose of acting in its client’s best economic interest.

VI. Mergers & Acquisitions

Evaluation of mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) are performed on a case-by-case basis incorporating information from an independent proxy research source (currently ISS.) Additional resources including portfolio management and research analysts may be considered as set forth in DeAM’s Policies and Procedures.

VII. Social & Political Issues

With increasing frequency, shareholder proposals are submitted relating to social and political responsibility issues. Almost universally, the company management will recommend a vote “against” these proposals. These types of proposals cover an extremely wide range of issues. Many of the issues tend to be controversial and are subject to more than one reasonable, yet opposing, theory of support. More so than with other types of proxy proposals, social and political responsibility issues may not have a connection to the economic and corporate governance principles affecting shareholders’ interests. DeAM’s policy regarding social and political responsibility issues, as with any other issue, is designed to protect our client shareholders’ economic interests.

Occasionally, a distinction is made between a shareholder proposal requesting direct action on behalf of the board and a request for a report on (or disclosure of) some information. In order to avoid unduly burdening any company with reporting requirements, DeAM’s policy is to vote against shareholder proposals that demand additional disclosure or reporting than is required by the Securities and Exchange Commission unless it appears there is a legitimate issue and the company has not adequately addressed shareholders’ concerns.

A. Labor & Human Rights

DeAM policy is to vote “against” adopting global codes of conduct or workplace standards exceeding those mandated by law.

Rationale: Additional requirements beyond those mandated by law are deemed unnecessary and potentially burdensome to companies

B. Environmental Issues

DeAM policy is to vote “against” the adoption of the CERES Principles or other similar environmental mandates (e.g., those relating to Greenhouse gas emissions or the use of nuclear power).

Rationale: Environmental issues are extensively regulated by outside agencies and compliance with additional requirements often involves significant cost to companies.

C. Diversity & Equality

1. DeAM policy is to vote “against” shareholder proposals to force equal employment opportunity, affirmative action or board diversity.

Rationale: Compliance with State and Federal legislation along with information made available through filings with the EEOC provides sufficient assurance that companies act responsibly and make information public.

2. DeAM policy is also to vote “against” proposals to adopt the Mac Bride Principles. The Mac Bride Principles promote fair employment, specifically regarding religious discrimination.

Rationale: Compliance with the Fair Employment Act of 1989 makes adoption of the Mac Bride Principles redundant. Their adoption could potentially lead to charges of reverse discrimination.

D. Health & Safety

1. DeAM policy is to vote “against” adopting a pharmaceutical price restraint policy or reporting pricing policy changes.

Rationale: Pricing is an integral part of business for pharmaceutical companies and should not be dictated by shareholders (particularly pursuant to an arbitrary formula.) Disclosing pricing policies may also jeopardize a company’s competitive position in the marketplace.

2. DeAM policy is to vote “against” shareholder proposals to control the use or labeling of and reporting on genetically engineered products.

Rationale: Additional requirements beyond those mandated by law are deemed unnecessary and potentially burdensome to companies.

E. Government/Military

1. DeAM policy is to vote against shareholder proposals regarding the production or sale of military arms or nuclear or space-based weapons, including proposals seeking to dictate a company’s interaction with a particular foreign country or agency.

Rationale: Generally, management is in a better position to determine what products or industries a company can and should participate in. Regulation of the production or distribution of military supplies is, or should be, a matter of government policy.

2. DeAM policy is to vote “against” shareholder proposals regarding political contributions and donations.

Rationale: The Board of Directors and Management, not shareholders, should evaluate and determine the recipients of any contributions made by the company.

3. DeAM policy is to vote “against” shareholder proposals regarding charitable contributions and donations.

Rationale: The Board of Directors and Management, not shareholders, should evaluate and determine the recipients of any contributions made by the company.

F. Tobacco

1. DeAM policy is to vote “against” shareholder proposals requesting additional standards or reporting requirements for tobacco companies as well as “against” requesting companies to report on the intentional manipulation of nicotine content.

Rationale: Where a tobacco company’s actions meet the requirements of legal and industry standards, imposing additional burdens may detrimentally affect a company’s ability to compete. The disclosure of nicotine content information could affect the company’s rights in any pending or future litigation.

4. Shareholder requests to spin-off or restructure tobacco businesses will be opposed.

Rationale: These decisions are more appropriately left to the Board and management, and not to shareholder mandate.

VIII. Miscellaneous Items

A. Ratification of Auditors

DeAM policy is to vote “for” a) the management recommended selection of auditors and b) proposals to require shareholder approval of auditors.

Rationale: Absent evidence that auditors have not performed their duties adequately, support for management’s nomination is warranted.

B. Limitation of non-audit services provided by independent auditor

DeAM policy is to support proposals limiting non-audit fees to 50% of the aggregate annual fees earned by the firm retained as a company’s independent auditor.

Rationale: In the wake of financial reporting problems and alleged audit failures at a number of companies, DeAM supports the general principle that companies should retain separate firms for audit and consulting services to avoid potential conflicts of interest. However, given the protections afforded by the recently enacted Sarbanes-Oxley Act of 2002 (which requires Audit Committee pre-approval for non-audit services and prohibits auditors from providing specific types of services), and the fact that some non-audit services are legitimate audit-related services, complete separation of audit and consulting fees may not be warranted. A reasonable limitation is appropriate to help ensure auditor independence and it is reasonable to expect that audit fees exceed non-audit fees.

C. Audit firm rotation

DeAM policy is to support proposals seeking audit firm rotation unless the rotation period sought is less than five years.

Rationale: While the Sarbanes-Oxley Act mandates that the lead audit partner be switched every five years, DeAM believes that rotation of the actual audit firm would provide an even stronger system of checks and balances on the audit function.

D. Transaction of Other Business

DeAM policy is to vote against “transaction of other business” proposals.

Rationale: This is a routine item to allow shareholders to raise other issues and discuss them at the meeting. As the nature of these issues may not be disclosed prior to the meeting, we recommend a vote against these proposals. This protects shareholders voting by proxy (and not physically present at a meeting) from having action taken at the meeting that they did not receive proper notification of or sufficient opportunity to consider.

E. Motions to Adjourn the Meeting

DeAM Policy is to vote against proposals to adjourn the meeting.

Rationale: Management may seek authority to adjourn the meeting if a favorable outcome is not secured. Shareholders should already have had enough information to make a decision. Once votes have been cast, there is no justification for management to continue spending time and money to press shareholders for support.

F. Bundled Proposals

DeAM policy is to vote against bundled proposals if any bundled issue would require a vote against it if proposed individually.

Rationale: Shareholders should not be forced to “take the good with the bad” in cases where the proposals could reasonably have been submitted separately.

G. Change of Company Name

DeAM policy is to support management on proposals to change the company name.

Rationale: This is generally considered a business decision for a company.

H. Proposals Related to the Annual Meeting

DeAM Policy is to vote in favor of management for proposals related to the conduct of the annual meeting (meeting time, place, etc.)

Rationale: These are considered routine administrative proposals.

I. Investment Company Proxies

Proxies solicited by investment companies are voted in accordance with the recommendations of an independent third party, currently ISS. However, regarding investment companies for which DeAM or an affiliate serves as investment adviser or principal underwriter, such proxies are voted in the same proportion as the vote of all other shareholders. Proxies solicited by master funds from feeder funds will be voted in accordance with applicable provisions of Section 12 of the Investment Company Act of 1940.

Investment companies, particularly closed-end investment companies, are different from traditional operating companies. These differences may call for differences in voting positions on the same matter. For example, DeAM could vote “for” staggered boards of closed-end investment companies, although DeAM generally votes “against” staggered boards for operating companies. Further, the manner in which DeAM votes investment company proxies may differ from proposals for which a DeAM-advised investment company solicits proxies from its shareholders. As reflected in the Guidelines, proxies solicited by closed-end (and open-end) investment companies are voted in accordance with the pre-determined guidelines of an independent third-party.

J. International Proxy Voting

The above guidelines pertain to issuers organized in the United States or Canada. Proxies solicited by other issuers are voted in accordance with the recommendations of an independent third party, currently ISS.

DIMENSIONAL FUND ADVISORS LP PROXY VOTING POLICY SUMMARY

Dimensional Fund Advisors LP (“Dimensional”) has adopted Proxy Voting Policies and Procedures (the “Voting Policies”) and Proxy Voting Guidelines (“Voting Guidelines”), which Dimensional will apply to the Fund(s) sub-advised by Dimensional. The Voting Guidelines have been developed by Institutional Shareholder Services, an independent third party service provider (“ISS”), except with respect to certain matters for which Dimensional has modified the standard ISS voting guidelines. A concise summary of the Voting Guidelines is provided below under the heading “Dimensional Voting Guidelines Summary.”

The Investment Committee at Dimensional is generally responsible for overseeing Dimensional’s proxy voting process. The Investment Committee has formed a Corporate Governance Committee composed of certain officers, directors and other personnel of Dimensional and has delegated to its members authority to (i) oversee the voting of proxies, (ii) make determinations as to how to vote certain specific proxies, (iii) verify the on-going compliance with the Voting Policies, and (iv) review the Voting Policies from time to time and recommend changes to the Investment Committee. The Corporate Governance Committee may designate one or more of its members to oversee specific, ongoing compliance with respect to the Voting Policies and may designate other personnel of Dimensional to vote proxies on behalf of the Funds, including all authorized traders of Dimensional.

Dimensional votes (or refrains from voting) proxies in a manner consistent with the best interests of the Funds as understood by Dimensional at the time of the vote. Generally, Dimensional analyzes proxy statements on behalf of the Funds in accordance with the Voting Policies and the Voting Guidelines. Most proxies that Dimensional receives will be voted in accordance with the Voting Guidelines. Since most proxies are voted in accordance with the Voting Guidelines, it normally will not be necessary for Dimensional to make an actual determination of how to vote a particular proxy, thereby largely eliminating conflicts of interest for Dimensional during the proxy voting process. However, the Proxy Policies do address the procedures to be followed if a conflict of interest arises between the interests of the Funds, and the interests of Dimensional or its affiliates. If the Corporate Governance Committee member has actual knowledge of a conflict of interest and recommends a vote contrary to the Voting Guidelines, Dimensional, prior to voting, will fully disclose the conflict to the Board of Directors/Trustees of the applicable Fund, or an authorized committee of such Board, and vote the proxy in accordance with the direction of the Board or its authorized committee.

Dimensional will usually vote proxies in accordance with the Voting Guidelines. The Voting Guidelines provide a framework for analysis and decision making, however, the Voting Guidelines do not address all potential issues. In order to be able to address all the relevant facts and circumstances related to a proxy vote, Dimensional reserves the right to vote counter to the Voting Guidelines if, after a review of the matter, Dimensional believes that the best interests of the Fund would be served by such a vote. In such a circumstance, the analysis will be documented in writing and periodically presented to the Corporate Governance Committee. To the extent that the Voting Guidelines do not cover potential voting issues, Dimensional will vote on

such issues in a manner that is consistent with the spirit of the Voting Guidelines and that Dimensional believes would be in the best interests of the Fund.

Dimensional votes (or refrains from voting) proxies in a manner that Dimensional determines is in the best interests of a Fund and which seeks to maximize the value of that Fund’s investments. In some cases, Dimensional may determine that it is in the best interests of a Fund to refrain from exercising proxy voting rights. Dimensional may determine that voting is not in the best interest of a Fund and refrain from voting if the costs, including the opportunity costs, of voting would, in the view of Dimensional, exceed the expected benefits of voting. For securities on loan, Dimensional will balance the revenue-producing value of loans against the difficult-to-assess value of casting votes. It is Dimensional’s belief that the expected value of casting a vote generally will be less than the securities lending income, either because the votes will not have significant economic consequences or because the outcome of the vote would not be affected by Dimensional recalling loaned securities in order to ensure they are voted. Dimensional does intend to recall securities on loan if it determines that voting the securities is likely to materially affect the value of the Fund’s investment and that it is in the Fund’s best interests to do so. In cases where Dimensional does not receive a solicitation or enough information within a sufficient period of time (as reasonably determined by Dimensional) prior to the proxy-voting deadline, Dimensional may be unable to vote.

With respect to non-U.S. securities, it is typically both difficult and costly to vote proxies due to local regulations, customs, and other requirements or restrictions. Dimensional does not vote proxies of non-U.S. companies if Dimensional determines that the expected economic costs from voting outweigh the anticipated economic benefit to a Fund associated with voting. Dimensional determines whether to vote proxies of non-U.S. companies on a country-by-country and portfolio-by-portfolio basis, and generally implements uniform voting procedures for all proxies of companies in a country. Dimensional periodically reviews voting logistics, including costs and other voting difficulties, on a portfolio-by-portfolio and country-by-country basis, in order to determine if there have been any material changes that would affect Dimensional ‘s decision of whether or not to vote. In the event Dimensional is made aware of and believes an issue to be voted is likely to materially affect the economic value of a Fund, that its vote is reasonably likely to influence the ultimate outcome of the contest, and the expected benefits of voting the proxies exceed the costs, Dimensional will make every reasonable effort to vote such proxies.

Dimensional has retained ISS to provide certain services with respect to proxy voting. ISS provides information on shareholder meeting dates and proxy materials; translates proxy materials printed in a foreign language; provides research on proxy proposals and voting recommendations in accordance with the Voting Guidelines; effects votes on behalf of the Funds; and provides reports concerning the proxies voted. Although Dimensional may consider the recommendations of ISS on proxy issues, Dimensional remains ultimately responsible for all proxy voting decisions.

DIMENSIONAL VOTING GUIDELINES SUMMARY

U.S. Proxy Voting

The following is a concise summary of the Voting Guidelines for voting U.S. proxies.

1. Operational Items:

Auditor Ratification

Vote FOR proposals to ratify auditors, unless any of the following apply:

	•		An auditor has a financial interest in or association with the company, and is therefore not independent;

	•		There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company’s financial position;

	•		Poor accounting practices are identified that rise to a serious level of concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures; or

	•		Fees for non-audit services (“Other” fees) are excessive.

Non-audit fees are excessive if:

•

Non-audit (“other”) fees exceed audit fees + audit-related fees + tax compliance/preparation fees

Vote CASE-BY-CASE on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services.

Vote CASE-BY-CASE on shareholder proposals asking for audit firm rotation, taking into account:

	•		The tenure of the audit firm;

	•		The length of rotation specified in the proposal;

	•		Any significant audit-related issues at the company;

	•		The number of Audit Committee meetings held each year;

	•		The number of financial experts serving on the committee; and

	•		Whether the company has a periodic renewal process where the auditor is evaluated for both audit quality and competitive price.

2. Board of Directors:

Voting on Director Nominees in Uncontested Elections

Vote on director nominees should be determined on a CASE-BY-CASE basis.

Vote AGAINST or WITHHOLD from individual directors who:

•

Attend less than 75 percent of the board and committee meetings without a valid excuse, such as illness, service to the nation, work on behalf of the company, or funeral obligations. If the company provides meaningful public or private disclosure explaining the director’s absences, evaluate the information on a CASE-BY-CASE basis taking into account the following factors:

Degree to which absences were due to an unavoidable conflict;

	-		Pattern of absenteeism; and

	-		Other extraordinary circumstances underlying the director’s absence;

	•		Sit on more than six public company boards;^*

	•		Are CEOs of public companies who sit on the boards of more than two public companies besides their own— withhold only at their outside boards.

Vote AGAINST or WITHHOLD from all nominees of the board of directors, (except from new nominees, who should be considered on a CASE-BY-CASE basis) if:

	•		The company’s proxy indicates that not all directors attended 75% of the aggregate of their board and committee meetings, but fails to provide the required disclosure of the names of the directors involved. If this information cannot be obtained, vote against/withhold from all incumbent directors;

	•		The company’s poison pill has a dead-hand or modified dead-hand feature. Vote against/withhold every year until this feature is removed;

	•		The board adopts or renews a poison pill without shareholder approval, does not commit to putting it to shareholder vote within 12 months of adoption (or in the case of an newly public company, does not commit to put the pill to a shareholder vote within 12 months following the IPO), or reneges on a commitment to put the pill to a vote, and has not yet received a withhold/against recommendation for this issue;

	•		The board failed to act on a shareholder proposal that received approval by a majority of the shares outstanding the previous year (a management proposal with other than a FOR recommendation by management will not be considered as sufficient action taken);

	•		The board failed to act on a shareholder proposal that received approval of the majority of shares cast for the previous two consecutive years (a management proposal with other than a FOR recommendation by management will not be considered as sufficient action taken);

	•		The board failed to act on takeover offers where the majority of the shareholders tendered their shares;

	•		At the previous board election, any director received more than 50 percent withhold/against votes of the shares cast and the company has failed to address the underlying issue(s) that caused the high withhold/against vote;

	•		The board is classified, and a continuing director responsible for a problematic governance issue at the board/committee level that would warrant a withhold/against vote recommendation is not up for election- any or all appropriate nominees (except new) may be held accountable;

	•		The board lacks accountability and oversight, coupled with sustained poor performance relative to peers. Sustained poor performance is measured by one- and three-year total shareholder returns in the bottom half of a company’s four-digit GICS industry group (Russell 3000 companies only).

Vote AGAINST or WITHHOLD from Inside Directors and Affiliated Outside Directors (per the Classification of Directors below) when:

•

The inside or affiliated outside director serves on any of the three key committees: audit, compensation, or nominating;


^*		Dimensional will screen votes otherwise subject to this policy based on the qualifications and circumstances of the directors involved.

	•		The company lacks an audit, compensation, or nominating committee so that the full board functions as that committee;

	•		The company lacks a formal nominating committee, even if board attests that the independent directors fulfill the functions of such a committee;

	•		The full board is less than majority independent.

Vote AGAINST or WITHHOLD from the members of the Audit Committee if:

	•		The non-audit fees paid to the auditor are excessive;

	•		The company receives an adverse opinion on the company’s financial statements from its auditor; or

	•		There is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.

Vote CASE-by-CASE on members of the Audit Committee and/or the full board if poor accounting practices, which rise to a level of serious concern are indentified, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures.

Examine the severity, breadth, chronological sequence and duration, as well as the company’s efforts at remediation or corrective actions in determining whether negative vote recommendations are warranted against the members of the Audit Committee who are responsible for the poor accounting practices, or the entire board.

Vote AGAINST or WITHHOLD from the members of the Compensation Committee if:

	•		There is a negative correlation between the chief executive’s pay and company performance (see discussion under Equity Compensation Plans);

	•		The company reprices underwater options for stock, cash or other consideration without prior shareholder approval, even if allowed in their equity plan;

	•		The company fails to submit one-time transfers of stock options to a shareholder vote;

	•		The company fails to fulfill the terms of a burn rate commitment they made to shareholders;

	•		The company has backdated options (see “Options Backdating” policy);

The company has poor compensation practices (see “Poor Pay Practices” policy). Poor pay practices may warrant withholding votes from the CEO and potentially the entire board as well.

Vote AGAINST or WITHHOLD from directors, individually or the entire board, for egregious actions or failure to replace management as appropriate.

Independent Chair (Separate Chair/CEO)

Generally vote FOR shareholder proposals requiring that the chairman’s position be filled by an independent director, unless the company satisfies all of the following criteria: The company maintains the following counterbalancing features:

•

Designated lead director, elected by and from the independent board members with clearly delineated and comprehensive duties. (The role may alternatively reside with a presiding director, vice chairman, or rotating lead director; however the director must serve a minimum of one year in order to qualify as a lead director.) The duties should include, but are not limited to, the following:

	-		presides at all meetings of the board at which the chairman is not present, including executive sessions of the independent directors;

	-		serves as liaison between the chairman and the independent directors;

	-		approves information sent to the board;

	-		approves meeting agendas for the board;

	-		approves meeting schedules to assure that there is sufficient time for discussion of all agenda items;

	-		has the authority to call meetings of the independent directors;

	-		if requested by major shareholders, ensures that he is available for consultation and direct communication;

	•		Two-thirds independent board;

	•		All independent key committees;

	•		Established governance guidelines;

	•		A company in the Russell 3000 universe must not have exhibited sustained poor total shareholder return (TSR) performance, defined as one- and three-year TSR in the bottom half of the company’s four-digit GICS industry group within the Russell 3000 only), unless there has been a change in the Chairman/CEO position within that time;

	•		The company does not have any problematic governance or management issues, examples of which include, but are not limited to:

	-		Egregious compensation practices;

	-		Multiple related-party transactions or other issues putting director independence at risk;

	-		Corporate and/or management scandals;

	-		Excessive problematic corporate governance provisions; or

	-		Flagrant board or management actions with potential or realized negative impact on shareholders.

Majority Vote Shareholder Proposals

Generally vote FOR precatory and binding resolutions requesting that the board change the company’s bylaws to stipulate that directors need to be elected with an affirmative majority of votes cast, provided it does not conflict with the state law where the company is incorporated. Binding resolutions need to allow for a carve-out for a plurality vote standard when there are more nominees than board seats.

Companies are strongly encouraged to also adopt a post-election policy (also know as a director resignation policy) that provides guidelines so that the company will promptly address the situation of a holdover director.

Performance/Governance Evaluation for Directors

Vote WITHHOLD/AGAINST on all director nominees if the board lacks accountability and oversight, coupled with sustained poor performance relative to peers, measured by one- and three-year total shareholder returns in the bottom half of a company’s four-digit GICS industry group (Russell 3000 companies only).

Evaluate board accountability and oversight at companies that demonstrate sustained poor performance. Problematic provisions include but are not limited to:

	•		a classified board structure;

	•		a supermajority vote requirement;

	•		majority vote standard for director elections with no carve out for contested elections;

	•		the inability of shareholders to call special meetings;

	•		the inability of shareholders to act by written consent;

	•		a dual-class structure; and/or

	•		a non-shareholder approved poison pill.

If a company exhibits sustained poor performance coupled with a lack of board accountability and oversight, also take into consideration the company’s five-year total shareholder return and five-year operational metrics in the evaluation.

3. Proxy Contests

Voting for Director Nominees in Contested Elections

Vote CASE-BY-CASE on the election of directors in contested elections, considering the following factors:

	•		Long-term financial performance of the target company relative to its industry;

	•		Management’s track record;

	•		Background to the proxy contest;

	•		Qualifications of director nominees (both slates);

	•		Strategic plan of dissident slate and quality of critique against management;

	•		Likelihood that the proposed goals and objectives can be achieved (both slates);

	•		Stock ownership positions.

Reimbursing Proxy Solicitation Expenses

Vote CASE-BY-CASE on proposals to reimburse proxy solicitation expenses. When voting in conjunction with support of a dissident slate, vote FOR the reimbursement of all appropriate proxy solicitation expenses associated with the election.

Generally vote FOR shareholder proposals calling for the reimbursement of reasonable costs incurred in connection with nominating one or more candidates in a contested election where the following apply:

	•		The election of fewer than 50% of the directors to be elected is contested in the election;

	•		One or more of the dissident’s candidates is elected;

	•		Shareholders are not permitted to cumulate their votes for directors; and

	•		The election occurred, and the expenses were incurred, after the adoption of this bylaw.

4. Antitakeover Defenses and Voting Related Issues

Advance Notice Requirements for Shareholder Proposals/Nominations

Vote CASE-BY-CASE on advance notice proposals, giving support to proposals that allow shareholders to submit proposals/nominations reasonably close to the meeting date and within the broadest window possible, recognizing the need to allow sufficient notice for company, regulatory and shareholder review.

To be reasonable, the company’s deadline for shareholder notice of a proposal/ nominations must not be more than 60 days prior to the meeting, with a submittal window of at least 30 days prior to the deadline.

In general, support additional efforts by companies to ensure full disclosure in regard to a proponent’s economic and voting position in the company so long as the informational requirements are reasonable and aimed at providing shareholders with the necessary information to review such proposal.

Poison Pills

Vote FOR shareholder proposals requesting that the company submit its poison pill to a shareholder vote or redeem it UNLESS the company has: (1) A shareholder approved poison pill in place; or (2) The company has adopted a policy concerning the adoption of a pill in the future specifying that the board will only adopt a shareholder rights plan if either:

	•		Shareholders have approved the adoption of the plan; or

	•		The board, in exercising its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay that would result from seeking stockholder approval (i.e., the “fiduciary out” provision). A poison pill adopted under this “fiduciary out” will be put to a shareholder ratification vote within 12 months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate.

Vote FOR shareholder proposals calling for poison pills to be put to a vote within a time period of less than one year after adoption. If the company has no non-shareholder approved poison pill in place and has adopted a policy with the provisions outlined above, vote AGAINST the proposal. If these conditions are not met, vote FOR the proposal, but with the caveat that a vote within 12 months would be considered sufficient.

Vote CASE-by-CASE on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:

	•		No lower than a 20% trigger, flip-in or flip-over;

	•		A term of no more than three years;

	•		No dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board to redeem the pill;

	•		Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, 10 percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill.

In addition, the rationale for adopting the pill should be thoroughly explained by the company. In examining the request for the pill, take into consideration the company’s existing governance structure, including: board independence, existing takeover defenses, and any problematic governance concerns.

For management proposals to adopt a poison pill for the stated purpose of preserving a company’s net operating losses (“NOL pills”), the following factors should be considered:

	•		the trigger (NOL pills generally have a trigger slightly below 5%);

	•		the value of the NOLs;

	•		the term;

	•		shareholder protection mechanisms (sunset provision, causing expiration of the pill upon exhaustion or expiration of NOLs); and

	•		other factors that may be applicable.

In addition, vote WITHHOLD/AGAINST the entire board of directors, (except new nominees, who should be considered on a CASE-by-CASE basis) if the board adopts or renews a poison pill without shareholder approval, does not commit to putting it to a shareholder vote within 12 months of adoption (or in the case of a newly public company, does not commit to put the pill to a shareholder vote within 12 months

following the IPO), or reneges on a commitment to put the pill to a vote, and has not yet received a withhold recommendation for this issue.

5. Mergers and Corporate Restructurings

Overall Approach

For mergers and acquisitions, review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:

	•		Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction and strategic rationale.

	•		Market reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal.

	•		Strategic rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions.

	•		Negotiations and process - Were the terms of the transaction negotiated at arm’s-length? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation “wins” can also signify the deal makers’ competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value.

	•		Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to support or recommend the merger.

	•		Governance - Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.

6. State of Incorporation

Reincorporation Proposals

Evaluate management or shareholder proposals to change a company’s state of incorporation on a CASE-BY-CASE basis, giving consideration to both financial and corporate governance concerns including the following:

	•		Reasons for reincorporation;

	•		Comparison of company’s governance practices and provisions prior to and following the reincorporation; and

	•		Comparison of corporation laws of original state and destination state

Vote FOR reincorporation when the economic factors outweigh any neutral or negative governance changes.

7. Capital Structure

Common Stock Authorization

Vote CASE-BY-CASE on proposals to increase the number of shares of common stock authorized for issuance. Take into account company-specific factors which include, at a minimum, the following:

	•		Specific reasons/ rationale for the proposed increase;

	•		The dilutive impact of the request as determined through an allowable cap generated by ISS’ quantitative model;

	•		The board’s governance structure and practices; and

	•		Risks to shareholders of not approving the request.

Vote FOR proposals to approve increases beyond the allowable cap when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain.

Preferred Stock

Vote CASE-BY-CASE on proposals to increase the number of shares of preferred stock authorized for issuance. Take into account company-specific factors which include, at a minimum, the following:

	•		Specific reasons/ rationale for the proposed increase;

	•		The dilutive impact of the request as determined through an allowable cap generated by ISS’ quantitative model;

	•		The board’s governance structure and practices; and

	•		Risks to shareholders of not approving the request.

Vote AGAINST proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (“blank check” preferred stock).

Vote FOR proposals to create “declawed” blank check preferred stock (stock that cannot be used as a takeover defense).

Vote FOR proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable.

Vote AGAINST proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose.

8. Executive and Director Compensation

Equity Compensation Plans

Vote CASE-BY-CASE on equity-based compensation plans. Vote AGAINST the equity plan if any of the following factors apply:

	•		The total cost of the company’s equity plans is unreasonable;

	•		The plan expressly permits the repricing of stock options/stock appreciation rights (SARs) without prior shareholder approval;

	•		The CEO is a participant in the proposed equity-based compensation plan and there is a disconnect between CEO pay and the company’s performance where over 50 percent of the year-over-year increase is attributed to equity awards;

	•		The company’s three year burn rate exceeds the greater of 2% and the mean plus one standard deviation of its industry group;

	•		The plan provides for the acceleration of vesting of equity awards even though an actual change in control may not occur (e.g., upon shareholder approval of a transaction or the announcement of a tender offer); or

	•		The plan is a vehicle for poor pay practices.

Poor Pay Practices

Vote AGAINST or WITHHOLD from compensation committee members, CEO, and potentially the entire board, if the company has poor compensation practices. Vote AGAINST equity plans if the plan is a vehicle for poor compensation practices.

The following practices, while not exhaustive, are examples of poor compensation practices that may warrant withhold vote recommendations:

	•		Egregious employment contracts -Contracts containing multi-year guarantees for salary increases, bonuses and equity compensation;

	•		Excessive perks/tax reimbursements:

	-		Overly generous perquisites, which may include, but are not limited to the following: personal use of corporate aircraft, personal security system maintenance and/or installation, car allowances;

	-		Reimbursement of income taxes on executive perquisites or other payments;

	-		Perquisites for former executives, such as car allowances, personal use of corporate aircraft or other inappropriate arrangements;

Abnormally large bonus payouts without justifiable performance linkage or proper disclosure - Performance metrics that are changed, canceled or replaced during the performance period without adequate explanation of the action and the link to performance;

•

Egregious pension/SERP (supplemental executive retirement plan) payouts:

	-		Inclusion of additional years of service not worked that result in significant payouts;

	-		Inclusion of performance-based equity awards in the pension calculation;

•

New CEO with overly generous new hire package:

	-		Excessive “make whole” provisions;

	-		Any of the poor pay practices listed in this policy;

•

Excessive severance and/or change in control provisions:

	-		Inclusion of excessive change in control or severance payments, especially those with a multiple in excess of 3X cash pay;

	-		Payments upon an executive’s termination in connection with performance failure;

	-		Change in control payouts without loss of job or substantial diminution of job duties (single-triggered);

	-		New or materially amended employment or severance agreements that provide for modified single triggers, under which an executive may voluntarily leave for any reason and still receive the change-in-control severance package;

	-		Liberal change in control definition in individual contracts or equity plans which could result in payments to executives without an actual change in control occurring;

	-		New or materially amended employment or severance agreements that provide for an excise tax gross-up. Modified gross-ups would be treated in the same manner as full gross-ups;

Perquisites for former executives such as car allowances, personal use of corporate aircraft or other inappropriate arrangements;

	•		Dividends or dividend equivalents paid on unvested performance shares or units;

	•		Poor disclosure practices:

	-		Unclear explanation of how the CEO is involved in the pay setting process;

	-		Retrospective performance targets and methodology not discussed;

	-		Methodology for benchmarking practices and/or peer group not disclosed and explained;

•

Internal Pay Disparity:

Excessive differential between CEO total pay and that of next highest paid named executive officer (NEO);

	•		Options backdating (covered in a separate policy);

	•		Other excessive compensation payouts or poor pay practices at the company.

Other Compensation Proposals and Policies

Advisory Vote on Executive Compensation (Say-on-Pay) Management Proposals

Vote CASE-BY-CASE on management proposals for an advisory vote on executive compensation. Vote AGAINST these resolutions in cases where boards have failed to demonstrate good stewardship of investors’ interests regarding executive compensation practices.

For U.S. companies, consider the following factors in the context of each company’s specific circumstances and the board’s disclosed rationale for its practices:

Relative Considerations:

	•		Assessment of performance metrics relative to business strategy, as discussed and explained in the CD&A;

	•		Evaluation of peer groups used to set target pay or award opportunities;

	•		Alignment of company performance and executive pay trends over time (e.g., performance down: pay down);

	•		Assessment of disparity between total pay of the CEO and other Named Executive Officers (NEOs).

Design Considerations:

	•		Balance of fixed versus performance-driven pay;

	•		Assessment of excessive practices with respect to perks, severance packages, supplemental executive pension plans, and burn rates.

Communication Considerations:

	•		Evaluation of information and board rationale provided in CD&A about how compensation is determined (e.g., why certain elements and pay targets are used, and specific incentive plan goals, especially retrospective goals);

	•		Assessment of board’s responsiveness to investor input and engagement on compensation issues (e.g., in responding to majority-supported shareholder proposals on executive pay topics).

Employee Stock Purchase Plans- Non-Qualified Plans

Vote CASE-by-CASE on nonqualified employee stock purchase plans. Vote FOR nonqualified employee stock purchase plans with all the following features:

•

Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company);

	•		Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary;

	•		Company matching contribution up to 25 percent of employee’s contribution, which is effectively a discount of 20 percent from market value;

	•		No discount on the stock price on the date of purchase since there is a company matching contribution.

Vote AGAINST nonqualified employee stock purchase plans when any of the plan features do not meet the above criteria. If the company matching contribution exceeds 25 percent of employee’s contribution, evaluate the cost of the plan against its allowable cap.

Option Exchange Programs/Repricing Options

Vote CASE-by-CASE on management proposals seeking approval to exchange/reprice options, taking into consideration:

	•		Historic trading patterns—the stock price should not be so volatile that the options are likely to be back “in-the-money” over the near term;

	•		Rationale for the re-pricing—was the stock price decline beyond management’s control?

	•		Is this a value-for-value exchange?

	•		Are surrendered stock options added back to the plan reserve?

	•		Option vesting—does the new option vest immediately or is there a black-out period?

	•		Term of the option—the term should remain the same as that of the replaced option;

	•		Exercise price—should be set at fair market or a premium to market;

	•		Participants—executive officers and directors should be excluded.

If the surrendered options are added back to the equity plans for re-issuance, then also take into consideration the company’s total cost of equity plans and its three-year average burn rate.

In addition to the above considerations, evaluate the intent, rationale, and timing of the repricing proposal. The proposal should clearly articulate why the board is choosing to conduct an exchange program at this point in time. Repricing underwater options after a recent precipitous drop in the company’s stock price demonstrates poor timing. Repricing after a recent decline in stock price triggers additional scrutiny and a potential AGAINST vote on the proposal. At a minimum, the decline should not have happened within the past year. Also, consider the terms of the surrendered options, such as the grant date, exercise price and vesting schedule. Grant dates of surrendered options should be far enough back (two to three years) so as not to suggest that repricings are being done to take advantage of short-term downward price movements. Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price. Vote FOR shareholder proposals to put option repricings to a shareholder vote.

Other Shareholder Proposals on Compensation

Advisory Vote on Executive Compensation (Say-on-Pay)

Generally, vote FOR shareholder proposals that call for non-binding shareholder ratification of the compensation of the Named Executive Officers and the accompanying narrative disclosure of material factors provided to understand the Summary Compensation Table.

Golden Coffins/Executive Death Benefits

Generally vote FOR proposals calling on companies to adopt a policy of obtaining shareholder approval for any future agreements and corporate policies that could oblige the company to make payments or awards following the death of a senior executive in the form of unearned salary or bonuses, accelerated vesting or the continuation in force of unvested equity grants, perquisites and other payments or awards made in lieu of compensation. This would not apply to any benefit programs or equity plan proposals for which the broad-based employee population is eligible.

Share Buyback Holding Periods

Generally vote AGAINST shareholder proposals prohibiting executives from selling shares of company stock during periods in which the company has announced that it may or will be repurchasing shares of its stock. Vote FOR the proposal when there is a pattern of abuse by executives exercising options or selling shares during periods of share buybacks.

Stock Ownership or Holding Period Guidelines

Generally vote AGAINST shareholder proposals that mandate a minimum amount of stock that directors must own in order to qualify as a director or to remain on the board. While ISS favors stock ownership on the part of directors, the company should determine the appropriate ownership requirement.

Vote on a CASE-BY-CASE on shareholder proposals asking companies to adopt policies requiring Named Executive Officers to retain 75% of the shares acquired through compensation plans while employed and/or for two years following the termination of their employment, and to report to shareholders regarding this policy. The following factors will be taken into account:

•

Whether the company has any holding period, retention ratio, or officer ownership requirements in place. These should consist of:

	-		Rigorous stock ownership guidelines, or

	-		A holding period requirement coupled with a significant long-term ownership requirement, or

	-		A meaningful retention ratio,

	•		Actual officer stock ownership and the degree to which it meets or exceeds the proponent’s suggested holding period/retention ratio or the company’s own stock ownership or retention requirements.

	•		Problematic pay practices, current and past, which may promote a short-term versus a long-term focus.

Tax Gross-Up Proposals

Generally vote FOR proposals asking companies to adopt a policy of not providing tax gross-up payments to executives, except where gross-ups are provided pursuant to a plan, policy, or arrangement applicable to management employees of the company, such as a relocation or expatriate tax equalization policy.

9. Corporate Social Responsibility (CSR) Issues

Overall Approach

When evaluating social and environmental shareholder proposals, ISS considers the following factors:

•

Whether adoption of the proposal is likely to enhance or protect shareholder value;

	•		Whether the information requested concerns business issues that relate to a meaningful percentage of the company’s business as measured by sales, assets, and earnings;

	•		The degree to which the company’s stated position on the issues raised in the proposal could affect its reputation or sales, or leave it vulnerable to a boycott or selective purchasing;

	•		Whether the issues presented are more appropriately/effectively dealt with through governmental or company-specific action;

	•		Whether the company has already responded in some appropriate manner to the request embodied in the proposal;

	•		Whether the company’s analysis and voting recommendation to shareholders are persuasive;

	•		What other companies have done in response to the issue addressed in the proposal;

	•		Whether the proposal itself is well framed and the cost of preparing the report is reasonable;

	•		Whether implementation of the proposal’s request would achieve the proposal’s objectives;

	•		Whether the subject of the proposal is best left to the discretion of the board;

	•		Whether the requested information is available to shareholders either from the company or from a publicly available source; and

	•		Whether providing this information would reveal proprietary or confidential information that would place the company at a competitive disadvantage.

Genetically Modified Ingredients

Generally vote AGAINST proposals asking suppliers, genetic research companies, restaurants and food retail companies to voluntarily label genetically engineered (GE) ingredients in their products and/or eliminate GE ingredients. The cost of labeling and/or phasing out the use of GE ingredients may not be commensurate with the benefits to shareholders and is an issue better left to regulators.

Vote CASE-BY-CASE on proposals asking for a report on the feasibility of labeling products containing GE ingredients taking into account:

	•		The company’s business and the proportion of it affected by the resolution;

	•		The quality of the company’s disclosure on GE product labeling, related voluntary initiatives, and how this disclosure compares with industry peer disclosure; and

	•		Company’s current disclosure on the feasibility of GE product labeling, including information on the related costs.

Generally vote AGAINST proposals seeking a report on the social, health, and environmental effects of genetically modified organisms (GMOs). Studies of this sort are better undertaken by regulators and the scientific community.

Generally vote AGAINST proposals to completely phase out GE ingredients from the company’s products or proposals asking for reports outlining the steps necessary to eliminate GE ingredients from the company’s products. Such resolutions presuppose that there are proven health risks to GE ingredients (an issue better left to regulators) that may outweigh the economic benefits derived from biotechnology.

Pharmaceutical Pricing, Access to Medicines, and Product Reimportation

Generally vote AGAINST proposals requesting that companies implement specific price restraints on pharmaceutical products unless the company fails to adhere to legislative guidelines or industry norms in its product pricing.

Vote CASE-BY-CASE on proposals requesting that the company report on their product pricing policies or their access to medicine policies, considering:

	•		The nature of the company’s business and the potential for reputational and market risk exposure;

	•		The existing disclosure of relevant policies;

	•		Deviation from established industry norms;

	•		The company’s existing, relevant initiatives to provide research and/or products to disadvantaged consumers;

	•		Whether the proposal focuses on specific products or geographic regions; and

	•		The potential cost and scope of the requested report.

Generally vote FOR proposals requesting that companies report on the financial and legal impact of their prescription drug reimportation policies unless such information is already publicly disclosed.

Generally vote AGAINST proposals requesting that companies adopt specific policies to encourage or constrain prescription drug reimportation. Such matters are more appropriately the province of legislative activity and may place the company at a competitive disadvantage relative to its peers.

Gender Identity, Sexual Orientation, and Domestic Partner Benefits

Generally vote FOR proposals seeking to amend a company’s EEO statement or diversity policies to prohibit discrimination based on sexual orientation and/or gender identity, unless the change would result in excessive costs for the company.

Generally vote AGAINST proposals to extend company benefits to, or eliminate benefits from domestic partners. Decisions regarding benefits should be left to the discretion of the company.

Climate Change

Generally vote FOR resolutions requesting that a company disclose information on the impact of climate change on the company’s operations and investments considering whether:

	•		The company already provides current, publicly-available information on the impacts that climate change may have on the company as well as associated company policies and procedures to address related risks and/or opportunities;

	•		The company’s level of disclosure is at least comparable to that of industry peers; and

	•		There are no significant, controversies, fines, penalties, or litigation associated with the company’s environmental performance.

Lobbying Expenditures/Initiatives

Vote CASE-BY-CASE on proposals requesting information on a company’s lobbying initiatives, considering:

	•		Significant controversies, fines, or litigation surrounding a company’s public policy activities,

	•		The company’s current level of disclosure on lobbying strategy, and

	•		The impact that the policy issue may have on the company’s business operations.

Political Contributions and Trade Association Spending

Generally vote AGAINST proposals asking the company to affirm political nonpartisanship in the workplace so long as:

	•		There are no recent, significant controversies, fines or litigation regarding the company’s political contributions or trade association spending; and

	•		The company has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and prohibits coercion.

Vote AGAINST proposals to publish in newspapers and public media the company’s political contributions. Such publications could present significant cost to the company without providing commensurate value to shareholders.

Vote CASE-BY-CASE on proposals to improve the disclosure of a company’s political contributions and trade association spending, considering:

	•		Recent significant controversy or litigation related to the company’s political contributions or governmental affairs; and

	•		The public availability of a company policy on political contributions and trade association spending including information on the types of organizations supported, the business rationale for supporting these organizations, and the oversight and compliance procedures related to such expenditures of corporate assets.

Vote AGAINST proposals barring the company from making political contributions. Businesses are affected by legislation at the federal, state, and local level and barring political contributions can put the company at a competitive disadvantage.

Vote AGAINST proposals asking for a list of company executives, directors, consultants, legal counsels, lobbyists, or investment bankers that have prior government service and whether such service had a bearing on the business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders.

Labor and Human Rights Standards

Generally vote FOR proposals requesting a report on company or company supplier labor and/or human rights standards and policies unless such information is already publicly disclosed.

Vote CASE-BY-CASE on proposals to implement company or company supplier labor and/or human rights standards and policies, considering:

	•		The degree to which existing relevant policies and practices are disclosed;

	•		Whether or not existing relevant policies are consistent with internationally recognized standards;

	•		Whether company facilities and those of its suppliers are monitored and how;

	•		Company participation in fair labor organizations or other internationally recognized human rights initiatives;

	•		Scope and nature of business conducted in markets known to have higher risk of workplace labor/human rights abuse;

	•		Recent, significant company controversies, fines, or litigation regarding human rights at the company or its suppliers;

	•		The scope of the request; and

	•		Deviation from industry sector peer company standards and practices.

Sustainability Reporting

Non-U.S. Proxy Voting

The following is a concise summary of the Voting Guidelines for voting non-U.S. proxies.

1. Operational Items

Financial Results/Director and Auditor Reports

Vote FOR approval of financial statements and director and auditor reports, unless:

	•		There are concerns about the accounts presented or audit procedures used; or

	•		The company is not responsive to shareholder questions about specific items that should be publicly disclosed.

Appointment of Auditors and Auditor Fees

Vote FOR the reelection of auditors and proposals authorizing the board to fix auditor fees, unless:

	•		There are serious concerns about the accounts presented or the audit procedures used;

	•		The auditors are being changed without explanation; or

	•		Non-audit-related fees are substantial or are routinely in excess of standard annual audit-related fees.

Vote AGAINST the appointment of external auditors if they have previously served the company in an executive capacity or can otherwise be considered affiliated with the company.

Appointment of Internal Statutory Auditors

Vote FOR the appointment or reelection of statutory auditors, unless:

	•		There are serious concerns about the statutory reports presented or the audit procedures used;

	•		Questions exist concerning any of the statutory auditors being appointed; or

	•		The auditors have previously served the company in an executive capacity or can otherwise be considered affiliated with the company.

Allocation of Income

Vote FOR approval of the allocation of income, unless:

	•		The dividend payout ratio has been consistently below 30 percent without adequate explanation; or

	•		The payout is excessive given the company’s financial position.

Stock (Scrip) Dividend Alternative

Vote FOR most stock (scrip) dividend proposals.

Vote AGAINST proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value.

Amendments to Articles of Association

Vote amendments to the articles of association on a CASE-BY-CASE basis.

Change in Company Fiscal Term

Vote FOR resolutions to change a company’s fiscal term unless a company’s motivation for the change is to postpone its AGM.

Lower Disclosure Threshold for Stock Ownership

Vote AGAINST resolutions to lower the stock ownership disclosure threshold below 5 percent unless specific reasons exist to implement a lower threshold.

Amend Quorum Requirements

Vote proposals to amend quorum requirements for shareholder meetings on a CASE-BY-CASE basis.

Transact Other Business

Vote AGAINST other business when it appears as a voting item.

2. Board of Directors

Director Elections

Vote FOR management nominees in the election of directors, unless:

	•		Adequate disclosure has not been provided in a timely manner;

	•		There are clear concerns over questionable finances or restatements;

	•		There have been questionable transactions with conflicts of interest;

	•		There are any records of abuses against minority shareholder interests; or

	•		The board fails to meet minimum corporate governance standards.

Vote FOR individual nominees unless there are specific concerns about the individual, such as criminal wrongdoing or breach of fiduciary responsibilities.

Vote AGAINST individual directors if repeated absences at board meetings have not been explained (in countries where this information is disclosed).

Vote on a CASE-BY-CASE basis for contested elections of directors, e.g. the election of shareholder nominees or the dismissal of incumbent directors, determining which directors are best suited to add value for shareholders.

Vote FOR employee and/or labor representatives if they sit on either the audit or compensation committee and are required by law to be on those committees. Vote AGAINST employee and/or labor representatives if they sit on either the audit or compensation committee, if they are not required to be on those committees.

ISS Classification of Directors — International Policy 2009

Executive Director

• Employee or executive of the company;

• Any director who is classified as a non-executive, but receives salary, fees, bonus, and/or other benefits that are in line with the highest-paid executives of the company.

Non-Independent Non-Executive Director (NED)

• Any director who is attested by the board to be a non-independent NED;

• Any director specifically designated as a representative of a significant shareholder of the company;

• Any director who is also an employee or executive of a significant shareholder of the company;

• Beneficial owner (direct or indirect) of at least 10% of the company’s stock, either in economic terms or in voting rights (this may be aggregated if voting power is distributed among more than one member of a defined group, e.g., family members who beneficially own less than 10% individually, but collectively own more than 10%), unless market best practice dictates a lower ownership and/or disclosure threshold (and in other special market-specific circumstances);

• Government representative;

• Currently provides (or a relative^[1] provides) professional services^[2] to the company, to an affiliate of the company, or to an individual officer of the company or of one of its affiliates in excess of $10,000 per year;

• Represents customer, supplier, creditor, banker, or other entity with which company maintains transactional/commercial relationship (unless company discloses information to apply a materiality test^[3]);

• Any director who has conflicting or cross-directorships with executive directors or the chairman of the company;

• Relative^[1] of a current employee of the company or its affiliates;

• Relative^[1] of a former executive of the company or its affiliates;

• A new appointee elected other than by a formal process through the General Meeting (such as a contractual appointment by a substantial shareholder);

• Founder/co-founder/member of founding family but not currently an employee;

• Former executive (5 year cooling off period);

• Years of service is generally not a determining factor unless it is recommended best practice in a market and/or in extreme circumstances, in which case it may be considered.^[4]

Independent NED

• No material^[5] connection, either directly or indirectly, to the company other than a board seat.

Employee Representative

• Represents employees or employee shareholders of the company (classified as “employee representative” but considered a non-independent NED).

Footnotes:


^[1]		“Relative” follows the U.S. SEC’s definition of “immediate family members” which covers spouses, parents, children, stepparents, step-children, siblings, in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer, or significant shareholder of the company.

^[2]		Professional services can be characterized as advisory in nature and generally include the following: investment banking/financial advisory services; commercial banking (beyond deposit services); investment services; insurance services; accounting/audit services; consulting services; marketing services; and legal services. The case of participation in a banking syndicate by a non-lead bank should be considered a transaction (and hence subject to the associated materiality test) rather than a professional relationship.

^[3]		If the company makes or receives annual payments exceeding the greater of $200,000 or five percent of the recipient’s gross revenues (the recipient is the party receiving the financial proceeds from the transaction).

^[4]		For example, in continental Europe, directors with a tenure exceeding 12 years will be considered non-independent. In the United Kingdom and Ireland, directors with a tenure exceeding nine years will be considered non-independent, unless the company provides sufficient and clear justification that the director is independent despite his long tenure.

^[5]		For purposes of ISS director independence classification, “material” will be defined as a standard of relationship financial, personal or otherwise) that a reasonable person might conclude could potentially influence one’s objectivity in the boardroom in a manner that would have a meaningful impact on an individual’s ability to satisfy requisite fiduciary standards on behalf of shareholders.

Discharge of Directors

Generally vote FOR the discharge of directors, including members of the management board and/or supervisory board, unless there is reliable information about significant and compelling controversies that the board is not fulfilling its fiduciary duties warranted by:

	•		A lack of oversight or actions by board members which invoke shareholder distrust related to malfeasance or poor supervision, such as operating in private or company interest rather than in shareholder interest; or

	•		Any legal issues (e.g. civil/criminal) aiming to hold the board responsible for breach of trust in the past or related to currently alleged actions yet to be confirmed (and not only the fiscal year in question), such as price fixing, insider trading, bribery, fraud, and other illegal actions; or

	•		Other egregious governance issues where shareholders will bring legal action against the company or its directors.

For markets which do not routinely request discharge resolutions (e.g. common law countries or markets where discharge is not mandatory), analysts may voice concern in other appropriate agenda items, such as approval of the annual accounts or other relevant resolutions, to enable shareholders to express discontent with the board.

Director Compensation

Vote FOR proposals to award cash fees to non-executive directors unless the amounts are excessive relative to other companies in the country or industry.

Vote non-executive director compensation proposals that include both cash and share-based components on a CASE-BY-CASE basis.

Vote proposals that bundle compensation for both non-executive and executive directors into a single resolution on a CASE-BY-CASE basis.

Vote AGAINST proposals to introduce retirement benefits for non-executive directors.

Director, Officer, and Auditor Indemnification and Liability Provisions

Vote proposals seeking indemnification and liability protection for directors and officers on a CASE-BY-CASE basis.

Vote AGAINST proposals to indemnify auditors.

Board Structure

Vote FOR proposals to fix board size.

Vote AGAINST the introduction of classified boards and mandatory retirement ages for directors.

Vote AGAINST proposals to alter board structure or size in the context of a fight for control of the company or the board.

3. Capital Structure

Share Issuance Requests
General Issuances:

Vote FOR issuance requests with preemptive rights to a maximum of 100 percent over currently issued capital.

Vote FOR issuance requests without preemptive rights to a maximum of 20 percent of currently issued capital.

Specific Issuances:

Vote on a CASE-BY-CASE basis on all requests, with or without preemptive rights.

Increases in Authorized Capital

Vote FOR non-specific proposals to increase authorized capital up to 100 percent over the current authorization unless the increase would leave the company with less than 30 percent of its new authorization outstanding.

Vote FOR specific proposals to increase authorized capital to any amount, unless:

	•		The specific purpose of the increase (such as a share-based acquisition or merger) does not meet ISS guidelines for the purpose being proposed; or

	•		The increase would leave the company with less than 30 percent of its new authorization outstanding after adjusting for all proposed issuances.

Vote AGAINST proposals to adopt unlimited capital authorizations.

Reduction of Capital

Vote FOR proposals to reduce capital for routine accounting purposes unless the terms are unfavorable to shareholders.

Vote proposals to reduce capital in connection with corporate restructuring on a CASE-BY-CASE basis.

Capital Structures

Vote FOR resolutions that seek to maintain or convert to a one-share, one-vote capital structure.

Vote AGAINST requests for the creation or continuation of dual-class capital structures or the creation of new or additional supervoting shares.

Preferred Stock

Vote FOR the creation of a new class of preferred stock or for issuances of preferred stock up to 50 percent of issued capital unless the terms of the preferred stock would adversely affect the rights of existing shareholders.

Vote FOR the creation/issuance of convertible preferred stock as long as the maximum number of common shares that could be issued upon conversion meets ISS guidelines on equity issuance requests.

Vote AGAINST the creation of a new class of preference shares that would carry superior voting rights to the common shares.

Vote AGAINST the creation of blank check preferred stock unless the board clearly states that the authorization will not be used to thwart a takeover bid.

Vote proposals to increase blank check preferred authorizations on a CASE-BY-CASE basis.

Debt Issuance Requests

Vote non-convertible debt issuance requests on a CASE-BY-CASE basis, with or without preemptive rights.

Vote FOR the creation/issuance of convertible debt instruments as long as the maximum number of common shares that could be issued upon conversion meets ISS guidelines on equity issuance requests.

Vote FOR proposals to restructure existing debt arrangements unless the terms of the restructuring would adversely affect the rights of shareholders.

Pledging of Assets for Debt

Vote proposals to approve the pledging of assets for debt on a CASE-BY-CASE basis.

Increase in Borrowing Powers

Vote proposals to approve increases in a company’s borrowing powers on a CASE-BY- CASE basis.

Share Repurchase Plans

Generally vote FOR share repurchase programs/market repurchase authorities, provided that the proposal meets the following parameters:

	•		Maximum volume: 10 percent for market repurchase within any single authority and 10 percent of outstanding shares to be kept in treasury (“on the shelf”);

	•		Duration does not exceed 18 months.

For markets that either generally do not specify the maximum duration of the authority or seek a duration beyond 18 months that is allowable under market specific legislation, ISS will assess the company’s historic practice. If there is evidence that a company has sought shareholder approval for the authority to repurchase shares on an annual basis, ISS will support the proposed authority.

In addition, vote AGAINST any proposal where:

	•		The repurchase can be used for takeover defenses;

	•		There is clear evidence of abuse;

	•		There is no safeguard against selective buybacks;

	•		Pricing provisions and safeguards are deemed to be unreasonable in light of market practice.

ISS may support share repurchase plans in excess of 10 percent volume under exceptional circumstances, such as one-off company specific events (e.g. capital re-structuring). Such proposals will be assessed case-by-case based on merits, which should be clearly disclosed in the annual report, provided that following conditions are met:

	•		The overall balance of the proposed plan seems to be clearly in shareholders’ interests;

	•		The plan still respects the 10 percent maximum of shares to be kept in treasury.

Reissuance of Repurchased Shares

Vote FOR requests to reissue any repurchased shares unless there is clear evidence of abuse of this authority in the past.

Capitalization of Reserves for Bonus Issues/Increase in Par Value

Vote FOR requests to capitalize reserves for bonus issues of shares or to increase par value.

4. Other

Reorganizations/Restructurings

Vote reorganizations and restructurings on a CASE-BY-CASE basis.

Mergers and Acquisitions

Vote CASE-BY-CASE on mergers and acquisitions taking into account the following: For every M&A analysis, ISS reviews publicly available information as of the date of the report and evaluates the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:

•

Valuation — Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, ISS places emphasis on

			the offer premium, market reaction, and strategic rationale.

	•		Market reaction — How has the market responded to the proposed deal? A negative market reaction will cause ISS to scrutinize a deal more closely.

	•		Strategic rationale — Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions.

	•		Conflicts of interest — Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? ISS will consider whether any special interests may have influenced these directors and officers to support or recommend the merger.

	•		Governance — Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.

Vote AGAINST if the companies do not provide sufficient information upon request to make an informed voting decision.

Mandatory Takeover Bid Waivers

Vote proposals to waive mandatory takeover bid requirements on a CASE-BY-CASE basis.

Reincorporation Proposals

Vote reincorporation proposals on a CASE-BY-CASE basis.

Expansion of Business Activities

Vote FOR resolutions to expand business activities unless the new business takes the company into risky areas.

Related-Party Transactions

Vote related-party transactions on a CASE-BY-CASE basis.

Compensation Plans

Vote compensation plans on a CASE-BY-CASE basis.

Antitakeover Mechanisms

Generally vote AGAINST all antitakeover proposals, unless they are structured in such a way that they give shareholders the ultimate decision on any proposal or offer.

Shareholder Proposals

Vote all shareholder proposals on a CASE-BY-CASE basis.

Vote FOR proposals that would improve the company’s corporate governance or business profile at a reasonable cost.

Vote AGAINST proposals that limit the company’s business activities or capabilities or result in significant costs being incurred with little or no benefit.

FRANKLIN ADVISERS, INC.
PROXY VOTING POLICIES & PROCEDURES

RESPONSIBILITY OF INVESTMENT MANAGER TO VOTE PROXIES

Franklin Advisers, Inc. (hereinafter “Investment Manager”) has delegated its administrative duties with respect to voting proxies to the Proxy Group within Franklin Templeton Companies, LLC (the “Proxy Group”), a wholly-owned subsidiary of Franklin Resources, Inc. Franklin Templeton Companies, LLC provides a variety of general corporate services to its affiliates, including but not limited to legal and compliance activities. Proxy duties consist of analyzing proxy statements of issuers whose stock is owned by any client (including both investment companies and any separate accounts managed by Investment Manager) that has either delegated proxy voting administrative responsibility to Investment Manager or has asked for information and/or recommendations on the issues to be voted. The Proxy Group will process proxy votes on behalf of, and Investment Manager votes proxies solely in the interests of, separate account clients, Investment Manager-managed mutual fund shareholders, or, where employee benefit plan assets are involved, in the interests of the plan participants and beneficiaries (collectively, “Advisory Clients”) that have properly delegated such responsibility or will inform Advisory Clients that have not delegated the voting responsibility but that have requested voting advice about Investment Manager’s views on such proxy votes. The Proxy Group also provides these services to other advisory affiliates of Investment Manager.

HOW INVESTMENT MANAGER VOTES PROXIES

Fiduciary Considerations

All proxies received by the Proxy Group will be voted based upon Investment Manager’s instructions and/or policies. To assist it in analyzing proxies, Investment Manager subscribes to RiskMetrics Group (“RiskMetrics”), an unaffiliated third party corporate governance research service that provides in-depth analyses of shareholder meeting agendas, vote recommendations, record keeping and vote disclosure services. In addition, Investment Manager subscribes to Glass Lewis & Co., LLC (“Glass Lewis”), an unaffiliated third party analytical research firm, to receive analyses and vote recommendations on the shareholder meetings of publicly held U.S. companies. Although RiskMetrics’ and/or Glass Lewis’ analyses are thoroughly reviewed and considered in making a final voting decision, Investment Manager does not consider recommendations from RiskMetrics, Glass Lewis, or any other third party to be determinative of Investment Manager’s ultimate decision. As a matter of policy, the officers, directors and employees of Investment Manager and the Proxy Group will not be influenced by outside sources whose interests conflict with the interests of Advisory Clients.

Conflicts of Interest

All conflicts of interest will be resolved in the interests of the Advisory Clients. Investment Manager is an affiliate of a large, diverse financial services firm with many affiliates and makes its best efforts to avoid conflicts of interest. However, conflicts of interest can arise in situations where:

	1.		The issuer is a client⁹ of Investment Manager or its affiliates;

	2.		The issuer is a vendor whose products or services are material or significant to the business of Investment Manager or its affiliates;

	3.		The issuer is an entity participating to a material extent in the distribution of investment products advised, administered or sponsored by Investment Manager or its affiliates (e.g., a broker, dealer or bank);¹⁰

	4.		An Access Person¹¹ of Investment Manager or its affiliates also serves as a director or officer of the issuer;

	5.		A director or trustee of Franklin Resources, Inc. or of a Franklin Templeton investment product, or an immediate family member¹² of such director or trustee, also serves as an officer or director of the issuer; or

	6.		The issuer is Franklin Resources, Inc. or any of its proprietary investment products.

Nonetheless, even though a potential conflict of interest exists, the Investment Manager may vote in opposition to the recommendations of an issuer’s management.

Material conflicts of interest are identified by the Proxy Group based upon analyses of client, broker and vendor lists, information periodically gathered from directors and officers, and information derived from other sources, including public filings. The Proxy Group gathers and analyzes this information on a best efforts basis, as much of this information is provided directly by individuals and groups other than the Proxy Group, and the Proxy Group relies on the accuracy of the information it receives from such parties.

In situations where a material conflict of interest is identified, the Proxy Group may defer to the voting recommendation of RiskMetrics, Glass Lewis, or those of another independent third party provider of proxy services or send the proxy directly to the relevant Advisory Clients with the Investment Manager’s recommendation regarding the vote for approval. If the conflict is not resolved by the Advisory Client, the Proxy Group may refer the matter, along with the recommended course of action by the Investment Manager, if any, to a Proxy Review Committee comprised of representatives from the Portfolio Management (which may include portfolio managers and/or research analysts employed by Investment Manager), Fund Administration, Legal and Compliance Departments within Franklin Templeton for evaluation and voting instructions. The Proxy Review Committee may defer to the voting recommendation


⁹		For purposes of this section, a “client” does not include underlying investors in a commingled trust, Canadian pooled fund, or other pooled investment vehicle managed by the Investment Manager or its affiliates. Sponsors of funds sub-advised by Investment Manager or its affiliates will be considered a “client.”

¹⁰		The top 40 executing broker-dealers (based on gross brokerage commissions and client commissions), and distributors (based on aggregate 12b-1 distribution fees), as determined on a quarterly basis, will be considered to present a potential conflict of interest. In addition, any insurance company that has entered into a participation agreement with a Franklin Templeton entity to distribute the Franklin Templeton Variable Insurance Products Trust or other variable products will be considered to present a potential conflict of interest.

¹¹		“Access Person” shall have the meaning provided under the current Code of Ethics of Franklin Resources, Inc.

¹²		The term “immediate family member” means a person’s spouse; child residing in the person’s household (including step and adoptive children); and any dependent of the person, as defined in Section 152 of the Internal Revenue Code (26 U.S.C. 152).

of RiskMetrics, Glass Lewis, or those of another independent third party provider of proxy services or send the proxy directly to the relevant Advisory Clients.

Where the Proxy Group or the Proxy Review Committee refers a matter to an Advisory Client, it may rely upon the instructions of a representative of the Advisory Client, such as the board of directors or trustees or a committee of the board in the case of a U. S. registered mutual fund, the conducting officer in the case of an open-ended collective investment scheme formed as a Société d’investissement à capital variable (SICAV), the Independent Review Committee for Canadian investment funds, or a plan administrator in the case of an employee benefit plan. The Proxy Group or the Proxy Review Committee may determine to vote all shares held by Advisory Clients in accordance with the instructions of one or more of the Advisory Clients.

The Proxy Review Committee may independently review proxies that are identified as presenting material conflicts of interest; determine the appropriate action to be taken in such situations (including whether to defer to an independent third party or refer a matter to an Advisory Client); report the results of such votes to Investment Manager’s clients as may be requested; and recommend changes to the Proxy Voting Policies and Procedures as appropriate.

The Proxy Review Committee will also decide whether to vote proxies for securities deemed to present conflicts of interest that are sold following a record date, but before a shareholder meeting date. The Proxy Review Committee may consider various factors in deciding whether to vote such proxies, including Investment Manager’s long-term view of the issuer’s securities for investment, or it may defer the decision to vote to the applicable Advisory Client.

Where a material conflict of interest has been identified, but the items on which the Investment Manager’s vote recommendations differ from Glass Lewis, RiskMetrics, or another independent third party provider of proxy services relate specifically to (1) shareholder proposals regarding social or environmental issues or political contributions, (2) “Other Business” without describing the matters that might be considered, or (3) items the Investment Manager wishes to vote in opposition to the recommendations of an issuer’s management, the Proxy Group may defer to the vote recommendations of the Investment Manager rather than sending the proxy directly to the relevant Advisory Clients for approval.

To avoid certain potential conflicts of interest, the Investment Manager will employ echo voting, if possible, in the following instances: (1) when a Franklin Templeton investment company invests in an underlying fund in reliance on any one of Sections 12(d)(1)(E), (F), or (G) of the Investment Company Act of 1940, as amended, or pursuant to an SEC exemptive order; (2) when a Franklin Templeton investment company invests uninvested cash in affiliated money market funds pursuant to an SEC exemptive order (“cash sweep arrangement”); or (3) when required pursuant to an account’s governing documents or applicable law. Echo voting means that the Investment Manager will vote the shares in the same proportion as the vote of all of the other holders of the fund’s shares.

Weight Given Management Recommendations

One of the primary factors Investment Manager considers when determining the desirability of investing in a particular company is the quality and depth of that company’s management. Accordingly, the recommendation of management on any issue is a factor that Investment Manager considers in determining how proxies should be voted. However, Investment Manager does not consider recommendations from management to be determinative of Investment Manager’s ultimate decision. As a matter of practice, the votes with respect to most issues are cast in accordance with the position of the company’s management. Each issue, however, is considered on its own merits, and Investment Manager will not support the position of a company’s management in any situation where it determines that the ratification of management’s position would adversely affect the investment merits of owning that company’s shares.

THE PROXY GROUP

RiskMetrics, Glass Lewis, or other sources. The Proxy Group maintains a log of all shareholder meetings that are scheduled for companies whose securities are held by Investment Manager’s managed funds and accounts. For each shareholder meeting, a member of the Proxy Group will consult with the research analyst that follows the security and provide the analyst with the meeting notice, agenda, RiskMetrics and/or Glass Lewis analyses, recommendations and any other available information. Except in situations identified as presenting material conflicts of interest, Investment Manager’s research analyst and relevant portfolio manager(s) are responsible for making the final voting decision based on their review of the agenda, RiskMetrics and/or Glass Lewis analyses, their knowledge of the company and any other information readily available. In situations where the Investment Manager has not responded with vote recommendations to the Proxy Group by the deadline date, the Proxy Group may defer to the vote recommendations of an independent third party provider of proxy services. Except in cases where the Proxy Group is deferring to the voting recommendation of an independent third party service provider, the Proxy Group must obtain voting instructions from Investment Manager’s research analyst, relevant portfolio manager(s), legal counsel and/or the Advisory Client or Proxy Review Committee prior to submitting the vote.

GENERAL PROXY VOTING GUIDELINES

Investment Manager has adopted general guidelines for voting proxies as summarized below. In keeping with its fiduciary obligations to its Advisory Clients, Investment Manager reviews all proposals, even those that may be considered to be routine matters. Although these guidelines are to be followed as a general policy, in all cases each proxy and proposal will be considered based on the relevant facts and circumstances. Investment Manager may deviate from the general policies and procedures when it determines that the particular facts and circumstances warrant such deviation to protect the interests of the Advisory Clients. These guidelines cannot provide an exhaustive list of all the issues that may arise nor can Investment Manager anticipate all future situations. Corporate governance issues are diverse and continually evolving and Investment Manager devotes significant time and resources to monitor these changes.

INVESTMENT MANAGER’S PROXY VOTING POLICIES AND PRINCIPLES

Investment Manager’s proxy voting positions have been developed based on years of experience with proxy voting and corporate governance issues. These principles have been reviewed by various members of Investment Manager’s organization, including portfolio management, legal counsel, and Investment Manager’s officers. The Board of Directors of Franklin Templeton’s U.S.-registered mutual funds will approve the proxy voting policies and procedures annually.

The following guidelines reflect what Investment Manager believes to be good corporate governance and behavior:

Board of Directors: The election of directors and an independent board are key to good corporate governance. Directors are expected to be competent individuals and they should be accountable and responsive to shareholders. Investment Manager supports an independent board of directors, and prefers that key committees such as audit, nominating, and compensation committees be comprised of independent directors. Investment Manager will generally vote against management efforts to classify a board and will generally support proposals to declassify the board of directors. Investment Manager will consider withholding votes from directors who have attended less than 75% of meetings without a valid reason. While generally in favor of separating Chairman and CEO positions, Investment Manager will review this issue on a case-by-case basis taking into consideration other factors including the company’s corporate governance guidelines and performance. Investment Manager evaluates proposals to restore or provide for cumulative voting on a case-by-case basis and considers such factors as corporate governance provisions as well as relative performance. The Investment Manager generally will support non-binding shareholder proposals to require a majority vote standard for the election of directors; however, if these proposals are binding, the Investment Manager will give careful review on a case-by-case basis of the potential ramifications of such implementation.

Manager will also consider, on a case-by-case basis, proposals to rotate auditors, and will vote against the ratification of auditors when there is clear and compelling evidence of accounting irregularities or negligence attributable to the auditors.

Management & Director Compensation: A company’s equity-based compensation plan should be in alignment with the shareholders’ long-term interests. Investment Manager believes that executive compensation should be directly linked to the performance of the company. Investment Manager evaluates plans on a case-by-case basis by considering several factors to determine whether the plan is fair and reasonable. Investment Manager reviews the RiskMetrics quantitative model utilized to assess such plans and/or the Glass Lewis evaluation of the plan. Investment Manager will generally oppose plans that have the potential to be excessively dilutive, and will almost always oppose plans that are structured to allow the repricing of underwater options, or plans that have an automatic share replenishment “evergreen” feature. Investment Manager will generally support employee stock option plans in which the purchase price is at least 85% of fair market value, and when potential dilution is 10% or less.

Severance compensation arrangements will be reviewed on a case-by-case basis, although Investment Manager will generally oppose “golden parachutes” that are considered excessive. Investment Manager will normally support proposals that require that a percentage of directors’ compensation be in the form of common stock, as it aligns their interests with those of the shareholders.

Anti-Takeover Mechanisms and Related Issues: Investment Manager generally opposes anti-takeover measures since they tend to reduce shareholder rights. However, as with all proxy issues, Investment Manager conducts an independent review of each anti-takeover proposal. On occasion, Investment Manager may vote with management when the research analyst has concluded that the proposal is not onerous and would not harm Advisory Clients’ interests as stockholders. Investment Manager generally supports proposals that require shareholder rights plans (“poison pills”) to be subject to a shareholder vote. Investment Manager will closely evaluate shareholder rights’ plans on a case-by-case basis to determine whether or not they warrant support. Investment Manager will generally vote against any proposal to issue stock that has unequal or subordinate voting rights. In addition, Investment Manager generally opposes any supermajority voting requirements as well as the payment of “greenmail.” Investment Manager usually supports “fair price” provisions and confidential voting.

Changes to Capital Structure: Investment Manager realizes that a company’s financing decisions have a significant impact on its shareholders, particularly when they involve the issuance of additional shares of common or preferred stock or the assumption of additional debt. Investment Manager will carefully review, on a case-by-case basis, proposals by companies to increase authorized shares and the purpose for the increase. Investment Manager will generally not vote in favor of dual-class capital structures to increase the number of authorized shares where that class of stock would have superior voting rights. Investment Manager will generally vote in favor of the issuance of preferred stock in cases where the company specifies the voting, dividend, conversion and other rights of such stock and the terms of the preferred stock issuance are deemed reasonable. Investment Manager will review proposals seeking preemptive rights on a case-by-case basis.

Mergers and Corporate Restructuring: Mergers and acquisitions will be subject to careful review by the research analyst to determine whether they would be beneficial to shareholders. Investment Manager will analyze various economic and strategic factors in making the final decision on a merger or acquisition. Corporate restructuring proposals are also subject to a thorough examination on a case-by-case basis.

Social and Corporate Policy Issues: As a fiduciary, Investment Manager is primarily concerned about the financial interests of its Advisory Clients. Investment Manager will generally give management discretion with regard to social, environmental and ethical issues although Investment Manager may vote in favor of those issues that are believed to have significant economic benefits or implications.

Global Corporate Governance: Investment Manager manages investments in countries worldwide. Many of the tenets discussed above are applied to Investment Manager’s proxy voting decisions for international investments. However, Investment Manager must be flexible in these worldwide markets and must be mindful of the varied market practices of each region. As experienced money managers, Investment Manager’s analysts are skilled in understanding the complexities of the regions in which they specialize and are trained to analyze proxy issues germane to their regions.

PROXY PROCEDURES

The Proxy Group is fully cognizant of its responsibility to process proxies and maintain proxy records pursuant to applicable rules and regulations, including those of the U.S. Securities and Exchange Commission (“SEC”) and the Canadian Securities Administrators (“CSA”). In addition, Investment Manager understands its fiduciary duty to vote proxies and that proxy voting decisions may affect the value of shareholdings. Therefore, Investment Manager will attempt to process every proxy it receives for all domestic and foreign securities. However, there may be situations in which Investment Manager cannot vote proxies. For example, if the cost of voting a foreign proxy outweighs the benefit of voting, the Proxy Group may refrain from processing that vote. Additionally, the Proxy Group may not be given enough time to process the vote. For example, the Proxy Group, through no fault of their own, may receive a meeting notice from the company too late, or may be unable to obtain a timely translation of the agenda. In addition, if Investment Manager has outstanding sell orders, or anticipates placing sell orders prior to the date of the shareholder meeting, in certain markets that have blocking restrictions, the proxies for those meetings may not be voted in order to facilitate the sale of those securities. If a security is on loan, Investment Manager may determine that it is not in the best interests of its clients to recall the security for voting purposes. Although Investment Manager may hold shares on a company’s record date, should it sell them prior to the company’s meeting date, Investment Manager ultimately may decide not to vote those shares. Lastly, the Investment Manager will not vote proxies when prohibited from voting by applicable law.

Investment Manager may vote against an agenda item where no further information is provided, particularly in non-U.S. markets. For example, if “Other Business” is listed on the agenda with no further information included in the proxy materials, Investment Manager may vote against the item to send a message to the company that if it had provided additional information, Investment Manager may have voted in favor of that item. Investment Manager may also enter a “withhold” vote on the election of certain directors from time to time based on individual situations, particularly where Investment Manager is not in favor of electing a director and there is no provision for voting against such director.

The following describes the standard procedures that are to be followed with respect to carrying out Investment Manager’s proxy policy:

	1.		The Proxy Group will identify all Advisory Clients, maintain a list of those clients, and indicate those Advisory Clients who have delegated proxy voting authority to the Investment Manager. The Proxy Group will periodically review and update this list.

	2.		All relevant information in the proxy materials received (e.g., the record date of the meeting) will be recorded immediately by the Proxy Group in a database to maintain control over such materials. The Proxy Group will confirm each relevant Advisory Client’s holdings of the securities and that the client is eligible to vote.

	3.		The Proxy Group will review and compile information on each proxy upon receipt of any agendas, materials, reports, recommendations from RiskMetrics and/or Glass Lewis, or other information. The Proxy Group will then forward this information to the appropriate research analyst and/or legal counsel for review and voting instructions.

	4.		In determining how to vote, Investment Manager’s analysts and relevant portfolio manager(s) will consider the General Proxy Voting Guidelines set forth above, their in-depth knowledge of the company, any readily available information and research about the company and its agenda items, and the recommendations put forth by RiskMetrics, Glass Lewis, or other independent third party providers of proxy services.

	5.		The Proxy Group is responsible for maintaining the documentation that supports Investment Manager’s voting position. Such documentation may include, but is not limited to, any information provided by RiskMetrics, Glass Lewis, or other proxy service providers, and, especially as to non-routine, materially significant or controversial matters, memoranda describing the position it has taken. Additionally, the Proxy Group may include documentation obtained from the research analyst, portfolio manager, legal counsel and/or

			the Proxy Review Committee.

	6.		After the proxy is completed but before it is returned to the issuer and/or its agent, the Proxy Group may review those situations including special or unique documentation to determine that the appropriate documentation has been created, including conflict of interest screening.

	7.		The Proxy Group will attempt to submit Investment Manager’s vote on all proxies to RiskMetrics for processing at least three days prior to the meeting for U.S. securities and 10 days prior to the meeting for foreign securities. However, in certain foreign jurisdictions it may be impossible to return the proxy 10 days in advance of the meeting. In these situations, the Proxy Group will use its best efforts to send the proxy vote to RiskMetrics in sufficient time for the vote to be processed.

	8.		The Proxy Group prepares reports for each client that has requested a record of votes cast. The report specifies the proxy issues that have been voted for the client during the requested period and the position taken with respect to each issue. The Proxy Group sends one copy to the client, retains a copy in the Proxy Group’s files and forwards a copy to either the appropriate portfolio manager or the client service representative. While many Advisory Clients prefer quarterly or annual reports, the Proxy Group will provide reports for any timeframe requested by a client.

	9.		If the Franklin Templeton Services, LLC Fund Treasury Department learns of a vote on a material event that will affect a security on loan, the Fund Treasury Department will notify Investment Manager and obtain instructions regarding whether Investment Manager desires the Fund Treasury Department to contact the custodian bank in an effort to retrieve the securities. If so requested by Investment Manager, the Fund Treasury Department shall use its best efforts to recall any security on loan and will use other practicable and legally enforceable means to ensure that Investment Manager is able to fulfill its fiduciary duty to vote proxies for Advisory Clients with respect to such loaned securities. The Fund Treasury Department will advise the Proxy Group of all recalled securities.

	10.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, on a timely basis, will file all required Form N-PXs, with respect to investment company clients, disclose that its proxy voting record is available on the web site, and will make available the information disclosed in its Form N-PX as soon as is reasonably practicable after filing Form N-PX with the SEC.

	11.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, will ensure that all required disclosure about proxy voting of the investment company clients is made in such clients’ financial statements and disclosure documents.

	12.		The Proxy Group will review the guidelines of RiskMetrics and Glass Lewis, with special emphasis on the factors they use with respect to proxy voting recommendations.

	13.		The Proxy Group will familiarize itself with the procedures of RiskMetrics that govern the transmission of proxy voting information from the Proxy Group to RiskMetrics and periodically review how well this process is functioning.

	14.		The Proxy Group will investigate, or cause others to investigate, any and all instances where these Procedures have been violated or there is evidence that they are not being followed. Based upon the findings of these investigations, the Proxy Group, if practicable, will recommend amendments to these Procedures to minimize the likelihood of the reoccurrence of non-compliance.

	15.		At least annually, the Proxy Group will verify that:

	•		Each proxy or a sample of proxies received has been voted in a manner consistent with these Procedures and the Proxy Voting Guidelines;

	•		Each proxy or sample of proxies received has been voted in accordance with the instructions of the Investment Manager;

	•		Adequate disclosure has been made to clients and fund shareholders about the procedures and how proxies were voted; and

•

Timely filings were made with applicable regulators related to proxy voting.

The Proxy Group is responsible for maintaining appropriate proxy voting records. Such records will include, but are not limited to, a copy of all materials returned to the issuer and/or its agent, the documentation described above, listings of proxies voted by issuer and by client, and any other relevant information. The Proxy Group may use an outside service such as RiskMetrics to support this function. All records will be retained for at least five years, the first two of which will be on-site. Advisory Clients may request copies of their proxy voting records by calling the Proxy Group collect at 1-954-527-7678, or by sending a written request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Advisory Clients may review Investment Manager’s proxy voting policies and procedures on-line at www.franklintempleton.com and may request additional copies by calling the number above. For U.S. mutual fund products, an annual proxy voting record for the period ending June 30 of each year will be posted to www.franklintempleton.com no later than August 31 of each year. For Canadian mutual fund products, an annual proxy voting record for the period ending June 30 of each year will be posted to www.franklintempleton.ca no later than August 31 of each year. The Proxy Group will periodically review web site posting and update the posting when necessary. In addition, the Proxy Group is responsible for ensuring that the proxy voting policies, procedures and records of the Investment Manager are available as required by law and is responsible for overseeing the filing of such policies, procedures and mutual fund voting records with the SEC, the CSA and other applicable regulators.

As of January 2, 2008

FRANKLIN MUTUAL ADVISERS, LLC
PROXY VOTING POLICIES & PROCEDURES

RESPONSIBILITY OF INVESTMENT MANAGER TO VOTE PROXIES

Franklin Mutual Advisers, LLC (hereinafter “Investment Manager”) has delegated its administrative duties with respect to voting proxies to the Proxy Group within Franklin Templeton Companies, LLC (the “Proxy Group”), a wholly-owned subsidiary of Franklin Resources, Inc. Franklin Templeton Companies, LLC provides a variety of general corporate services to its affiliates, including but not limited to legal and compliance activities. Proxy duties consist of analyzing proxy statements of issuers whose stock is owned by any client (including both investment companies and any separate accounts managed by Investment Manager) that has either delegated proxy voting administrative responsibility to Investment Manager or has asked for information and/or recommendations on the issues to be voted. The Proxy Group will process proxy votes on behalf of, and Investment Manager votes proxies solely in the interests of, separate account clients, Investment Manager-managed mutual fund shareholders, or, where employee benefit plan assets are involved, in the interests of the plan participants and beneficiaries (collectively, “Advisory Clients”) that have properly delegated such responsibility or will inform Advisory Clients that have not delegated the voting responsibility but that have requested voting advice about Investment Manager’s views on such proxy votes. The Proxy Group also provides these services to other advisory affiliates of Investment Manager.

HOW INVESTMENT MANAGER VOTES PROXIES

Fiduciary Considerations

Conflicts of Interest

	7.		The issuer is a client¹³ of Investment Manager or its affiliates;

	8.		The issuer is a vendor whose products or services are material or significant to the business of Investment Manager or its affiliates;

	9.		The issuer is an entity participating to a material extent in the distribution of investment products advised, administered or sponsored by Investment Manager or its affiliates (e.g., a broker, dealer or bank);¹⁴

	10.		An Access Person¹⁵ of Investment Manager or its affiliates also serves as a director or officer of the issuer;

	11.		A director or trustee of Franklin Resources, Inc. or of a Franklin Templeton investment product, or an immediate family member¹⁶ of such director or trustee, also serves as an officer or director of the issuer; or

	12.		The issuer is Franklin Resources, Inc. or any of its proprietary investment products.

Nonetheless, even though a potential conflict of interest exists, the Investment Manager may vote in opposition to the recommendations of an issuer’s management.


¹³		For purposes of this section, a “client” does not include underlying investors in a commingled trust, Canadian pooled fund, or other pooled investment vehicle managed by the Investment Manager or its affiliates. Sponsors of funds sub-advised by Investment Manager or its affiliates will be considered a “client.”

¹⁴		The top 40 executing broker-dealers (based on gross brokerage commissions and client commissions), and distributors (based on aggregate 12b-1 distribution fees), as determined on a quarterly basis, will be considered to present a potential conflict of interest. In addition, any insurance company that has entered into a participation agreement with a Franklin Templeton entity to distribute the Franklin Templeton Variable Insurance Products Trust or other variable products will be considered to present a potential conflict of interest.

¹⁵		“Access Person” shall have the meaning provided under the current Code of Ethics of Franklin Resources, Inc.

¹⁶		The term “immediate family member” means a person’s spouse; child residing in the person’s household (including step and adoptive children); and any dependent of the person, as defined in Section 152 of the Internal Revenue Code (26 U.S.C. 152).

a committee of the board in the case of a U. S. registered mutual fund, the conducting officer in the case of an open-ended collective investment scheme formed as a Société d’investissement à capital variable (SICAV), the Independent Review Committee for Canadian investment funds, or a plan administrator in the case of an employee benefit plan. The Proxy Group or the Proxy Review Committee may determine to vote all shares held by Advisory Clients in accordance with the instructions of one or more of the Advisory Clients.

Weight Given Management Recommendations

THE PROXY GROUP

and relevant portfolio manager(s) are responsible for making the final voting decision based on their review of the agenda, RiskMetrics and/or Glass Lewis analyses, their knowledge of the company and any other information readily available. In situations where the Investment Manager has not responded with vote recommendations to the Proxy Group by the deadline date, the Proxy Group may defer to the vote recommendations of an independent third party provider of proxy services. Except in cases where the Proxy Group is deferring to the voting recommendation of an independent third party service provider, the Proxy Group must obtain voting instructions from Investment Manager’s research analyst, relevant portfolio manager(s), legal counsel and/or the Advisory Client or Proxy Review Committee prior to submitting the vote.

GENERAL PROXY VOTING GUIDELINES

INVESTMENT MANAGER’S PROXY VOTING POLICIES AND PRINCIPLES

The following guidelines reflect what Investment Manager believes to be good corporate governance and behavior:

Ratification of Auditors: In light of several high profile accounting scandals, Investment Manager will closely scrutinize the role and performance of auditors. On a case-by-case basis, Investment Manager will examine proposals relating to non-audit relationships and non-audit fees. Investment Manager will also consider, on a case-by-case basis, proposals to rotate auditors, and will vote against the ratification of auditors when there is clear and compelling evidence of accounting irregularities or negligence attributable to the auditors.

Management & Director Compensation: A company’s equity-based compensation plan should be in alignment with the shareholders’ long-term interests. Investment Manager believes that executive

compensation should be directly linked to the performance of the company. Investment Manager evaluates plans on a case-by-case basis by considering several factors to determine whether the plan is fair and reasonable. Investment Manager reviews the RiskMetrics quantitative model utilized to assess such plans and/or the Glass Lewis evaluation of the plan. Investment Manager will generally oppose plans that have the potential to be excessively dilutive, and will almost always oppose plans that are structured to allow the repricing of underwater options, or plans that have an automatic share replenishment “evergreen” feature. Investment Manager will generally support employee stock option plans in which the purchase price is at least 85% of fair market value, and when potential dilution is 10% or less.

PROXY PROCEDURES

Manager understands its fiduciary duty to vote proxies and that proxy voting decisions may affect the value of shareholdings. Therefore, Investment Manager will attempt to process every proxy it receives for all domestic and foreign securities. However, there may be situations in which Investment Manager cannot vote proxies. For example, if the cost of voting a foreign proxy outweighs the benefit of voting, the Proxy Group may refrain from processing that vote. Additionally, the Proxy Group may not be given enough time to process the vote. For example, the Proxy Group, through no fault of their own, may receive a meeting notice from the company too late, or may be unable to obtain a timely translation of the agenda. In addition, if Investment Manager has outstanding sell orders, or anticipates placing sell orders prior to the date of the shareholder meeting, in certain markets that have blocking restrictions, the proxies for those meetings may not be voted in order to facilitate the sale of those securities. If a security is on loan, Investment Manager may determine that it is not in the best interests of its clients to recall the security for voting purposes. Although Investment Manager may hold shares on a company’s record date, should it sell them prior to the company’s meeting date, Investment Manager ultimately may decide not to vote those shares. Lastly, the Investment Manager will not vote proxies when prohibited from voting by applicable law.

The following describes the standard procedures that are to be followed with respect to carrying out Investment Manager’s proxy policy:

	16.		The Proxy Group will identify all Advisory Clients, maintain a list of those clients, and indicate those Advisory Clients who have delegated proxy voting authority to the Investment Manager. The Proxy Group will periodically review and update this list.

	17.		All relevant information in the proxy materials received (e.g., the record date of the meeting) will be recorded immediately by the Proxy Group in a database to maintain control over such materials. The Proxy Group will confirm each relevant Advisory Client’s holdings of the securities and that the client is eligible to vote.

	18.		The Proxy Group will review and compile information on each proxy upon receipt of any agendas, materials, reports, recommendations from RiskMetrics and/or Glass Lewis, or other information. The Proxy Group will then forward this information to the appropriate research analyst and/or legal counsel for review and voting instructions.

	19.		In determining how to vote, Investment Manager’s analysts and relevant portfolio manager(s) will consider the General Proxy Voting Guidelines set forth above, their in-depth knowledge of the company, any readily available information and research about the company and its agenda items, and the recommendations put forth by RiskMetrics, Glass Lewis, or other independent third party providers of proxy services.

	20.		The Proxy Group is responsible for maintaining the documentation that supports Investment Manager’s voting position. Such documentation may include, but is not limited to, any information provided by RiskMetrics, Glass Lewis, or other proxy service providers, and, especially as to non-routine, materially significant or controversial matters, memoranda describing the position it has taken. Additionally, the Proxy Group may include documentation obtained from the research analyst, portfolio manager, legal counsel and/or the Proxy Review Committee.

	21.		After the proxy is completed but before it is returned to the issuer and/or its agent, the Proxy Group may review those situations including special or unique documentation to determine that the appropriate documentation has been created, including conflict of interest screening.

	22.		The Proxy Group will attempt to submit Investment Manager’s vote on all proxies to RiskMetrics for processing at least three days prior to the meeting for U.S. securities and 10 days prior to the meeting for foreign securities. However, in certain foreign jurisdictions it may be impossible to return the proxy 10 days in advance of the meeting. In these situations, the Proxy Group will use its best efforts to send the proxy vote to RiskMetrics in sufficient time for the vote to be processed.

	23.		The Proxy Group prepares reports for each client that has requested a record of votes cast. The report specifies the proxy issues that have been voted for the client during the requested period and the position taken with respect to each issue. The Proxy Group sends one copy to the client, retains a copy in the Proxy Group’s files and forwards a copy to either the appropriate portfolio manager or the client service representative. While many Advisory Clients prefer quarterly or annual reports, the Proxy Group will provide reports for any timeframe requested by a client.

	24.		If the Franklin Templeton Services, LLC Fund Treasury Department learns of a vote on a material event that will affect a security on loan, the Fund Treasury Department will notify Investment Manager and obtain instructions regarding whether Investment Manager desires the Fund Treasury Department to contact the custodian bank in an effort to retrieve the securities. If so requested by Investment Manager, the Fund Treasury Department shall use its best efforts to recall any security on loan and will use other practicable and legally enforceable means to ensure that Investment Manager is able to fulfill its fiduciary duty to vote proxies for Advisory Clients with respect to such loaned securities. The Fund Treasury Department will advise the Proxy Group of all recalled securities.

	25.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, on a timely basis, will file all required Form N-PXs, with respect to investment company clients, disclose that its proxy voting record is available on the web site, and will make available the information disclosed in its Form N-PX as soon as is reasonably practicable after filing Form N-PX with the SEC.

	26.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, will ensure that all required disclosure about proxy voting of the investment company clients is made in such clients’ financial statements and disclosure documents.

	27.		The Proxy Group will review the guidelines of RiskMetrics and Glass Lewis, with special emphasis on the factors they use with respect to proxy voting recommendations.

	28.		The Proxy Group will familiarize itself with the procedures of RiskMetrics that govern the transmission of proxy voting information from the Proxy Group to RiskMetrics and periodically review how well this process is functioning.

	29.		The Proxy Group will investigate, or cause others to investigate, any and all instances where these Procedures have been violated or there is evidence that they are not being followed. Based upon the findings of these investigations, the Proxy Group, if practicable, will recommend amendments to these Procedures to minimize the likelihood of the reoccurrence of non-compliance.

	30.		At least annually, the Proxy Group will verify that:

	•		Each proxy or a sample of proxies received has been voted in a manner consistent with these Procedures and the Proxy Voting Guidelines;

	•		Each proxy or sample of proxies received has been voted in accordance with the instructions of the Investment Manager;

	•		Adequate disclosure has been made to clients and fund shareholders about the procedures and how proxies were voted; and

	•		Timely filings were made with applicable regulators related to proxy voting.

this function. All records will be retained for at least five years, the first two of which will be on-site. Advisory Clients may request copies of their proxy voting records by calling the Proxy Group collect at 1-954-527-7678, or by sending a written request to: Franklin Templeton Companies, LLC, 500 East Broward Boulevard, Suite 1500, Fort Lauderdale, FL 33394, Attention: Proxy Group. Advisory Clients may review Investment Manager’s proxy voting policies and procedures on-line at www.franklintempleton.com and may request additional copies by calling the number above. For U.S. mutual fund products, an annual proxy voting record for the period ending June 30 of each year will be posted to www.franklintempleton.com no later than August 31 of each year. For Canadian mutual fund products, an annual proxy voting record for the period ending June 30 of each year will be posted to www.franklintempleton.ca no later than August 31 of each year. The Proxy Group will periodically review web site posting and update the posting when necessary. In addition, the Proxy Group is responsible for ensuring that the proxy voting policies, procedures and records of the Investment Manager are available as required by law and is responsible for overseeing the filing of such policies, procedures and mutual fund voting records with the SEC, the CSA and other applicable regulators.

As of January 2, 2008

FRONTIER CAPITAL MANAGEMENT COMPANY, LLC

PROXY VOTING STATEMENT AND GUIDELINES

Introduction

As an investment adviser and fiduciary of client assets, Frontier utilizes proxy voting policies and procedures intended to pursue its clients’ best interest by protecting the value of clients’ investments. Frontier recognizes that proxies have an economic value. In voting proxies, we seek to both maximize the long-term value of our clients’ assets and to cast votes that we believe to be fair and in the best interest of the affected client(s). Proxies are considered client assets and are managed with the same care, skill and diligence as all other client assets. These written proxy policies and procedures are designed to reasonably ensure that Frontier votes proxies in the best interest of clients for whom Frontier has voting authority.

Arrangements with Outside Firms

Frontier has contracted with a third party vendor (the “ proxy vendor”) to provide vote recommendations according to a set of pre-determined proxy voting policy guidelines. Frontier has contracted with another vendor to act as agent (the “proxy agent”) for the proxy voting process and to maintain records on proxy voting for our clients. The vendor has represented to Frontier that it uses its best efforts to ensure that its proxy voting recommendations are in accordance with these policies as well as relevant requirements of the ERISA and the U.S. Department of Labor’s interpretations thereof.

There may be occasional circumstances in which Frontier exercises its voting discretion. Frontier’s action in these cases is described in the Conflicts of Interest section of these Policies and Procedures.

Proxy Voting Committee

Frontier has a Proxy Voting Committee that is responsible for deciding what is in the best interest of clients when determining how proxies are voted. The Committee meets at least annually to review and re-approve the vendor’s proxy voting policies as well as Frontier’s own policies if it determines that they continue to be reasonably designed to be in the best interest of Frontier’s clients. Any changes to the vendor’s voting guidelines must be reviewed, approved and adopted by the Committee before they will become effective for Frontier.

Account Set-Up

Except where the contract is silent, each client will designate in its investment management contract whether it would like to retain proxy voting authority or delegate that authority to Frontier. If a client contract is silent on whether the client delegates proxy voting authority to Frontier, Frontier will be implied to have proxy voting authority.

Account Update

On at least a quarterly basis, the agent for the proxy voting process will provide Frontier with a list of Frontier clients for which the agent is voting. This is designed to ensure that the agent is voting for all clients for whom Frontier retains voting authority. In that regard, Frontier will conduct a periodic reconciliation between its and the agent’s records.

Conflicts of Interest

As noted, Frontier has adopted the proxy vendor’s proxy voting guidelines. The adoption of these proxy voting guidelines provides pre-determined policies for voting proxies and is thus designed to remove conflicts of interest. Examples of such conflicts are when we vote a proxy solicited by an issuer who is a client of ours or with whom we have another business or personal relationship that may affect how we vote on the issuer’s proxy. The intent of this policy is to remove any discretion that Frontier may have to interpret how to vote proxies in cases where Frontier has a material conflict of interest or the appearance of a material conflict of interest.

Although under normal circumstances Frontier is not expected to exercise its voting discretion or to override the vendor, the Proxy Voting Committee will monitor any situation where Frontier wishes to exercise its discretion. In these situations, the Proxy Voting Committee, or an employee delegated by the Committee, will consider whether Frontier has a material conflict of interest. If the Committee determines that a material conflict exists, Frontier will vote the proxy using either of the following two methods: (a) we will follow the recommendations of Glass Lewis; or (b) we will not take into consideration the relationship that gave rise to the conflict and will vote the proxy in the best interest of our clients. If the Committee determines that a material conflict does not exist, then we may vote the proxy in our discretion. Frontier’s General Counsel must approve any decision made on such a vote prior to the vote being cast.

Oversight

Proxy Vendor

On a periodic basis, Frontier will verify with Glass Lewis that it made voting recommendations according to its pre-determined policies and provided Frontier with any changes in its pre-determined policies.

Proxy Agent

On a periodic basis, Frontier will verify with the proxy agent that it has voted proxies for accounts for which Frontier delegated voting tot he proxy agent.

Custodian

On a periodic basis, Frontier will confirm that client custodians are alerting the proxy agent when accounts are set up at the custodian for the proxy agent to begin voting Frontier’s clients’ securities and that they are forwarding all proxy materials pertaining to the client’s portfolios to the proxy agent for execution.

Votes Cast Other than According to the Proxy Vendor’s Pre-Determined Policies Frontier’s CCO, who is also the General Counsel will periodically confirm that all documentation regarding any decisions to vote other than according to the proxy vendor’s pre-determined policies are accurate and complete.

Client Disclosure

Clients may obtain information about how Frontier voted proxies for securities held in their account(s) by contacting Frontier at (617) 261-0777.

Upon a client’s request, the proxy agent will provide Frontier with the following information:

	1.		The name of the issuer of the portfolio security

	2.		The ticker symbol of the security

	3.		The CUSIP of the portfolio security

	4.		The shareholder meeting date

	5.		A description of the matter voted on

	6.		Whether the matter was proposed by the issuer or by a security holder

	7.		Whether the account voted on the matter

	8.		How each proxy proposal was voted (e.g., for or against the proposal, abstain; for or withhold authority regarding election of directors)

	9.		Whether the vote that was cast was for or against management’s recommendation.

Recordkeeping

Frontier will maintain in an easily accessible place for a period of six years, the first two years in an appropriate Frontier office, the following documents (except documents maintained on Frontier’s behalf by the proxy agent as specifically noted below):

	1.		Frontier’s proxy voting policies and procedures and the proxy voting guidelines.

	2.		Proxy statements received regarding client securities. Frontier will satisfy this requirement by relying on the proxy agent, on Frontier’s behalf, to retain a copy of each proxy statement.

	3.		Records of votes cast on behalf of its clients. Frontier will satisfy this requirement by relying on the proxy agent to retain, on Frontier’s behalf, a record of the vote cast.

	4.		A copy of any document created by Frontier personnel that was material to making a decision on how to vote proxies on behalf of a client or that memorialized the basis for that decision.

	5.		A copy of each written client request for information on how Frontier voted proxies on behalf of the client, and a copy of any written response by Frontier to any written or oral client request for information on how Frontier voted proxies on behalf of the requesting client.

GRANTHAM, MAYO, VAN OTTERLOO & CO. LLC
GMO AUSTRALASIA LLC
(TOGETHER “GMO”)

PROXY VOTING POLICIES AND PROCEDURES

Amended and Restated as of February 2, 2009

I. Introduction and General Principles

GMO provides investment advisory services primarily to institutional, including both ERISA and non-ERISA clients, and commercial clients. GMO understands that proxy voting is an integral aspect of security ownership. Accordingly, in cases where GMO has been delegated authority to vote proxies, that function must be conducted with the same degree of prudence and loyalty accorded any fiduciary or other obligation of an investment manager.

This policy permits clients of GMO to: (1) delegate to GMO the responsibility and authority to vote proxies on their behalf according to GMO’s proxy voting polices and guidelines; (2) delegate to GMO the responsibility and authority to vote proxies on their behalf according to the particular client’s own proxy voting policies and guidelines; or (3) elect to vote proxies themselves. In instances where clients elect to vote their own proxies, GMO shall not be responsible for voting proxies on behalf of such clients.

GMO believes that the following policies and procedures are reasonably designed to ensure that proxy matters are conducted in the best interest of its clients, in accordance with GMO’s fiduciary duties, applicable rules under the Investment Advisers Act of 1940 and fiduciary standards and responsibilities for ERISA clients set out in the Department of Labor interpretations.

II. Proxy Voting Guidelines

GMO has engaged Institutional Shareholder Services, Inc. (“ISS”) as its proxy voting agent to:

	(1)		research and make voting recommendations or, for matters for which GMO has so delegated, to make the voting determinations;

	(2)		ensure that proxies are voted and submitted in a timely manner;

	(3)		handle other administrative functions of proxy voting;

	(4)		maintain records of proxy statements received in connection with proxy votes and provide copies of such proxy statements promptly upon request;

	(5)		maintain records of votes cast; and

	(6)		provide recommendations with respect to proxy voting matters in general.

Proxies generally will be voted in accordance with the voting recommendations contained in the applicable domestic or global ISS Proxy Voting Manual, as in effect from time to time, subject to such modifications as may be determined by GMO (as described below). Copies of concise summaries of the current domestic and global ISS proxy voting guidelines are attached to these Proxy Voting Policies and Procedures as Exhibit A. To the extent GMO determines to adopt proxy voting guidelines that differ from the ISS proxy voting recommendations, such guidelines will be set forth on Exhibit B and proxies with respect to such matters will be voted in accordance with the guidelines set forth on Exhibit B. GMO reserves the right to modify any of the recommendations set forth in the ISS Proxy Voting Manual in the future. If any such changes are made, an amended Exhibit B to these Proxy Voting Policies and Procedures will be made available for clients.

Except in instances where a GMO client retains voting authority, GMO will instruct custodians of client accounts to forward all proxy statements and materials received in respect of client accounts to ISS.

III. Proxy Voting Procedures

GMO has a Corporate Actions Group with responsibility for administering the proxy voting process, including:

	1.		Implementing and updating the applicable domestic and global ISS proxy voting guidelines set forth in the ISS Proxy Voting Manual, as modified from time to time by Exhibit B hereto;

	2.		Overseeing the proxy voting process; and

	3.		Providing periodic reports to GMO’s Compliance Department and clients as requested.

There may be circumstances under which a portfolio manager or other GMO investment professional (“GMO Investment Professional”) believes that it is in the best interest of a client or clients to vote proxies in a manner inconsistent with the proxy voting guidelines described in Section II. In such an event, the GMO Investment Professional will inform GMO’s Corporate Actions Group of its decision to vote such proxy in a manner inconsistent with the proxy voting guidelines described in Section II. GMO’s Corporate Actions Group will report to GMO’s Compliance Department no less than quarterly any instance where a GMO Investment Professional has decided to vote a proxy on behalf of a client in that manner.

IV. Conflicts of Interest

As ISS will vote proxies in accordance with the proxy voting guidelines described in Section II, GMO believes that this process is reasonably designed to address conflicts of interest that may arise between GMO and a client as to how proxies are voted.

In instances where GMO has the responsibility and authority to vote proxies on behalf of its clients for shares of GMO Trust, a registered mutual fund for which GMO serves as the investment adviser, there may be instances where a conflict of interest exists. Accordingly, GMO will (i) vote such proxies in the best interests of its clients with respect to routine matters, including proxies relating to the election of Trustees; and (ii) with respect to matters where a conflict of interest exists between GMO and GMO Trust, such as proxies relating to a new or amended investment management contract between GMO Trust and GMO, or a re-organization of a series of GMO Trust, GMO will either (a) vote such proxies in the same proportion as the votes cast with respect to that proxy, or (b) seek instructions from its clients.

In addition, if GMO is aware that one of the following conditions exists with respect to a proxy, GMO shall consider such event a potential material conflict of interest:

	1.		GMO has a business relationship or potential relationship with the issuer;

	2.		GMO has a business relationship with the proponent of the proxy proposal; or

	3.		GMO members, employees or consultants have a personal or other business relationship with the participants in the proxy contest, such as corporate directors or director candidates.

In the event of a potential material conflict of interest, GMO will (i) vote such proxy according to Exhibit B (if applicable) or the specific recommendation of ISS; (ii) abstain; or (iii) request that the client votes such proxy. All such instances shall be reported to GMO’s Compliance Department at least quarterly.

V. Recordkeeping

GMO will maintain records relating to the implementation of these proxy voting policies and procedures, including:

	(1)		a copy of these policies and procedures which shall be made available to clients, upon request;

	(2)		a record of each vote cast (which ISS maintains on GMO’s behalf); and

	(3)		each written client request for proxy records and GMO’s written response to any client request for such records.

PROXY VOTING POLICY AND PROCEDURES

I. Introduction

Jennison Associates LLC (the “Adviser”) has adopted the following “Proxy Voting Policy and Procedures” (“Policy”), in compliance with Rule 206(4)-6 under the Investment Advisers Act of 1940 (the “Advisers Act”) and other applicable fiduciary obligations. The Policy is designed to provide guidance to those Jennison employees (portfolio managers and analysts, hereinafter referred to as “Investment Professionals”) who are responsible for discharging the Adviser’s proxy voting obligation under the Rule, and to ensure that proxies are voted in the best interests of the Adviser’s clients¹.

II. Statement of Policy

It is the policy of the Adviser that where proxy voting authority has been delegated to the Adviser by clients, that all proxies be voted in the best interest of the client without regard to the interests of the Adviser or other related parties. Secondary consideration may be given to the public and social value of each issue. For purposes of the Policy, the “best interests of clients” shall mean, unless otherwise specified by the client, the clients’ best economic interests over the long term – that is, the common interest that all clients share in seeing the value of a common investment increase over time. It is further the policy of the Adviser that complete and accurate disclosure concerning its proxy voting policies and procedures and proxy voting records, as required by the Advisers Act be made available to clients.

In voting proxies for international holdings, we will generally apply the same principles as those for U.S. holdings. However, in some countries, voting proxies result in additional restrictions that have an economic impact or cost to the security, such as “share blocking,” where Jennison would be restricted from selling shares of the security for a period of time if Jennison exercised its ability to vote the proxy. As such, we consider whether the vote, either itself or together with the votes of other shareholders, is expected to have an effect on the value of the investment that will outweigh the cost of voting. Our policy is to not vote these types of proxies when the costs outweigh the benefit of voting, as in share blocking.

III. Procedures

A. Account Set-up and Review

Initially, the Adviser must determine whether the client seeks to retain the responsibility of voting proxies or seeks to delegate that responsibility to the Adviser. The responsibility to Revised: October 16, 2007 1


¹		In the event the Adviser should manage affiliated client accounts, the Adviser, for purposes of this policy, makes no distinction between accounts of affiliated companies, e.g., the General Accounts of Prudential (as well as related insurance companies and entities), and other separately managed accounts, each of which will be treated consistently under the Policy.

Legg Mason Capital Management, Inc.

Proxy Principles and Procedures

OVERVIEW

Legg Mason Capital Management, Inc. (LMCM) has implemented the following principles and procedures for voting proxies on behalf of advisory clients. These principles and procedures are reasonably designed to ensure LMCM exercises its voting responsibilities to serve the best interests of its clients and in compliance with applicable laws and regulations. LMCM assumes responsibility and authority for voting proxies for all clients, unless such responsibility and authority has been expressly retained by the client or delegated by the client to others. For each proxy vote LMCM takes into consideration its duty to its clients and all other relevant facts available to LMCM at the time of the vote. Therefore, while these guidelines provide a framework for voting, votes are ultimately cast on a case-by-case basis. LMCM employs the same proxy principles and procedures for all funds for which it has voting responsibility.

PRINCIPLES

Proxy voting is a valuable right of company shareholders. Through the voting mechanism, shareholders are able to protect and promote their interests by communicating views directly to the company’s Board of Directors (Board), as well as exercising their right to grant or withhold approval for actions proposed by the Board or company management. LMCM believes the interests of shareholders are best served by the following principles when considering proxy proposals:

Preserve and expand the power of shareholders in areas of corporate governance – Equity shareholders are owners of the business – company boards and management teams are ultimately accountable to them. LMCM supports policies, plans and structures that promote accountability of the Board and management to owners, and align the interests of the Board and management with owners. Examples include: annual election of all Board members, cumulative voting, and incentive plans that are contingent on delivering value to shareholders. LMCM opposes proposals that reduce accountability or misalign interests, including but not limited to classified boards, poison pills, and incentives that are not linked to owner returns.

Allow responsible management teams to run the business – LMCM supports policies, plans and structures that give management teams appropriate latitude to run the business in the way that is most likely to maximize value for owners. Conversely, LMCM opposes proposals that limit management’s ability to do this. LMCM generally opposes proposals that seek to place restrictions on management in order to promote political, religious or social agendas.

Please see LMCM’s proxy voting guidelines, which are attached as Schedule A, for more details.

PROCEDURES

Oversight

LMCM’s Chief Investment Officer (CIO) has full authority to determine LMCM’s proxy voting principles and vote proxies on behalf of LMCM’s clients. The Chief Investment Officer has delegated oversight and implementation of the proxy voting process, including the principles and procedures that govern it, to one or more Proxy Officers and Compliance Officers. No less than annually, LMCM will review existing principles and procedures in light of LMCM’s duties as well as applicable laws and regulations to determine if any changes are necessary.

Limitations

LMCM recognizes proxy voting as a valuable right of company shareholders. Generally speaking, LMCM will vote all proxies it receives. However, LMCM may refrain from voting in certain circumstances. For instance, LMCM generally intends to refrain from voting a proxy if the company’s shares are no longer held by LMCM’s clients at the time of the meeting. Additionally, LMCM may refrain from voting a proxy if LMCM concludes the potential impact on shareholders’ interests is insignificant while the cost associated with analyzing and voting the proxy may be significant.

Proxy Administration

LMCM instructs each client custodian to forward proxy materials to LMCM’s Proxy Administrator. New client custodians are notified at account inception of their responsibility to deliver proxy materials to LMCM. LMCM uses Institutional Shareholder Services (ISS) to electronically receive and vote proxies, as well as to maintain proxy voting receipts and records.

Upon receipt of proxy materials:

Compliance Review

A Compliance Officer reviews the proxy issues and identifies any potential conflicts of interests between LMCM, or its employees, and LMCM’s clients. LMCM recognizes that it has a duty to vote proxies in the best interests of its clients, even if such votes may result in a loss of business or economic benefit to LMCM or its affiliates.

1. Identifying Potential Conflicts. In identifying potential conflicts of interest the Compliance Officer will review the following issues:

(a) Whether there are any business or personal relationships between LMCM, or an employee of LMCM, and the officers, directors or shareholder proposal proponents of a company whose securities are held in client accounts that may create an incentive for LMCM to vote in a manner that is not consistent with the best interests of its clients;

(b) Whether LMCM has any other economic incentive to vote in a manner that is not consistent with the best interests of its clients; and

(c) Whether the Proxy Officer voting the shares is aware of any business or personal relationship, or other economic incentive, that has the potential to influence the manner in which the Proxy Officer votes the shares.

2. Assessing Materiality. A potential conflict will be deemed to be material if the Compliance Officer determines in the exercise of reasonable judgment that the conflict is likely to have an impact on the manner in which the subject shares are voted.

If the Compliance Officer determines that the potential conflict is not material, the proxy issue will be forwarded to the Proxy Officer for voting.

If the Compliance Officer determines that the potential conflict may be material, the following steps will be taken:

(a) The Compliance Officer will consult with representatives of LMCM’s senior management to make a final determination of materiality. The Compliance Officer will maintain a record of this determination.

(b) After the determination is made, the following procedures will apply:

(i) If the final determination is that the potential conflict is not material, the proxy issue will be forwarded to the Proxy Officer for voting.

(ii) If the final determination is that the potential conflict is material, LMCM will adhere to the following procedures:

A. If LMCM’s Proxy Voting Guidelines (Guidelines), a copy of which is included as Schedule A, definitively address the issues presented for vote, LMCM will vote according to the Guidelines.

B. If the issues presented for vote are not definitively addressed in the Guidelines, LMCM will either (x) follow the vote recommendation of an independent voting delegate, or (y) disclose the conflict to clients and obtain their consent to vote.

Proxy Officer Duties

The Proxy Officer reviews proxies and evaluates matters for vote in light of LMCM’s principles and procedures and the Guidelines. The Proxy Officer may seek additional information from LMCM’s investment personnel, company management, independent research services, or other sources to determine the best interests of shareholders. Additionally, the Proxy Officer may consult with LMCM’s Chief Investment Officer for guidance on proxy issues. LMCM will maintain all documents that have a material impact on the basis for the vote. The Proxy Officer will return all signed, voted forms to the Proxy Administrator.

Proxy Administrator Duties

The Proxy Administrator:

1. Provides custodians with instructions to forward proxies to LMCM for all clients for whom LMCM is responsible for voting proxies;

2. Reconciles the number of shares indicated on the proxy ballot with LMCM’s internal data on shares held as of the record date and notifies the custodian of any discrepancies or missed proxies;

3. Will use best efforts to obtain missing proxies from custodians;

4. Informs the Compliance Officer and Proxy Officer if the company’s shares are no longer held by Firm clients as of the meeting date;

5. Ensures that the Compliance Officer and Proxy Officer are aware of the timeline to vote a proxy and uses best efforts to ensure that votes are cast in a timely manner;

6. Follows instructions from the Proxy Officer or Compliance Officer as to how to vote proxy issues, and casts such votes via ISS software, online or via facsimile; and

7. Obtains evidence of receipt and maintains records of all proxies voted.

Record Keeping

The following documents are maintained onsite for two years and in an easily accessible place for another three years:

Schedule A
Proxy Voting Guidelines

LMCM maintains these proxy-voting guidelines, which set forth the manner in which LMCM generally votes on issues that are routinely presented. Please note that for each proxy vote LMCM takes into consideration its duty to its clients, the specific circumstances of the vote and all other relevant facts available at the time of the vote. While these guidelines provide the framework for voting proxies, ultimately proxy votes are cast on a case-by-case basis. Therefore actual votes for any particular proxy issue may differ from the guidelines shown below.

Four principal areas of interest to shareholders:

1) Obligations of the Board of Directors

2) Compensation of management and the Board of Directors

3) Take-over protections

4) Shareholders’ rights


Proxy Issue		LMCM Guideline
BOARD OF DIRECTORS

Independence of Boards of Directors: majority of unrelated directors, independent of management		For

Nominating Process: independent nominating committee seeking qualified candidates, continually assessing directors and proposing new nominees		For

Size and Effectiveness of Boards of Directors: Boards must be no larger than 15 members		For

Cumulative Voting for Directors		For

Staggered Boards		Against

Separation of Board and Management Roles (CEO/Chairman)		Case-by-Case

Compensation Review Process: compensation committee comprised of outside, unrelated directors to ensure shareholder value while rewarding good performance		For

Director Liability & Indemnification: support limitation of liability and provide indemnification		For

Audit Process		For

Board Committee Structure: audit, compensation, and nominating and/or governance committee consisting entirely of independent directors		For

Monetary Arrangements for Directors: outside of normal board activities amts should be approved by a board of independent directors and reported in proxy		For

Fixed Retirement Policy for Directors		Case-by-Case

Ownership Requirement: all Directors have direct and material cash investment in common shares of Company		For

Proposals on Board Structure: (lead director, shareholder advisory committees, requirement that candidates be nominated by shareholders, attendance at meetings)		For

Annual Review of Board/CEO by Board		For

Periodic Executive Sessions Without Mgmt (including CEO)		For

Votes for Specific Directors		Case-by-Case

- Continued -


Proxy Issue		LMCM Guideline
MANAGEMENT AND DIRECTOR COMPENSATION

Stock Option and Incentive Compensation Plans:		Case-by-Case

Form of Vehicle: grants of stock options, stock appreciation rights, phantom shares and restricted stock		Case-by-Case

Price		Against plans whose underlying securities are to be issued at less than 100% of the current market value

Re-pricing: plans that allow the Board of Directors to lower the exercise price of options already granted if the stock price falls or under-performs the market		Against

Expiry: plan whose options have a life of more than ten years		Case-by-Case

Expiry: “evergreen” stock option plans		Against

Dilution:		Case-by-Case — taking into account value creation, commitment to shareholder-friendly policies, etc.

Vesting: stock option plans that are 100% vested when granted		Against

Performance Vesting: link granting of options, or vesting of options previously granted, to specific performance targets		For

Concentration: authorization to allocate 20% or more of the available options to any one individual in any one year		Against

Director Eligibility: stock option plans for directors if terms and conditions are clearly defined and reasonable		Case-by-Case

Change in Control: stock option plans with change in control provisions that allow option holders to receive more for their options than shareholders would receive for their shares		Against

Change in Control: change in control arrangements developed during a take-over fight specifically to entrench or benefit management		Against


Proxy Issue		LMCM Guideline
Change in Control: granting options or bonuses to outside directors in event of a change in control		Against

Board Discretion: plans to give Board broad discretion in setting terms and conditions of programs		Against

Employee Loans: Proposals authorizing loans to employees to pay for stock or options		Against

Director Compensation: % of directors’ compensation in form of common shares		For

Golden Parachutes		Case-by-Case

Expense Stock Options		For

Severance Packages: must receive shareholder approval		For

Lack of Disclosure about Provisions of Stock-based Plans		Against

Reload Options		Against

Plan Limited to a Small Number of Senior Employees		Against

Employee Stock Purchase Plans		Case-by-Case

- Continued -


Proxy Issue		LMCM Guideline
TAKEOVER PROTECTIONS

Shareholder Rights Plans: plans that go beyond ensuring the equal treatment of shareholders in the event of a bid and allowing the corp. enough time to consider alternatives to a bid		Against

Going Private Transaction, Leveraged Buyouts and Other Purchase Transactions		Case-by-Case

Lock-up Arrangements: “hard” lock-up arrangements that serve to prevent competing bids in a takeover situation		Against

Crown Jewel Defenses		Against

Payment of Greenmail		Against

“Continuing Director” or “Deferred Redemption” Provisions: provisions that seek to limit the discretion of a future board to redeem the plan		Against

Change Corporation’s Domicile: if reason for re-incorporation is to take advantage of protective statutes (anti-takeover)		Against

Poison Pills: receive shareholder ratification		For

Redemption/Ratification of Poison Pill		For

SHAREHOLDERS’ RIGHTS

Confidential Voting by Shareholders		For

Dual-Class Share Structures		Against

October 25, 2007

LORD, ABBETT & CO. LLC

PROXY VOTING POLICIES AND PROCEDURES

INTRODUCTION

Lord Abbett has a Proxy Committee responsible for establishing voting policies and for the oversight of its proxy voting process. Lord Abbett’s Proxy Committee consists of the portfolio managers of each investment team and certain members of those teams, the Chief Administrative Officer for the Investment Department, the Firm’s Chief Investment Officer and its General Counsel. Once policy is established, it is the responsibility of each investment team leader to assure that each proxy for that team’s portfolio is voted in a timely manner in accordance with those policies. In each case where an investment team declines to follow a recommendation of a company’s management, a detailed explanation of the reason(s) for the decision is entered into the proxy voting system. Lord Abbett has retained RiskMetrics Group, formerly Institutional Shareholder Services (“RMG”), to analyze proxy issues and recommend voting on those issues, and to provide assistance in the administration of the proxy process, including maintaining complete proxy voting records.

The Boards of Directors of each of the Lord Abbett Mutual Funds established several years ago a Proxy Committee, composed solely of independent directors. The Funds’ Proxy Committee Charter provides that the Committee shall (i) monitor the actions of Lord Abbett in voting securities owned by the Funds; (ii) evaluate the policies of Lord Abbett in voting securities; (iii) meet with Lord Abbett to review the policies in voting securities, the sources of information used in determining how to vote on particular matters, and the procedures used to determine the votes in any situation where there may be a conflict of interest.

Lord Abbett is a privately-held firm, and we conduct only one business: we manage the investment portfolios of our clients. We are not part of a larger group of companies conducting diverse financial operations. We would therefore expect, based on our past experience, that the incidence of an actual conflict of interest involving Lord Abbett’s proxy voting process would be limited. Nevertheless, if a potential conflict of interest were to arise, involving one or more of the Lord Abbett Funds, where practicable we would disclose this potential conflict to the affected Funds’ Proxy Committees and seek voting instructions from those Committees in accordance with the procedures described below under “Specific Procedures for Potential Conflict Situations”. If it were not practicable to seek instructions from those Committees, Lord Abbett would simply follow its proxy voting policies or, if the particular issue were not covered by those policies, we would follow a recommendation of RMG. If such a conflict arose with any other client, Lord Abbett would simply follow its proxy voting policies or, if the particular issue were not covered by those policies, we would follow the recommendation of RMG.

SPECIFIC PROCEDURES FOR POTENTIAL CONFLICT SITUATIONS

Situation 1. Fund Independent Board Member on Board (or Nominee for Election to Board) of Publicly Held Company Owned by a Lord Abbett Fund.

Lord Abbett will compile a list of all publicly held companies where an Independent Board Member serves on the board of directors, or has indicated to Lord Abbett that he is a nominee for election to the board of directors (a “Fund Director Company”). If a Lord Abbett Fund owns stock in a Fund Director Company, and if Lord Abbett has decided not to follow the proxy voting recommendation of

RMG, then Lord Abbett shall bring that issue to the Fund’s Proxy Committee for instructions on how to vote that proxy issue.

The Independent Directors have decided that the Director on the board of the Fund Director Company will not participate in any discussion by the Fund’s Proxy Committee of any proxy issue for that Fund Director Company or in the voting instruction given to Lord Abbett.

Situation 2. Lord Abbett has a Significant Business Relationship with a Company.

Lord Abbett will compile a list of all publicly held companies (or which are a subsidiary of a publicly held firm) that have a significant business relationship with Lord Abbett (a “Relationship Firm”). A “significant business relationship” for this purpose means: (a) a broker dealer firm which sells one percent or more of the Lord Abbett Funds’ total (i.e., gross) dollar amount of shares sold for the last 12 months; (b) a firm which is a sponsor firm with respect to Lord Abbett’s Separately Managed Account business; (c) an institutional client which has an investment management agreement with Lord Abbett; (d) an institutional investor having at least $5 million in Class I shares of the Lord Abbett Funds; and (e) a large plan 401(k) client with at least $5 million under management with Lord Abbett.

For each proxy issue involving a Relationship Firm, Lord Abbett shall notify the Fund’s Proxy Committee and shall seek voting instructions from the Fund’s Proxy Committee only in those situations where Lord Abbett has proposed not to follow the recommendations of RMG.

SUMMARY OF PROXY VOTING GUIDELINES

Lord Abbett generally votes in accordance with management’s recommendations on the election of directors, appointment of independent auditors, changes to the authorized capitalization (barring excessive increases) and most shareholder proposals. This policy is based on the premise that a broad vote of confidence on such matters is due the management of any company whose shares we are willing to hold.

Election of Directors

Lord Abbett will generally vote in accordance with management’s recommendations on the election of directors. However, votes on director nominees are made on a case-by- case basis. Factors that are considered include current composition of the board and key- board nominees, long-term company performance relative to a market index, and the directors’ investment in the company. We also consider whether the Chairman of the board is also serving as CEO, and whether a retired CEO sits on the board, as these situations may create inherent conflicts of interest. We generally will vote in favor of separation of the Chairman and CEO functions when management supports such a requirement, but we will make our determination to vote in favor of or against such a proposed requirement on a case-by-case basis.

There are some actions by directors that may result in votes being withheld.

These actions include, but are not limited to:

	•		Attending less than 75% of board and committee meetings without a valid excuse.

	•		Ignoring shareholder proposals that are approved by a majority of votes for two consecutive years.

	•		Failing to act on takeover offers where a majority of shareholders tendered their shares.

	•		Serving as inside directors and sit on an audit, compensation, stock option, nominating or governance committee.

	•		Failing to replace management as appropriate.

We will generally vote in favor of proposals requiring that directors be elected by a majority of the shares represented and voting at a meeting at which a quorum is present, although special considerations in individual cases may cause us to vote against such a proposal. We also will generally approve proposals to elect directors annually. The ability to elect directors is the single most important use of the shareholder franchise, and all directors should be accountable on an annual basis. The basic premise of the staggered election of directors is to provide a continuity of experience on the board and to prevent a precipitous change in the composition of the board. Although shareholders need some form of protection from hostile takeover attempts, and boards need tools and leverage in order to negotiate effectively with potential acquirers, a classified board tips the balance of power too much toward incumbent management at the price of potentially ignoring shareholder interests.

Incentive Compensation Plans

We usually vote with management regarding employee incentive plans and changes in such plans, but these issues are looked at very closely on a case-by-case basis. We use RMG for guidance on appropriate compensation ranges for various industries and company sizes. In addition to considering the individual expertise of management and the value they bring to the company, we also consider the costs associated with stock-based incentive packages including shareholder value transfer and voting power dilution.

We scrutinize very closely the approval of repricing or replacing underwater stock options, taking into consideration the following:

	•		The stock’s volatility, to ensure the stock price will not be back in the money over the near term.

	•		Management’s rationale for why the repricing is necessary.

	•		The new exercise price, which must be set at a premium to market price to ensure proper employee motivation.

	•		Other factors, such as the number of participants, term of option, and the value for value exchange.

In large-cap companies we would generally vote against plans that promoted short-term performance at the expense of longer-term objectives. Dilution, either actual or potential, is, of course, a major consideration in reviewing all incentive plans. Team leaders in small- and mid-cap companies often view option plans and other employee incentive plans as a critical component of such companies’ compensation structure, and have discretion to approve such plans, notwithstanding dilution concerns.

Shareholder Rights

Cumulative Voting

We generally oppose cumulative voting proposals on the ground that a shareowner or special group electing a director by cumulative voting may seek to have that director represent a narrow special interest rather than the interests of the shareholders as a whole.

Confidential Voting

There are both advantages and disadvantages to a confidential ballot. Under the open voting system, any shareholder that desires anonymity may register the shares in the name of a bank, a broker or some other nominee. A confidential ballot may tend to preclude any opportunity for the board to communicate with those who oppose management proposals.

On balance we believe shareholder proposals regarding confidential balloting should generally be approved, unless in a specific case, countervailing arguments appear compelling.

Supermajority Voting

Supermajority provisions violate the principle that a simple majority of voting shares should be all that is necessary to effect change regarding a company and its corporate governance provisions. Requiring more than this may permit management to entrench themselves by blocking amendments that are in the best interest of shareholders.

Takeover Issues

Votes on mergers and acquisitions must be considered on a case-by-case basis. The voting decision should depend on a number of factors, including: anticipated financial and operating benefits, the offer price, prospects of the combined companies, changes in corporate governance and their impact on shareholder rights. It is our policy to vote against management proposals to require supermajority

shareholder vote to approve mergers and other significant business combinations, and to vote for shareholder proposals to lower supermajority vote requirements for mergers and acquisitions. We are also opposed to amendments that attempt to eliminate shareholder approval for acquisitions involving the issuance of more than 10% of the company’s voting stock. Restructuring proposals will also be evaluated on a case-by-case basis following the same guidelines as those used for mergers.

Among the more important issues that we support, as long as they are not tied in with other measures that clearly entrench management, are:

1)		Anti-greenmail provisions, which prohibit management from buying back shares at above market prices from potential suitors without shareholder approval.

2)		Fair Price Amendments, to protect shareholders from inequitable two-tier stock acquisition offers.

3)		Shareholder Rights Plans (so-called “Poison Pills”), usually “blank check” preferred and other classes of voting securities that can be issued without further shareholder approval. However, we look at these proposals on a case-by-case basis, and we only approve these devices when proposed by companies with strong, effective managements to force corporate raiders to negotiate with management and assure a degree of stability that will support good long-range corporate goals. We vote for shareholder proposals asking that a company submit its poison pill for shareholder ratification.

4)		“Chewable Pill” provisions, are the preferred form of Shareholder Rights Plan. These provisions allow the shareholders a secondary option when the Board refuses to withdraw a poison pill against a majority shareholder vote. To strike a balance of power between management and the shareholder, ideally “Chewable Pill” provisions should embody the following attributes, allowing sufficient flexibility to maximize shareholder wealth when employing a poison pill in negotiations:

•

Redemption Clause allowing the board to rescind a pill after a potential acquirer has surpassed the ownership threshold.

	1)		No dead-hand or no-hand pills.

	1)		Sunset Provisions which allow the shareholders to review, and reaffirm or redeem a pill after a predetermined time frame.

•

Qualifying Offer Clause which gives shareholders the ability to redeem a poison pill when faced with a bona fide takeover offer.

Social Issues

It is our general policy to vote as management recommends on social issues, unless we feel that voting otherwise will enhance the value of our holdings. We recognize that highly ethical and competent managements occasionally differ on such matters, and so we review the more controversial issues closely.

MARSICO CAPITAL MANAGEMENT, LLC
PROXY VOTING POLICY AND PROCEDURES

Statement of Policy

1. It is the policy of Marsico Capital Management, LLC (“MCM”) to seek to vote or otherwise process, such as by a decision to abstain from voting or to take no action on, proxies over which it has voting authority in the best interests of MCM’s clients, as summarized here.

	•		MCM’s security analysts generally review proxy proposals as part of their monitoring of portfolio companies. Under MCM’s investment discipline, one of the qualities that MCM generally seeks in companies selected for client portfolios is good management teams that generally seek to serve shareholder interests. Because MCM believes that the management teams of most companies it invests in generally seek to serve shareholder interests, MCM believes that voting proxy proposals in clients’ best economic interests usually means voting with the recommendations of these management teams (including their boards of directors).

			• In certain circumstances, MCM’s vote-by-vote analysis of proxy proposals could lead it to conclude that particular management recommendations may not appear as closely aligned with shareholder interests as MCM may deem desirable, or could be disregarded in the best interests of shareholders. In those and other circumstances, MCM may, in its sole discretion, vote against a management recommendation based on its analysis if such a vote appears consistent with the best interests of clients.

	•		MCM may process certain proxies without voting them, such as by making a decision to abstain from voting or take no action on such proxies (or on certain proposals within such proxies). Examples include, without limitation, proxies issued by companies that MCM has decided to sell, proxies issued for securities that MCM did not select for a client portfolio (such as, without limitation, securities that were selected by the client or by a previous adviser, unsupervised securities held in a client’s account, money market securities, or other securities selected by clients or their representatives other than MCM), or proxies issued by foreign companies that impose burdensome or unreasonable voting, power of attorney, or holding requirements. MCM also may abstain from voting, or take no action on, proxies in other circumstances, such as when voting may not be in the best interests of clients, as an alternative to voting with (or against) management, or when voting may be unduly burdensome or expensive.

	•		In circumstances when there may be an apparent material conflict of interest between MCM’s interests and clients’ interests in how proxies are voted (such as when MCM knows that a proxy issuer is also an MCM client), MCM generally will resolve any appearance concerns by causing those proxies to be “echo voted” or “mirror voted” in the same proportion as other votes, or by voting the proxies as recommended by an independent service provider. In other cases, MCM might use other procedures to resolve an apparent material conflict.

	•		MCM may use an independent service provider to help vote proxies, keep voting records, and disclose voting information to clients. MCM’s Proxy Voting policy and reports describing the voting of a client’s proxies are available to the client on request.

	•		MCM seeks to ensure that, to the extent reasonably feasible, proxies for which MCM receives ballots in good order and receives timely notice will be voted or otherwise processed (such as through a decision to abstain or take no action) as intended under MCM’s Proxy Voting policy and procedures. MCM may be unable to vote or otherwise process proxy ballots that are not received or processed in a timely manner due to functional limitations of the proxy voting system, custodial limitations, or other factors beyond MCM’s control. Such ballots may include, without limitation, ballots for securities out on loan under securities lending programs initiated by the client or its custodian, ballots not timely forwarded by a custodian, or ballots for which MCM

does not receive timely notice from a proxy voting service provider of factors such as the proxy proposal itself or modifications to the required vote cast date.

Definitions

2. By “best interests of MCM’s clients,” MCM means clients’ best economic interests over the long term — that is, the common interest that all clients share in seeing the value of a common investment increase over time. Clients may have differing political or social interests, but their best economic interests are generally uniform.

3.a. By “material conflict of interest,” MCM means circumstances when MCM itself knowingly does business with a particular proxy issuer, other proponent of a proposal, or a closely affiliated entity, or other circumstances in which MCM may appear to have a significant conflict of interest between its own interests and the interests of clients in how proxies are voted. A material conflict of interest might also exist in unusual circumstances when MCM has actual knowledge of a material business arrangement between a particular proxy issuer, other proponent of a proposal, or a closely affiliated entity and MCM’s parent company, Bank of America Corporation (“BAC”) or another BAC subsidiary, or when MCM has actual knowledge that MCM or BAC or another BAC subsidiary may have a significant interest in the subject matter or outcome of a proxy vote.

3.b. A material conflict of interest ordinarily does not exist when BAC or a BAC subsidiary other than MCM does business with a particular proxy issuer or closely affiliated entity, because: (i) MCM is separately managed from BAC and other subsidiaries; (ii) MCM’s employees work in a separate location from BAC and other subsidiaries and do not routinely communicate with them; (iii) MCM generally is not aware of a proxy issuer’s (or affiliated entity’s) business arrangements with BAC or other subsidiaries, and is not aware of the materiality of such arrangements to BAC or other subsidiaries; and (iv) MCM has no direct interest in any such business arrangements.

Procedures: MCM Invests in Companies With Management Teams That Seek Shareholders’ Best Interests, and Usually Votes Proxies with Management Recommendations

4. MCM’s security analysts generally review proxy proposals as part of their monitoring of portfolio companies. Under MCM’s investment discipline, one of the qualities that MCM generally seeks in companies selected for client portfolios is good management teams that generally seek to serve shareholder interests. Because MCM believes that the management teams of companies it invests in generally seek to serve shareholder interests, MCM believes that voting proxy proposals in clients’ best economic interests usually means voting with the recommendations of these management teams (including their boards of directors). Therefore, when portfolio companies issue proxy proposals, MCM usually votes the proxies with management recommendations, because it believes that recommendations by these companies’ managements generally are in shareholders’ best interests, and therefore in the best economic interests of MCM’s clients.

5. In certain circumstances, MCM’s vote-by-vote analysis of proxy proposals could lead it to conclude that particular management recommendations may not appear as closely aligned with shareholder interests as MCM may deem desirable, or could be disregarded in the best interests of shareholders. For example, in some circumstances, certain proxy proposals or recommendations by management, shareholders, or other proponents — such as, without limitation, proposals that would effect changes in corporate governance relating to anti-takeover measures, board election requirements, director qualifications, shared board and management responsibilities, capitalization changes, compensation programs, or other matters — could present circumstances in which management recommendations may not appear as closely aligned with shareholder interests as MCM in its sole discretion may deem desirable. In those and other circumstances, MCM may, in its sole discretion, vote against a management recommendation based on MCM’s analysis if in

MCM’s view such a vote appears consistent with the best interests of clients. As further examples, in MCM’s sole discretion, it may vote against a management recommendation in order to, without limitation, support a shareholder proposal favoring safeguards against potential overreaching by management or enhancements of shareholder control that MCM believes are reasonable or appropriate, or vote against management in order to oppose management proposals that are not shareholder-friendly in MCM’s view.

6. MCM periodically reassesses its views of the management teams of the companies that it invests in for clients. A decision to vote against a particular management recommendation or to otherwise abstain or take no action on a proxy proposal does not necessarily signal a departure from MCM’s general view that a management team is serving the best interests of shareholders. If MCM concludes, in its sole discretion, that a company’s management team no longer appears to be serving shareholders’ best interests, MCM may take any action it deems appropriate, including, without limitation, awaiting further developments, voting against selected management recommendations, or selling shares of the company.

Procedures: Use of an Independent Service Provider

7. MCM may engage an independent service provider to assist with the administrative and ministerial aspects of proxy voting. The independent service provider may perform functions that include, without limitation, voting proxies for MCM in accordance with MCM’s instructions based on MCM’s Proxy Voting policy, maintaining records of proxy votes, and assisting in preparing certain reports. To avoid the possibility that MCM’s proxy votes could be affected by potential conflicts of interest that may exist between an independent service provider and a proxy issuer, MCM generally does not cause such a service provider to vote proxies for MCM based on the service provider’s recommendations (although MCM may do so in certain circumstances discussed in “Alternative Procedures for Potential Material Conflicts of Interest” below).

Procedures: Voting/Abstention/No Action/Other Exceptions

8. MCM seeks to ensure that, to the extent reasonably feasible, proxies for which MCM receives ballots in good order and receives timely notice will be voted or otherwise processed as intended under MCM’s Proxy Voting policy and procedures. MCM employs a number of measures, including certain reconciliations and other cross-check procedures, to attempt to verify that proxies are voted or otherwise processed as intended, although such checks may not be feasible or reliable in some cases because of the complexity of the proxy voting process. MCM’s ability to vote or otherwise process proxies may be limited by many factors, including MCM’s dependence on custodians and independent proxy voting service providers to assist in processing proxies. MCM may be unable to vote or otherwise process proxy ballots that are not received or processed in a timely manner due to functional limitations of the proxy voting system, custodial limitations, or other factors beyond MCM’s control. Such ballots may include, without limitation, ballots for securities out on loan under securities lending programs initiated by a client or its custodian, ballots not timely forwarded by a custodian, or ballots for which MCM does not receive timely notice from a proxy voting service provider of factors such as the proxy proposal itself or modifications to the required vote cast date.

9.a MCM may process some proxies without voting them, such as by making a decision to abstain or take no action on such proxies (or on certain proposals within such proxies). For example, if MCM has decided to sell the shares of a company, MCM generally may abstain from voting proxies or may take no action on proxies issued by the company. If MCM receives proxies relating to securities acquired as a result of an account transition (such as, without limitation, securities delivered into a newly opened MCM account that were selected by the client or by a previous adviser), MCM generally may choose to abstain or take no action on the proxies because the related shares may not be retained in the account for a substantial period of time. MCM also may abstain or take no action on proxies issued for other securities that MCM did not select for a client portfolio (such as, without limitation, unsupervised securities held in a client’s account, or

money market securities or other securities selected by clients or their representatives other than MCM).

9.b. MCM may abstain or take no action on proxies (or on certain proposals within such proxies) in other circumstances. MCM may determine, for example, that abstaining or taking no action on proxies is appropriate if voting may be unduly burdensome or expensive, such as when foreign proxy issuers impose burdensome or unreasonable voting, power of attorney, or holding requirements. MCM also may abstain or take no action when voting may not be in the best interests of clients in MCM’s view, or as an alternative to voting with (or against) management.

10. The procedures in this policy generally apply to all proxy voting matters over which MCM has voting authority, including changes in corporate governance structures, the adoption or amendment of compensation plans (including stock options), and matters involving social issues or corporate responsibility.

Alternative Procedures for Potential Material Conflicts of Interest

11. In certain circumstances, such as when the issuer or other proponent of a proxy proposal is also a client of MCM, an appearance might arise of a potential conflict between MCM’s interests and the interests of affected clients in how the proxies of that issuer are voted.

12. MCM seeks to vote or otherwise process proxies in the best interests of its clients, and believes that any potential conflict of interest would not actually affect MCM’s voting of the proxies.

13. Nevertheless, when MCM is aware that a material conflict of interest (as defined in section 3.a. and 3.b. above) between MCM’s interests and clients’ interests may appear to exist, MCM generally will, to avoid any appearance concerns, follow an alternative procedure rather than vote or otherwise process ballots in accordance with its own determinations. Such an alternative procedure generally would involve either:

(i) Directing an independent service provider to cause the proxies of those MCM client accounts that MCM is responsible for processing to be “echo voted” or “mirror voted” in the same proportion as the votes of other proxy holders if the service provider indicates it can do so; or

(ii) Directing the proxies of those MCM client accounts that MCM is responsible for processing to be voted in accordance with the recommendations of an independent service provider that MCM may use to assist in voting proxies. This procedure will only be used if it can be determined that the independent service provider appears able to make such recommendations and vote in an impartial manner. In making this determination, MCM may (1) require the independent service provider to represent or otherwise demonstrate that the service provider faces no conflict of interest with respect to the vote, or (2) ask the independent service provider to disclose to MCM relevant facts concerning the firm’s relationship with the proxy issuer or other persons and certify that the service provider has taken steps to ensure that no actual conflicts exist.

MCM will document the identification of any material conflict of interest and its procedure for resolving the particular conflict.

14. In unusual cases, MCM may use other alternative procedures to address circumstances when a material conflict of interest may appear to exist, such as, without limitation:

(i) Notifying affected clients of the conflict of interest (if it is reasonably feasible to do so), and seeking a waiver of the conflict to permit MCM to vote the proxies;

(ii) Abstaining or taking no action on the proxies; or

(iii) Forwarding the proxies to clients so that clients may vote the proxies themselves.

Voting by Client Instead of MCM

15. An MCM client may vote its own proxies instead of directing MCM to do so. MCM recommends this approach if a client believes that proxies should be voted based on political or social interests or other client-specific considerations.

16. MCM generally cannot implement client proxy voting guidelines (and may instead encourage the client to vote its own proxies) if the client seeks to impose client-specific voting guidelines that may be inconsistent with MCM’s policy or with MCM’s vote-by-vote analysis.

17. MCM generally may abstain or will take no action on proxy votes relating to legal proceedings such as shareholder class actions or bankruptcy proceedings, or may refer such votes to clients.

Persons Responsible for Implementing MCM’s Policy

18. MCM’s Client Services staff has primary responsibility for implementing MCM’s Proxy Voting policy and procedures, including ensuring that proxies are timely submitted. MCM also generally uses a service provider to assist in voting proxies, recordkeeping, and other matters.

19. Members of MCM’s Investment staff, such as security analysts generally review proxy proposals as part of their ongoing assessment of companies.

Recordkeeping

20.a. MCM or a service provider maintains, in accordance with Rule 204-2 under the Investment Advisers Act:

(i) Copies of all proxy voting policies and procedures;

(ii) Copies of proxy statements received (unless maintained elsewhere as described below);

(iii) Records of proxy votes cast on behalf of clients;

(iv) Documents prepared by MCM that are material to a decision on how to vote or memorializing the basis for a decision;

(v) Written client requests for proxy voting information, and

(vi) Written responses by MCM to written or oral client requests.

20.b. MCM will document instances in which it identifies a material conflict of interest, as well as the procedure utilized for resolving the particular conflict. MCM’s Client Services Department also documents certain other non-routine proxy voting issues, including: (1) the basis for any decision in which MCM determines to vote against a management recommendation that does not involve general matters relating to corporate governance issues discussed in section 5 above; and (2) any decision to abstain or take no action on a proxy that is intended by MCM to demonstrate divergence from a management recommendation.

20.c. MCM will not document other, more routine instances in which it may take certain actions with respect to a particular proxy, including certain situations identified in this Proxy Voting policy and procedures. MCM generally will not document, for example, the basis for routine decisions to vote against general corporate governance issues, or to abstain or take no action on proxies in circumstances when foreign issuers impose burdensome or unreasonable

voting, power of attorney, or holding requirements, when MCM has sold or determined to sell a security, when MCM did not select the securities for the client portfolio (such as, without limitation, securities that were selected by the client or by a previous adviser, unsupervised securities held in a client’s account, or money market securities or other securities selected by clients or their representatives other than MCM), or in other routine situations identified in section 9 above. MCM also cannot document decisions not to vote or otherwise process proxies that were not received in good order, not received in a timely fashion, or otherwise not processed for reasons beyond MCM’s control, such as in certain situations addressed in section 8 above.

21. MCM will obtain an undertaking from any service provider that the service provider will provide copies of proxy voting records and other documents promptly upon request if MCM relies on the service provider to maintain related records.

22. MCM or its service provider may rely on the SEC’s EDGAR system to keep records of certain proxy statements if the proxy statements are maintained by issuers on that system (as is generally true in the case of larger U.S.-based issuers).

23. All proxy-related records will be maintained in an easily accessible place for five years (and at an appropriate office of MCM or a service provider for the first two years).

Availability of Policy and Proxy Voting Records to Clients

24. MCM will initially inform clients of this policy and provide information regarding how a client may learn of MCM’s voting record for the client’s securities through summary disclosure in Part II of MCM’s Form ADV. Upon receipt of a client’s request for more information, MCM will provide the client with a copy of this Proxy Voting policy. Reports describing how MCM voted proxies for the client during the period since this policy was adopted are also available upon request.

* * *

MCM’s Chief Compliance Officer will review this policy at least annually to determine whether it should be amended or updated. Any amendments to this policy require the written approval of the Chief Compliance Officer.


		Approved by:		Steven Carlson /s/

		Title:		Chief Compliance Officer

		Effective Date:		October 1, 2004

		Policy Amended:		February 10, 2006

		Approved by:		Steven Carlson /s/

		Title:		Chief Compliance Officer

		Effective Date:		February 10, 2006

MASSACHUSETTS FINANCIAL SERVICES COMPANY

PROXY VOTING POLICIES AND PROCEDURES

January 1, 2009

Massachusetts Financial Services Company, MFS Institutional Advisors, Inc., MFS International (UK) Limited, MFS Heritage Trust Company, and MFS’ other investment adviser subsidiaries (except Four Pillars Capital, Inc.) (collectively, “MFS”) have adopted proxy voting policies and procedures, as set forth below (“MFS Proxy Voting Policies and Procedures”), with respect to securities owned by the clients for which MFS serves as investment adviser and has the power to vote proxies, including the registered investment companies sponsored by MFS.

VOTING GUIDELINES

General Policy; Potential Conflicts of Interest

MFS’ policy is that proxy voting decisions are made in what MFS believes to be the best long-term economic interests of MFS’ clients, and not in the interests of any other party or in MFS’ corporate interests, including interests such as the distribution of MFS Fund shares, and institutional relationships.

In developing these proxy voting guidelines, MFS periodically reviews corporate governance issues and proxy voting matters that are presented for shareholder vote by either management or shareholders of public companies. Based on the overall principle that all votes cast by MFS on behalf of its clients must be in what MFS believes to be the best long-term economic interests of such clients, MFS has adopted proxy voting guidelines, set forth below, that govern how MFS generally will vote on specific matters presented for shareholder vote. In all cases, MFS will exercise its discretion in voting on these matters in accordance with this overall principle. In other words, the underlying guidelines are simply that — guidelines. Proxy items of significance are often considered on a case-by-case basis, in light of all relevant facts and circumstances, and in certain cases MFS may vote proxies in a manner different from what otherwise would be dictated by these guidelines.

As a general matter, MFS maintains a consistent voting position on similar proxy proposals with respect to various issuers. In addition, MFS generally votes consistently on the same matter when securities of an issuer are held by multiple client accounts. However, MFS recognizes that there are gradations in certain types of proposals that might result in different voting positions being taken with respect to different proxy statements. There also may be situations involving matters presented for shareholder vote that are not governed by the guidelines or situations where MFS has received explicit voting instructions from a client for its own account. Some items that otherwise would be acceptable will be voted against the proponent when it is seeking extremely broad flexibility without offering a valid explanation. MFS reserves the right to override the guidelines with respect to a particular shareholder vote when such an override is, in MFS’ best judgment, consistent with the overall principle of voting proxies in the best long-term economic interests of MFS’ clients.

From time to time, MFS may receive comments on the MFS Proxy Voting Policies and Procedures from its clients. These comments are carefully considered by MFS when it reviews these guidelines each year and revises them as appropriate.

These policies and procedures are intended to address any potential material conflicts of interest on the part of MFS or its subsidiaries that are likely to arise in connection with the voting of proxies on behalf of MFS’ clients. If such potential material conflicts of interest do arise, MFS will analyze, document and report on such potential material conflicts of interest (see Sections B.2 and E below), and shall ultimately vote the relevant proxies in what MFS believes to be the best long-term economic interests of its clients. The MFS Proxy Voting Committee is responsible for monitoring and reporting with respect to such potential material conflicts of interest.

ADMINISTRATIVE PROCEDURES

MFS Proxy Voting Committee

The administration of these MFS Proxy Voting Policies and Procedures is overseen by the MFS Proxy Voting Committee, which includes senior personnel from the MFS Legal and Global Investment Support Departments. The Proxy Voting Committee does not include individuals whose primary duties relate to client relationship management, marketing, or sales. The MFS Proxy Voting Committee:

	a.		Reviews these MFS Proxy Voting Policies and Procedures at least annually and recommends any amendments considered to be necessary or advisable;

	b.		Determines whether any potential material conflict of interest exist with respect to instances in which MFS (i) seeks to override these MFS Proxy Voting Policies and Procedures; (ii) votes on ballot items not governed by these MFS Proxy Voting Policies and Procedures; (iii) evaluates an excessive executive compensation issue in relation to the election of directors; or (iv) requests a vote recommendation from an MFS portfolio manager or investment analyst (e.g. mergers and acquisitions); and

	c.		Considers special proxy issues as they may arise from time to time.

Potential Conflicts of Interest

The MFS Proxy Voting Committee is responsible for monitoring potential material conflicts of interest on the part of MFS or its subsidiaries that could arise in connection with the voting of proxies on behalf of MFS’ clients. Due to the client focus of our investment management business, we believe that the potential for actual material conflict of interest issues is small. Nonetheless, we have developed precautions to assure that all proxy votes are cast in the best long-term economic interest of shareholders. Other MFS internal policies require all MFS employees to avoid actual and potential conflicts of interests between personal activities and MFS’ client activities. If an employee identifies an actual or potential conflict of interest with respect to any voting decision, then that employee must recuse himself/herself from participating in the voting process. Additionally, with respect to decisions concerning all Non Standard Votes, as defined below, MFS will review the securities holdings reported by the individuals that participate in such decision to determine whether such person has a direct economic interest in the decision, in which case such person shall not further participate in making the decision. Any significant attempt by an employee of MFS or its subsidiaries to influence MFS’ voting on a particular proxy matter should also be reported to the MFS Proxy Voting Committee.

In cases where proxies are voted in accordance with these MFS Proxy Voting Policies and Procedures, no material conflict of interest will be deemed to exist. In cases where (i) MFS is considering overriding these MFS Proxy Voting Policies and Procedures, (ii) matters presented for vote are not clearly governed by these MFS Proxy Voting Policies and Procedures, (iii) MFS evaluates an excessive executive compensation issue in relation to the election of directors, or (iv) a vote recommendation is requested from an MFS portfolio manager or investment analyst (e.g. mergers and acquisitions) (collectively, “Non Standard Votes”); the MFS Proxy Voting Committee will follow these procedures:

	a.		Compare the name of the issuer of such proxy against a list of significant current (i) distributors of MFS Fund shares, and (ii) MFS institutional clients (the “MFS Significant Client List”);

	b.		If the name of the issuer does not appear on the MFS Significant Client List, then no material conflict of interest will be deemed to exist, and the proxy will be voted as otherwise determined by the MFS Proxy Voting Committee;

	c.		If the name of the issuer appears on the MFS Significant Client List, then the MFS Proxy Voting Committee will be apprised of that fact and each member of the MFS Proxy Voting Committee will carefully evaluate the proposed vote in order to ensure that the proxy ultimately is voted in what MFS believes to be the best long-term economic interests of MFS’ clients, and not in MFS’ corporate interests; and

	d.		For all potential material conflicts of interest identified under clause (c) above, the MFS Proxy Voting Committee will document: the name of the issuer, the issuer’s relationship to MFS, the analysis of the matters submitted for proxy vote, the votes as to be cast and the reasons why the MFS Proxy Voting Committee determined that the votes were cast in the best long-term economic interests of MFS’ clients, and not in MFS’ corporate interests. A copy of the foregoing documentation will be provided to MFS’ Conflicts Officer.

The members of the MFS Proxy Voting Committee are responsible for creating and maintaining the MFS Significant Client List, in consultation with MFS’ distribution and institutional business units. The MFS Significant Client List will be reviewed and updated periodically, as appropriate.

From time to time, certain MFS Funds (the “top tier fund”) may own shares of other MFS Funds (the “underlying fund”). If an underlying fund submits a matter to a shareholder vote, the top tier fund will generally vote its shares in the same proportion as the other shareholders of the underlying fund.

Gathering Proxies

Most U.S. proxies received by MFS and its clients originate at Automatic Data Processing Corp. (“ADP”) although a few proxies are transmitted to investors by corporate issuers through their custodians or depositories. ADP and other service providers, on behalf of issuers, send proxy related material to the record holders of the shares beneficially owned by MFS’ clients, usually to the client’s proxy voting administrator or, less commonly, to the client itself. This material will include proxy ballots reflecting the shareholdings of Funds and of clients on the record dates for such shareholder meetings, as well as proxy statements with the issuer’s explanation of the items to be voted upon.

MFS, on behalf of itself and the Funds, has entered into an agreement with an independent proxy administration firm, RiskMetrics Group, Inc., Inc. (the “Proxy Administrator”), pursuant to which the Proxy Administrator performs various proxy vote related administrative services, such as vote processing and recordkeeping functions for MFS’ Funds and institutional client accounts. The Proxy Administrator receives proxy statements and proxy ballots directly or indirectly from various custodians, logs these materials into its database and matches upcoming meetings with MFS Fund and client portfolio holdings, which are input into the Proxy Administrator’s system by an MFS holdings datafeed. Through the use of the Proxy Administrator system, ballots and proxy material summaries for all upcoming shareholders’ meetings are available on-line to certain MFS employees and members of the MFS Proxy Voting Committee.

Analyzing Proxies

Proxies are voted in accordance with these MFS Proxy Voting Policies and Procedures. The Proxy Administrator, at the prior direction of MFS, automatically votes all proxy matters that do not require the particular exercise of discretion or judgment with respect to these MFS Proxy Voting Policies and Procedures as determined by the MFS Proxy Voting Committee. With respect to proxy matters that require the particular exercise of discretion or judgment, MFS considers and votes on those proxy matters. MFS also receives research from ISS which it may take into account in deciding how to vote. In addition, MFS expects to rely on ISS to identify circumstances in which a board may have approved excessive executive compensation. Representatives of the MFS Proxy Voting Committee review, as appropriate, votes cast to ensure conformity with these MFS Proxy Voting Policies and Procedures.

As a general matter, portfolio managers and investment analysts have little or no involvement in specific votes taken by MFS. This is designed to promote consistency in the application of MFS’ voting guidelines, to promote consistency in voting on the same or similar issues (for the same or for multiple issuers) across all client accounts, and to minimize the potential that proxy solicitors, issuers, or third parties might attempt to exert inappropriate influence on the vote. In limited types of votes (e.g., corporate actions, such as mergers and acquisitions), a representative of MFS Proxy Voting Committee may consult with or seek recommendations from MFS portfolio managers or investment analysts.²⁰ However, the MFS Proxy Voting Committee would ultimately determine the manner in which all proxies are voted.

As noted above, MFS reserves the right to override the guidelines when such an override is, in MFS’ best judgment, consistent with the overall principle of voting proxies in the best long-term economic interests of MFS’ clients. Any such override of the guidelines shall be analyzed, documented and reported in accordance with the procedures set forth in these policies.

Voting Proxies

In accordance with its contract with MFS, the Proxy Administrator also generates a variety of reports for the MFS Proxy Voting Committee, and makes available on-line various other types of information so that the MFS Proxy Voting Committee may review and monitor the votes cast by the Proxy Administrator on behalf of MFS’ clients.

Securities Lending


²⁰		From time to time, due to travel schedules and other commitments, an appropriate portfolio manager or research analyst is not available to provide a recommendation on a merger or acquisition proposal. If such a recommendation cannot be obtained prior to the cut-off date of the shareholder meeting, certain members of the MFS Proxy Voting Committee may determine to abstain from voting.

From time to time, the MFS Funds or other pooled investment vehicles sponsored by MFS may participate in a securities lending program. In the event MFS or its agent receives timely notice of a shareholder meeting for a U.S. security, MFS and its agent will attempt to recall any securities on loan before the meeting’s record date so that MFS will be entitled to vote these shares. However, there may be instances in which MFS is unable to timely recall securities on loan for a U.S. security, in which cases MFS will not be able to vote these shares. MFS will report to the appropriate board of the MFS Funds those instances in which MFS is not able to timely recall the loaned securities. MFS generally does not recall non-U.S. securities on loan because there is generally insufficient advance notice of record or vote cut-off dates to allow MFS to timely recall the shares. As a result, non-U.S. securities that are on loan will not generally be voted. If MFS receives timely notice of what MFS determines to be an unusual, significant vote for a non-U.S. security whereas MFS shares are on loan, and determines that voting is in the best long-term economic interest of shareholders, then MFS will attempt to timely recall the loaned shares.

MONITORING SYSTEM

It is the responsibility of the Proxy Administrator and MFS’ Proxy Voting Committee to monitor the proxy voting process. When proxy materials for clients are received by the Proxy Administrator, they are input into the Proxy Administrator’s system. Through an interface with the portfolio holdings database of MFS, the Proxy Administrator matches a list of all MFS Funds and clients who hold shares of a company’s stock and the number of shares held on the record date with the Proxy Administrator’s listing of any upcoming shareholder’s meeting of that company.

When the Proxy Administrator’s system “tickler” shows that the voting cut-off date of a shareholders’ meeting is approaching, a Proxy Administrator representative checks that the vote for MFS Funds and clients holding that security has been recorded in the computer system. If a proxy ballot has not been received from the client’s custodian, the Proxy Administrator contacts the custodian requesting that the materials be forwarded immediately. If it is not possible to receive the proxy ballot from the custodian in time to be voted at the meeting, then MFS may instruct the custodian to cast the vote in the manner specified and to mail the proxy directly to the issuer.

RECORDS RETENTION

MFS will retain copies of these MFS Proxy Voting Policies and Procedures in effect from time to time and will retain all proxy voting reports submitted to the Board of Trustees and Board of Managers of the MFS Funds for the period required by applicable law. Proxy solicitation materials, including electronic versions of the proxy ballots completed by representatives of the MFS Proxy Voting Committee, together with their respective notes and comments, are maintained in an electronic format by the Proxy Administrator and are accessible on-line by the MFS Proxy Voting Committee. All proxy voting materials and supporting documentation, including records generated by the Proxy Administrator’s system as to proxies processed, including the dates when proxy ballots were received and submitted, and the votes on each company’s proxy issues, are retained as required by applicable law.

REPORTS

All MFS Advisory Clients

At any time, a report can be printed by MFS for each client who has requested that MFS furnish a record of votes cast. The report specifies the proxy issues which have been voted for the

MFC Global Investment Management (U.S.A.) Limited (“MFC-GIM (USA)”) manages money on behalf of, or provides investment advice to, clients.

Arising out of these relationships, MFC-GIM(USA) has a fiduciary duty to exercise care, diligence and skill in the administration and management of client funds that any person, familiar with the matters would exercise under similar circumstances in managing the property of another person.

In addition to its fiduciary duty, MFC-GIM (USA) must also comply with the proxy requirements of Rule 206(4)-6 of the Investment Advisers Act of 1940, as amended from time to time (“Advisers Act”), and any other law which governs the exercise of voting rights by an investment adviser.

A proxy is a shareholder’s right to vote that has been delegated to professionals who manage their investments. (Note: clients have the unqualified right to rescind the permission given to an advisor to vote proxies on their behalf.) The right to vote is an asset, as a company’s shareholders have the power to influence the management of a corporation and it is our fiduciary obligation to ensure that these rights are voted, if clients request us to do so in writing, such that they optimize the long-term value of the investment portfolios.

Fiduciary Duty Guideline Requirements

When voting proxies, fiduciaries have an obligation to do so in an informed and responsible manner. There is a duty of loyalty. Records of voting should be maintained by retaining copies of, or access to, proxies and any supporting documentation for non-routine issues. As an investment advisory company, the obligation of fiduciaries is to vote proxies in the best interest of the clients or beneficiaries.

Our Policy

A proxy vote should be cast on behalf of each client holding the security in question. The decision on how to vote is made by the responsible Portfolio Manager, or another person or persons to whom such responsibility has been delegated by the Portfolio Manager, on behalf of the client. Such a person may include a proxy committee or a proxy voting service. See “Proxy Committees” and “Proxy Services” below.

When voting proxies, the following standards apply:

• The Portfolio Manager will vote based on what they believe to be in the best interest of the client and in accordance with the client’s investment guidelines.

• Each voting decision should be made independently. The Portfolio Manager may enlist the services of reputable professionals and/or proxy evaluation services, such as Institutional Shareholder Services (“ISS”) (see “Proxy Service” below), whether inside or outside the organization, to assist with the analysis of voting issues and/or to carry out the actual voting process. However, the ultimate decision as to how to cast a vote will always rest with the Portfolio Manager, or any Proxy Committee which may be formed to deal with voting matters from time to time. See “Proxy Committees” below.

• Investment guidelines/contracts should outline how voting matters will be treated, and clients should be notified of voting procedures from time to time in accordance with any applicable legislative requirements.

• The quality of a company’s management is a key consideration factor in the Portfolio Manager’s investment decision, and a good management team is presumed to act in the best interests of the company. Therefore, in general, MFC-GIM(USA) will vote as recommended by a company’s management, except in situations where the Portfolio Manager believes this is not in the best interests of clients.

• As a general principle, voting should be consistent among portfolios having the same mandates, subject to the client’s preferences and the Conflict Procedures set out below.

MFC-GIM (USA) will reasonably consider specific voting instruction requests made to it by clients.

Proxy Services

Each Portfolio Manager is responsible for the voting of securities in portfolios managed by them. In order to assist in voting securities, MFC-GIM (USA) may from time to time delegate certain proxy advisory and voting responsibilities to a third party proxy service provider.

MFC-GIM (USA) has currently delegated certain duties to ISS. ISS specializes in the proxy voting and corporate governance area and provides a variety of proxy advisory and voting services. These services include in-depth research, analysis, and voting recommendations as well as vote execution, reporting, auditing and consulting assistance. While each Portfolio Manager may rely on ISS’s research and recommendations in casting votes, each Portfolio Manager may deviate from any recommendation provided from ISS on general policy issues or specific proxy proposals in accordance with any MFC-GIM (USA) proxy policies and procedures which may be in effect from time to time. See “Proxy Committees” below.

MFC-GIM (USA) may retain other proxy voting services in place of, or in addition to, ISS from time to time without further notice to clients.

Proxy Committees

From time to time proxy voting issues arise generally or with respect to a specific vote.

In such cases, one or more persons may be appointed as a Proxy Committee to review certain issues.

One or more of such committees may be created on a permanent or temporary basis from time to time. The terms of reference and the procedures under which a committee will operate from time to time must be reviewed by the Legal and Compliance Department. Records of the committee’s deliberations and recommendations shall be kept in accordance with this Policy and applicable law, if any. See “Documentation and Client Notification Requirements” below.

Conflicts Procedures

MFC-GIM (USA) is required to monitor and resolve possible material conflicts (“Conflicts”) between the interests of MFC-GIM (USA) and the interests of clients who have instructed MFC-GIM (USA) to vote securities held in their portfolios. MFC-GIM (USA) is affiliated with both Manulife Financial Corporation (“MFC”) and The Manufacturers Life Insurance Company (“MLI”). Conflicts may arise, for example, if a proxy vote is required on matters involving those companies, or other issuers in which either of them has a substantial equity interest.

Anyone within MFC-GIM (USA) who becomes aware of a potential conflict shall notify the Legal and Compliance department as well as the appropriate desk head. If it is determined by the Legal and Compliance Department that a potential conflict does exist, a Proxy Committee shall be appointed to consider the issue.

In addition to the procedures set out above concerning Proxy Committees, any Proxy Committee which considers a Conflict must appoint a member of the Legal and Compliance team as a voting member of the Committee. Persons who are officers of the issuer involved in the matter may participate in the Committee’s deliberations, but shall not be entitled to vote as a member of the Committee.

The Proxy Committee shall then consider the issue involved and shall be free to make any decision it concludes is reasonable The Proxy Committee need not determine to vote each client portfolio the same way on a given matter, depending on the interests of the particular client involved.

Documentation and Client Notification Requirements

The Portfolio Manager should retain, or arrange to be retained in an accessible format from a proxy service or other source, voting records for securities held in each portfolio. These should include all records required by applicable law from time to time, such as

• proxy voting procedures and policies, and all amendments thereto;

• all proxy statements received regarding client securities;

• a record of all votes cast on behalf of clients;

• records of all client requests for proxy voting information;

• any documents prepared by the Portfolio Manager or a Proxy Committee that were material to a voting decision or that memorialized the basis for the decision;

• all records relating to communications with clients regarding conflicts of interest in voting; and

• any other material required by law to be kept from time to time.

MFC-GIM(USA) shall describe to clients, or provide a copy of, it’s proxy voting policies and procedures and shall also advise clients how they may obtain information on securities voted in their portfolio.

MFC Global Investment Management (U.S.), LLC
PROXY VOTING POLICY

Proxies for portfolio securities are voted by IRRC according to the following policy.

For issues not covered in the policy, or those to be evaluated on a case-by case basis, the portfolio manager holding he largest number of shares of that security among the JH funds will be contacted for advice and a voting recommendation.

If you have any questions about the procedure, please contact Lois White at 617-375-6214. For questions about the policy, contact Barry Evans at (617-375-1979).

Proxy Voting Summary

We believe in placing our clients’ interests first. Before we invest in a particular stock or bond, our team of portfolio managers and research analysts look closely at the company by examining its earnings history, its management team and its place in the market. Once we invest, we monitor all our clients’ holdings, to ensure that they maintain their potential to produce results for investors.

As part of our active investment management strategy, we keep a close eye on each company we invest in. Routinely, companies issue proxies by which they ask investors like us to vote for or against a change, such as a new management team, a new business procedure or an acquisition. We base our decisions on how to vote these proxies with the goal of maximizing the value of our clients’ investments.

Currently, John Hancock Advisers, LLC (“JHA”) and MFC Global Investment Management (U.S.), LLC (“MFC Global (U.S.)”) manage open-end funds, closed-end funds and portfolios for institutions and high-net-worth investors. Occasionally, we utilize the expertise of an outside asset manager by means of a subadvisory agreement. In all cases, JHA or MFC Global (U.S.) makes the final decision as to how to vote our clients’ proxies. There is one exception, however, and that pertains to our international accounts. The investment management team for international investments votes the proxies for the accounts they manage. Unless voting is specifically retained by the named fiduciary of the client, JHA and MFC Global (U.S.) will vote proxies for ERISA clients.

In order to ensure a consistent, balanced approach across all our investment teams, we have established a proxy oversight group comprised of associates from our investment, operations and legal teams. The group has developed a set of policies and procedures that detail the standards for how JHA and MFC Global (U.S.) vote proxies. The guidelines of JHA have been approved and adopted by each fund client’s board of trustees who have voted to delegate proxy voting authority to their investment adviser, JHA. JHA and MFC Global (U.S.)’s other clients have granted us the authority to vote proxies in our advisory contracts or comparable documents.

JHA and MFC Global (U.S.) have hired a third party proxy voting service which has been instructed to vote all proxies in accordance with our established guidelines except as otherwise instructed.

In evaluating proxy issues, our proxy oversight group may consider information from many sources, including the portfolio manager, management of a company presenting a proposal, shareholder groups, and independent proxy research services. Proxies for securities on loan through securities lending programs will generally not be voted, however a decision may be made to recall a security for voting purposes if the issue is material.

Below are the guidelines we adhere to when voting proxies. Please keep in mind that these are purely guidelines. Our actual votes will be driven by the particular circumstances of each proxy. From time to time votes may ultimately be cast on a case-by-case basis, taking into consideration

relevant facts and circumstances at the time of the vote. Decisions on these matters (case-by-case, abstention, recall) will normally be made by a portfolio manager under the supervision of the chief investment officer and the proxy oversight group. We may abstain from voting a proxy if we conclude that the effect on our clients’ economic interests or the value of the portfolio holding is indeterminable or insignificant.

Proxy Voting Guidelines

Board of Directors

We believe good corporate governance evolves from an independent board.

We support the election of uncontested director nominees, but will withhold our vote for any nominee attending less than 75% of the board and committee meetings during the previous fiscal year. Contested elections will be considered on a case by case basis by the proxy oversight group, taking into account the nominee’s qualifications. We will support management’s ability to set the size of the board of directors and to fill vacancies without shareholder approval but will not support a board that has fewer than 3 directors or allows for the removal of a director without cause.

We will support declassification of a board and block efforts to adopt a classified board structure. This structure typically divides the board into classes with each class serving a staggered term.

In addition, we support proposals for board indemnification and limitation of director liability, as long as they are consistent with corporate law and shareholders’ interests. We believe that this is necessary to attract qualified board members.

Selection of Auditors

We believe an independent audit committee can best determine an auditor’s qualifications.

We will vote for management proposals to ratify the board’s selection of auditors, and for proposals to increase the independence of audit committees.

Capitalization

We will vote for a proposal to increase or decrease authorized common or preferred stock and the issuance of common stock, but will vote against a proposal to issue or convert preferred or multiple classes of stock if the board has unlimited rights to set the terms and conditions of the shares, or if the shares have voting rights inferior or superior to those of other shareholders.

In addition, we will support a management proposal to: create or restore preemptive rights; approve a stock repurchase program; approve a stock split or reverse stock split; and, approve the issuance or exercise of stock warrants.

Acquisitions, mergers and corporate restructuring

Proposals to merge with or acquire another company will be voted on a case-by-case basis, as will proposals for recapitalization, restructuring, leveraged buyout, sale of assets, bankruptcy or liquidation. We will vote against a reincorporation proposal if it would reduce shareholder rights. We will vote against a management proposal to ratify or adopt a poison pill or to establish a supermajority voting provision to approve a merger or other business combination. We would however support a management proposal to opt out of a state takeover statutory provision, to spin-off certain operations or divisions and to establish a fair price provision.

Corporate Structure and Shareholder Rights

In general, we support proposals that foster good corporate governance procedures and that provide shareholders with voting power equal to their equity interest in the company.

To preserve shareholder rights, we will vote against a management proposal to restrict shareholders’ right to: call a special meeting and to eliminate a shareholders’ right to act by written consent. In addition, we will not support a management proposal to adopt a supermajority vote requirement to change certain by-law or charter provisions or a non-technical amendment to by-laws or a charter that reduces shareholder rights.

Equity-based compensation

Equity-based compensation is designed to attract, retain and motivate talented executives and independent directors, but should not be so significant as to materially dilute shareholders’ interests.

We will vote against the adoption or amendment of a stock option plan if the:

• The compensation committee is not fully independent

• plan dilution is more than 10% of outstanding common stock,

• company allows or has allowed the re-pricing or replacement of underwater options in the past three fiscal years (or the exchange of underwater options) without shareholder approval.

• if the option is not premium priced or indexed, or does not vest based on future performance

With respect to the adoption or amendment of employee stock purchase plans or a stock award plan, we will vote against management if:

• the plan allows stock to be purchased at less than 85% of fair market value;

• this plan dilutes outstanding common equity greater than 10%

• all stock purchase plans, including the proposed plan, exceed 15% of outstanding common equity

• if the potential dilution from all company plans is more than 85%

With respect to director stock incentive/option plans, we will vote against management if:

• the minimum vesting period for options or time lapsing restricted stock is les than one year

• if the potential dilution for all company plans is more than 85%

Other Business

For routine business matters which are the subject of many proxy related questions, we will vote with management proposals to:

• change the company name;

• approve other business;

• adjourn meetings;

• make technical amendments to the by-laws or charters;

• approve financial statements;

• approve an employment agreement or contract.

Shareholder Proposals

Shareholders are permitted per SEC regulations to submit proposals for inclusion in a company’s proxy statement. We will generally vote against shareholder proposals and in accordance with the recommendation of management except as follows where we will vote for proposals:

• calling for shareholder ratification of auditors;

• calling for auditors to attend annual meetings;

• seeking to increase board independence;

• requiring minimum stock ownership by directors;

• seeking to create a nominating committee or to increase the independence of the nominating committee;

• seeking to increase the independence of the audit committee.

Corporate and social policy issues

We believe that “ordinary business matters” are primarily the responsibility of management and should be approved solely by the corporation’s board of directors.

Proposals in this category, initiated primarily by shareholders, typically request that the company disclose or amend certain business practices. We generally vote against business practice proposals and abstain on social policy issues, though we may make exceptions in certain instances where we believe a proposal has substantial economic implications.

Proxy Voting Procedures

The role of the proxy voting service

John Hancock Advisers, LLC (“JHA”) and MFC Global Investment Management (U.S.) (“MFC Global (U.S.)”) have hired a proxy voting service to assist with the voting of client proxies. The proxy service coordinates with client custodians to ensure that proxies are received for securities held in client accounts and acted on in a timely manner. The proxy service votes all proxies received in accordance with the proxy voting guidelines established and adopted by JHA and MFC Global (U.S.). When it is unclear how to apply a particular proxy voting guideline or when a particular proposal is not covered by the guidelines, the proxy voting service will contact the proxy oversight group coordinator for a resolution.

The role of the proxy oversight group and coordinator

The coordinator will interact directly with the proxy voting service to resolve any issues the proxy voting service brings to the attention of JHA or MFC Global (U.S.). When a question arises regarding how a proxy should be voted the coordinator contacts the firm’s investment professionals and the proxy oversight group for a resolution. In addition the coordinator ensures that the proxy voting service receives responses in a timely manner. Also, the coordinator is responsible for identifying whether, when a voting issue arises, there is a potential conflict of interest situation and then escalating the issue to the firm’s Executive Committee. For securities out on loan as part of a securities lending program, if a decision is made to vote a proxy, the coordinator will manage the return/recall of the securities so the proxy can be voted.

The role of mutual fund trustees

The boards of trustees of our mutual fund clients have reviewed and adopted the proxy voting guidelines of the funds’ investment adviser, JHA. The trustees will periodically review the proxy voting guidelines and suggest changes they deem advisable.

Conflicts of interest

Conflicts of interest are resolved in the best interest of clients.

With respect to potential conflicts of interest, proxies will be voted in accordance with JHA’s or MFC Global (U.S.)’s predetermined policies. If application of the predetermined policy is unclear or does not address a particular proposal, a special internal review by the JHA Executive Committee or MFC Global (U.S.) Executive Committee will determine the vote. After voting, a report will be made to the client (in the case of an investment company, to the fund’s board of trustees), if requested. An example of a conflict of interest created with respect to a proxy solicitation is when JHA or MFC Global (U.S.) must vote the proxies of companies that they provide investment advice to or are currently seeking to provide investment advice to, such as to pension plans.

III. ADMINISTRATION OF POLICY

The MSIM Proxy Review Committee (the “Committee”) has overall responsibility for creating and implementing the Policy, working with an MSIM staff group (the “Corporate Governance Team”). The Committee, which is appointed by MSIM’s Chief

Investment Officer of Global Equities (“CIO”), consists of senior investment professionals who represent the different investment disciplines and geographic locations of the firm. Because proxy voting is an investment responsibility and impacts shareholder value, and because of their knowledge of companies and markets, portfolio managers and other members of investment staff play a key role in proxy voting, although the Committee has final authority over proxy votes.

The Committee Chairperson is the head of the Corporate Governance Team, and is responsible for identifying issues that require Committee deliberation or ratification. The Corporate Governance Team, working with advice of investment teams and the Committee, is responsible for voting on routine items and on matters that can be addressed in line with these Policy guidelines. The Corporate Governance Team has responsibility for voting case-by-case where guidelines and precedent provide adequate guidance, and to refer other case-by-case decisions to the Proxy Review Committee.

The Committee will periodically review and have the authority to amend, as necessary, the Policy and establish and direct voting positions consistent with the Client Proxy Standard.

Committee Procedures

The Committee will meet at least monthly to (among other matters) address any outstanding issues relating to the Policy or its implementation. The Corporate Governance Team will timely communicate to ISS MSIM’s Policy (and any amendments and/or any additional guidelines or procedures the Committee may adopt).

The Committee will meet on an ad hoc basis to (among other matters): (1) authorize “split voting” (i.e., allowing certain shares of the same issuer that are the subject of the same proxy solicitation and held by one or more MSIM portfolios to be voted differently than other shares) and/or “override voting” (i.e., voting all MSIM portfolio shares in a manner contrary to the Policy); (2) review and approve upcoming votes, as appropriate, for matters for which specific direction has been provided in this Policy; and (3) determine how to vote matters for which specific direction has not been provided in this Policy.

Members of the Committee may take into account Research Providers’ recommendations and research as well as any other relevant information they may request or receive, including portfolio manager and/or analyst research, as applicable. Generally, proxies related to securities held in accounts that are managed pursuant to quantitative, index or index-like strategies (“Index Strategies”) will be voted in the same manner as those held in actively managed accounts, unless economic interests of the accounts differ. Because accounts managed using Index Strategies are passively managed accounts, research from portfolio managers and/or analysts related to securities held in these accounts may not be available. If the affected securities are held only in accounts that are managed pursuant to Index Strategies, and the proxy relates to a matter that is not described in this Policy, the Committee will consider all available information from the Research Providers, and to the extent that the holdings are significant, from the portfolio managers and/or analysts.

Material Conflicts of Interest

In addition to the procedures discussed above, if the Committee determines that an issue raises a material conflict of interest, the Committee will request a special committee to review, and recommend a course of action with respect to, the conflict(s) in question (“Special Committee”).

The Special Committee shall be comprised of the Chairperson of the Proxy Review Committee, the Chief Compliance Officer or his/her designee, a senior portfolio manager

(if practicable, one who is a member of the Proxy Review Committee) designated by the Proxy Review Committee, and MSIM’s relevant Chief Investment Officer or his/her designee, and any other persons deemed necessary by the Chairperson. The Special Committee may request the assistance of MSIM’s General Counsel or his/her designee who will have sole discretion to cast a vote. In addition to the research provided by Research Providers, the Special Committee may request analysis from MSIM Affiliate investment professionals and outside sources to the extent it deems appropriate.

C. Identification of Material Conflicts of Interest

A potential material conflict of interest could exist in the following situations, among others:

1. The issuer soliciting the vote is a client of MSIM or an affiliate of MSIM and the vote is on a material matter affecting the issuer.

2. The proxy relates to Morgan Stanley common stock or any other security issued by Morgan Stanley or its affiliates except if echo voting is used, as with MSIM Funds, as described herein.

3. Morgan Stanley has a material pecuniary interest in the matter submitted for a vote (e.g., acting as a financial advisor to a party to a merger or acquisition for which Morgan Stanley will be paid a success fee if completed).

If the Chairperson of the Committee determines that an issue raises a potential material conflict of interest, depending on the facts and circumstances, the Chairperson will address the issue as follows:

1. If the matter relates to a topic that is discussed in this Policy, the proposal will be voted as per the Policy.

2. If the matter is not discussed in this Policy or the Policy indicates that the issue is to be decided case-by-case, the proposal will be voted in a manner consistent with the Research Providers, provided that all the Research Providers have the same recommendation, no portfolio manager objects to that vote, and the vote is consistent with MSIM’s Client Proxy Standard.

3. If the Research Providers’ recommendations differ, the Chairperson will refer the matter to the Committee to vote on the proposal. If the Committee determines that an issue raises a material conflict of interest, the Committee will request a Special Committee to review and recommend a course of action, as described above. Notwithstanding the above, the Chairperson of the Committee may request a Special Committee to review a matter at any time as he/she deems necessary to resolve a conflict.

Proxy Voting Reporting

The Committee and the Special Committee, or their designee(s), will document in writing all of their decisions and actions, which documentation will be maintained by the Committee and the Special Committee, or their designee(s), for a period of at least 6 years. To the extent these decisions relate to a security held by an MSIM Fund, the Committee and Special Committee, or their designee(s), will report their decisions to each applicable Board of Trustees/Directors of those Funds at each Board’s next regularly scheduled Board meeting. The report will contain information concerning decisions made by the Committee and Special Committee during the most recently ended calendar quarter immediately preceding the Board meeting.

The Corporate Governance Team will timely communicate to applicable portfolio managers and to ISS, decisions of the Committee and Special Committee so that, among other things, ISS will vote proxies consistent with their decisions.

MSIM will promptly provide a copy of this Policy to any client requesting it. MSIM will also, upon client request, promptly provide a report indicating how each proxy was voted with respect to securities held in that client’s account.

MSIM’s Legal Department is responsible for filing an annual Form N-PX on behalf of each MSIM Fund for which such filing is required, indicating how all proxies were voted with respect to such Fund’s holdings.

APPENDIX A

The following procedures apply to accounts managed by Morgan Stanley AIP GP LP (“AIP”).

Generally, AIP will follow the guidelines set forth in Section II of MSIM’s Proxy Voting Policy and Procedures. To the extent that such guidelines do not provide specific direction, or AIP determines that consistent with the Client Proxy Standard, the guidelines should not be followed, the Proxy Review Committee has delegated the voting authority to vote securities held by accounts managed by AIP to the Liquid Markets investment team and the Private Markets investment team of AIP. A summary of decisions made by the investment teams will be made available to the Proxy Review Committee for its information at the next scheduled meeting of the Proxy Review Committee.

In certain cases, AIP may determine to abstain from determining (or recommending) how a proxy should be voted (and therefore abstain from voting such proxy or recommending how such proxy should be voted), such as where the expected cost of giving due consideration to the proxy does not justify the potential benefits to the affected account(s) that might result from adopting or rejecting (as the case may be) the measure in question.

Waiver of Voting Rights

For regulatory reasons, AIP may either 1) invest in a class of securities of an underlying fund (the “Fund”) that does not provide for voting rights; or 2) waive 100% of its voting rights with respect to the following:

1. Any rights with respect to the removal or replacement of a director, general partner, managing member or other person acting in a similar capacity for or on behalf of the Fund (each individually a “Designated Person,” and collectively, the “Designated Persons”), which may include, but are not limited to, voting on the election or removal of a Designated Person in the event of such Designated Person’s death, disability, insolvency, bankruptcy, incapacity, or other event requiring a vote of interest holders of the Fund to remove or replace a Designated Person; and

2. Any rights in connection with a determination to renew, dissolve, liquidate, or otherwise terminate or continue the Fund, which may include, but are not limited to, voting on the renewal, dissolution, liquidation, termination or continuance of the Fund upon the occurrence of an event described in the Fund’s organizational documents; provided, however, that, if the Fund’s organizational documents require the consent of the Fund’s general partner or manager, as the case may be, for any such termination or continuation of the Fund to be effective, then AIP may exercise its voting rights with respect to such matter.

APPENDIX B

The following procedures apply to the portion of the Van Kampen Dynamic Credit Opportunities Fund (“VK Fund”) sub advised by Avenue Europe International Management, L.P. (“Avenue”). (The portion of the VK Fund managed solely by Van Kampen Asset Management will continue to be subject to MSIM’s Policy.) 1. Generally: With respect to Avenue’s portion of the VK Fund, the Board of Trustees of the VK Fund will retain sole authority and responsibility for proxy voting. The Adviser’s involvement in the voting process of Avenue’s portion of the VK Fund is a purely administrative function, and serves to execute and deliver the proxy voting decisions made by the VK Fund Board in connection with the Avenue portion of the VK Fund, which may, from time to time, include related administrative tasks such as receiving proxies, following up on missing proxies, and collecting data related to proxies. As such, the Adviser shall not be deemed to have voting power or shared voting power with Avenue with respect to Avenue’s portion of the Fund.

2. Voting Guidelines: All proxies, with respect to Avenue’s portion of the VK Fund, will be considered by the VK Fund Board or such subcommittee as the VK Fund Board may designate from time to time for determination and voting approval. The VK Board or its subcommittee will timely communicate to MSIM’s Corporate Governance Group its proxy voting decisions, so that among other things the votes will be effected consistent with the VK Board’s authority.

3. Administration: The VK Board or its subcommittee will meet on an adhoc basis as may be required from time to time to review proxies that require its review and determination. The VK Board or its subcommittee will document in writing all of its decisions and actions which will be maintained by the VK Fund, or its designee(s), for a period of at least 6 years. If a subcommittee is designated, a summary of decisions made by such subcommittee will be made available to the full VK Board for its information at its next scheduled respective meetings.

February 27, 2009

MORGAN STANLEY INVESTMENT MANAGEMENT

PROXY VOTING POLICY AND PROCEDURES

POLICY STATEMENT

Morgan Stanley Investment Management’s (“MSIM”) policy and procedures for voting proxies (“Policy”) with respect to securities held in the accounts of clients applies to those MSIM entities that provide discretionary investment management services and for which an MSIM entity has authority to vote proxies. This Policy is reviewed and updated as necessary to address new and evolving proxy voting issues and standards.

The MSIM entities covered by this Policy currently include the following: Morgan Stanley Investment Advisors Inc., Morgan Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Management Limited, Morgan Stanley Investment Management Company, Morgan Stanley Asset & Investment Trust Management Co., Limited, Morgan Stanley Investment Management Private Limited, Van Kampen Asset Management, and Van Kampen Advisors Inc. (each an “MSIM Affiliate” and collectively referred to as the “MSIM Affiliates” or as “we” below).

Each MSIM Affiliate will use its best efforts to vote proxies as part of its authority to manage, acquire and dispose of account assets. With respect to the MSIM registered management investment companies (Van Kampen, Institutional and Advisor Funds—collectively referred to herein as the “MSIM Funds”), each MSIM Affiliate will vote proxies under this Policy pursuant to authority granted under its applicable investment advisory agreement or, in the absence of such authority, as authorized by the Board of Directors/Trustees of the MSIM Funds. An MSIM Affiliate will not vote proxies if the “named fiduciary” for an ERISA account has reserved the authority for itself, or in the case of an account not governed by ERISA, the investment management or investment advisory agreement does not authorize the MSIM Affiliate to vote proxies. MSIM Affiliates will vote proxies in a prudent and diligent manner and in the best interests of clients, including beneficiaries of and participants in a client’s benefit plan(s) for which the MSIM Affiliates manage assets, consistent with the objective of maximizing long-term investment returns (“Client Proxy Standard”). In certain situations, a client or its fiduciary may provide an MSIM Affiliate with a proxy voting policy. In these situations, the MSIM Affiliate will comply with the client’s policy.

Proxy Research Services — RiskMetrics Group ISS Governance Services (“ISS”) and Glass Lewis (together with other proxy research providers as we may retain from time to time, the “Research Providers”) are independent advisers that specialize in providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors, custodians, consultants, and other institutional investors. The services provided include in-depth research, global issuer analysis, and voting recommendations. While we may review and utilize the recommendations of the Research Providers in making proxy voting decisions, we are in no way obligated to follow such recommendations. In addition to research, ISS provides vote execution, reporting, and recordkeeping services.

Voting Proxies for Certain Non-U.S. Companies — Voting proxies of companies located in some jurisdictions, particularly emerging markets, may involve several problems that can restrict or prevent the ability to vote such proxies or entail significant costs. These problems include, but are not limited to: (i) proxy statements and ballots being written in a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings; (iii) restrictions on the ability of holders outside the issuer’s jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person; (v) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting; and (vi)

requirements to provide local agents with power of attorney to facilitate our voting instructions. As a result, we vote clients’ non-U.S. proxies on a best efforts basis only, after weighing the costs and benefits of voting such proxies, consistent with the Client Proxy Standard. ISS has been retained to provide assistance in connection with voting non-U.S. proxies.

II.

GENERAL PROXY VOTING GUIDELINES

To promote consistency in voting proxies on behalf of its clients, we follow this Policy (subject to any exception set forth herein). The Policy addresses a broad range of issues, and provides general voting parameters on proposals that arise most frequently. However, details of specific proposals vary, and those details affect particular voting decisions, as do factors specific to a given company. Pursuant to the procedures set forth herein, we may vote in a manner that is not in accordance with the following general guidelines, provided the vote is approved by the Proxy Review Committee (see Section III for description) and is consistent with the Client Proxy Standard. Morgan Stanley AIP GP LP will follow the procedures as described in Appendix A.

We endeavor to integrate governance and proxy voting policy with investment goals, using the vote to encourage portfolio companies to enhance long-term shareholder value and to provide a high standard of transparency such that equity markets can value corporate assets appropriately.

We seek to follow the Client Proxy Standard for each client. At times, this may result in split votes, for example when different clients have varying economic interests in the outcome of a particular voting matter (such as a case in which varied ownership interests in two companies involved in a merger result in different stakes in the outcome). We also may split votes at times based on differing views of portfolio managers.

We may abstain on matters for which disclosure is inadequate.

A. Routine Matters. We generally support routine management proposals. The following are examples of routine management proposals:

	•		Approval of financial statements and auditor reports if delivered with an unqualified auditor’s opinion.

	•		General updating/corrective amendments to the charter, articles of association or bylaws, unless we believe that such amendments would diminish shareholder rights.

	•		Most proposals related to the conduct of the annual meeting, with the following exceptions. We generally oppose proposals that relate to “the transaction of such other business which may come before the meeting,” and open-ended requests for adjournment. However, where management specifically states the reason for requesting an adjournment and the requested adjournment would facilitate passage of a proposal that would otherwise be supported under this Policy (i.e. an uncontested corporate transaction), the adjournment request will be supported.

We generally support shareholder proposals advocating confidential voting procedures and independent tabulation of voting results.

B. Board of Directors.

Election of directors: Votes on board nominees can involve balancing a variety of considerations. In balancing various factors in uncontested elections, we may take into consideration whether the company has a majority voting policy in place that we believe makes the director vote more

meaningful. In the absence of a proxy contest, we generally support the board’s nominees for director except as follows:

We consider withholding support from or voting against interested directors if the company’s board does not meet market standards for director independence, or if otherwise we believe board independence is insufficient. We refer to prevalent market standards as promulgated by a stock exchange or other authority within a given market (e.g., New York Stock Exchange or Nasdaq rules for most U.S. companies, and The Combined Code on Corporate Governance in the United Kingdom). Thus, for an NYSE company with no controlling shareholder, we would expect that at a minimum a majority of directors should be independent as defined by NYSE. Where we view market standards as inadequate, we may withhold votes based on stronger independence standards. Market standards notwithstanding, we generally do not view long board tenure alone as a basis to classify a director as non-independent, although lack of board turnover and fresh perspective can be a negative factor in voting on directors.

	i.		At a company with a shareholder or group that controls the company by virtue of a majority economic interest in the company, we have a reduced expectation for board independence, although we believe the presence of independent directors can be helpful, particularly in staffing the audit committee, and at times we may withhold support from or vote against a nominee on the view the board or its committees are not sufficiently independent.

	ii.		We consider withholding support from or voting against a nominee if he or she is affiliated with a major shareholder that has representation on a board disproportionate to its economic interest.

	b.		Depending on market standards, we consider withholding support from or voting against a nominee who is interested and who is standing for election as a member of the company’s compensation, nominating or audit committee.

	c.		We consider withholding support from or voting against a nominee if we believe a direct conflict exists between the interests of the nominee and the public shareholders, including failure to meet fiduciary standards of care and/or loyalty. We may oppose directors where we conclude that actions of directors are unlawful, unethical or negligent. We consider opposing individual board members or an entire slate if we believe the board is entrenched and/or dealing inadequately with performance problems, and/or acting with insufficient independence between the board and management.

	d.		We consider withholding support from or voting against a nominee standing for election if the board has not taken action to implement generally accepted governance practices for which there is a “bright line” test. For example, in the context of the U.S. market, failure to eliminate a dead hand or slow hand poison pill would be seen as a basis for opposing one or more incumbent nominees.

	e.		In markets that encourage designated audit committee financial experts, we consider voting against members of an audit committee if no members are designated as such. We also may not support the audit committee members if the company has faced financial reporting issues and/or does not put the auditor up for ratification by shareholders.

	f.		We believe investors should have the ability to vote on individual nominees, and may abstain or vote against a slate of nominees where we are not given the opportunity to vote on individual nominees.

	g.		We consider withholding support from or voting against a nominee who has failed to attend at least 75% of the nominee’s board and board committee meetings within a given year without a reasonable excuse. We also consider opposing nominees if the company does not meet market standards for disclosure on attendance.

We consider withholding support from or voting against a nominee who appears overcommitted, particularly through service on an excessive number of boards. Market expectations are incorporated into this analysis; for U.S. boards, we generally oppose election of a nominee who serves on more than six public company boards (excluding investment companies).

	2.		Discharge of directors’ duties: In markets where an annual discharge of directors’ responsibility is a routine agenda item, we generally support such discharge. However, we may vote against discharge or abstain from voting where there are serious findings of fraud or other unethical behavior for which the individual bears responsibility. The annual discharge of responsibility represents shareholder approval of actions taken by the board during the year and may make future shareholder action against the board difficult to pursue.

	3.		Board independence: We generally support U.S. shareholder proposals requiring that a certain percentage (up to 66²/₃%) of the company’s board members be independent directors, and promoting all-independent audit, compensation and nominating/governance committees.

	4.		Board diversity: We consider on a case-by-case basis shareholder proposals urging diversity of board membership with respect to social, religious or ethnic group.

	5.		Majority voting: We generally support proposals requesting or requiring majority voting policies in election of directors, so long as there is a carve-out for plurality voting in the case of contested elections.

	6.		Proxy access: We consider on a case-by-case basis shareholder proposals to provide procedures for inclusion of shareholder nominees in company proxy statements.

	7.		Proposals to elect all directors annually: We generally support proposals to elect all directors annually at public companies (to “declassify” the Board of Directors) where such action is supported by the board, and otherwise consider the issue on a case-by-case basis based in part on overall takeover defenses at a company.

	8.		Cumulative voting: We generally support proposals to eliminate cumulative voting in the U.S. market context. (Cumulative voting provides that shareholders may concentrate their votes for one or a handful of candidates, a system that can enable a minority bloc to place representation on a board.) U.S. proposals to establish cumulative voting in the election of directors generally will not be supported.

	9.		Separation of Chairman and CEO positions: We vote on shareholder proposals to separate the Chairman and CEO positions and/or to appoint a non-executive Chairman based in part on prevailing practice in particular markets, since the context for such a practice varies. In many non-U.S. markets, we view separation of the roles as a market standard practice, and support division of the roles in that context.

	10.		Director retirement age and term limits: Proposals recommending set director retirement ages or director term limits are voted on a case-by-case basis.

	11.		Proposals to limit directors’ liability and/or broaden indemnification of officers and directors. Generally, we will support such proposals provided that an individual is eligible only if he or she has not acted in bad faith, gross negligence or reckless disregard of their duties.

C. Statutory auditor boards. The statutory auditor board, which is separate from the main board of directors, plays a role in corporate governance in several markets. These boards are elected by shareholders to provide assurance on compliance with legal and accounting standards and the company’s articles of association. We generally vote for statutory auditor nominees if they meet independence standards. In markets that require disclosure on attendance by internal statutory auditors, however, we consider voting against nominees for these positions who failed to attend at least 75% of meetings in the previous year. We

also consider opposing nominees if the company does not meet market standards for disclosure on attendance.

D. Corporate transactions and proxy fights. We examine proposals relating to mergers, acquisitions and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations) on a case-by-case basis in the interests of each fund or other account. Proposals for mergers or other significant transactions that are friendly and approved by the Research Providers usually are supported if there is no portfolio manager objection. We also analyze proxy contests on a case-by-case basis.

E. Changes in capital structure.

We generally support the following:

	•		Management and shareholder proposals aimed at eliminating unequal voting rights, assuming fair economic treatment of classes of shares we hold.

	•		Management proposals to increase the authorization of existing classes of common stock (or securities convertible into common stock) if: (i) a clear business purpose is stated that we can support and the number of shares requested is reasonable in relation to the purpose for which authorization is requested; and/or (ii) the authorization does not exceed 100% of shares currently authorized and at least 30% of the total new authorization will be outstanding. (We consider proposals that do not meet these criteria on a case-by-case basis.)

	•		Management proposals to create a new class of preferred stock or for issuances of preferred stock up to 50% of issued capital, unless we have concerns about use of the authority for anti-takeover purposes.

	•		Management proposals to authorize share repurchase plans, except in some cases in which we believe there are insufficient protections against use of an authorization for anti-takeover purposes.

	•		Management proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock.

	•		Management proposals to effect stock splits.

	•		Management proposals to effect reverse stock splits if management proportionately reduces the authorized share amount set forth in the corporate charter. Reverse stock splits that do not adjust proportionately to the authorized share amount generally will be approved if the resulting increase in authorized shares coincides with the proxy guidelines set forth above for common stock increases.

	•		Management dividend payout proposals, except where we perceive company payouts to shareholders as inadequate.

We generally oppose the following (notwithstanding management support):

	•		Proposals to add classes of stock that would substantially dilute the voting interests of existing shareholders.

	•		Proposals to increase the authorized or issued number of shares of existing classes of stock that are unreasonably dilutive, particularly if there are no preemptive rights for existing shareholders. However, depending on market practices, we consider voting for proposals giving general authorization for issuance of shares not subject to pre-emptive rights if the authority is limited.

	•		Proposals that authorize share issuance at a discount to market rates, except where authority for such issuance is de minimis, or if there is a special situation that we believe justifies such authorization (as may be the case, for example, at a company under severe stress and risk of bankruptcy).

	•		Proposals relating to changes in capitalization by 100% or more.

We consider on a case-by-case basis shareholder proposals to increase dividend payout ratios, in light of market practice and perceived market weaknesses, as well as individual company payout history and current circumstances. For example, currently we perceive low payouts to shareholders as a concern at some Japanese companies, but may deem a low payout ratio as appropriate for a growth company making good use of its cash, notwithstanding the broader market concern.

F. Takeover Defenses and Shareholder Rights.

	1.		Shareholder rights plans: We generally support proposals to require shareholder approval or ratification of shareholder rights plans (poison pills). In voting on rights plans or similar takeover defenses, we consider on a case-by-case basis whether the company has demonstrated a need for the defense in the context of promoting long-term share value; whether provisions of the defense are in line with generally accepted governance principles in the market (and specifically the presence of an adequate qualified offer provision that would exempt offers meeting certain conditions from the pill); and the specific context if the proposal is made in the midst of a takeover bid or contest for control.

	2.		Supermajority voting requirements: We generally oppose requirements for supermajority votes to amend the charter or bylaws, unless the provisions protect minority shareholders where there is a large shareholder. In line with this view, in the absence of a large shareholder we support reasonable shareholder proposals to limit such supermajority voting requirements.

	3.		Shareholder rights to call meetings: We consider proposals to enhance shareholder rights to call meetings on a case-by-case basis.

	4.		Reincorporation: We consider management and shareholder proposals to reincorporate to a different jurisdiction on a case-by-case basis. We oppose such proposals if we believe the main purpose is to take advantage of laws or judicial precedents that reduce shareholder rights.

	5.		Anti-greenmail provisions: Proposals relating to the adoption of anti-greenmail provisions will be supported, provided that the proposal: (i) defines greenmail; (ii) prohibits buyback offers to large block holders (holders of at least 1% of the outstanding shares and in certain cases, a greater amount, as determined by the Proxy Review Committee) not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other provisions restricting the rights of shareholders.

	6.		Bundled proposals: We may consider opposing or abstaining on proposals if disparate issues are “bundled” and presented for a single vote.

G. Auditors. We generally support management proposals for selection or ratification of independent auditors. However, we may consider opposing such proposals with reference to incumbent audit firms if the company has suffered from serious accounting irregularities and we believe rotation of the audit firm is appropriate, or if fees paid to the auditor for non-audit-related services are excessive. Generally, to determine if non-audit fees are excessive, a 50% test will be applied (i.e., non-audit-related fees should be less than 50% of the total fees paid to the auditor). We generally vote against proposals to indemnify auditors.

H. Executive and Director Remuneration.

We generally support the following:

	•		Proposals for employee equity compensation plans and other employee ownership plans, provided that our research does not indicate that approval of the plan would be against shareholder interest. Such approval may be against shareholder interest if it authorizes excessive dilution and shareholder cost, particularly in the context of high usage (“run rate”) of equity compensation in the recent past; or if there are objectionable plan design and provisions.

	•		Proposals relating to fees to outside directors, provided the amounts are not excessive relative to other companies in the country or industry, and provided that the structure is appropriate within the market context. While stock-based compensation to outside directors is positive if moderate and appropriately structured, we are wary of significant stock option awards or other performance-based awards for outside directors, as well as provisions that could result in significant forfeiture of value on a director’s decision to resign from a board (such forfeiture can undercut director independence).

	•		Proposals for employee stock purchase plans that permit discounts up to 15%, but only for grants that are part of a broad-based employee plan, including all non-executive employees.

	•		Proposals for the establishment of employee retirement and severance plans, provided that our research does not indicate that approval of the plan would be against shareholder interest.

	2.		We generally oppose retirement plans and bonuses for non-executive directors and independent statutory auditors.

	3.		Shareholder proposals requiring shareholder approval of all severance agreements will not be supported, but proposals that require shareholder approval for agreements in excess of three times the annual compensation (salary and bonus) generally will be supported. We generally oppose shareholder proposals that would establish arbitrary caps on pay. We consider on a case-by-case basis shareholder proposals that seek to limit Supplemental Executive Retirement Plans (SERPs), but support such proposals where we consider SERPs to be excessive.

	4.		Shareholder proposals advocating stronger and/or particular pay-for-performance models will be evaluated on a case-by-case basis, with consideration of the merits of the individual proposal within the context of the particular company and its labor markets, and the company’s current and past practices. While we generally support emphasis on long-term components of senior executive pay and strong linkage of pay to performance, we consider whether a proposal may be overly prescriptive, and the impact of the proposal, if implemented as written, on recruitment and retention.

	5.		We consider shareholder proposals for U.K.-style advisory votes on pay on a case-by-case basis.

	6.		We generally support proposals advocating reasonable senior executive and director stock ownership guidelines and holding requirements for shares gained in executive equity compensation programs.

	7.		We generally support shareholder proposals for reasonable “claw-back” provisions that provide for company recovery of senior executive bonuses to the extent they were based on achieving financial benchmarks that were not actually met in light of subsequent restatements.

Management proposals effectively to re-price stock options are considered on a case-by-case basis. Considerations include the company’s reasons and justifications for a re-pricing, the company’s competitive position, whether senior executives and outside directors are excluded, potential cost to shareholders, whether the re-pricing or share exchange is on a value-for-value basis, and whether vesting requirements are extended.

I. Social, Political and Environmental Issues. We consider proposals relating to social, political and environmental issues on a case-by-case basis to determine likely financial impacts on shareholder value, balancing concerns on reputational and other risks that may be raised in a proposal against costs of implementation. We may abstain from voting on proposals that do not have a readily determinable financial impact on shareholder value. While we support proposals that we believe will enhance useful disclosure, we generally vote against proposals requesting reports that we believe are duplicative, related to matters not material to the business, or that would impose unnecessary or excessive costs. We believe that certain social and environmental shareholder proposals may intrude excessively on management prerogatives, which can lead us to oppose them.

J. Fund of Funds. Certain Funds advised by an MSIM Affiliate invest only in other MSIM Funds. If an underlying fund has a shareholder meeting, in order to avoid any potential conflict of interest, such proposals will be voted in the same proportion as the votes of the other shareholders of the underlying fund, unless otherwise determined by the Proxy Review Committee.

III. ADMINISTRATION OF POLICY

The MSIM Proxy Review Committee (the “Committee”) has overall responsibility for the Policy. The Committee, which is appointed by MSIM’s Chief Investment Officer of Global Equities (“CIO”) or senior officer, consists of senior investment professionals who represent the different investment disciplines and geographic locations of the firm, and is chaired by the director of the Corporate Governance Team (“CGT”). Because proxy voting is an investment responsibility and impacts shareholder value, and because of their knowledge of companies and markets, portfolio managers and other members of investment staff play a key role in proxy voting, although the Committee has final authority over proxy votes.

The CGT Director is responsible for identifying issues that require Committee deliberation or ratification. The CGT, working with advice of investment teams and the Committee, is responsible for voting on routine items and on matters that can be addressed in line with these Policy guidelines. The CGT has responsibility for voting case-by-case where guidelines and precedent provide adequate guidance.

The Committee will periodically review and have the authority to amend, as necessary, the Policy and establish and direct voting positions consistent with the Client Proxy Standard.

CGT and members of the Committee may take into account Research Providers’ recommendations and research as well as any other relevant information they may request or receive, including portfolio manager and/or analyst comments and research, as applicable. Generally, proxies related to securities held in accounts that are managed pursuant to quantitative, index or index-like strategies (“Index Strategies”) will be voted in the same manner as those held in actively managed accounts, unless economic interests of the accounts differ. Because accounts managed using Index Strategies are passively managed accounts, research from portfolio managers and/or analysts related to securities held in these accounts may not be available. If the affected securities are held only in accounts that are managed pursuant to Index Strategies, and the proxy relates to a matter that is not described in this Policy, the CGT will consider all available information from the Research Providers, and to the extent that the holdings are significant, from the portfolio managers and/or analysts.

A. Committee Procedures

The Committee meets at least annually to review and consider changes to the Policy. The Committee will appoint a subcommittee (the “Subcommittee”) to meet as needed between Committee meetings to address any outstanding issues relating to the Policy or its implementation.

The Subcommittee will meet on an ad hoc basis to (among other functions): (1) monitor and ratify “split voting” (i.e., allowing certain shares of the same issuer that are the subject of the same proxy solicitation and held by one or more MSIM portfolios to be voted differently than other shares) and/or “override voting” (i.e., voting all MSIM portfolio shares in a manner contrary to the Policy); (2) review and approve upcoming votes, as appropriate, for matters as requested by CGT.

The Committee reserves the right to review voting decisions at any time and to make voting decisions as necessary to ensure the independence and integrity of the votes. The Committee or the Subcommittee are provided with reports on at least a monthly basis detailing specific key votes cast by CGT.

B. Material Conflicts of Interest

In addition to the procedures discussed above, if the CGT Director determines that an issue raises a material conflict of interest, the CGT Director will request a special committee to review, and recommend a course of action with respect to, the conflict(s) in question (“Special Committee”).

A potential material conflict of interest could exist in the following situations, among others:

	1.		The issuer soliciting the vote is a client of MSIM or an affiliate of MSIM and the vote is on a matter that materially affects the issuer.

	2.		The proxy relates to Morgan Stanley common stock or any other security issued by Morgan Stanley or its affiliates except if echo voting is used, as with MSIM Funds, as described herein.

	3.		Morgan Stanley has a material pecuniary interest in the matter submitted for a vote (e.g., acting as a financial advisor to a party to a merger or acquisition for which Morgan Stanley will be paid a success fee if completed).

If the CGT Director determines that an issue raises a potential material conflict of interest, depending on the facts and circumstances, the issue will be addressed as follows:

	1.		If the matter relates to a topic that is discussed in this Policy, the proposal will be voted as per the Policy.

	2.		If the matter is not discussed in this Policy or the Policy indicates that the issue is to be decided case-by-case, the proposal will be voted in a manner consistent with the Research Providers, provided that all the Research Providers have the same recommendation, no portfolio manager objects to that vote, and the vote is consistent with MSIM’s Client Proxy Standard.

	3.		If the Research Providers’ recommendations differ, the CGT Director will refer the matter to the Subcommittee or a Special Committee to vote on the proposal, as appropriate.

The Special Committee shall be comprised of the CGT Director, the Chief Compliance Officer or his/her designee, a senior portfolio manager (if practicable, one who is a member of the Proxy Review Committee) designated by the Proxy Review Committee, and MSIM’s relevant Chief Investment Officer or his/her designee, and any other persons deemed necessary by the CGT Director. The CGT Director may request non-voting participation by MSIM’s General Counsel or his/her designee. In addition to the research provided by Research Providers, the Special Committee may request analysis from MSIM Affiliate investment professionals and outside sources to the extent it deems appropriate.

C. Proxy Voting Reporting

The CGT will document in writing all Committee, Subcommittee and Special Committee decisions and actions, which documentation will be maintained by the CGT for a period of at least six years. To the extent these decisions relate to a security held by an MSIM Fund, the CGT will report the decisions to each applicable Board of Trustees/Directors of those Funds at each Board’s next regularly scheduled Board

meeting. The report will contain information concerning decisions made during the most recently ended calendar quarter immediately preceding the Board meeting.

APPENDIX A

The following procedures apply to accounts managed by Morgan Stanley AIP GP LP (“AIP”).

Waiver of Voting Rights

	1.		Any rights with respect to the removal or replacement of a director, general partner, managing member or other person acting in a similar capacity for or on behalf of the Fund (each individually a “Designated Person,” and collectively, the “Designated Persons”), which may include, but are not limited to, voting on the election or removal of a Designated Person in the event of such Designated Person’s death, disability, insolvency, bankruptcy, incapacity, or other event requiring a vote of interest holders of the Fund to remove or replace a Designated Person; and

	2.		Any rights in connection with a determination to renew, dissolve, liquidate, or otherwise terminate or continue the Fund, which may include, but are not limited to, voting on the renewal, dissolution, liquidation, termination or continuance of the Fund upon the occurrence of an event described in the Fund’s organizational documents; provided, however, that, if the Fund’s organizational documents require the consent of the Fund’s general partner or manager, as the case may be, for any such termination or continuation of the Fund to be effective, then AIP may exercise its voting rights with respect to such matter.

APPENDIX B

the VK Fund managed solely by Van Kampen Asset Management will continue to be subject to MSIM’s Policy.)

	1.		Generally: With respect to Avenue’s portion of the VK Fund, the Board of Trustees of the VK Fund will retain sole authority and responsibility for proxy voting. The Adviser’s involvement in the voting process of Avenue’s portion of the VK Fund is a purely administrative function, and serves to execute and deliver the proxy voting decisions made by the VK Fund Board in connection with the Avenue portion of the VK Fund, which may, from time to time, include related administrative tasks such as receiving proxies, following up on missing proxies, and collecting data related to proxies. As such, the Adviser shall not be deemed to have voting power or shared voting power with Avenue with respect to Avenue’s portion of the Fund.

	2.		Voting Guidelines: All proxies, with respect to Avenue’s portion of the VK Fund, will be considered by the VK Fund Board or such subcommittee as the VK Fund Board may designate from time to time for determination and voting approval. The VK Board or its subcommittee will timely communicate to MSIM’s Corporate Governance Group its proxy voting decisions, so that among other things the votes will be effected consistent with the VK Board’s authority.

	3.		Administration: The VK Board or its subcommittee will meet on an adhoc basis as may be required from time to time to review proxies that require its review and determination. The VK Board or its subcommittee will document in writing all of its decisions and actions which will be maintained by the VK Fund, or its designee(s), for a period of at least 6 years. If a subcommittee is designated, a summary of decisions made by such subcommittee will be made available to the full VK Board for its information at its next scheduled respective meetings.

MUNDER CAPITAL MANAGEMENT
PROXY VOTING POLICY

Munder has adopted and implemented Proxy Procedures and has established a “Proxy Committee” as a means reasonably designed to ensure that Munder votes any proxy or other beneficial interest in an equity security prudently and solely in the best interest of the Fund considering all relevant factors and without undue influence from individuals or groups who may have an economic interest in the outcome of a proxy vote.

Munder has retained Institutional Shareholder Services (“ISS”) to review proxies received for client accounts and recommend how to vote them. ISS has established voting guidelines that are consistent in all material respects with the policies and the process noted herein. Munder has also retained ISS to provide its voting agent service. As such, ISS is responsible for ensuring that all proxy ballots are submitted in a timely manner. At least annually, the Proxy Committee will review ISS’s “Proxy Voting Guidelines” to confirm that they are consistent in all material respects with Munder’s Proxy Procedures. The Proxy Committee meets as needed to administer Munder’s proxy review and voting process and revise and update the Proxy Procedures as appropriate. At least monthly, the Proxy Committee reviews selected recommendations made by ISS to further the goal of voting proxies in a manner consistent with the best interest of Munder’s client accounts.

Munder generally will vote proxies consistent with ISS’s recommendations without independent review, unless the subject matter of the proxy solicitation raises complex, unusual or significant issues and the cost of reviewing ISS’s advice and recommendations with respect to a particular proxy does not outweigh the potential benefits to clients from the review of ISS’s advice and recommendations. In addition, the Proxy Committee will review ISS’s recommendations if client holdings for a particular issuer are of meaningful size or value.

For these purposes, the holding of a particular issuer would be considered to be meaningful if: (i) the particular issuer soliciting proxies or to whom the proxy solicitation relates represents at least two percent (2%) of the fair market value of any advisory client’s account and the fair market value of the portfolio holding is at least one million dollars ($1,000,000); or (ii) all client accounts with respect to which Munder holds full discretionary authority to vote a client’s proxies hold, in the aggregate, at least one percent (1%) of the outstanding voting shares of the issuer.

In each instance where Munder does not separately review ISS’s recommendations, clients’ proxies will always be voted consistent with ISS’s recommendations. In each instance where Munder does separately review ISS’s recommendation, Munder may vote differently from ISS’s recommendation, if, based upon certain criteria generally described in the following paragraph, Munder determines that such vote is in the best interests of the Fund.

Munder generally is willing to vote with recommendations of management on matters of a routine administrative nature (e.g., appointment or election of auditors). Munder’s position is that management should be allowed to make those decisions that are essential to the ongoing operation of the company and that are not expected to have a major economic impact on the corporation and its shareholders. Munder generally is opposed to special interest proposals that involve an economic cost to the corporation or that restrict the freedom of management to operate in the best interest of the corporation and its shareholders. With respect to those issues, Munder will generally refrain from voting or vote with management. Munder is generally not willing to vote with management on proposals that have the potential for major adverse economic impact on the corporation and the long-term value of its shares (e.g., executive compensation issues) without independent analysis. Munder believes that the owners of the corporation should carefully analyze and decide such issues on a case-by-case basis.

From time to time a portfolio manager, an analyst or a member of the Proxy Committee may disagree with ISS’s recommendation on how to vote proxies for one or more resolutions. However, because Munder may have business interests that expose it to pressure to vote a proxy in a manner that may

not be in the best interest of the Fund, all requests to vote differently from the ISS recommendation with respect to a particular matter must be submitted to the Proxy Committee and Munder’s legal/compliance department (“Legal/Compliance Department”) for independent review. In that review, the Proxy Committee seeks to determine whether the request is in the best interests of the Fund and to identify any actual or potential conflicts between the interests of Munder and those of the Fund. If the Proxy Committee approves the request, it is then submitted to the Legal/Compliance Department for review of any actual or potential conflicts of interest that have been identified. The Legal/Compliance Department must approve a request before it is implemented. Such a request for approval will be accompanied by a written description of the conflict. The Legal/Compliance Department may approve a request only under the following conditions:

	(i)		No Conflict. No conflict of interest is identified.

	(ii)		Immaterial or Remote Conflict. A potential or actual conflict of interest is identified, but such conflict, in the reasonable judgment of the Legal/Compliance Department, is so clearly immaterial or remote as to be unlikely to influence any determination made by the Proxy Committee.

	(iii)		Material Conflict. In the event a potential or actual conflict of interest is identified and appears to be material, the Legal/Compliance Department may approve the request only with written approval from its applicable clients. If an override request is approved by clients holding a majority of the subject shares over which Munder has voting discretion, the Legal/Compliance Department may approve the override with respect to all applicable clients without seeking or obtaining additional approval from each of them. If approval is not obtained from clients holding a majority of the subject shares held by unaffiliated clients, Munder will vote the shares in accordance with ISS’s recommendation.

A copy of Munder’s Proxy Voting Policies and Procedures is available without charge, upon request, at www.munder.com.

PIMCO

Proxy Voting Policy and Procedures³⁷

The following are general proxy voting policies and procedures (“Policies and Procedures”) adopted by Pacific Investment Management Company LLC (“PIMCO”), an investment adviser registered under the Investment Advisers Act of 1940, as amended (“Advisers Act”).³⁸ PIMCO serves as the investment adviser to a wide range of domestic and international clients, including investment companies registered under the Investment Company Act of 1940, as amended (“1940 Act”) and separate investment accounts for other clients.³⁹ These Policies and Procedures are adopted to ensure compliance with Rule 206(4)-6 under the Advisers Act, other applicable fiduciary obligations of PIMCO and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”) and interpretations of its staff. In addition to SEC requirements governing advisers, PIMCO’s Policies and Procedures reflect the long-standing fiduciary standards and responsibilities applicable to investment advisers with respect to accounts subject to the Employee Retirement Income Security Act of 1974 (“ERISA”), as set forth in the Department of Labor’s rules and regulations.⁴⁰

PIMCO will implement these Policies and Procedures for each of its respective clients as required under applicable law, unless expressly directed by a client in writing to refrain from voting that client’s proxies. PIMCO’s authority to vote proxies on behalf of its clients is established by its advisory contracts, comparable documents or by an overall delegation of discretionary authority over its client’s assets. Recognizing that proxy voting is a rare event in the realm of fixed income investing and is typically limited to solicitation of consent to changes in features of debt securities, these Policies and Procedures also apply to any voting rights and/or consent rights of PIMCO, on behalf of its clients, with respect to debt securities, including but not limited to, plans of reorganization, and waivers and consents under applicable indentures.⁴¹

Set forth below are PIMCO’s Policies and Procedures with respect to any voting or consent rights of advisory clients over which PIMCO has discretionary voting authority. These Policies and Procedures may be revised from time to time.

General Statements of Policy

These Policies and Procedures are designed and implemented in a manner reasonably expected to ensure that voting and consent rights are exercised in the best interests of PIMCO’s clients. Each proxy is voted on a case-by-case basis taking into consideration any relevant contractual obligations as well as other relevant facts and circumstances.

PIMCO may abstain from voting a client proxy under the following circumstances: (1) when the economic effect on shareholders’ interests or the value of the portfolio holding is indeterminable or insignificant; or (2) when the cost of voting the proxies outweighs the benefits.


³⁷		Revised as of May 7, 2007.

³⁸		These Policies and Procedures are adopted by PIMCO pursuant to Rule 206(4)-6 under the Advisers Act, effective August 6, 2003. **See Proxy Voting by Investment Advisers, IA Release No. 2106 (January 31, 2003).**

³⁹		These Policies and Procedures address proxy voting considerations under U.S. law and regulations and do not address the laws or requirements of other jurisdictions.

⁴⁰		Department of Labor Bulletin 94-2, 29 C.F.R. 2509.94-2 (July 29, 1994). If a client is subject to ERISA, PIMCO will be responsible for voting proxies with respect to the client’s account, unless the client has expressly retained the right and obligation to vote the proxies, and provided prior written notice to PIMCO of this retention.

⁴¹		For purposes of these Policies and Procedures, proxy voting includes any voting rights, consent rights or other voting authority of PIMCO on behalf of its clients. For purposes of these Policies and Procedures, voting or consent rights shall not include matters which are primarily investment decisions, including tender offers, exchange offers, conversions, put options, redemptions, and dutch auctions.

Conflicts of Interest

PIMCO seeks to resolve any material conflicts of interest by voting in good faith in the best interest of its clients. If a material conflict of interest should arise, PIMCO will seek to resolve such conflict in the client’s best interest by pursuing any one of the following courses of action:

	1.		convening an ad-hoc committee to assess and resolve the conflict;⁴²

	2.		voting in accordance with the instructions/consent of a client after providing notice of and disclosing the conflict to that client;

	3.		voting the proxy in accordance with the recommendation of an independent third-party service provider;

	4.		suggesting that the client engage another party to determine how the proxies should be voted;

	5.		delegating the vote to an independent third-party service provider; or

	6.		voting in accordance with the factors discussed in these Policies and Procedures.

PIMCO will document the process of resolving any identified material conflict of interest.

Reporting Requirements and the Availability of Proxy Voting Records

Except to the extent required by applicable law or otherwise approved by PIMCO, PIMCO will not disclose to third parties how it voted a proxy on behalf of a client. However, upon request from an appropriately authorized individual, PIMCO will disclose to its clients or the entity delegating the voting authority to PIMCO for such clients (e.g., trustees or consultants retained by the client), how PIMCO voted such client’s proxy. In addition, PIMCO provides its clients with a copy of these Policies and Procedures or a concise summary of these Policies and Procedures: (i) in Part II of Form ADV; (ii) together with a periodic account statement in a separate mailing; or (iii) any other means as determined by PIMCO. The summary will state that these Policies and Procedures are available upon request and will inform clients that information about how PIMCO voted that client’s proxies is available upon request.

PIMCO Record Keeping

PIMCO or its agent maintains proxy voting records as required by Rule 204-2(c) of the Advisers Act. These records include: (1) a copy of all proxy voting policies and procedures; (2) proxy statements (or other disclosures accompanying requests for client consent) received regarding client securities (which may be satisfied by relying on obtaining a copy of a proxy statement from the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system or a third party provided that the third party undertakes to provide a copy promptly upon request); (3) a record of each vote cast by PIMCO on behalf of a client; (4) a copy of any document created by PIMCO that was material to making a decision on how to vote proxies on behalf of a client or that memorializes the basis for that decision; and (5) a copy of each written client request for proxy voting records and any written response from PIMCO to any (written or oral) client request for such records. Additionally, PIMCO or its agent maintains any documentation related to an identified material conflict of interest.

Proxy voting books and records are maintained by PIMCO or its agent in an easily accessible place for a period of five years from the end of the fiscal year during which the last entry was made on such record, the first two years in the offices of PIMCO or its agent.

Review and Oversight

PIMCO’s proxy voting procedures are described below. PIMCO’s Compliance Group will provide for the supervision and periodic review, no less than on an annual basis, of its proxy voting activities and the implementation of these Policies and Procedures.

Because PIMCO has contracted with State Street Investment Manager Solutions, LLC (“IMS West”) to perform portfolio accounting, securities processing and settlement processing on behalf of PIMCO, certain of the following procedures involve IMS West in administering and implementing the proxy voting process. IMS West will review and monitor the proxy voting process to ensure that proxies are voted on a timely basis.


⁴²		Any committee must be comprised of personnel who have no direct interest in the outcome of the potential conflict.

1. Transmit Proxy to PIMCO. IMS West will forward to PIMCO’s Compliance Group each proxy received from registered owners of record (e.g., custodian bank or other third party service providers).

2. Conflicts of Interest. PIMCO’s Compliance Group will review each proxy to determine whether there may be a material conflict between PIMCO and its client. As part of this review, the group will determine whether the issuer of the security or proponent of the proposal is a client of PIMCO, or if a client has actively solicited PIMCO to support a particular position. If no conflict exists, this group will forward each proxy to PIMCO’s Middle Office Group for consideration by the appropriate portfolio manager(s). However, if a conflict does exist, PIMCO’s Compliance Group will seek to resolve any such conflict in accordance with these Policies and Procedures.

3. Vote. The portfolio manager will review the information, will vote the proxy in accordance with these Policies and Procedures and will return the voted proxy to PIMCO’s Middle Office Group.

4. Review. PIMCO’s Middle Office Group will review each proxy that was submitted to and completed by the appropriate portfolio manager. PIMCO’s Middle Office Group will forward the voted proxy back to IMS West with the portfolio manager’s decision as to how it should be voted.

5. Transmittal to Third Parties. IMS West will document the portfolio manager’s decision for each proxy received from PIMCO’s Middle Office Group in a format designated by the custodian bank or other third party service provider. IMS West will maintain a log of all corporate actions, including proxy voting, which indicates, among other things, the date the notice was received and verified, PIMCO’s response, the date and time the custodian bank or other third party service provider was notified, the expiration date and any action taken.

6. Information Barriers. Certain entities controlling, controlled by, or under common control with PIMCO (“Affiliates”) may be engaged in banking, investment advisory, broker-dealer and investment banking activities. PIMCO personnel and PIMCO’s agents are prohibited from disclosing information regarding PIMCO’s voting intentions to any Affiliate. Any PIMCO personnel involved in the proxy voting process who are contacted by an Affiliate regarding the manner in which PIMCO or its delegate intend to vote on a specific issue must terminate the contact and notify the Compliance Group immediately.

Categories of Proxy Voting Issues

In general, PIMCO reviews and considers corporate governance issues related to proxy matters and generally supports proposals that foster good corporate governance practices. PIMCO considers each proposal on a case-by-case basis, taking into consideration various factors and all relevant facts and circumstances at the time of the vote. PIMCO may vote proxies as recommended by management on routine matters related to the operation of the issuer and on matters not expected to have a significant economic impact on the issuer and/or shareholders, because PIMCO believes the recommendations by the issuer generally are in shareholders’ best interests, and therefore in the best economic interest of PIMCO’s clients. The following is a non-exhaustive list of issues that may be included in proxy materials submitted to clients of PIMCO, and a non-exhaustive list of factors that PIMCO may consider in determining how to vote the client’s proxies.

Board of Directors

1. Independence. PIMCO may consider the following factors when voting on director independence issues: (i) majority requirements for the board and the audit, nominating, compensation and/or other board committees; and (ii) whether the issuer adheres to and/or is subject to legal and regulatory requirements.

2. Director Tenure and Retirement. PIMCO may consider the following factors when voting on limiting the term of outside directors: (i) the introduction of new viewpoints on the board; (ii) a reasonable retirement age for the outside directors; and (iii) the impact on the board’s stability and continuity.

3. Nominations in Elections. PIMCO may consider the following factors when voting on uncontested elections: (i) composition of the board; (ii) nominee availability and attendance at meetings; (iii) any investment made by the nominee in the issuer; and (iv) long-term corporate performance and the price of the issuer’s securities.

4. Separation of Chairman and CEO Positions. PIMCO may consider the following factors when voting on proposals requiring that the positions of chairman of the board and the chief executive officer not be filled by the same person: (i) any potential conflict of interest with respect to the board’s ability to review and oversee management’s actions; and (ii) any potential effect on the issuer’s productivity and efficiency.

5. D&O Indemnification and Liability Protection. PIMCO may consider the following factors when voting on proposals that include director and officer indemnification and liability protection: (i) indemnifying directors for conduct in the normal course of business; (ii) limiting liability for monetary damages for violating the duty of care; (iii) expanding coverage beyond legal expenses to acts that represent more serious violations of fiduciary obligation than carelessness (e.g. negligence); and (iv) providing expanded coverage in cases where a director’s legal defense was unsuccessful if the director was found to have acted in good faith and in a manner that he or she reasonably believed was in the best interests of the company.

6. Stock Ownership. PIMCO may consider the following factors when voting on proposals on mandatory share ownership requirements for directors: (i) the benefits of additional vested interest in the issuer’s stock; (ii) the ability of a director to fulfill his duties to the issuer regardless of the extent of his stock ownership; and (iii) the impact of limiting the number of persons qualified to be directors.

Proxy Contests and Proxy Contest Defenses

1. Contested Director Nominations. PIMCO may consider the following factors when voting on proposals for director nominees in a contested election: (i) background and reason for the proxy contest; (ii) qualifications of the director nominees; (iii) management’s track record; (iv) the issuer’s long-term financial performance within its industry; (v) assessment of what each side is offering shareholders; (vi) the likelihood that the proposed objectives and goals can be met; and (vii) stock ownership positions of the director nominees.

2. Reimbursement for Proxy Solicitation Expenses. PIMCO may consider the following factors when voting on reimbursement for proxy solicitation expenses: (i) identity of the persons who will pay the expenses; (ii) estimated total cost of solicitation; (iii) total expenditures to date; (iv) fees to be paid to proxy solicitation firms; and (v) when applicable, terms of a proxy contest settlement.

3. Ability to Alter the Size of the Board by Shareholders. PIMCO may consider whether the proposal seeks to fix the size of the board and/or require shareholder approval to alter the size of the board.

4. Ability to Remove Directors by Shareholders. PIMCO may consider whether the proposal allows shareholders to remove directors with or without cause and/or allow shareholders to elect directors and fill board vacancies.

5. Cumulative Voting. PIMCO may consider the following factors when voting on cumulative voting proposals: (i) the ability of significant stockholders to elect a director of their choosing; (ii) the ability of minority shareholders to concentrate their support in favor of a director(s) of their choosing; and (iii) any potential limitation placed on the director’s ability to work for all shareholders.

6. Supermajority Shareholder Requirements. PIMCO may consider all relevant factors, including but not limited to limiting the ability of shareholders to effect change when voting on supermajority requirements to approve an issuer’s charter or bylaws, or to approve a merger or other significant business combination that would require a level of voting approval in excess of a simple majority.

Tender Offer Defenses

1. Classified Boards. PIMCO may consider the following factors when voting on classified boards: (i) providing continuity to the issuer; (ii) promoting long-term planning for the issuer; and (iii) guarding against unsolicited takeovers.

2. Poison Pills. PIMCO may consider the following factors when voting on poison pills: (i) supporting proposals to require a shareholder vote on other shareholder rights plans; (ii) ratifying or redeeming a poison pill in the interest of protecting the value of the issuer; and (iii) other alternatives to prevent a takeover at a price clearly below the true value of the issuer.

3. Fair Price Provisions. PIMCO may consider the following factors when voting on proposals with respect to fair price provisions: (i) the vote required to approve the proposed acquisition; (ii) the vote required to repeal the fair price provision; (iii) the mechanism for determining fair price; and (iv) whether these provisions are bundled with other anti-takeover measures (e.g., supermajority voting requirements) that may entrench management and discourage attractive tender offers.

Capital Structure

1. Stock Authorizations. PIMCO may consider the following factors to help distinguish between legitimate proposals to authorize increases in common stock for expansion and other corporate purchases and those proposals designed primarily as an anti-takeover device: (i) the purpose and need for the stock increase; (ii) the percentage increase with respect to the authorization currently in place; (iii) voting rights of the stock; and (iv) overall capitalization structure of the issuer.

2. Issuance of Preferred Stock. PIMCO may consider the following factors when voting on the issuance of preferred stock: (i) whether the new class of preferred stock has unspecified voting, conversion, dividend distribution, and other rights; (ii) whether the issuer expressly states that the stock will not be used as a takeover defense or carry superior voting rights; (iii) whether the issuer specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable; and (iv) whether the stated purpose is to raise capital or make acquisitions in the normal course of business.

3. Stock Splits. PIMCO may consider the following factors when voting on stock splits: (i) the percentage increase in the number of shares with respect to the issuer’s existing authorized shares; and (ii) the industry that the issuer is in and the issuer’s performance in that industry.

4. Reversed Stock Splits. PIMCO may consider the following factors when voting on reverse stock splits: (i) the percentage increase in the shares with respect to the issuer’s existing authorized stock; and (ii) issues related to delisting the issuer’s stock.

Executive and Director Compensation

1. Stock Option Plans. PIMCO may consider the following factors when voting on stock option plans: (i) whether the stock option plan expressly permits the repricing of options; (ii) whether the plan could result in earnings dilution of greater than a specified percentage of shares outstanding; (iii) whether the plan has an option exercise price below the market price on the day of the grant; (iv) whether the proposal relates to an amendment to extend the term of options for persons leaving the firm voluntarily or for cause; and (v) whether the stock option plan has certain other embedded features.

2. Director Compensation. PIMCO may consider the following factors when voting on director compensation: (i) whether director shares are at the same market risk as those of the issuer’s shareholders; and (ii) how stock option programs for outside directors compare with the standards of internal stock option programs.

3. Golden and Tin Parachutes. PIMCO may consider the following factors when voting on golden and/or tin parachutes: (i) whether they will be submitted for shareholder approval; and (ii) the employees covered by the plan and the quality of management.

State of Incorporation

State Takeover Statutes. PIMCO may consider the following factors when voting on proposals to opt out of a state takeover statute: (i) the power the statute vests with the issuer’s board; (ii) the potential of the statute to stifle bids; and (iii) the potential for the statute to empower the board to negotiate a better deal for shareholders.

Mergers and Restructurings

1. Mergers and Acquisitions. PIMCO may consider the following factors when voting on a merger and/or acquisition: (i) anticipated financial and operating benefits as a result of the merger or acquisition; (ii) offer price; (iii) prospects of the combined companies; (iv) how the deal was negotiated; and (v) changes in corporate governance and the potential impact on shareholder rights. PIMCO may also consider what impact the merger or acquisition may have on groups/organizations other than the issuer’s shareholders.

2. Corporate Restructurings. With respect to a proxy proposal that includes a spin-off, PIMCO may consider the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives. With respect to a proxy proposal that includes an asset sale, PIMCO may consider the impact on the balance sheet or working capital and the value received for the asset. With respect to a proxy proposal that includes a liquidation, PIMCO may consider management’s efforts to pursue alternatives, the appraisal value of assets, and the compensation plan for executives managing the liquidation.

Investment Company Proxies

For a client that is invested in an investment company, PIMCO votes each proxy of the investment company on a case-by-case basis and takes all reasonable steps to ensure that proxies are voted consistent with all applicable investment policies of the client and in accordance with any resolutions or other instructions approved by authorized persons of the client.

For a client that is invested in an investment company that is advised by PIMCO or its affiliates, if there is a conflict of interest which may be presented when voting for the client (e.g., a proposal to approve a contract between PIMCO and the investment company), PIMCO will resolve the conflict by doing any one of the following: (i) voting in accordance with the instructions/consent of the client after providing notice of and disclosing the conflict to that client; (ii) voting the proxy in accordance with the recommendation of an independent third-party service provider; or (iii) delegating the vote to an independent third-party service provider.

1. Election of Directors or Trustees. PIMCO may consider the following factors when voting on the director or trustee nominees of a mutual fund: (i) board structure, director independence and qualifications, and compensation paid by the fund and the family of funds; (ii) availability and attendance at board and committee meetings; (iii) investments made by the nominees in the fund; and (iv) the fund’s performance.

2. Converting Closed-end Fund to Open-end Fund. PIMCO may consider the following factors when voting on converting a closed-end fund to an open-end fund: (i) past performance as a closed-end fund; (ii) the market in which the fund invests; (iii) measures taken by the board to address any discount of the fund’s shares; (iv) past shareholder activism; (v) board activity; and (vi) votes on related proposals.

3. Proxy Contests. PIMCO may consider the following factors related to a proxy contest: (i) past performance of the fund; (ii) the market in which the fund invests; (iii) measures taken by the board to address past shareholder activism; (iv) board activity; and (v) votes on related proposals.

4. Investment Advisory Agreements. PIMCO may consider the following factors related to approval of an investment advisory agreement: (i) proposed and current fee arrangements/schedules; (ii) fund category/investment objective; (iii) performance benchmarks; (iv) share price performance as compared with peers; and (v) the magnitude of any fee increase and the reasons for such fee increase.

5. Policies Established in Accordance with the 1940 Act. PIMCO may consider the following factors: (i) the extent to which the proposed changes fundamentally alter the investment focus of the fund and comply with SEC interpretation; (ii) potential competitiveness; (iii) regulatory developments; and (iv) current and potential returns and risks.

6. Changing a Fundamental Restriction to a Non-fundamental Restriction. PIMCO may consider the following when voting on a proposal to change a fundamental restriction to a non-fundamental restriction: (i) reasons given by the board and management for the change; and (ii) the projected impact of the change on the fund’s portfolio.

7. Distribution Agreements. PIMCO may consider the following when voting on a proposal to approve a distribution agreement: (i) fees charged to comparably sized funds with similar investment objectives; (ii) the distributor’s reputation and past performance; and (iii) competitiveness of the fund among other similar funds in the industry.

8. Names Rule Proposals. PIMCO may consider the following factors when voting on a proposal to change a fund name, consistent with Rule 35d-1 of the 1940 Act: (i) whether the fund invests a minimum of 80% of its assets in the type of investments suggested by the proposed name; (ii) the political and economic changes in the target market; and (iii) current asset composition.

9. Disposition of Assets/Termination/Liquidation. PIMCO may consider the following when voting on a proposal to dispose of fund assets, terminate, or liquidate the fund: (i) strategies employed to salvage the fund; (ii) the fund’s past performance; and (iii) the terms of the liquidation.

10. Changes to Charter Documents. PIMCO may consider the following when voting on a proposal to change a fund’s charter documents: (i) degree of change implied by the proposal; (ii) efficiencies that could result; (iii) state of incorporation; and (iv) regulatory standards and implications.

11. Changing the Domicile of a Fund. PIMCO may consider the following when voting on a proposal to change the domicile of a fund: (i) regulations of both states; (ii) required fundamental policies of both states; and (iii) the increased flexibility available.

12. Change in Fund’s Subclassification. PIMCO may consider the following when voting on a change in a fund’s subclassification from diversified to non-diversified or to permit concentration in an industry: (i) potential competitiveness; (ii) current and potential returns; (iii) risk of concentration; and (iv) consolidation in the target industry.

Distressed and Defaulted Securities

1. Waivers and Consents. PIMCO may consider the following when determining whether to support a waiver or consent to changes in provisions of indentures governing debt securities which are held on behalf of clients: (i) likelihood that the granting of such waiver or consent will potentially increase recovery to clients; (ii) potential for avoiding cross-defaults under other agreements; and (iii) likelihood that deferral of default will give the obligor an opportunity to improve its business operations.

2. Voting on Chapter 11 Plans of Liquidation or Reorganization. PIMCO may consider the following when determining whether to vote for or against a Chapter 11 plan in a case pending with respect to an obligor under debt securities which are held on behalf of clients: (i) other alternatives to the proposed plan; (ii) whether clients are treated appropriately and in accordance with applicable law with respect to their distributions; (iii) whether the vote is likely to increase or decrease recoveries to clients.

Miscellaneous Provisions

1. Such Other Business. Proxy ballots sometimes contain a proposal granting the board authority to “transact such other business as may properly come before the meeting.” PIMCO may consider the following factors when developing a position on proxy ballots that contain a proposal granting the board authority to “transact such other business as may properly come before the meeting”: (i) whether the board is limited in what actions it may legally take within such authority; and (ii) PIMCO’s responsibility to consider actions before supporting them.

2. Equal Access. PIMCO may consider the following factors when voting on equal access: (i) the opportunity for significant company shareholders to evaluate and propose voting recommendations on proxy proposals and director nominees, and to nominate candidates to the board; and (ii) the added complexity and burden of providing shareholders with access to proxy materials.

3. Charitable Contributions. PIMCO may consider the following factors when voting on charitable contributions: (i) the potential benefits to shareholders; and (ii) the potential impact on the issuer’s resources that could have been used to increase shareholder value.

4. Special Interest Issues. PIMCO may consider the following factors when voting on special interest issues: (i) the long-term benefit to shareholders of promoting corporate accountability and responsibility on social issues; (ii) management’s responsibility with respect to special interest issues; (iii) any economic costs and restrictions on management; (iv) a client’s instruction to vote proxies in a specific manner and/or in a manner different from these Policies and Procedures; and (v) the responsibility to vote proxies for the greatest long-term shareholder value.

PERIMETER CAPITAL

PROXY VOTING

Policy

It is the policy of Perimeter to vote proxies in the interest of maximizing value for Perimeter’s Clients. Proxies are an asset of a Client, which should be treated by Perimeter with the same care, diligence, and loyalty as any asset belonging to a Client. To that end, Perimeter will vote in a way that it believes, consistent with its fiduciary duty, will cause the value of the issue to increase the most or decline the least. Consideration will be given to both the short- and long-term implications of the proposal to be voted on when considering the optimal vote.

Any general or specific proxy voting guidelines provided by a Client or its designated agent in writing will supersede this policy. A Client may have its proxies voted by an independent third party or other named fiduciary or agent, at the Client’s cost.

Procedures for Voting Proxies

Perimeter has retained Glass, Lewis & Co. (“Glass, Lewis”) to assist in the coordination and voting of Client proxies. The CCO is responsible for managing the relationship with Glass, Lewis. The CCO shall ensure that all proxies are being properly voted and that Glass, Lewis is retaining all of the appropriate proxy voting records.

Perimeter assumes voting responsibility for all Client accounts unless explicitly noted otherwise in the Client’s advisory agreement. Perimeter will generally cast votes for all shares for which the Company has voting authority, with the possible exception of share blocking markets. In some non-U.S. markets where share blocking occurs, shares must be “frozen” for trading purposes at the custodian or sub-custodian level in order to vote. During the time that shares are blocked, any pending trades will not settle. Depending on the market, this period can last from one day to three weeks. Any sales that must be executed will settle late and potentially be subject to interest charges or other punitive fees. For this reason, in blocking markets, Perimeter retains the right to vote or not, based on the determination of Perimeter’s investment personnel. Glass, Lewis sends a weekly report of upcoming meetings in blocking markets detailing each client account entitled to vote, the number of shares held, type of meeting and blocking period. The CCO will monitor these upcoming meetings, consult with Perimeter’s investment team members responsible for each industry or market and arrive at a decision on whether or not to vote. If the decision is made to vote, Perimeter will process votes through Glass, Lewis.

The following general guidelines are to be followed when possible:

	•		Glass, Lewis will monitor and keep track of all voting proxies.

	•		Glass, Lewis will analyze each vote and provide Perimeter with its recommendation, which recommendation shall be pursuant to the guidelines previously agreed to by Perimeter and Glass, Lewis.

	•		The member of the investment team who covers the security shall be responsible for reviewing the proxy and Glass, Lewis’ recommendation and make a determination on how the Company should vote such proxy. If the vote of Perimeter investment team member is contrary to Glass, Lewis’ recommendation, then the investment team member shall provide a brief explanation of such vote.

•

The investment team shall have its recommendation voted through Glass, Lewis.

In certain limited circumstances, a proxy may be received from sources other than Glass, Lewis. In such circumstances, the CCO shall use the above guidelines and be responsible for maintaining the history and record customarily retained by Glass, Lewis.

Resolving Potential Conflicts of Interest

We recognize that conflicts of interest may arise due to a variety of reasons and the CCO will reasonably try to assess any material conflicts between Perimeter’s interests and those of its clients with respect to proxy voting. If the CCO detects a conflict of interest, Glass, Lewis will evaluate the ballot issue and, using our pre-determined guidelines and their research, make an objective voting decision based upon criteria such as the financial implication of the proposal and impact on shareholder rights. In exceptional circumstances, for instance in the case of a merger or acquisition which may have significant economic implications for our client’s portfolios, we may solicit input from the applicable Perimeter investment team and possibly override the voting recommendation of Glass, Lewis.

Conflicts of Interest

Perimeter realizes that due to the difficulty of predicting and identifying all material conflicts, it must rely on its Employees to notify the CCO of any material conflict that may impair Perimeter’s ability to vote proxies in an objective manner.

In addition, any attempts by others within Perimeter to influence the voting of client proxies in a manner that is inconsistent with the proxy voting policy shall be reported to the CCO. Further, any attempts by persons or entitles outside Perimeter to influence the voting of client proxies shall be reported to the CCO. The CCO may then elect to report the attempt to legal counsel.

Procedures for Perimeter’s Receipt of Class Actions

Perimeter recognizes that as a fiduciary it has a duty to act with the highest obligation of good faith, loyalty, fair dealing and due care. When a recovery is achieved in a class action, investors who owned shares in the company subject to the action have the option to either: (1) opt out of the class action and pursue their own remedy; or (2) participate in the recovery achieved via the class action. Collecting the recovery involves the completion of a Proof of Claim form which is submitted to the Claims Administrator. After the Claims Administrator receives all Proof of Claims, it dispenses the money from the settlement fund to those persons and entities with valid claims.

If “Class Action” documents are received by Perimeter for a separate account client, Perimeter will gather any requisite information it has and forward to the client, to enable the client to file the “Class Action” at the client’s discretion. The decision of whether to participate in the recovery or opt-out may be a legal one that Perimeter is not qualified to make for such client. Therefore Perimeter will not file “Class Actions” on behalf of any separate account client.

If “Class Action” documents are received by Perimeter for a pooled fund client, Perimeter will gather requisite information and file a Proof of Claim form with the Claims Administrator if deemed appropriate and in the best interest of shareholders of the pooled fund. Any sums received from the settlement fund will be credited to the account of the pooled fund client.

Recordkeeping

Perimeter will maintain the documentation described in the following section for a period of not less than five (5) years, the first two (2) years at its principal place of business. The Director of Third-Party

Distribution & Client Relations will be responsible for the following procedures and for ensuring that the required documentation is retained.

Client request to review proxy votes

	§		Any request, whether written (including e-mail) or oral, received by any Employee of Perimeter, must be promptly reported to the CCO. All written requests must be retained in the permanent file.

	§		The CCO will record the identity of the client, the date of the request, and the action taken as a result of the request, in a suitable place.

	§		In order to facilitate the management of proxy voting record keeping process, and to facilitate dissemination of such proxy voting records to Clients, the CCO may distribute to any client requesting proxy voting information the complete proxy voting record of Perimeter for the period requested.

	§		Furnish the information requested, free of charge, to the client within a reasonable time period (within 10 business days). Maintain a copy of the written record provided in response to client’s written (including e-mail) or oral request. A copy of the written response should be attached and maintained with the client’s written request, if applicable and maintained in the permanent file.

	§		Clients are permitted to request the proxy voting record for the five-year period prior to their request.

Proxy statements received regarding client securities

	§		Upon receipt of a proxy, copy or print a sample of the proxy statement or card and maintain the copy in a central file along with a sample of the proxy solicitation instructions.

			Note: Perimeter is permitted to rely on proxy statements filed on the SEC’s EDGAR system instead of keeping its own copies.

Proxy voting records

	§		A record of how Perimeter voted Client proxies.

	§		Documents prepared or created by Perimeter that were material to making a decision on how to vote, or that memorialized the basis for the decision.

	§		Documentation or notes or any communications received from third parties, other industry analysts, third party service providers, company’s management discussions, etc. that were material in the basis for the decision.

Disclosure

Perimeter will ensure that Part II of Form ADV is updated as necessary to reflect: (i) all material changes to the Proxy Voting Policy and Procedures; and (ii) information about how Clients may obtain information on how Perimeter voted their securities.

Proxy Solicitation

Rainier Investment Management, Inc.
2007 Proxy Voting Policy
Summary & Procedures

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Introduction

This statement sets forth the proxy voting policy of Rainier Investment Management, Inc. (“RIM”) and is intended to be in compliance with 17 CFR 270.30b1-4 and 17 CFR 275.206(4)-6, rules relating to the voting of proxies by registered investment advisers and investment companies registered under Investment Company Act of 1940.

RIM clients include mutual funds, employee benefit plans, corporations, charitable organizations and individuals. As an investment adviser, RIM is a fiduciary that owes each of its clients duties of care and loyalty with respect to all services undertaken on the client’s behalf, including proxy voting. The duty of care requires RIM, when it has proxy voting authority, to monitor corporate events and to vote the proxies. To satisfy its duty of loyalty, RIM will cast the proxy votes in a manner consistent with the best interest of its clients and will not subrogate client interests to its own.

RIM is the Adviser of the Rainier Investment Management Mutual Funds (“Funds”). RIM acts as a fiduciary of the Funds and shall vote the proxies of the Funds’ portfolio securities in a manner consistent with the best interest of the Funds and its shareholders.

RIM shall analyze each proxy on a case-by-case basis, informed by the guidelines elaborated below, subject to the requirement that all votes shall be cast solely in the long-term interest of its clients. RIM does not intend for these guidelines to be exhaustive. Hundreds of issues appear on proxy ballots every year, and it is neither practical nor productive to fashion voting guidelines and policies which attempt to address every eventuality. Rather, RIM’s guidelines are intended to cover the most significant and frequent proxy issues that arise. RIM shall revise its guidelines as events warrant.

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Procedures

Procedures used to address any potential conflicts of interest.

RIM votes on a pre-established set of policy guidelines and on the recommendations of an independent third party, Institutional Shareholder Services (ISS). ISS makes its recommendations based on its independent, objective analysis of the economic interests of shareholders. This process ensures that RIM votes in the best interests of advisory clients and mutual fund shareholders, and it insulates our voting decisions from any potential conflicts of interest. Subject to RIM Proxy Policy Committee procedures, RIM may also override ISS vote recommendations on a case-by case basis on:

• Issues called out by other established proxy voting guidelines, such as the AFL-CIO Proxy Voting Guidelines

• Issues that ISS itself considers on a case-by-case basis

The extent to which RIM delegates proxy voting authority to or relies on recommendations of a third party.

As noted above, RIM relies on the recommendations of ISS. We retain ultimate responsibility for the votes, and we have the ability to override ISS vote recommendations. We will only do so, however, if we believe that a different vote is in the best interests of our clients and mutual fund shareholders.

To the extent RIM desires to override ISS’s vote recommendations for the reasons noted above, RIM (through its Proxy Policy Committee) will consider whether the proxy voting decision poses a material conflict between RIM’s interest and that of the relevant clients. If RIM determines that a proxy proposal

raises a material conflict between RIM’s interests and a client’s interest, RIM will resolve such a conflict in the manner described below, in its discretion:

(i) RIM may follow the recommendation of another nationally recognized third-party proxy advisory service, and document RIM’s reasons for overriding ISS and vote in accordance with the recommendation of the other third party;

(ii) RIM may decide independently how to vote the proxies notwithstanding its material conflict of interest, provided it carefully and fully documents its reasons for voting in the manner proposed;

(iii) RIM may, in its discretion, disclose the conflict to each affected client and vote as directed by the client, if RIM receives a timely response from the client (and RIM may abstain from voting in the absence of a timely client response);

(iv) RIM may erect information barriers around the person or persons making the voting decision sufficient to insulate the decision from the conflict;

(v) RIM may abstain from voting on the proposal, if (a) RIM determines that an abstention is in the best interest of the affected clients as a whole, (b) the expected benefit to the affected clients as a whole of voting the proxy exceeds the costs of voting the proxy, (c) RIM concludes that the value of the affected clients’ economic interest as a whole in the proposal or the value of the portfolio holding is insignificant, or (d) RIM has not received a timely response from the client; or

(vi) RIM may implement any other procedure that results in a decision that is demonstrably based on the client’s best interest and not the product of the conflict.

The extent to which RIM will support or give weight to the views of management of a portfolio company.

We base our voting decisions on our policy guidelines and on ISS recommendations, both of which are driven by considerations of the best interests of our clients and mutual fund shareholders. We vote in favor of management positions only when they coincide with the best interests of our clients and mutual fund shareholders.

Policies and procedures relating to matters substantially affecting the rights of the holders of the security being voted.

Our policy guidelines include a section devoted specifically to shareholder rights. We generally support shareholder voting rights and oppose efforts to restrict them.

Disclosure to Clients.

RIM will disclose to its clients how they may obtain information from RIM about how RIM voted with respect to their securities. RIM will provide to its clients a description or a copy of these proxy voting policies and procedures.

Books and Records Maintained by RIM.

In connection with voting proxies and these Proxy Voting Policies and Procedures, RIM maintains (in hardcopy or electronic form) such books and records as may be required by applicable law, rules or regulations, including:

	•		RIM’s policies and procedures relating to voting proxies;

	•		A copy of each proxy statement that RIM receives regarding clients’ securities, provided that RIM may rely on (a) a third party to make and retain, on RIM’s behalf, pursuant to a written undertaking, a

ISS 2007 Proxy Voting Guidelines Summary
Effective for Meetings Feb 1, 2007
Updated December 15, 2006

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The following is a condensed version of the proxy voting recommendations contained in the ISS Proxy Voting Manual.

1. Operational Items

Adjourn Meeting
Amend Quorum Requirements
Amend Minor Bylaws
Auditor Indemnification and Limitation of Liability
Auditor Ratification
Change Company Name
Change Date, Time, or Location of Annual Meeting
Transact Other Business

2. Board of Directors:

Voting on Director Nominees in Uncontested Elections
2007 Classification of Directors
Age Limits
Board Size
Classification/Declassification of the Board
Cumulative Voting
Director and Officer Indemnification and Liability Protection
Establish/Amend Nominee Qualifications
Filling Vacancies/Removal of Directors
Independent Chair (Separate Chair/CEO)
Majority of Independent Directors/Establishment of Committees
Majority Vote Shareholder Proposals
Office of the Board
Open Access
Performance Test for Directors
Stock Ownership Requirements
Term Limits

3. Proxy Contests

Voting for Director Nominees in Contested Elections
Reimbursing Proxy Solicitation Expenses
Confidential Voting

4. Antitakeover Defenses and Voting Related Issues

Advance Notice Requirements for Shareholder Proposals/Nominations
Amend Bylaws without Shareholder Consent
Poison Pills
Shareholder Ability to Act by Written Consent
Shareholder Ability to Call Special Meetings
Supermajority Vote Requirements

5. Mergers and Corporate Restructurings
Overall Approach

Appraisal Rights
Asset Purchases
Asset Sales
Bundled Proposals
Conversion of Securities
Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy
Plans/Reverse Leveraged Buyouts/Wrap Plans
Formation of Holding Company
Going Private Transactions (LBOs, Minority Squeezeouts, and Going Dark)
Joint Ventures
Liquidations

Mergers and Acquisitions/ Issuance of Shares to Facilitate Merger or Acquisition
Private Placements/Warrants/Convertible Debentures
Spinoffs
Value Maximization Proposals

6. State of Incorporation

Control Share Acquisition Provisions
Control Share Cash-out Provisions
Disgorgement Provisions
Fair Price Provisions
Freeze-out Provisions
Greenmail
Reincorporation Proposals
Stakeholder Provisions
State Antitakeover Statutes

7. Capital Structure

Adjustments to Par Value of Common Stock
Common Stock Authorization
Dual-Class Stock
Issue Stock for Use with Rights Plan
Preemptive Rights
Preferred Stock
Recapitalization
Reverse Stock Splits
Share Repurchase Programs
Stock Distributions: Splits and Dividends

Tracking Stock

8. Executive and Director Compensation
Equity Compensation Plans

Cost of Equity Plans
Repricing Provisions
Pay-for Performance Disconnect
Three-Year Burn Rate/Burn Rate Commitment
Poor Pay Practices

Specific Treatment of Certain Award Types in Equity Plan Evaluations:

Dividend Equivalent Rights
Liberal Share Recycling Provisions

Other Compensation Proposals and Policies

401(k) Employee Benefit Plans
Director Compensation
Director Retirement Plans
Employee Stock Ownership Plans (ESOPs)
Employee Stock Purchase Plans— Qualified Plans
Employee Stock Purchase Plans— Non-Qualified Plans
Incentive Bonus Plans and Tax Deductibility Proposals (OBRA-Related
Compensation Proposals)
Options Backdating
Option Exchange Programs/Repricing Options
Stock Plans in Lieu of Cash
Transfer Programs of Stock Options

Shareholder Proposals on Compensation

Advisory Vote on Executive Compensation (Say-on-Pay)
Compensation Consultants- Disclosure of Board or Company’s Utilization
Disclosure/Setting Levels or Types of Compensation for Executives and Directors
Option Repricing
Pay for Superior Performance
Pension Plan Income Accounting
Performance-Based Awards
Severance Agreements for Executives/Golden Parachutes
Supplemental Executive Retirement Plans (SERPs)

9. Corporate Responsibility

Consumer Issues and Public Safety

Animal Rights
Drug Pricing
Drug Reimportation
Genetically Modified Foods
Handguns
HIV/AIDS
Predatory Lending
Tobacco
Toxic Chemicals

Environment and Energy

Arctic National Wildlife Refuge
CERES Principles
Climate Change
Concentrated Area Feeding Operations (CAFOs)
Environmental-Economic Risk Report
Environmental Reports
Global Warming
Kyoto Protocol Compliance
Land Use
Nuclear Safety
Operations in Protected Areas
Recycling
Renewable Energy
Sustainability Report

General Corporate Issues

Charitable/Political Contributions
Disclosure of Lobbying Expenditures/Initiatives
Link Executive Compensation to Social Performance
Outsourcing/Offshoring

Labor Standards and Human Rights

China Principles
Country-specific Human Rights Reports
International Codes of Conduct/Vendor Standards
MacBride Principles

Military Business

Foreign Military Sales/Offsets
Landmines and Cluster Bombs
Nuclear Weapons
Operations in Nations Sponsoring Terrorism (e.g., Iran)
Spaced-Based Weaponization

Workplace Diversity

Board Diversity
Equal Employment Opportunity (EEO)
Glass Ceiling
Sexual Orientation

10. Mutual Fund Proxies

Election of Directors
Converting Closed-end Fund to Open-end Fund
Proxy Contests
Investment Advisory Agreements
Approving New Classes or Series of Shares
Preferred Stock Proposals
1940 Act Policies
Changing a Fundamental Restriction to a Nonfundamental Restriction
Change Fundamental Investment Objective to Nonfundamental
Name Change Proposals
Change in Fund’s Subclassification
Disposition of Assets/Termination/Liquidation
Changes to the Charter Document

1. Operational Items

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Adjourn Meeting

Generally vote AGAINST proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal.

Vote FOR proposals that relate specifically to soliciting votes for a merger or transaction if supporting that merger or transaction. Vote AGAINST proposals if the wording is too vague or if the proposal includes “other business.”

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Amend Quorum Requirements

Vote AGAINST proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding unless there are compelling reasons to support the proposal.

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Amend Minor Bylaws

Vote FOR bylaw or charter changes that are of a housekeeping nature (updates or corrections).

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Auditor Indemnification and Limitation of Liability

Consider the issue of auditor indemnification and limitation of liability on a CASE-BY-CASE basis. Factors to be assessed include, but are not limited to:

	•		The terms of the auditor agreement- the degree to which these agreements impact shareholders’ rights;

	•		Motivation and rationale for establishing the agreements;

	•		Quality of disclosure; and

	•		Historical practices in the audit area.

WTHHOLD against members of an audit committee in situations where there is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.

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Auditor Ratification

Vote FOR proposals to ratify auditors, unless any of the following apply:

	•		An auditor has a financial interest in or association with the company, and is therefore not independent,

	•		There is reason to believe that the independent auditor has rendered an opinion which is neither accurate nor indicative of the company’s financial position, or

	•		Fees for non-audit services (“Other” fees) are excessive.

Non-audit fees are excessive if:

Non-audit (“other”) fees >audit fees + audit-related fees + tax compliance/preparation fees

Tax compliance and preparation include the preparation of original and amended tax returns, refund claims and tax payment planning. All other services in the tax category, such as tax advice, planning or consulting should be added to “Other” fees. If the breakout of tax fees cannot be determined, add all tax fees to “Other” fees.

Vote CASE-BY-CASE on shareholder proposals asking companies to prohibit or limit their auditors from engaging in non-audit services.

Vote CASE-BY-CASE on shareholder proposals asking for audit firm rotation, taking into account:

	•		The tenure of the audit firm;

	•		The length of rotation specified in the proposal;

	•		Any significant audit-related issues at the company;

	•		The number of Audit Committee meetings held each year;

	•		The number of financial experts serving on the committee; and

	•		Whether the company has a periodic renewal process where the auditor is evaluated for both audit quality and competitive price.

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Change Company Name

Vote FOR proposals to change the corporate name.

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Change Date, Time, or Location of Annual Meeting

Vote FOR management proposals to change the date, time, and/or location of the annual meeting unless the proposed change is unreasonable.

Vote AGAINST shareholder proposals to change the date, time, and/or location of the annual meeting unless the current scheduling or location is unreasonable.

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Transact Other Business

Vote AGAINST proposals to approve other business when it appears as voting item.

2. Board of Directors:

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Voting on Director Nominees in Uncontested Elections

Vote CASE-BY-CASE on director nominees, examining, but not limited to, the following factors:

	•		Composition of the board and key board committees;

	•		Attendance at board and committee meetings;

	•		Corporate governance provisions and takeover activity;

	•		Disclosures under Section 404 of Sarbanes-Oxley Act;

	•		Long-term company performance relative to a market and peer index;

	•		Extent of the director’s investment in the company;

	•		Existence of related party transactions;

	•		Whether the chairman is also serving as CEO;

	•		Whether a retired CEO sits on the board;

	•		Number of outside boards at which a director serves;

	•		Majority vote standard for director elections without a provision to allow for plurality voting when there are more nominees than seats.

WITHHOLD from individual directors who:

	•		Attend less than 75 percent of the board and committee meetings without a valid excuse (such as illness, service to the nation, work on behalf of the company);

	•		Sit on more than six public company boards;

	•		Are CEOs of public companies who sit on the boards of more than two public companies besides their own— withhold only at their outside boards.

WITHHOLD from the entire board of directors, (except from new nominees, who should be considered on a CASE-BY-CASE basis) if:

	•		The company’s proxy indicates that not all directors attended 75% of the aggregate of their board and committee meetings, but fails to provide the required disclosure of the names of the directors involved. If this information cannot be obtained, withhold from all incumbent directors;

	•		The company’s poison pill has a dead-hand or modified dead-hand feature. Withhold every year until this feature is removed;

	•		The board adopts or renews a poison pill without shareholder approval since the beginning of 2005, does not commit to putting it to shareholder vote within 12 months of adoption, or reneges on a commitment to put the pill to a vote, and has not yet received a withhold recommendation for this issue;

	•		The board failed to act on a shareholder proposal that received approval by a majority of the shares outstanding the previous year;

	•		The board failed to act on a shareholder proposal that received approval of the majority of shares cast for the previous two consecutive years;

	•		The board failed to act on takeover offers where the majority of the shareholders tendered their shares;

	•		At the previous board election, any director received more than 50 percent withhold votes of the shares cast and the company has failed to address the issue(s) that caused the high withhold rate;

	•		The company is a Russell 3000 company that underperformed its industry group (GICS group) under the criteria discussed in the section “Performance Test for Directors”.

WITHHOLD from Inside Directors and Affiliated Outside Directors (per the Classification of Directors below) when:

	•		The inside or affiliated outside director serves on any of the three key committees: audit, compensation, or nominating;

	•		The company lacks an audit, compensation, or nominating committee so that the full board functions as that committee;

	•		The company lacks a formal nominating committee, even if board attests that the independent directors fulfill the functions of such a committee;

	•		The full board is less than majority independent.

WITHHOLD from the members of the Audit Committee if:

	•		The non — audit fees paid to the auditor are excessive (see discussion under Auditor Ratification);

	•		A material weakness identified in the Section 404 Sarbanes-Oxley Act disclosures rises to a level of serious concern; there are chronic internal control issues and an absence of established effective control mechanisms;

	•		There is persuasive evidence that the audit committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm.

WITHHOLD from the members of the Compensation Committee if:

	•		There is a negative correlation between the chief executive’s pay and company performance (see discussion under Equity Compensation Plans);

	•		The company reprices underwater options for stock, cash or other consideration without prior shareholder approval, even if allowed in their equity plan;

	•		The company fails to submit one-time transfers of stock options to a shareholder vote;

	•		The company fails to fulfill the terms of a burn rate commitment they made to shareholders;

	•		The company has backdated options (see “Options Backdating” policy);

	•		The company has poor compensation practices (see “Poor Pay Practices” policy). Poor pay practices may warrant withholding votes from the CEO and potentially the entire board as well.

WITHHOLD from directors, individually or the entire board, for egregious actions or failure to replace management as appropriate.

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2007 Classification of Directors

Inside Director (I)

	•		Employee of the company or one of its affiliates¹;

	•		Non-employee officer of the company if among the five most highly paid individuals (excluding interim CEO);

	•		Listed as a Section 16 officer²;

	•		Current interim CEO;

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Beneficial owner of more than 50 percent of the company’s voting power (this may be aggregated if voting power is distributed among more than one member of a defined group).

Affiliated Outside Director (AO)

	•		Board attestation that an outside director is not independent;

	•		Former CEO of the company;

	•		Former CEO of an acquired company within the past five years;

	•		Former interim CEO if the service was longer than 18 months. If the service was between twelve and eighteen months an assessment of the interim CEO’s employment agreement will be made;³

	•		Former executive² of the company, an affiliate or an acquired firm within the past five years;

	•		Executive² of a former parent or predecessor firm at the time the company was sold or split off from the parent/predecessor within the past five years;

	•		Executive, former executive, general or limited partner of a joint venture or partnership with the company;

	•		Relative⁴ of a current Section 16 officer of company or its affiliates;

	•		Relative⁴ of a current employee of company or its affiliates where additional factors raise concern (which may include, but are not limited to, the following: a director related to numerous employees; the company or its affiliates employ relatives of numerous board members; or a non-Section 16 officer in a key strategic role);

	•		Relative⁴ of former Section 16 officer, of company or its affiliate within the last five years;

	•		Currently provides (or a relative⁴ provides) professional services⁵ to the company, to an affiliate of the company or an individual officer of the company or one of its affiliates in excess of $10,000 per year;

	•		Employed by (or a relative⁴ is employed by) a significant customer or supplier⁶;

	•		Has (or a relative⁴ has) any transactional relationship with the company or its affiliates excluding investments in the company through a private placement; ⁶

	•		Any material financial tie or other related party transactional relationship to the company;

	•		Party to a voting agreement to vote in line with management on proposals being brought to shareholder vote;

	•		Has (or a relative⁴ has) an interlocking relationship as defined by the SEC involving members of the board of directors or its Compensation and Stock Option Committee; ⁷

	•		Founder ⁸ of the company but not currently an employee;

	•		Is (or a relative⁴ is) a trustee, director or employee of a charitable or non-profit organization that receives grants or endowments6 from the company or its affiliates¹.

Independent Outside Director (IO)

•

No material9 connection to the company other than a board seat.

Footnotes:


1		“Affiliate” includes a subsidiary, sibling company, or parent company. ISS uses 50 percent control ownership by the parent company as the standard for applying its affiliate designation.

2		“Executives” (officers subject to Section 16 of the Securities and Exchange Act of 1934) include the chief executive, operating, financial, legal, technology, and accounting officers of a company (including the president, treasurer, secretary, controller, or any vice president in charge of a principal business unit, division or policy function).

3		ISS will look at the terms of the interim CEO’s employment contract to determine if it contains severance pay, long-term health and pension benefits or other such standard provisions typically contained in contracts of permanent, non-temporary CEOs. ISS will also consider if a formal search process was underway for a full-time CEO at the time.

4		“Relative” follows the SEC’s new definition of “immediate family members” which covers spouses, parents, children, step-parents, step-children, siblings, in-laws, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer, or significant shareholder of the company.

5		Professional services can be characterized as advisory in nature and generally include the following: investment banking / financial advisory services; commercial banking (beyond deposit services); investment services; insurance services; accounting/audit services; consulting services; marketing services; and legal services. The case of participation in a banking syndicate by a non-lead bank should be considered a transaction (and hence subject to the associated materiality test) rather than a professional relationship.

6		If the company makes or receives annual payments exceeding the greater of $200,000 or five percent of the recipient’s gross revenues. (The recipient is the party receiving the financial proceeds from the transaction).

7		Interlocks include: (a) executive officers serving as directors on each other’s compensation or similar committees (or, in the absence of such a committee, on the board) or (b) executive officers sitting on each other’s boards and at least one serves on the other’s compensation or similar committees (or, in the absence of such a committee, on the board).

8		The operating involvement of the Founder with the company will be considered. Little to no operating involvement may cause ISS to deem the Founder as an independent outsider.

9		For purposes of ISS’ director independence classification, “material” will be defined as a standard of relationship (financial, personal or otherwise) that a reasonable person might conclude could potentially influence one’s objectivity in the boardroom in a manner that would have a meaningful impact on an individual’s ability to satisfy requisite fiduciary standards on behalf of shareholders.

•

Age Limits

Vote AGAINST shareholder or management proposals to limit the tenure of outside directors through mandatory retirement ages.

•

Board Size

Vote FOR proposals seeking to fix the board size or designate a range for the board size.

Vote AGAINST proposals that give management the ability to alter the size of the board outside of a specified range without shareholder approval.

•

Classification/Declassification of the Board

Vote AGAINST proposals to classify the board.

Vote FOR proposals to repeal classified boards and to elect all directors annually.

•

Cumulative Voting

Generally vote AGAINST proposals to eliminate cumulative voting.

Generally vote FOR proposals to restore or provide for cumulative voting unless the company meets all of the following criteria:

	•		Majority vote standard in director elections, including a carve-out for plurality voting in contested situations;

	•		Annually elected board;

	•		Two-thirds of the board composed of independent directors;

	•		Nominating committee composed solely of independent directors;

	•		Confidential voting; however, there may be a provision for suspending confidential voting during proxy contests;

	•		Ability of shareholders to call special meetings or act by written consent with 90 days’ notice;

	•		Absence of superior voting rights for one or more classes of stock;

	•		Board does not have the right to change the size of the board beyond a stated range that has been approved by shareholders;

	•		The company has not under-performed its both industry peers and index on both a one-year and three-year total shareholder returns basis*, unless there has been a change in the CEO position within the last three years; and

	•		No director received a WITHHOLD vote level of 35% or more of the votes cast in the previous election.


*		Starting in 2007, the industry peer group used for this evaluation will change from the 4-digit GICS group to the average of the 12 companies in the same 6-digit GICS group that are closest in revenue to the company. To fail, the company must under-perform its index and industry group on all 4 measures (1 and 3 year on industry peers and index).

•

Director and Officer Indemnification and Liability Protection

Vote CASE-BY-CASE on proposals on director and officer indemnification and liability protection using Delaware law as the standard.

Vote AGAINST proposals to eliminate entirely directors’ and officers’ liability for monetary damages for violating the duty of care.

Vote AGAINST indemnification proposals that would expand coverage beyond just legal expenses to liability for acts, such as negligence, that are more serious violations of fiduciary obligation than mere carelessness.

Vote AGAINST proposals that would expand the scope of indemnification to provide for mandatory indemnification of company officials in connection with acts that previously the company was permitted to provide indemnification for at the discretion of the company’s board (i.e. “permissive indemnification”) but that previously the company was not required to indemnify.

Vote FOR only those proposals providing such expanded coverage in cases when a director’s or officer’s legal defense was unsuccessful if both of the following apply:

	•		If the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company; and

	•		If only the director’s legal expenses would be covered.

•

Establish/Amend Nominee Qualifications

Vote CASE-BY-CASE on proposals that establish or amend director qualifications. Votes should be based on how reasonable the criteria are and to what degree they may preclude dissident nominees from joining the board.

Vote AGAINST shareholder proposals requiring two candidates per board seat.

•

Filling Vacancies/Removal of Directors

Vote AGAINST proposals that provide that directors may be removed only for cause.

Vote FOR proposals to restore shareholders’ ability to remove directors with or without cause.

Vote AGAINST proposals that provide that only continuing directors may elect replacements to fill board vacancies.

Vote FOR proposals that permit shareholders to elect directors to fill board vacancies.

•

Independent Chair (Separate Chair/CEO)

Generally vote FOR shareholder proposals requiring the position of chair be filled by an independent director unless there are compelling reasons to recommend against the proposal, such as a counterbalancing governance structure. This should include all of the following:

•

	•		Presides at all meetings of the board at which the chairman is not present, including executive sessions of the independent directors,

	•		Serves as liaison between the chairman and the independent directors,

	•		Approves information sent to the board,

	•		Approves meeting agendas for the board,

	•		Approves meetings schedules to assure that there is sufficient time for discussion of all agenda items,

	•		Has the authority to call meetings of the independent directors,

	•		If requested by major shareholders, ensures that he is available for consultation and direct communication;

	•		Two-thirds independent board;

	•		All-independent key committees;

	•		Established governance guidelines;

	•		The company should not have underperformed both its industry peers and index on both a one-year and three-year total shareholder returns basis*, unless there has been a change in the Chairman/CEO position within that time;

	•		The company does not have any problematic governance issues.


*		Starting in 2007, the industry peer group used for this evaluation will change from the 4-digit GICS group to the average of the 12 companies in the same 6-digit GICS group that are closest in revenue to the company. To fail, the company must under-perform its index and industry group on all 4 measures (1 and 3 year on industry peers and index).

•

Majority of Independent Directors/Establishment of Committees

Vote FOR shareholder proposals asking that a majority or more of directors be independent unless the board composition already meets the proposed threshold by ISS’ definition of independent outsider. (See Classification of Directors.)

Vote FOR shareholder proposals asking that board audit, compensation, and/or nominating committees be composed exclusively of independent directors if they currently do not meet that standard.

•

Majority Vote Shareholder Proposals

Companies are strongly encouraged to also adopt a post-election policy (also know as a director resignation policy) that will provide guidelines so that the company will promptly address the situation of a holdover director.

•

Office of the Board

Generally vote FOR shareholders proposals requesting that the board establish an Office of the Board of Directors in order to facilitate direct communications between shareholders and non-management directors, unless the company has all of the following:

•

Established a communication structure that goes beyond the exchange requirements to facilitate the exchange of information between shareholders and members of the board;

	•		Effectively disclosed information with respect to this structure to its shareholders;

	•		Company has not ignored majority-supported shareholder proposals or a majority withhold vote on a director nominee; and

	•		The company has an independent chairman or a lead/presiding director, according to ISS’ definition. This individual must be made available for periodic consultation and direct communication with major shareholders.

•

Open Access

Generally vote FOR reasonably crafted shareholder proposals providing shareholders with the ability to nominate director candidates to be included on management’s proxy card, provided the proposal substantially mirrors the SEC’s proposed two-trigger formulation (see the proposed “Security Holder Director Nominations” rule (http://www.sec.gov/rules/proposed/34-48626.htm) or ISS’ comment letter to the SEC dated 6/13/2003, available on ISS website under Governance Center- ISS Position Papers).

•

Performance Test for Directors

WITHHOLD from directors of Russell 3000 companies that underperformed relative to their industry peers. The criterion used to evaluate such underperformance is a combination of four performance measures:

One measurement will be a market-based performance metric and three measurements will be tied to the company’s operational performance. The market performance metric in the methodology is five-year Total Shareholder Return (TSR) on a relative basis within each four-digit GICS group. The three operational performance metrics are sales growth, EBITDA growth, and pre-tax operating Return on Invested Capital (ROIC) on a relative basis within each four-digit GICS group. All four metrics will be time-weighted as follows: 40 percent on the trailing 12 month period and 60 percent on the 48 month period prior to the trailing 12 months. This methodology emphasizes the company’s historical performance over a five-year period yet also accounts for near-term changes in a company’s performance.

The table below summarizes the new framework:

Metrics

Basis of Evaluation

Weighting

2nd Weighting

Operational

Performance

50%

5-year Average

Management

33.3

pre-tax operating

efficiency in

ROIC

deploying assets

5-year Sales Growth

Top-Line

33.3

5-year EBITDA Growth

Core-earnings

33.3

Sub Total

100

Stock Performance

5-year TSR

Market

Total

100

Adopt a two-phased approach. In 2007 (Year 1), the worst performers (bottom five percent) within each of the 24 GICS groups will automatically receive cautionary language, except for companies that have already received cautionary language or withhold votes in 2006 under the current policy. The latter may be subject to withhold votes in 2007. For 2008 (Year 2), WITHHOLD votes from director nominees if a company continues to be in the bottom five percent within its GICS group for that respective year and/or shows no improvement in its most recent trailing 12 months operating and market performance relative to its peers in its GICS group. This policy would be applied on a rolling basis going forward.

•

Stock Ownership Requirements

Generally vote AGAINST shareholder proposals that mandate a minimum amount of stock that directors must own in order to qualify as a director or to remain on the board. While stock ownership on the part of directors is desired, the company should determine the appropriate ownership requirement.

Vote CASE-BY-CASE on shareholder proposals asking that the company adopt a holding or retention period for its executives (for holding stock after the vesting or exercise of equity awards), taking into account any stock ownership requirements or holding period/retention ratio already in place and the actual ownership level of executives.

•

Term Limits

Vote AGAINST shareholder or management proposals to limit the tenure of outside directors through term limits. However, scrutinize boards where the average tenure of all directors exceeds 15 years for independence from management and for sufficient turnover to ensure that new perspectives are being added to the board.

3. Proxy Contests

•

Voting for Director Nominees in Contested Elections

Vote CASE-BY-CASE on the election of directors in contested elections, considering the following factors:

	•		Long-term financial performance of the target company relative to its industry;

	•		Management’s track record;

	•		Background to the proxy contest;

	•		Qualifications of director nominees (both slates);

	•		Strategic plan of dissident slate and quality of critique against management;

	•		Likelihood that the proposed goals and objectives can be achieved (both slates);

	•		Stock ownership positions.

•

Reimbursing Proxy Solicitation Expenses

•

Confidential Voting

Vote FOR shareholder proposals requesting that corporations adopt confidential voting, use independent vote tabulators, and use independent inspectors of election, as long as the proposal includes a provision for proxy contests as follows: In the case of a contested election, management should be permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents will not agree, the confidential voting policy is waived.

Vote FOR management proposals to adopt confidential voting.

4. Antitakeover Defenses and Voting Related Issues

•

Advance Notice Requirements for Shareholder Proposals/Nominations

Vote CASE-BY-CASE on advance notice proposals, supporting those proposals which allow shareholders to submit proposals as close to the meeting date as reasonably possible and within the broadest window possible.

•

Amend Bylaws without Shareholder Consent

Vote AGAINST proposals giving the board exclusive authority to amend the bylaws.

Vote FOR proposals giving the board the ability to amend the bylaws in addition to shareholders.

•

Poison Pills

•		Shareholders have approved the adoption of the plan; or

•		The board, in its exercise of its fiduciary responsibilities, determines that it is in the best interest of shareholders under the circumstances to adopt a pill without the delay in adoption that would result from seeking stockholder approval (i.e. the “fiduciary out” provision). A poison pill adopted under this fiduciary out will be put to a shareholder ratification vote within twelve months of adoption or expire. If the pill is not approved by a majority of the votes cast on this issue, the plan will immediately terminate.

not met, vote FOR the proposal, but with the caveat that a vote within twelve months would be considered sufficient.

Vote CASE-by-CASE on management proposals on poison pill ratification, focusing on the features of the shareholder rights plan. Rights plans should contain the following attributes:

	•		No lower than a 20% trigger, flip-in or flip-over;

	•		A term of no more than three years;

	•		No dead-hand, slow-hand, no-hand or similar feature that limits the ability of a future board to redeem the pill;

	•		Shareholder redemption feature (qualifying offer clause); if the board refuses to redeem the pill 90 days after a qualifying offer is announced, ten percent of the shares may call a special meeting or seek a written consent to vote on rescinding the pill.

•

Shareholder Ability to Act by Written Consent

Vote AGAINST proposals to restrict or prohibit shareholder ability to take action by written consent.

Vote FOR proposals to allow or make easier shareholder action by written consent.

•

Shareholder Ability to Call Special Meetings

Vote AGAINST proposals to restrict or prohibit shareholder ability to call special meetings.

Vote FOR proposals that remove restrictions on the right of shareholders to act independently of management.

•

Supermajority Vote Requirements

Vote AGAINST proposals to require a supermajority shareholder vote.

Vote FOR proposals to lower supermajority vote requirements.

5. Mergers and Corporate Restructurings

Overall Approach

For mergers and acquisitions, review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including:

	•		Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction and strategic rationale.

	•		Market reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal.

	•		Strategic rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions.

	•		Negotiations and process - Were the terms of the transaction negotiated at arm’s-length? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation “wins” can also signify the deal makers’ competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value.

	•		Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests. Consider whether these interests may have influenced these directors and officers to support or recommend the merger. The CIC figure presented in the “ISS Transaction Summary” section of this report is an aggregate figure that can in certain cases be a misleading indicator of the true value transfer from shareholders to insiders. Where such figure appears to be excessive, analyze the underlying assumptions to determine whether a potential conflict exists.

	•		Governance - Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance.

•

Appraisal Rights

Vote FOR proposals to restore, or provide shareholders with, rights of appraisal.

•

Asset Purchases

Vote CASE-BY-CASE on asset purchase proposals, considering the following factors:

	•		Purchase price;

	•		Fairness opinion;

	•		Financial and strategic benefits;

	•		How the deal was negotiated;

	•		Conflicts of interest;

	•		Other alternatives for the business;

	•		Non-completion risk.

•

Asset Sales

Vote CASE-BY-CASE on asset sales, considering the following factors:

	•		Impact on the balance sheet/working capital;

	•		Potential elimination of diseconomies;

	•		Anticipated financial and operating benefits;

	•		Anticipated use of funds;

	•		Value received for the asset;

	•		Fairness opinion;

	•		How the deal was negotiated;

	•		Conflicts of interest.

•

Bundled Proposals

Vote CASE-BY-CASE on bundled or “conditional” proxy proposals. In the case of items that are conditioned upon each other, examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders’ best interests, vote AGAINST the proposals. If the combined effect is positive, support such proposals.

•

Conversion of Securities

Vote CASE-BY-CASE on proposals regarding conversion of securities. When evaluating these proposals the investor should review the dilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties, and conflicts of interest.

Vote FOR the conversion if it is expected that the company will be subject to onerous penalties or will be forced to file for bankruptcy if the transaction is not approved.

•

Corporate Reorganization/Debt Restructuring/Prepackaged Bankruptcy Plans/Reverse Leveraged Buyouts/Wrap Plans

Vote CASE-BY-CASE on proposals to increase common and/or preferred shares and to issue shares as part of a debt restructuring plan, taking into consideration the following:

	•		Dilution to existing shareholders’ position;

	•		Terms of the offer;

	•		Financial issues;

	•		Management’s efforts to pursue other alternatives;

	•		Control issues;

	•		Conflicts of interest.

Vote FOR the debt restructuring if it is expected that the company will file for bankruptcy if the transaction is not approved.

•

Formation of Holding Company

Vote CASE-BY-CASE on proposals regarding the formation of a holding company, taking into consideration the following:

	•		The reasons for the change;

	•		Any financial or tax benefits;

	•		Regulatory benefits;

	•		Increases in capital structure;

	•		Changes to the articles of incorporation or bylaws of the company.

Absent compelling financial reasons to recommend the transaction, vote AGAINST the formation of a holding company if the transaction would include either of the following:

	•		Increases in common or preferred stock in excess of the allowable maximum (see discussion under “Capital Structure”);

	•		Adverse changes in shareholder rights.

•

Going Private Transactions (LBOs, Minority Squeezeouts, and Going Dark)

Vote CASE-BY-CASE on going private transactions, taking into account the following:

	•		Offer price/premium;

	•		Fairness opinion;

	•		How the deal was negotiated;

	•		Conflicts of interest;

	•		Other alternatives/offers considered; and

	•		Non-completion risk.

Vote CASE-BY-CASE on “going dark” transactions, determining whether the transaction enhances shareholder value by taking into consideration:

	•		Whether the company has attained benefits from being publicly-traded (examination of trading volume, liquidity, and market research of the stock);

	•		Cash-out value;

	•		Whether the interests of continuing and cashed-out shareholders are balanced; and

	•		The market reaction to public announcement of transaction.

•

Joint Ventures

Vote CASE-BY-CASE on proposals to form joint ventures, taking into account the following:

	•		Percentage of assets/business contributed;

	•		Percentage ownership;

	•		Financial and strategic benefits;

	•		Governance structure;

	•		Conflicts of interest;

	•		Other alternatives;

	•		Noncompletion risk.

•

Liquidations

Vote CASE-BY-CASE on liquidations, taking into account the following:

	•		Management’s efforts to pursue other alternatives;

	•		Appraisal value of assets; and

	•		The compensation plan for executives managing the liquidation.

Vote FOR the liquidation if the company will file for bankruptcy if the proposal is not approved.

•

Mergers and Acquisitions/ Issuance of Shares to Facilitate Merger or Acquisition

Vote CASE-BY-CASE on mergers and acquisitions, determining whether the transaction enhances shareholder value by giving consideration to items listed under “Mergers and Corporate Restructurings: Overall Approach.”

•

Private Placements/Warrants/Convertible Debentures

Vote CASE-BY-CASE on proposals regarding private placements, taking into consideration:

	•		Dilution to existing shareholders’ position;

	•		Terms of the offer;

	•		Financial issues;

	•		Management’s efforts to pursue other alternatives;

	•		Control issues;

	•		Conflicts of interest.

Vote FOR the private placement if it is expected that the company will file for bankruptcy if the transaction is not approved.

•

Spinoffs

Vote CASE-BY-CASE on spin-offs, considering:

	•		Tax and regulatory advantages;

	•		Planned use of the sale proceeds;

	•		Valuation of spinoff;

	•		Fairness opinion;

	•		Benefits to the parent company;

	•		Conflicts of interest;

	•		Managerial incentives;

	•		Corporate governance changes;

•

Changes in the capital structure.

•

Value Maximization Proposals

Vote CASE-BY-CASE on shareholder proposals seeking to maximize shareholder value by hiring a financial advisor to explore strategic alternatives, selling the company or liquidating the company and distributing the proceeds to shareholders. These proposals should be evaluated based on the following factors:

	•		Prolonged poor performance with no turnaround in sight;

	•		Signs of entrenched board and management;

	•		Strategic plan in place for improving value;

	•		Likelihood of receiving reasonable value in a sale or dissolution; and

	•		Whether company is actively exploring its strategic options, including retaining a financial advisor.

6. State of Incorporation

•

Control Share Acquisition Provisions

Control share acquisition statutes function by denying shares their voting rights when they contribute to ownership in excess of certain thresholds. Voting rights for those shares exceeding ownership limits may only be restored by approval of either a majority or supermajority of disinterested shares. Thus, control share acquisition statutes effectively require a hostile bidder to put its offer to a shareholder vote or risk voting disenfranchisement if the bidder continues buying up a large block of shares.

Vote FOR proposals to opt out of control share acquisition statutes unless doing so would enable the completion of a takeover that would be detrimental to shareholders.

Vote AGAINST proposals to amend the charter to include control share acquisition provisions.

Vote FOR proposals to restore voting rights to the control shares.

•

Control Share Cash-out Provisions

Control share cash-out statutes give dissident shareholders the right to “cash-out” of their position in a company at the expense of the shareholder who has taken a control position. In other words, when an investor crosses a preset threshold level, remaining shareholders are given the right to sell their shares to the acquirer, who must buy them at the highest acquiring price.

Vote FOR proposals to opt out of control share cash-out statutes.

•

Disgorgement Provisions

Disgorgement provisions require an acquirer or potential acquirer of more than a certain percentage of a company’s stock to disgorge, or pay back, to the company any profits realized from the sale of that company’s stock purchased 24 months before achieving control status. All sales of company stock by the acquirer occurring within a certain period of time (between 18 months and 24 months) prior to the investor’s gaining control status are subject to these recapture-of-profits provisions.

Vote FOR proposals to opt out of state disgorgement provisions.

•

Fair Price Provisions

Vote CASE-BY-CASE on proposals to adopt fair price provisions (provisions that stipulate that an acquirer must pay the same price to acquire all shares as it paid to acquire the control shares), evaluating factors such as the vote required to approve the proposed acquisition, the vote required to repeal the fair price provision, and the mechanism for determining the fair price.

Generally, vote AGAINST fair price provisions with shareholder vote requirements greater than a majority of disinterested shares.

•

Freeze-out Provisions

Vote FOR proposals to opt out of state freeze-out provisions. Freeze-out provisions force an investor who surpasses a certain ownership threshold in a company to wait a specified period of time before gaining control of the company.

•

Greenmail

Greenmail payments are targeted share repurchases by management of company stock from individuals or groups seeking control of the company. Since only the hostile party receives payment, usually at a substantial premium over the market value of its shares, the practice discriminates against all other shareholders.

Vote FOR proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments.

Vote CASE-BY-CASE on anti-greenmail proposals when they are bundled with other charter or bylaw amendments.

•

Reincorporation Proposals

Vote CASE-BY-CASE on proposals to change a company’s state of incorporation, taking into consideration both financial and corporate governance concerns, including:

	•		The reasons for reincorporating;

	•		A comparison of the governance provisions;

	•		Comparative economic benefits; and

	•		A comparison of the jurisdictional laws.

Vote FOR re-incorporation when the economic factors outweigh any neutral or negative governance changes.

•

Stakeholder Provisions

Vote AGAINST proposals that ask the board to consider non-shareholder constituencies or other non-financial effects when evaluating a merger or business combination.

•

State Antitakeover Statutes

Vote CASE-BY-CASE on proposals to opt in or out of state takeover statutes (including control share acquisition statutes, control share cash-out statutes, freezeout provisions, fair price provisions, stakeholder laws, poison pill endorsements, severance pay and labor contract provisions, anti-greenmail provisions, and disgorgement provisions).

7. Capital Structure

•

Adjustments to Par Value of Common Stock

Vote FOR management proposals to reduce the par value of common stock.

•

Common Stock Authorization

Vote CASE-BY-CASE on proposals to increase the number of shares of common stock authorized for issuance using a model developed by ISS.

Vote FOR proposals to approve increases beyond the allowable increase when a company’s shares are in danger of being delisted or if a company’s ability to continue to operate as a going concern is uncertain.

In addition, for capital requests less than or equal to 300 percent of the current authorized shares that marginally fail the calculated allowable cap (i.e., exceed the allowable cap by no more than 5 percent), on a CASE-BY-CASE basis, vote FOR the increase based on the company’s performance and whether the company’s ongoing use of shares has shown prudence. Factors should include, at a minimum, the following:

	•		Rationale;

	•		Good performance with respect to peers and index on a five-year total shareholder return basis;

	•		Absence of non-shareholder approved poison pill;

	•		Reasonable equity compensation burn rate;

	•		No non-shareholder approved pay plans; and

	•		Absence of egregious equity compensation practices.

•

Dual-Class Stock

Vote AGAINST proposals to create a new class of common stock with superior voting rights.

Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior voting rights.

Vote FOR proposals to create a new class of nonvoting or sub-voting common stock if:

	•		It is intended for financing purposes with minimal or no dilution to current shareholders;

	•		It is not designed to preserve the voting power of an insider or significant shareholder.

•

Issue Stock for Use with Rights Plan

Vote AGAINST proposals that increase authorized common stock for the explicit purpose of implementing a non-shareholder approved shareholder rights plan (poison pill).

•

Preemptive Rights

Vote CASE-BY-CASE on shareholder proposals that seek preemptive rights, taking into consideration: the size of a company, the characteristics of its shareholder base, and the liquidity of the stock.

•

Preferred Stock

Vote AGAINST proposals authorizing the creation of new classes of preferred stock with unspecified voting, conversion, dividend distribution, and other rights (“blank check” preferred stock).

Vote FOR proposals to create “declawed” blank check preferred stock (stock that cannot be used as a takeover defense).

Vote AGAINST proposals to increase the number of blank check preferred stock authorized for issuance when no shares have been issued or reserved for a specific purpose.

Vote CASE-BY-CASE on proposals to increase the number of blank check preferred shares after analyzing the number of preferred shares available for issue given a company’s industry and performance in terms of shareholder returns.

•

Recapitalization

Vote CASE-BY-CASE on recapitalizations (reclassifications of securities), taking into account the following:

	•		More simplified capital structure;

	•		Enhanced liquidity;

	•		Fairness of conversion terms;

	•		Impact on voting power and dividends;

	•		Reasons for the reclassification;

	•		Conflicts of interest; and

	•		Other alternatives considered.

•

Reverse Stock Splits

Vote FOR management proposals to implement a reverse stock split when the number of authorized shares will be proportionately reduced.

Vote FOR management proposals to implement a reverse stock split to avoid delisting.

Vote CASE-BY-CASE on proposals to implement a reverse stock split that do not proportionately reduce the number of shares authorized for issue based on the allowable increased calculated using the Capital Structure model.

•

Share Repurchase Programs

Vote FOR management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.

•

Stock Distributions: Splits and Dividends

Vote FOR management proposals to increase the common share authorization for a stock split or share dividend, provided that the increase in authorized shares would not result in an excessive number of shares available for issuance as determined using a model developed by ISS.

•

Tracking Stock

Vote CASE-BY-CASE on the creation of tracking stock, weighing the strategic value of the transaction against such factors as:

	•		Adverse governance changes;

	•		Excessive increases in authorized capital stock;

	•		Unfair method of distribution;

	•		Diminution of voting rights;

	•		Adverse conversion features;

	•		Negative impact on stock option plans; and

	•		Alternatives such as spin-off.

8. Executive and Director Compensation

Equity Compensation Plans

Vote CASE-BY-CASE on equity-based compensation plans. Vote AGAINST the equity plan if any of the following factors apply:

	•		The total cost of the company’s equity plans is unreasonable;

	•		The plan expressly permits the repricing of stock options without prior shareholder approval;

	•		There is a disconnect between CEO pay and the company’s performance;

	•		The company’s three year burn rate exceeds the greater of 2% and the mean plus 1 standard deviation of its industry group; or

	•		The plan is a vehicle for poor pay practices.

Each of these factors is further described below:

•

Cost of Equity Plans

Generally, vote AGAINST equity plans if the cost is unreasonable. For non-employee director plans, vote FOR the plan if certain factors are met (see Director Compensation section).

The cost of the equity plans is expressed as Shareholder Value Transfer (SVT), which is measured using a binomial option pricing model that assesses the amount of shareholders’ equity flowing out of the company to employees and directors. SVT is expressed as both a dollar amount and as a percentage of market value, and includes the new shares proposed, shares available under existing plans, and shares granted but unexercised. All award types are valued. For omnibus plans, unless limitations are placed on the most expensive types of awards (for example, full value awards), the assumption is made that all awards to be granted will be the most expensive types. See discussion of specific types of awards.

The Shareholder Value Transfer is reasonable if it falls below the company-specific allowable cap. The allowable cap is determined as follows: The top quartile performers in each industry group (using the Global Industry Classification Standard GICS) are identified. Benchmark SVT levels for each industry are established based on these top performers’ historic SVT. Regression analyses are run on each industry group to identify the variables most strongly correlated to SVT. The benchmark industry SVT level is then adjusted upwards or downwards for the specific company by plugging the company-specific performance measures, size and cash compensation into the industry cap equations to arrive at the company’s allowable cap.

•

Repricing Provisions

Vote AGAINST plans that expressly permit the repricing of underwater stock options without prior shareholder approval, even if the cost of the plan is reasonable. Also, WITHHOLD from members of the Compensation Committee who approved and/or implemented an option exchange program by repricing and buying out underwater options for stock, cash or other consideration or canceling underwater options and regranting options with a lower exercise price without prior shareholder approval, even if such repricings are allowed in their equity plan.

Vote AGAINST plans if the company has a history of repricing options without shareholder approval, and the applicable listing standards would not preclude them from doing so.

•

Pay-for Performance Disconnect

Generally vote AGAINST plans in which:

	•		there is a disconnect between the CEO’s pay and company performance (an increase in pay and a decrease in performance);

	•		the main source of the pay increase (over half) is equity-based, and

	•		the CEO is a participant of the equity proposal.

Performance decreases are based on negative one- and three-year total shareholder returns. CEO pay increases are based on the CEO’s total direct compensation (salary, cash bonus, present value of stock options, face value of restricted stock, value of non-equity incentive payouts, change in pension value and nonqualified deferred compensation earnings, and all other compensation) increasing over the previous year.

WITHHOLD votes from the Compensation Committee members when the company has a pay for performance disconnect.

On a CASE-BY-CASE basis, vote for equity plans and FOR compensation committee members with a pay-for-performance disconnect if compensation committee members can present strong and compelling evidence of improved committee performance. This evidence must go beyond the usual compensation committee report disclosure. This additional evidence necessary includes all of the following:

•

The compensation committee has reviewed all components of the CEO’s compensation, including the following:

	•		Base salary, bonus, long-term incentives;

	•		Accumulative realized and unrealized stock option and restricted stock gains;

	•		Dollar value of perquisites and other personal benefits to the CEO and the total cost to the company;

	•		Earnings and accumulated payment obligations under the company’s nonqualified deferred compensation program;

	•		Actual projected payment obligations under the company’s supplemental executive retirement plan (SERPs).

•

A tally sheet with all the above components should be disclosed for the following termination scenarios:

	•		Payment if termination occurs within 12 months: $___;

	•		Payment if “not for cause” termination occurs within 12 months: $___;

	•		Payment if “change of control” termination occurs within 12 months: $___.

•

The compensation committee is committed to providing additional information on the named executives’ annual cash bonus program and/or long-term incentive cash plan for the current fiscal year. The compensation committee will provide full disclosure of the qualitative and quantitative performance criteria and hurdle rates used to determine the payouts of the cash program. From this disclosure, shareholders will know the minimum level of performance required for any cash bonus to be delivered, as well as the maximum cash bonus payable for superior performance.

The repetition of the compensation committee report does not meet ISS’ requirement of compelling and strong evidence of improved disclosure. The level of transparency and disclosure is at the highest level where shareholders can understand the mechanics of the annual cash bonus and/or long-term incentive cash plan based on the additional disclosure.

•

The compensation committee is committed to granting a substantial portion of performance-based equity awards to the named executive officers. A substantial portion of performance-based awards would be at least 50 percent of the shares awarded to each of the named executive officers. Performance-based equity awards are earned or paid out based on the achievement of company performance targets. The company will disclose the details of the performance criteria (e.g., return on equity) and the hurdle rates (e.g., 15 percent) associated with the performance targets. From this disclosure, shareholders will know the minimum level of performance required for any equity grants to be made. The performance-based equity awards do not refer to non-qualified stock options1 or performance-accelerated grants.² Instead,


1		Non-qualified stock options are not performance-based awards unless the grant or the vesting of the stock options is tied to the achievement of a pre-determined and disclosed performance measure. A rising stock market will generally increase share prices of all companies, despite of the company’s underlying performance.

2		Performance-accelerated grants are awards that vest earlier based on the achievement of a specified measure. However, these grants will ultimately vest over time even without the attainment of the goal(s).

		performance-based equity awards are performance-contingent grants where the individual will not receive the equity grant by not meeting the target performance and vice versa.

The level of transparency and disclosure is at the highest level where shareholders can understand the mechanics of the performance-based equity awards based on the additional disclosure.

•

The compensation committee has the sole authority to hire and fire outside compensation consultants. The role of the outside compensation consultant is to assist the compensation committee to analyze executive pay packages or contracts and understand the company’s financial measures.

•

Three-Year Burn Rate/Burn Rate Commitment

Generally vote AGAINST plans if the company’s most recent three-year burn rate exceeds one standard deviation in excess of the industry mean (per the following Burn Rate Table) and is over two percent of common shares outstanding. The three-year burn rate policy does not apply to non-employee director plans unless outside directors receive a significant portion of shares each year.

However, vote FOR equity plans if the company fails this burn rate test but the company commits in a public filing to a three-year average burn rate equal to its GICS group burn rate mean plus one standard deviation (or 2%, whichever is greater), assuming all other conditions for voting FOR the plan have been met.

If a company fails to fulfill its burn rate commitment, vote to WITHHOLD from the compensation committee.

2007 Burn Rate Table


	Russell 3000										Non-Russell 3000
					Standard			Mean +						Standard			Mean +
GICS	Description	Mean			Deviation			STDEV			Mean			Deviation			STDEV
1010	Energy		1.37	%		0.92	%		2.29	%		1.76	%		2.01	%		3.77	%
1510	Materials		1.23	%		0.62	%		1.85	%		2.21	%		2.15	%		4.36	%
2010	Capital Goods		1.60	%		0.98	%		2.57	%		2.34	%		1.98	%		4.32	%
2020	Commercial Services & Supplies		2.39	%		1.42	%		3.81	%		2.25	%		1.93	%		4.18	%
2030	Transportation		1.30	%		1.01	%		2.31	%		1.92	%		1.95	%		3.86	%
2510	Automobiles & Components		1.93	%		0.98	%		2.90	%		2.37	%		2.32	%		4.69	%
2520	Consumer Durables & Apparel		1.97	%		1.12	%		3.09	%		2.02	%		1.68	%		3.70	%
2530	Hotels Restaurants & Leisure		2.22	%		1.19	%		3.41	%		2.29	%		1.88	%		4.17	%
2540	Media		1.78	%		0.92	%		2.70	%		3.26	%		2.36	%		5.62	%
2550	Retailing		1.95	%		1.10	%		3.05	%		2.92	%		2.21	%		5.14	%
3010, 3020, 3030	Food & Staples Retailing		1.66	%		1.25	%		2.91	%		1.90	%		2.00	%		3.90	%
3510	Health Care Equipment & Services		2.87	%		1.32	%		4.19	%		3.51	%		2.31	%		5.81	%
3520	Pharmaceuticals & Biotechnology		3.12	%		1.38	%		4.50	%		3.96	%		2.89	%		6.85	%
4010	Banks		1.31	%		0.89	%		2.20	%		1.15	%		1.10	%		2.25	%
4020	Diversified Financials		2.13	%		1.64	%		3.76	%		4.84	%		5.03	%		9.87	%
4030	Insurance		1.34	%		0.88	%		2.22	%		1.60	%		1.96	%		3.56	%
4040	Real Estate		1.21	%		1.02	%		2.23	%		1.21	%		1.02	%		2.23	%
4510	Software & Services		3.77	%		2.05	%		5.82	%		5.33	%		3.13	%		8.46	%
4520	Technology Hardware & Equipment		3.05	%		1.65	%		4.70	%		3.58	%		2.34	%		5.92	%
4530	Semiconductors & Semiconductor Equip.		3.76	%		1.64	%		5.40	%		4.48	%		2.46	%		6.94	%
5010	Telecommunication Services		1.71	%		0.99	%		2.70	%		2.98	%		2.94	%		5.92	%
5510	Utilities		0.84	%		0.51	%		1.35	%		0.84	%		0.51	%		1.35	%

For companies that grant both full value awards and stock options to their employees, ISS shall apply a premium on full value awards for the past three fiscal years. The guideline for applying the premium is as follows:


	Annual Stock Price
Characteristics	Volatility	Premium
High annual volatility	53% and higher	1 full-value award will count as 1.5 option shares
Moderate annual volatility	25% — 52%	1 full-value award will count as 2.0 option shares
Low annual volatility	Less than 25%	1 full-value award will count as 4.0 option shares

•

Poor Pay Practices

Vote AGAINST equity plans if the plan is a vehicle for poor compensation practices.

WITHHOLD from compensation committee members, CEO, and potentially the entire board, if the company has poor compensation practices. The following practices, while not exhaustive, are examples of poor compensation practices that may warrant withholding votes:

•		Egregious employment contracts (e.g., those containing multi-year guarantees for bonuses and grants);

•		Excessive perks that dominate compensation (e.g., tax gross-ups for personal use of corporate aircraft);

•		Huge bonus payouts without justifiable performance linkage or proper disclosure;

•		Performance metrics that are changed (e.g., canceled or replaced during the performance period without adequate explanation of the action and the link to performance);

•		Egregious pension/SERP (supplemental executive retirement plan) payouts (e.g., the inclusion of additional years of service not worked or inclusion of performance-based equity awards in the pension calculation);

•		New CEO awarded an overly generous new hire package (e.g., including excessive “make whole” provisions or any of the poor pay practices listed in this policy);

•		Excessive severance provisions (e.g., including excessive change in control payments);

•		Change in control payouts without loss of job or substantial diminution of job duties;

•		Internal pay disparity;

•		Options backdating (covered in a separate policy); and

•		Other excessive compensation payouts or poor pay practices at the company.

Specific Treatment of Certain Award Types in Equity Plan Evaluations:

•

Dividend Equivalent Rights

Options that have Dividend Equivalent Rights (DERs) associated with them will have a higher calculated award value than those without DERs under the binomial model, based on the value of these dividend streams. The higher value will be applied to new shares, shares available under existing plans, and shares awarded but not exercised per the plan specifications. DERS transfer more shareholder equity to employees and non-employee directors and this cost should be captured.

•

Liberal Share Recycling Provisions

Under net share counting provisions, shares tendered by an option holder to pay for the exercise of an option, shares withheld for taxes or shares repurchased by the company on the open market can be recycled back into the equity plan for awarding again. All awards with such provisions should be valued as full-value awards. Stock-settled stock appreciation rights (SSARs) will also be considered as full-value awards if a company counts only the net shares issued to employees towards their plan reserve.

Other Compensation Proposals and Policies

•

401(k) Employee Benefit Plans

Vote FOR proposals to implement a 401(k) savings plan for employees.

•

Director Compensation

Vote CASE-BY-CASE on compensation plans for non-employee directors, based on the cost of the plans against the company’s allowable cap.

On occasion, director stock plans that set aside a relatively small number of shares when combined with employee or executive stock compensation plans exceed the allowable cap. Vote for the plan if ALL of the following qualitative factors in the board’s compensation are met and disclosed in the proxy statement:

	•		Director stock ownership guidelines with a minimum of three times the annual cash retainer.

	•		Vesting schedule or mandatory holding/deferral period:

	•		A minimum vesting of three years for stock options or restricted stock; or

	•		Deferred stock payable at the end of a three-year deferral period.

•

Mix between cash and equity:

	•		A balanced mix of cash and equity, for example 40% cash/60% equity or 50% cash/50% equity; or

	•		If the mix is heavier on the equity component, the vesting schedule or deferral period should be more stringent, with the lesser of five years or the term of directorship.

	•		No retirement/benefits and perquisites provided to non-employee directors; and

	•		Detailed disclosure provided on cash and equity compensation delivered to each non-employee director for the most recent fiscal year in a table. The column headers for the table may include the following: name of each non-employee director, annual retainer, board meeting fees, committee retainer, committee-meeting fees, and equity grants.

•

Director Retirement Plans

Vote AGAINST retirement plans for non-employee directors.

Vote FOR shareholder proposals to eliminate retirement plans for non-employee directors.

•

Employee Stock Ownership Plans (ESOPs)

Vote FOR proposals to implement an ESOP or increase authorized shares for existing ESOPs, unless the number of shares allocated to the ESOP is excessive (more than five percent of outstanding shares).

•

Employee Stock Purchase Plans— Qualified Plans

Vote CASE-BY-CASE on qualified employee stock purchase plans. Vote FOR employee stock purchase plans where all of the following apply:

	•		Purchase price is at least 85 percent of fair market value;

	•		Offering period is 27 months or less; and

	•		The number of shares allocated to the plan is ten percent or less of the outstanding shares.

Vote AGAINST qualified employee stock purchase plans where any of the following apply:

	•		Purchase price is less than 85 percent of fair market value; or

	•		Offering period is greater than 27 months; or

	•		The number of shares allocated to the plan is more than ten percent of the outstanding shares.

•

Employee Stock Purchase Plans— Non-Qualified Plans

Vote CASE-by-CASE on nonqualified employee stock purchase plans. Vote FOR nonqualified employee stock purchase plans with all the following features:

	•		Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company);

	•		Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary;

	•		Company matching contribution up to 25 percent of employee’s contribution, which is effectively a discount of 20 percent from market value;

	•		No discount on the stock price on the date of purchase since there is a company matching contribution.

•		Incentive Bonus Plans and Tax Deductibility Proposals (OBRA-Related

•		Compensation Proposals)

Vote FOR proposals that simply amend shareholder-approved compensation plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m).

Vote FOR proposals to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) unless they are clearly inappropriate.

Vote CASE-BY-CASE on amendments to existing plans to increase shares reserved and to qualify for favorable tax treatment under the provisions of Section 162(m) as long as the plan does not exceed the allowable cap and the plan does not violate any of the supplemental policies.

Generally vote FOR cash or cash and stock bonus plans that are submitted to shareholders for the purpose of exempting compensation from taxes under the provisions of Section 162(m) if no increase in shares is requested.

•

Options Backdating

In cases where a company has practiced options backdating, WITHHOLD on a CASE-BY-CASE basis from the members of the compensation committee, depending on the severity of the practices and the subsequent corrective actions on the part of the board. WITHHOLD from the compensation committee members who oversaw the questionable options grant practices or from current compensation committee members who fail to respond to the issue proactively, depending on several factors, including, but not limited to:

	•		Reason and motive for the options backdating issue, such as inadvertent vs. deliberate grant date changes;

	•		Length of time of options backdating;

	•		Size of restatement due to options backdating;

	•		Corrective actions taken by the board or compensation committee, such as canceling or repricing backdated options, or recoupment of option gains on backdated grants;

	•		Adoption of a grant policy that prohibits backdating, and creation of a fixed grant schedule or window period for equity grants going forward.

•

Option Exchange Programs/Repricing Options

Vote CASE-by-CASE on management proposals seeking approval to exchange/reprice options taking into consideration:

	•		Historic trading patterns—the stock price should not be so volatile that the options are likely to be back “in-the-money” over the near term;

	•		Rationale for the re-pricing—was the stock price decline beyond management’s control?

	•		Is this a value-for-value exchange?

	•		Are surrendered stock options added back to the plan reserve?

	•		Option vesting—does the new option vest immediately or is there a black-out period?

	•		Term of the option—the term should remain the same as that of the replaced option;

	•		Exercise price—should be set at fair market or a premium to market;

	•		Participants—executive officers and directors should be excluded.

If the surrendered options are added back to the equity plans for re-issuance, then also take into consideration the company’s three-year average burn rate.

past year. Also, consider the terms of the surrendered options, such as the grant date, exercise price and vesting schedule. Grant dates of surrendered options should be far enough back (two to three years) so as not to suggest that repricings are being done to take advantage of short-term downward price movements. Similarly, the exercise price of surrendered options should be above the 52-week high for the stock price.

Vote FOR shareholder proposals to put option repricings to a shareholder vote.

•

Stock Plans in Lieu of Cash

Vote CASE-by-CASE on plans which provide participants with the option of taking all or a portion of their cash compensation in the form of stock.

Vote FOR non-employee director only equity plans which provide a dollar-for-dollar cash for stock exchange.

Vote CASE-by-CASE on plans which do not provide a dollar-for-dollar cash for stock exchange. In cases where the exchange is not dollar-for-dollar, the request for new or additional shares for such equity program will be considered using the binomial option pricing model. In an effort to capture the total cost of total compensation, ISS will not make any adjustments to carve out the in-lieu-of cash compensation.

•

Transfer Programs of Stock Options

One-time Transfers: WITHHOLD votes from compensation committee members if they fail to submit one-time transfers for to shareholders for approval.

Vote CASE-BY-CASE on one-time transfers. Vote FOR if:

	•		Executive officers and non-employee directors are excluded from participating;

	•		Stock options are purchased by third-party financial institutions at a discount to their fair value using option pricing models such as Black-Scholes or a Binomial Option Valuation or other appropriate financial models;

	•		There is a two-year minimum holding period for sale proceeds (cash or stock) for all participants.

Additionally, management should provide a clear explanation of why options are being transferred and whether the events leading up to the decline in stock price were beyond management’s control. A review of the company’s historic stock price volatility should indicate if the options are likely to be back “in-the-money” over the near term.

Shareholder Proposals on Compensation

•		Advisory Vote on Executive Compensation (Say-on-Pay)

Generally, vote FOR shareholder proposals that call for non-binding shareholder ratification of the compensation of the named Executive Officers and the accompanying narrative disclosure of material factors provided to understand the Summary Compensation Table.

• Compensation Consultants- Disclosure of Board or Company’s Utilization

Generally vote FOR shareholder proposals seeking disclosure regarding the Company, Board, or Board committee’s use of compensation consultants, such as company name, business relationship(s) and fees paid.

• Disclosure/Setting Levels or Types of Compensation for Executives and Directors

Generally, vote FOR shareholder proposals seeking additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders’ needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company.

Vote AGAINST shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation.

Vote AGAINST shareholder proposals requiring director fees be paid in stock only.

Vote CASE-BY-CASE on all other shareholder proposals regarding executive and director pay, taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook.

•

Option Repricing

Vote FOR shareholder proposals to put option repricings to a shareholder vote.

•

Pay for Superior Performance

Generally vote FOR shareholder proposals based on a case-by-case analysis that requests the board establish a pay-for-superior performance standard in the company’s executive compensation plan for senior executives. The proposals call for:

	•		the annual incentive component of the plan should utilize financial performance criteria that can be benchmarked against peer group performance, and provide that no annual bonus be awarded based on financial performance criteria unless the company exceeds the median or mean performance of a disclosed group of peer companies on the selected financial criteria;

	•		the long-term equity compensation component of the plan should utilize financial and/or stock price performance criteria that can be benchmarked against peer group performance, and any options, restricted shares, or other equity compensation used should be structured so that compensation is received only when company performance exceeds the median or mean performance of the peer group companies on the selected financial and stock price performance criteria; and

	•		the plan disclosure should allow shareholders to monitor the correlation between pay and performance.

Consider the following factors in evaluating this proposal:

	•		What aspects of the company’s annual and long -term equity incentive programs are performance driven?

	•		If the annual and long-term equity incentive programs are performance driven, are the performance criteria and hurdle rates disclosed to shareholders or are they benchmarked against a disclosed peer group?

	•		Can shareholders assess the correlation between pay and performance based on the current disclosure?

	•		What type of industry and stage of business cycle does the company belong to?

•

Pension Plan Income Accounting

Generally vote FOR shareholder proposals to exclude pension plan income in the calculation of earnings used in determining executive bonuses/compensation.

•

Performance-Based Awards

Vote CASE-BY-CASE on shareholder proposal requesting that a significant amount of future long-term incentive compensation awarded to senior executives shall be performance-based and requesting that the board adopt and disclose challenging performance metrics to shareholders, based on the following analytical steps:

•		First, vote FOR shareholder proposals advocating the use of performance-based equity awards, such as performance contingent options or restricted stock, indexed options or premium-priced options, unless the proposal is overly restrictive or if the company has demonstrated that it is using a “substantial” portion of performance-based awards for its top executives. Standard stock options and performance-accelerated awards do not meet the criteria to be considered as performance-based awards. Further, premium-priced options should have a premium of at least 25 percent and higher to be considered performance-based awards.

•		Second, assess the rigor of the company’s performance-based equity program. If the bar set for the performance-based program is too low based on the company’s historical or peer group comparison, generally vote FOR the proposal. Furthermore, if target performance results in an above target payout, vote FOR the shareholder proposal due to program’s poor design. If the company does not disclose the performance metric of the performance-based equity program, vote FOR the shareholder proposal regardless of the outcome of the first step to the test.

In general, vote FOR the shareholder proposal if the company does not meet both of the above two steps.

•

Severance Agreements for Executives/Golden Parachutes

Vote FOR shareholder proposals to require golden parachutes or executive severance agreements to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts.

Vote on a CASE-BY-CASE basis on proposals to ratify or cancel golden parachutes. An acceptable parachute should include, but is not limited to, the following:

	•		The triggering mechanism should be beyond the control of management;

	•		The amount should not exceed three times base amount (defined as the average annual taxable W-2 compensation during the five years prior to the year in which the change of control occurs;

	•		Change-in-control payments should be double-triggered, i.e., (1) after a change in control has taken place, and (2) termination of the executive as a result of the change in control. Change in control is defined as a change in the company ownership structure.

•

Supplemental Executive Retirement Plans (SERPs)

Generally vote FOR shareholder proposals requesting to put extraordinary benefits contained in SERP agreements to a shareholder vote unless the company’s executive pension plans do not contain excessive benefits beyond what is offered under employee-wide plans.

Generally vote FOR shareholder proposals requesting to limit the executive benefits provided under the company’s supplemental executive retirement plan (SERP) by limiting covered compensation to a senior executive’s annual salary and excluding of all incentive or bonus pay from the plan’s definition of covered compensation used to establish such benefits.

9. Corporate Responsibility

Consumer Issues and Public Safety

•

Animal Rights

Generally vote AGAINST proposals to phase out the use of animals in product testing unless:

	•		The company is conducting animal testing programs that are unnecessary or not required by regulation;

	•		The company is conducting animal testing when suitable alternatives are accepted and used at peer firms;

	•		The company has been the subject of recent, significant controversy related to its testing programs.

Generally vote FOR proposals seeking a report on the company’s animal welfare standards unless:

	•		The company has already published a set of animal welfare standards and monitors compliance;

	•		The company’s standards are comparable to or better than those of peer firms; and

	•		There are no serious controversies surrounding the company’s treatment of animals.

•

Drug Pricing

Vote CASE-BY-CASE on proposals requesting that the company evaluate their product pricing considering:

	•		The existing level of disclosure on pricing policies;

	•		Deviation from established industry pricing norms;

	•		The company’s existing initiatives to provide its products to needy consumers;

	•		Whether the proposal focuses on specific products or geographic regions.

•

Drug Reimportation

Generally vote FOR proposals requesting that companies report on the financial and legal impact of their policies regarding prescription drug reimportation unless such information is already publicly disclosed.

Generally vote AGAINST proposals requesting that companies adopt specific policies to encourage or constrain prescription drug reimportation.

•

Genetically Modified Foods

Vote AGAINST proposals asking companies to voluntarily label genetically engineered (GE) ingredients in their products or alternatively to provide interim labeling and eventually eliminate GE ingredients due to the costs and feasibility of labeling and/or phasing out the use of GE ingredients.

Vote CASE-BY-CASE on proposals asking for a report on the feasibility of labeling products containing GE ingredients taking into account:

	•		The relevance of the proposal in terms of the company’s business and the proportion of it affected by the resolution;

	•		The quality of the company’s disclosure on GE product labeling and related voluntary initiatives and how this disclosure compares with peer company disclosure;

	•		Company’s current disclosure on the feasibility of GE product labeling, including information on the related costs;

	•		Any voluntary labeling initiatives undertaken or considered by the company.

Vote CASE-BY-CASE on proposals asking for the preparation of a report on the financial, legal, and environmental impact of continued use of GE ingredients/seeds. Evaluate the following:

	•		The relevance of the proposal in terms of the company’s business and the proportion of it affected by the resolution;

	•		The quality of the company’s disclosure on risks related to GE product use and how this disclosure compares with peer company disclosure;

	•		The percentage of revenue derived from international operations, particularly in Europe, where GE products are more regulated and consumer backlash is more pronounced.

Vote AGAINST proposals seeking a report on the health and environmental effects of genetically modified organisms (GMOs). Health studies of this sort are better undertaken by regulators and the scientific community.

Vote AGAINST proposals to completely phase out GE ingredients from the company’s products or proposals asking for reports outlining the steps necessary to eliminate GE ingredients from the company’s products. Such resolutions presuppose that there are proven health risks to GE ingredients (an issue better left to federal regulators) that outweigh the economic benefits derived from biotechnology.

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Handguns

Generally vote AGAINST requests for reports on a company’s policies aimed at curtailing gun violence in the United States unless the report is confined to product safety information. Criminal misuse of firearms is beyond company control and instead falls within the purview of law enforcement agencies.

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HIV/AIDS

Vote CASE-BY-CASE on requests for reports outlining the impact of the health pandemic (HIV/AIDS, malaria and tuberculosis) on the company’s Sub-Saharan operations and how the company is responding to it, taking into account:

	•		The nature and size of the company’s operations in Sub-Saharan Africa and the number of local employees;

	•		The company’s existing healthcare policies, including benefits and healthcare access for local workers;

	•		Company donations to healthcare providers operating in the region.

Vote AGAINST proposals asking companies to establish, implement, and report on a standard of response to the HIV/AIDS, TB, and malaria health pandemic in Africa and other developing countries, unless the company has significant operations in these markets and has failed to adopt policies and/or procedures to address these issues comparable to those of industry peers.

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Predatory Lending

Vote CASE-BY CASE on requests for reports on the company’s procedures for preventing predatory lending, including the establishment of a board committee for oversight, taking into account:

	•		Whether the company has adequately disclosed mechanisms in place to prevent abusive lending practices;

	•		Whether the company has adequately disclosed the financial risks of its subprime business;

	•		Whether the company has been subject to violations of lending laws or serious lending controversies;

	•		Peer companies’ policies to prevent abusive lending practices.

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Tobacco

Most tobacco-related proposals should be evaluated on a CASE-BY-CASE basis, taking into account the following factors:

Second-hand smoke:

	•		Whether the company complies with all local ordinances and regulations;

	•		The degree that voluntary restrictions beyond those mandated by law might hurt the company’s competitiveness;

	•		The risk of any health-related liabilities.

Advertising to youth:

	•		Whether the company complies with federal, state, and local laws on the marketing of tobacco or if it has been fined for violations;

	•		Whether the company has gone as far as peers in restricting advertising;

	•		Whether the company entered into the Master Settlement Agreement, which restricts marketing of tobacco to youth;

	•		Whether restrictions on marketing to youth extend to foreign countries.

Cease production of tobacco-related products or avoid selling products to tobacco companies:

	•		The percentage of the company’s business affected;

	•		The economic loss of eliminating the business versus any potential tobacco-related liabilities.

Spin-off tobacco-related businesses:

	•		The percentage of the company’s business affected;

	•		The feasibility of a spin-off;

	•		Potential future liabilities related to the company’s tobacco business.

Stronger product warnings:

Vote AGAINST proposals seeking stronger product warnings. Such decisions are better left to public health authorities.

Investment in tobacco stocks:

Vote AGAINST proposals prohibiting investment in tobacco equities. Such decisions are better left to portfolio managers.

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Toxic Chemicals

Generally vote FOR resolutions requesting that a company discloses its policies related to toxic chemicals.

Vote CASE-BY-CASE on resolutions requesting that companies evaluate and disclose the potential financial and legal risks associated with utilizing certain chemicals, considering:

	•		Current regulations in the markets in which the company operates;

	•		Recent significant controversy, litigation, or fines stemming from toxic chemicals or ingredients at the company; and

	•		The current level of disclosure on this topic.

Generally vote AGAINST resolutions requiring that a company reformulate its products within a certain timeframe unless such actions are required by law in specific markets.

Environment and Energy

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Arctic National Wildlife Refuge

Generally vote AGAINST request for reports outlining potential environmental damage from drilling in the Arctic National Wildlife Refuge (ANWR) unless:

	•		New legislation is adopted allowing development and drilling in the ANWR region;

	•		The company intends to pursue operations in the ANWR; and

	•		The company does not currently disclose an environmental risk report for their operations in the ANWR.

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CERES Principles

Vote CASE-BY-CASE on proposals to adopt the CERES Principles, taking into account:

	•		The company’s current environmental disclosure beyond legal requirements, including environmental health and safety (EHS) audits and reports that may duplicate CERES;

	•		The company’s environmental performance record, including violations of federal and state regulations, level of toxic emissions, and accidental spills;

	•		Environmentally conscious practices of peer companies, including endorsement of CERES;

	•		Costs of membership and implementation.

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Climate Change

In general, vote FOR resolutions requesting that a company disclose information on the impact of climate change on the company’s operations unless:

	•		The company already provides current, publicly-available information on the perceived impact that climate change may have on the company as well as associated policies and procedures to address such risks and/or opportunities;

	•		The company’s level of disclosure is comparable to or better than information provided by industry peers; and

	•		There are no significant fines, penalties, or litigation associated with the company’s environmental performance.

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Concentrated Area Feeding Operations (CAFOs)

Vote FOR resolutions requesting that companies report to shareholders on the risks and liabilities associated with CAFOs unless:

	•		The company has publicly disclosed guidelines for its corporate and contract farming operations, including compliance monitoring; or

	•		The company does not directly source from CAFOs.

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Environmental-Economic Risk Report

Vote CASE-BY-CASE on proposals requesting an economic risk assessment of environmental performance considering:

	•		The feasibility of financially quantifying environmental risk factors;

	•		The company’s compliance with applicable legislation and/or regulations regarding environmental performance;

	•		The costs associated with implementing improved standards;

	•		The potential costs associated with remediation resulting from poor environmental performance; and

	•		The current level of disclosure on environmental policies and initiatives.

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Environmental Reports

Generally vote FOR requests for reports disclosing the company’s environmental policies unless it already has well-documented environmental management systems that are available to the public.

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Global Warming

Generally vote FOR proposals requesting a report on greenhouse gas emissions from company operations and/or products unless this information is already publicly disclosed or such factors are not integral to the company’s line of business.

Generally vote AGAINST proposals that call for reduction in greenhouse gas emissions by specified amounts or within a restrictive time frame unless the company lags industry standards and has been the subject of recent, significant fines or litigation resulting from greenhouse gas emissions.

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Kyoto Protocol Compliance

Generally vote FOR resolutions requesting that companies outline their preparations to comply with standards established by Kyoto Protocol signatory markets unless:

	•		The company does not maintain operations in Kyoto signatory markets;

	•		The company already evaluates and substantially discloses such information; or,

	•		Greenhouse gas emissions do not significantly impact the company’s core businesses.

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Land Use

Generally vote AGAINST resolutions that request the disclosure of detailed information on a company’s policies related to land use or development unless the company has been the subject of recent, significant fines or litigation stemming from its land use.

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Nuclear Safety

Generally vote AGAINST resolutions requesting that companies report on risks associated with their nuclear reactor designs and/or the production and interim storage of irradiated fuel rods unless:

	•		The company does not have publicly disclosed guidelines describing its policies and procedures for addressing risks associated with its operations;

	•		The company is non-compliant with Nuclear Regulatory Commission (NRC) requirements; or

	•		The company stands out amongst its peers or competitors as having significant problems with safety or environmental performance related to its nuclear operations.

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Operations in Protected Areas

Generally vote FOR requests for reports outlining potential environmental damage from operations in protected regions, including wildlife refuges unless:

	•		The company does not currently have operations or plans to develop operations in these protected regions; or,

	•		The company provides disclosure on its operations and environmental policies in these regions comparable to industry peers.

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Recycling

Vote CASE-BY-CASE on proposals to adopt a comprehensive recycling strategy, taking into account:

	•		The nature of the company’s business and the percentage affected;

	•		The extent that peer companies are recycling;

	•		The timetable prescribed by the proposal;

	•		The costs and methods of implementation;

	•		Whether the company has a poor environmental track record, such as violations of federal and state regulations.

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Renewable Energy

In general, vote FOR requests for reports on the feasibility of developing renewable energy sources unless the report is duplicative of existing disclosure or irrelevant to the company’s line of business.

Generally vote AGAINST proposals requesting that the company invest in renewable energy sources. Such decisions are best left to management’s evaluation of the feasibility and financial impact that such programs may have on the company.

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Sustainability Report

Generally vote FOR proposals requesting the company to report on policies and initiatives related to social, economic, and environmental sustainability, unless:

	•		The company already discloses similar information through existing reports or policies such as an Environment, Health, and Safety (EHS) report; a comprehensive Code of Corporate Conduct; and/or a Diversity Report; or

	•		The company has formally committed to the implementation of a reporting program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame.

General Corporate Issues

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Charitable/Political Contributions

Generally vote AGAINST proposals asking the company to affirm political nonpartisanship in the workplace so long as:

	•		The company is in compliance with laws governing corporate political activities; and

	•		The company has procedures in place to ensure that employee contributions to company-sponsored political action committees (PACs) are strictly voluntary and not coercive.

Vote AGAINST proposals to publish in newspapers and public media the company’s political contributions as such publications could present significant cost to the company without providing commensurate value to shareholders.

Vote CASE-BY-CASE on proposals to improve the disclosure of a company’s political contributions considering:

	•		Recent significant controversy or litigation related to the company’s political contributions or governmental affairs; and

	•		The public availability of a policy on political contributions.

Vote AGAINST proposals barring the company from making political contributions. Businesses are affected by legislation at the federal, state, and local level and barring contributions can put the company at a competitive disadvantage.

Vote AGAINST proposals restricting the company from making charitable contributions. Charitable contributions are generally useful for assisting worthwhile causes and for creating goodwill in the community. In the absence of bad faith, self-dealing, or gross negligence, management should determine which contributions are in the best interests of the company.

on the business of the company. Such a list would be burdensome to prepare without providing any meaningful information to shareholders.

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Disclosure of Lobbying Expenditures/Initiatives

Vote CASE-BY-CASE on proposals requesting information on a company’s lobbying initiatives, considering any significant controversy or litigation surrounding a company’s public policy activities, the current level of disclosure on lobbying strategy, and the impact that the policy issue may have on the company’s business operations.

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Link Executive Compensation to Social Performance

Vote CASE-BY-CASE on proposals to review ways of linking executive compensation to social factors, such as corporate downsizings, customer or employee satisfaction, community involvement, human rights, environmental performance, predatory lending, and executive/employee pay disparities. Such resolutions should be evaluated in the context of:

	•		The relevance of the issue to be linked to pay;

	•		The degree that social performance is already included in the company’s pay structure and disclosed;

	•		The degree that social performance is used by peer companies in setting pay;

	•		Violations or complaints filed against the company relating to the particular social performance measure;

	•		Artificial limits sought by the proposal, such as freezing or capping executive pay

	•		Independence of the compensation committee;

	•		Current company pay levels.

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Outsourcing/Offshoring

Vote CASE-BY-CASE on proposals calling for companies to report on the risks associated with outsourcing, considering:

	•		Risks associated with certain international markets;

	•		The utility of such a report to shareholders;

	•		The existence of a publicly available code of corporate conduct that applies to international operations.

Labor Standards and Human Rights

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China Principles

Vote AGAINST proposals to implement the China Principles unless:

	•		There are serious controversies surrounding the company’s China operations; and

	•		The company does not have a code of conduct with standards similar to those promulgated by the International Labor Organization (ILO).

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Country-specific Human Rights Reports

Vote CASE-BY-CASE on requests for reports detailing the company’s operations in a particular country and steps to protect human rights, based on:

	•		The nature and amount of company business in that country;

	•		The company’s workplace code of conduct;

	•		Proprietary and confidential information involved;

	•		Company compliance with U.S. regulations on investing in the country;

	•		Level of peer company involvement in the country.

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International Codes of Conduct/Vendor Standards

Vote CASE-BY-CASE on proposals to implement certain human rights standards at company facilities or those of its suppliers and to commit to outside, independent monitoring. In evaluating these proposals, the following should be considered:

	•		The company’s current workplace code of conduct or adherence to other global standards and the degree they meet the standards promulgated by the proponent;

	•		Agreements with foreign suppliers to meet certain workplace standards;

	•		Whether company and vendor facilities are monitored and how;

	•		Company participation in fair labor organizations;

	•		Type of business;

	•		Proportion of business conducted overseas;

	•		Countries of operation with known human rights abuses;

	•		Whether the company has been recently involved in significant labor and human rights controversies or violations;

	•		Peer company standards and practices;

	•		Union presence in company’s international factories.

Generally vote FOR reports outlining vendor standards compliance unless any of the following apply:

	•		The company does not operate in countries with significant human rights violations;

	•		The company has no recent human rights controversies or violations; or

	•		The company already publicly discloses information on its vendor standards compliance.

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MacBride Principles

Vote CASE-BY-CASE on proposals to endorse or increase activity on the MacBride Principles, taking into account:

	•		Company compliance with or violations of the Fair Employment Act of 1989;

	•		Company antidiscrimination policies that already exceed the legal requirements;

	•		The cost and feasibility of adopting all nine principles;

	•		The cost of duplicating efforts to follow two sets of standards (Fair Employment and the MacBride Principles);

	•		The potential for charges of reverse discrimination;

	•		The potential that any company sales or contracts in the rest of the United Kingdom could be negatively impacted;

	•		The level of the company’s investment in Northern Ireland;

	•		The number of company employees in Northern Ireland;

	•		The degree that industry peers have adopted the MacBride Principles;

	•		Applicable state and municipal laws that limit contracts with companies that have not adopted the MacBride Principles.

Military Business

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Foreign Military Sales/Offsets

Vote AGAINST reports on foreign military sales or offsets. Such disclosures may involve sensitive and confidential information. Moreover, companies must comply with government controls and reporting on foreign military sales.

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Landmines and Cluster Bombs

Vote CASE-BY-CASE on proposals asking a company to renounce future involvement in antipersonnel landmine production, taking into account:

	•		Whether the company has in the past manufactured landmine components;

	•		Whether the company’s peers have renounced future production.

Vote CASE-BY-CASE on proposals asking a company to renounce future involvement in cluster bomb production, taking into account:

	•		What weapons classifications the proponent views as cluster bombs;

	•		Whether the company currently or in the past has manufactured cluster bombs or their components;

	•		The percentage of revenue derived from cluster bomb manufacture;

	•		Whether the company’s peers have renounced future production.

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Nuclear Weapons

Vote AGAINST proposals asking a company to cease production of nuclear weapons components and delivery systems, including disengaging from current and proposed contracts. Components and delivery

systems serve multiple military and non-military uses, and withdrawal from these contracts could have a negative impact on the company’s business.

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Operations in Nations Sponsoring Terrorism (e.g., Iran)

Vote CASE-BY-CASE on requests for a board committee review and report outlining the company’s financial and reputational risks from its operations in a terrorism-sponsoring state, taking into account current disclosure on:

	•		The nature and purpose of the operations and the amount of business involved (direct and indirect revenues and expenses) that could be affected by political disruption;

	•		Compliance with U.S. sanctions and laws.

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Spaced-Based Weaponization

Generally vote FOR reports on a company’s involvement in spaced-based weaponization unless:

	•		The information is already publicly available; or

	•		The disclosures sought could compromise proprietary information.

Workplace Diversity

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Board Diversity

Generally vote FOR reports on the company’s efforts to diversify the board, unless:

	•		The board composition is reasonably inclusive in relation to companies of similar size and business; or

	•		The board already reports on its nominating procedures and diversity initiatives.

Generally vote AGAINST proposals that would call for the adoption of specific committee charter language regarding diversity initiatives unless the company fails to publicly disclose existing equal opportunity or non-discrimination policies.

Vote CASE-BY-CASE on proposals asking the company to increase the representation of women and minorities on the board, taking into account:

	•		The degree of board diversity;

	•		Comparison with peer companies;

	•		Established process for improving board diversity;

	•		Existence of independent nominating committee;

	•		Use of outside search firm;

	•		History of EEO violations.

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Equal Employment Opportunity (EEO)

Generally vote FOR reports outlining the company’s affirmative action initiatives unless all of the following apply:

	•		The company has well-documented equal opportunity programs;

	•		The company already publicly reports on its company-wide affirmative initiatives and provides data on its workforce diversity; and

	•		The company has no recent EEO-related violations or litigation.

Vote AGAINST proposals seeking information on the diversity efforts of suppliers and service providers, which can pose a significant cost and administration burden on the company.

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Glass Ceiling

Generally vote FOR reports outlining the company’s progress towards the Glass Ceiling Commission’s business recommendations, unless:

	•		The composition of senior management and the board is fairly inclusive;

	•		The company has well-documented programs addressing diversity initiatives and leadership development;

	•		The company already issues public reports on its company-wide affirmative initiatives and provides data on its workforce diversity; and

	•		The company has had no recent, significant EEO-related violations or litigation.

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Sexual Orientation

Vote FOR proposals seeking to amend a company’s EEO statement in order to prohibit discrimination based on sexual orientation, unless the change would result in excessive costs for the company.

Vote AGAINST proposals to extend company benefits to or eliminate benefits from domestic partners. Benefits decisions should be left to the discretion of the company.

10. Mutual Fund Proxies

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Election of Directors

Vote CASE-BY-CASE on the election of directors and trustees, following the same guidelines for uncontested directors for public company shareholder meetings. However, mutual fund boards do not usually have compensation committees, so do not withhold for the lack of this committee.

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Converting Closed-end Fund to Open-end Fund

Vote CASE-BY-CASE on conversion proposals, considering the following factors:

	•		Past performance as a closed-end fund;

	•		Market in which the fund invests;

	•		Measures taken by the board to address the discount; and

	•		Past shareholder activism, board activity, and votes on related proposals.

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Proxy Contests

Vote CASE-BY-CASE on proxy contests, considering the following factors:

	•		Past performance relative to its peers;

	•		Market in which fund invests;

	•		Measures taken by the board to address the issues;

	•		Past shareholder activism, board activity, and votes on related proposals;

	•		Strategy of the incumbents versus the dissidents;

	•		Independence of directors;

	•		Experience and skills of director candidates;

	•		Governance profile of the company;

	•		Evidence of management entrenchment.

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Investment Advisory Agreements

Vote CASE-BY-CASE on investment advisory agreements, considering the following factors:

	•		Proposed and current fee schedules;

	•		Fund category/investment objective;

	•		Performance benchmarks;

	•		Share price performance as compared with peers;

	•		Resulting fees relative to peers;

	•		Assignments (where the advisor undergoes a change of control).

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Approving New Classes or Series of Shares

Vote FOR the establishment of new classes or series of shares.

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Preferred Stock Proposals

Vote CASE-BY-CASE on the authorization for or increase in preferred shares, considering the following factors:

	•		Stated specific financing purpose;

	•		Possible dilution for common shares;

	•		Whether the shares can be used for antitakeover purposes.

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1940 Act Policies

Vote CASE-BY-CASE on policies under the Investment Advisor Act of 1940, considering the following factors:

	•		Potential competitiveness;

	•		Regulatory developments;

	•		Current and potential returns; and

	•		Current and potential risk.

Generally vote FOR these amendments as long as the proposed changes do not fundamentally alter the investment focus of the fund and do comply with the current SEC interpretation.

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Changing a Fundamental Restriction to a Nonfundamental Restriction

Vote CASE-BY-CASE on proposals to change a fundamental restriction to a non-fundamental restriction, considering the following factors:

	•		The fund’s target investments;

	•		The reasons given by the fund for the change; and

	•		The projected impact of the change on the portfolio.

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Change Fundamental Investment Objective to Nonfundamental

Vote AGAINST proposals to change a fund’s fundamental investment objective to non-fundamental.

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Name Change Proposals

Vote CASE-BY-CASE on name change proposals, considering the following factors:

	•		Political/economic changes in the target market;

	•		Consolidation in the target market; and

	•		Current asset composition.

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Change in Fund’s Subclassification

Vote CASE-BY-CASE on changes in a fund’s sub-classification, considering the following factors:

	•		Potential competitiveness;

	•		Current and potential returns;

	•		Risk of concentration;

	•		Consolidation in target industry.

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Disposition of Assets/Termination/Liquidation

Vote CASE-BY-CASE on proposals to dispose of assets, to terminate or liquidate, considering the following factors:

	•		Strategies employed to salvage the company;

	•		The fund’s past performance;

•

The terms of the liquidation.

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Changes to the Charter Document

Vote CASE-BY-CASE on changes to the charter document, considering the following factors:

	•		The degree of change implied by the proposal;

	•		The efficiencies that could result;

	•		The state of incorporation;

	•		Regulatory standards and implications.

Vote AGAINST any of the following changes:

	•		Removal of shareholder approval requirement to reorganize or terminate the trust or any of its series;

	•		Removal of shareholder approval requirement for amendments to the new declaration of trust;

	•		Removal of shareholder approval requirement to amend the fund’s management contract, allowing the contract to be modified by the investment manager and the trust management, as permitted by the 1940 Act;

	•		Allow the trustees to impose other fees in addition to sales charges on investment in a fund, such as deferred sales charges and redemption fees that may be imposed upon redemption of a fund’s shares;

	•		Removal of shareholder approval requirement to engage in and terminate subadvisory arrangements;

	•		Removal of shareholder approval requirement to change the domicile of the fund.

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Changing the Domicile of a Fund

Vote CASE-BY-CASE on re-incorporations, considering the following factors:

	•		Regulations of both states;

	•		Required fundamental policies of both states;

	•		The increased flexibility available.

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Authorizing the Board to Hire and Terminate Subadvisors Without Shareholder Approval

Vote AGAINST proposals authorizing the board to hire/terminate subadvisors without shareholder approval.

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Distribution Agreements

Vote CASE-BY-CASE on distribution agreement proposals, considering the following factors:

	•		Fees charged to comparably sized funds with similar objectives;

	•		The proposed distributor’s reputation and past performance;

	•		The competitiveness of the fund in the industry;

votes submitted by RCM on behalf of its clients are not biased by other clients of RCM. Proxy voting proposals are voted with regard to enhancing shareholder wealth and voting power.

A Proxy Committee, including investment, compliance and operations personnel, is responsible for establishing our proxy voting policies and procedures. These guidelines summarize our positions on various issues and give general indication as to how we will vote shares on each issue. However, this listing is not exhaustive and does not include all potential voting issues and for that reason, there may be instances when we may not vote proxies in strict adherence to these Guidelines. To the extent that these guideline policies and procedures do not cover potential voting issues or a case arises of a material conflict between our interest and those of a client with respect to proxy voting, our Proxy Committee will convene to discuss these instances. In evaluating issues, the Proxy Committee may consider information from many sources, including our portfolio management team, our analyst responsible for monitoring the stock of the company at issue, management of a company presenting a proposal, shareholder groups, and independent proxy research services. The Proxy Committee will meet annually to review these guidelines and determine whether any revisions are appropriate.

Voting Procedure

The voting of all proxies is conducted by the Proxy Specialist in consultation with a Proxy Committee consisting representatives from the Research Department, Portfolio Management Team (PMT), the Legal and Compliance Department, and the Proxy Specialist. The Proxy Specialist performs the initial review of the proxy statement, third-party proxy research provided by ISS, and other relevant material, and makes a vote decision in accordance with RCM Proxy Voting Guidelines. In situations where the Proxy Voting Guidelines do not give clear guidance on an issue, the Proxy Specialist will, at his or her discretion, consult the Analyst or Portfolio Manager and/or the Proxy Committee. In the event that an Analyst or Portfolio Manager wishes to override the Guidelines, the proposal will be presented to the Proxy Committee for a final decision.

RCM retains a third-party proxy voting service, Institutional Shareholder Services, Inc. (ISS), to assist us in processing proxy votes in accordance with RCM’s vote decisions. ISS is responsible for notifying RCM of all upcoming meetings, providing a proxy analysis and vote recommendation for each proposal, verifying that all proxies are received, and contacting custodian banks to request missing proxies. ISS sends the proxy vote instructions provided by RCM to the appropriate tabulator. ISS provides holdings reconciliation reports on a monthly basis, and vote summary reports for clients on a quarterly or annual basis. RCM keeps proxy materials used in the vote process on site for at least one year.

Resolving Conflicts of Interest

RCM may have conflicts that can affect how it votes its clients’ proxies. For example, RCM may manage a pension plan whose management is sponsoring a proxy proposal. RCM may also be faced with clients having conflicting views on the appropriate manner of exercising shareholder voting rights in general or in specific situations. Accordingly, RCM may reach different voting decisions for different clients. Regardless, votes shall only be cast in the best interest of the client affected by the shareholder right. For this reason, RCM shall not vote shares held in one client’s account in a manner designed to benefit or accommodate any other client.

In order to ensure that all material conflicts of interest are addressed appropriately while carrying out its obligation to vote proxies, the Proxy Committee shall be responsible for addressing how RCM resolves such material conflicts of interest with its clients.

Cost-Benefit Analysis Involving Voting Proxies

RCM shall review various criteria to determine whether the costs associated with voting the proxy exceeds the expected benefit to its clients and may conduct a cost-benefit analysis in determining whether it is in the best economic interest to vote client proxies. Given the outcome of the cost-benefit analysis, RCM may refrain from voting a proxy on behalf of its clients’ accounts.

In addition, RCM may refrain from voting under certain circumstances. These circumstances may include, but are not limited to: 1) proxy statements and ballots being written in a foreign language, 2) untimely notice of a shareholder meeting, 3) requirements to vote proxies in person, 4) restrictions on foreigner’s ability to exercise votes, 5) requirements to provide local agents with power of attorney to facilitate the voting instructions. Such proxies are voted on a best-efforts basis.

Proxy voting in certain countries requires “share blocking.” To vote proxies in such countries, shareholders must deposit their shares shortly before the date of the meeting with a designated depositary and the shares are then restricted from being sold until the meeting has taken place and the shares are returned to the shareholders’ custodian banks. Absent compelling reasons, RCM believes the benefit to its clients of exercising voting rights does not outweigh the effects of not being able to sell the shares. Therefore, if share blocking is required RCM generally abstains from voting.

RCM will not be able to vote securities on loan under securities lending arrangements into which RCM’s clients have entered. However, under rare circumstances, for voting issues that may have a significant impact on the investment, and if the client holds a sufficient number of shares to have a material impact on the vote, we may request that clients recall securities that are on loan if we determine that the benefit of voting outweighs the costs and lost revenue to the client and the administrative burden of retrieving the securities.

Proxy Voting Guidelines

Ordinary Business

Ordinary Business Matters: Case-by-Case

RCM votes FOR management proposals covering routine business matters such as changing the name of the company, routine bylaw amendments, and changing the date, time, or location of the annual meeting.

Routine items that are bundled with non-routine items will be evaluated on a case-by-case basis. Proposals that are not clearly defined other than to transact “other business,” will be voted AGAINST, to prevent the passage of significant measures without our express oversight.

Auditors

Ratification of Auditors: Case-by-Case

RCM generally votes FOR proposals to ratify auditors, unless there is reason to believe that there is a conflict of interest, or if the auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position.

RCM will review, on a case-by-case basis, instances in which the audit firm has substantial non-audit relationships with the company, to determine whether we believe independence has been compromised.

Shareholder Proposals Regarding Rotation of Auditors: Generally FOR

RCM generally will support shareholder proposals asking for audit firm rotation, unless the rotation period is less than five years, which would be unduly burdensome to the company.

Shareholder Proposals Regarding Auditor Independence: Case-by-Case

RCM will evaluate on a case-by-case basis, shareholder proposals asking companies to prohibit their auditors from engaging in non-audit services or to cap the level of non-audit services.

Board of Directors

Election of Directors: Case-by-Case

Votes on director nominees are made on a case-by-case basis. RCM favors boards that consist of a substantial majority of independent directors who demonstrate a commitment to creating shareholder value. RCM also believes that key board committees (audit, compensation, and nominating) should include only independent directors to assure that shareholder interests will be adequately addressed. When available information demonstrates a conflict of interest or a poor performance record for

specific candidates, RCM may withhold votes from director nominees.

Majority Vote Requirement for the Election of Directors: Case-by-Case

RCM evaluates proposals to require a majority vote for the election of directors, on a case-by-case basis. RCM generally supports binding and non-binding (advisory) proposals to initiate a change in the vote threshold requirement for board nominees, as we believe this may bring greater director accountability to shareholders. Exceptions may be made for companies with policies that provide for a meaningful alternative to a full majority-voting standard.

Classified Boards: AGAINST

Classified (or staggered) boards provide for the directors to be divided into three groups, serving a staggered three-year term. Each year one of the groups of directors is nominated for re-election and serves a three-year term. RCM generally opposes classified board structures, as we prefer annual election of directors to discourage entrenchment. RCM will vote FOR shareholder proposals to de-classify the board of directors.

Changing Size of Board: Case-by-Case

RCM votes FOR proposals to change the size of the board of directors, if the proposed number falls between 6 to 15 members. We generally vote AGAINST proposals to increase the number of directors to more than 15, because very large boards may experience difficulty achieving consensus and acting quickly on important items.

Majority of Independent Directors on Board: Case-by-Case

RCM considers how board structure impacts the value of the company and evaluates shareholder proposals for a majority of independent directors on a case-by-case basis. RCM generally votes FOR proposals requiring the board to consist of, at least, a substantial (2/3) majority of independent directors. Exceptions are made for companies with a controlling shareholder and for boards with very long term track records of adding shareholder value based on 3, 5 and 10-year stock performance.

Minimum Share Ownership by the Board: AGAINST

Although stockholders may benefit from directors owning stock in a company and having a stake in the profitability and well-being of a company, RCM does not support resolutions that would require directors to make a substantial investment which would effectively exclude them from accepting directorships for purely financial reasons.

Limit Tenure of Directors: AGAINST

RCM does not support shareholder proposals for term limits, as limiting tenure may force valuable, experienced directors to leave the board solely because of their length of service. We prefer to retain the ability to evaluate director performance, and vote on all director nominees once a year.

Director Indemnification and Liability Protection: Case-by-Case

RCM votes AGAINST proposals that would limit or eliminate all liability for monetary damages, for

directors and officers who violate the duty of care. RCM will also vote AGAINST proposals that would expand indemnification to cover acts, such as negligence, that are more serious violations of fiduciary obligations than mere carelessness. If, however, a director was found to have acted in good faith and in a manner that he reasonably believed was in the best interest of the company, and if only the director’s legal expenses would be covered, RCM may vote FOR expanded coverage.

Separate Chairman/Chief Executive Officer: Case-by-Case

RCM votes shareholder proposals to separate Chairman and CEO positions on a case-by-case basis, and considers the impact on management credibility and thus the value of the company. RCM generally votes FOR shareholder proposals requiring the position of Chairman to be filled by an independent director, because a combined title can make it difficult for the board to remove a CEO that has underperformed, and harder to challenge a CEO’s decisions. We are, however, willing to accept a combined title for companies whose outside directors hold regularly-scheduled non-management meetings with a powerful and independent Lead Director.

Diversity of the Board of Directors: Case-by-Case

RCM reviews shareholder proposals that request a company to increase the representation of women and minorities on the board, on a case-by-case basis. RCM generally votes FOR requests for reports on the company’s efforts to diversify the board, unless the board composition is reasonably inclusive of women and minorities in relation to companies of similar size and business, and if the board already reports on its nominating procedures and diversity initiatives.

Executive and Director Compensation

Stock Incentive Plans: Case-by-Case

RCM reviews stock incentive plan proposals on a case-by-case basis, to determine whether the plan is in the best interest of shareholders. We generally support stock incentive plans that are designed to attract, retain or encourage executives and employees, while aligning their financial interests with those of investors. We also prefer plans that limit the transfer of shareholder wealth to insiders, and favor stock compensation in the form of performance-based restricted stock over fixed price option plans.

RCM utilizes research from a third-party proxy voting service (ISS) to assist us in analyzing all details of a proposed stock incentive plan. Unless there is evidence that a plan would have a positive economic impact on shareholder value, we generally vote against plans that result in excessive dilution, and vote against plans that contain negative provisions, such as repricing or replacing underwater options without shareholder approval.

Shareholder Proposals Regarding Options Expensing: FOR

RCM generally votes FOR shareholder proposals requesting companies to disclose the cost of stock options as an expense on their income statement, to clarify the company’s earnings and profitability to shareholders.

Cash Bonus Plans (OBRA related): Case-by-Case

RCM considers Omnibus Budget and Reconciliation Act (OBRA) Cash Bonus Plan proposals on a

case-by-case basis. OBRA regulations require companies to secure shareholder approval for their performance-based cash or cash and stock bonus plans to preserve the tax deduction for bonus compensation exceeding OBRA’s $1 million cap.

The primary objective of such proposals is to avoid tax deduction limitations imposed by Section 162(m) of the Internal Revenue Code, and RCM will generally vote FOR plans that have appropriate performance targets and measures in place.

In cases where plans do not meet acceptable standards or we believe executives are over compensated in the context of shareholder value creation, RCM may vote AGAINST the cash bonus plan, and may withhold votes from compensation committee members.

Eliminate Non-Employee Director Retirement Plans: FOR

RCM generally supports proposals to eliminate retirement benefits for non-employee directors, as such plans can create conflicts of interest by their high value. Additionally, such benefits are often redundant, since many directors receive pension benefits from their primary employer.

Employee Stock Purchase Plans: Case-by-Case

Employee Stock Purchase Plans give employees the opportunity to purchase stock of their company, primarily through payroll deductions. Such plans provide performance incentives and lead employees to identify with shareholder interests.

Qualified employee stock purchase plans qualify for favorable tax treatment under Section 423 of the Internal Revenue Code. RCM will vote FOR Qualified Employee Stock Purchase Plans that include: (1) a purchase price of at least 85 percent of fair market value, and (2) an offering period of 27 months or less, and (3) voting power dilution (percentage of outstanding shares) of no more than 10 percent.

For Nonqualified Employee Stock Purchase Plans, companies provide a match to employees’ contributions, instead of a discount in stock price. Provided the cost of the plan is not excessive, RCM generally votes FOR non-qualified plans that include: (1) broad-based participation (2) limits on employee contribution (3) company matching contribution up to 25 percent of the employee’s contribution (4) no discount on stock price on the date of purchase.

Shareholder Proposals Regarding Executive Pay: Case-by-Case

RCM generally votes FOR shareholder proposals that request additional disclosure of executive and director pay information, provided the information requested is relevant to shareholders’ needs, would not put the company at a competitive disadvantage relative to its industry, and is not unduly burdensome to the company.

RCM votes FOR proposals requesting that at least a significant portion of the company’s awards are performance-based. Preferably, performance measures should include long term growth metrics.

RCM votes FOR proposals to require option repricings to be put to a shareholder vote, and FOR proposals to require shareholder votes on compensation plans.

RCM votes AGAINST shareholder proposals that seek to set absolute levels on compensation or otherwise dictate the amount of compensation, and AGAINST shareholder proposals requiring director fees to be paid in stock only.

All other shareholder proposals regarding executive and director pay are voted on a case-by-case basis,

taking into account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook.

Executive Severance Agreements (Golden Parachutes): Case-by-Case

RCM votes FOR shareholder proposals to require golden and tin parachutes (executive severance agreements) to be submitted for shareholder ratification, unless the proposal requires shareholder approval prior to entering into employment contracts.

Proposals to ratify or cancel golden or tin parachutes are evaluated on a case-by-case basis. RCM will vote AGAINST parachute proposals, when the amount exceeds three times base salary plus guaranteed benefits.

Capital Structure

Capital Stock Authorizations: Case-by-Case

RCM votes proposals for an increase in authorized shares of common or preferred stock on a case-by-case basis, after analyzing the company’s industry and performance in terms of shareholder returns. We generally vote AGAINST stock increases that are greater than 100 percent, unless the company has provided a specific reason for the increase. We will also vote AGAINST proposals for increases in which the stated purpose is to reserve additional shares to implement a poison pill. (Note: see page 10, for more on preferred stock).

Stock Splits and Dividends: Case-by-Case

RCM generally votes FOR management proposals to increase common share authorization for a stock split or share dividend, provided that the increase in shares is not excessive. We also generally vote in favor shareholder proposals to initiate a dividend, particularly in the case of poor performing large cap companies with stock option plans result in excessive dilution.

Mergers and Corporate Restructuring

Mergers and Restructurings: Case-by-Case

A merger, restructuring, or spin-off in some way affects a change in control of the company’s assets. In evaluating the merit such transactions, RCM will consider the terms of each proposal and will analyze the potential long-term value of the investment. RCM will support management proposals for a merger or restructuring if the transaction appears to offer fair value, but may oppose them if they include significant changes to corporate governance and takeover defenses that are not in the best interest of shareholders.

Prevent a Company from Paying Greenmail: FOR

Greenmail is the payment a corporate raider receives for his/her shares. This payment is usually at a

premium to the market price, so while greenmail can ensure the continued independence of the company, it discriminates against other shareholders. RCM will generally vote FOR anti-greenmail provisions.

Fair Price Provision: AGAINST

Standard fair price provisions require that, absent board or shareholder approval of the acquisition, the bidder must pay the remaining shareholders the same price for their shares as was paid to buy the control shares (usually between five and twenty percent of the outstanding shares) that triggered the provision. An acquirer may avoid such a pricing requirement by obtaining the support of holders of at least a majority of disinterested shares. Such provisions may be viewed as marginally favorable to the remaining disinterested shareholders, since achieving a simple majority vote in favor of an attractive offer may not be difficult.

RCM will vote AGAINST fair price provisions, if the shareholder vote requirement, imbedded in the provision, is greater than a majority of disinterested shares.

RCM will vote FOR shareholder proposals to lower the shareholder vote requirements imbedded in existing fair price provisions.

State Antitakeover Statutes: Case-by-Case

RCM evaluates the specific statutes at issue, including their effect on shareholder rights and votes proposals to opt out-of-state takeover statutes on a case-by-case basis.

Reincorporation: Case-by-Case

RCM will evaluate reincorporation proposals case-by-case and will consider a variety of factors including the impact reincorporation might have on the longer-term valuation of the stock, the quality of the company’s financial disclosure, the impact on current and potential business with the U.S. government, M&A opportunities and the risk of being forced to reincorporate in the future. RCM generally supports reincorporation proposals for valid business reasons such as reincorporating in the same state as its corporate headquarters.

Anti-takeover Defenses and Voting Related Issues

Poison Pills: Case-by-Case

RCM votes AGAINST poison pills or (or shareholder rights plans) proposed by a company’s management. Poison pills are triggered by an unwanted takeover attempt and cause a variety of events to occur which may make the company financially less attractive to the suitor. Typically, directors have enacted these plans without shareholder approval.

RCM will always vote FOR shareholder proposals requesting boards to submit their pills to a shareholder vote or redeem them, as poison pills may lead to management entrenchment and can discourage legitimate tender offers.

Dual Class Capitalization with Unequal Voting Rights: Case-by-Case

RCM will vote AGAINST dual class exchange offers and dual class capitalizations with unequal voting rights as they can contribute to the entrenchment of management and allow for voting power to be concentrated in the hands of management and other insiders. RCM will vote FOR proposals to create a new class of nonvoting or subvoting common stock if intended for purposes with minimal or no dilution to current shareholders or not designed to preserve voting power of insiders or significant shareholders.

Blank Check Preferred Stock: Case-by-Case

Blank check proposals authorize a class of preferred stock for which voting rights are not established in advance, but are left to the discretion of the Board of Directors when issued. Such proposals may give management needed flexibility to accomplish acquisitions, mergers or financings. On the other hand, such proposals also give the board the ability to place a block of stock with a shareholder sympathetic to management, thereby entrenching management or making takeovers more difficult.

RCM generally votes AGAINST proposals authorizing the creation of new classes of preferred stock, unless the company expressly states that the stock that will not be used as a takeover defense. We also vote AGAINST proposals to increase the number of authorized preferred stock shares, when no shares have been issued or reserved for a specific purpose.

RCM will vote FOR proposals to authorize preferred stock, in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable.

Supermajority Voting Provisions: AGAINST

Supermajority vote requirements in a company’s charter or bylaws require a level of voting approval in excess of a simple majority. Generally supermajority provisions require at least 2/3 affirmative vote for passage of issues.

RCM votes AGAINST supermajority voting provisions, as this requirement can make it difficult for shareholders to effect a change regarding a company and its corporate governance provisions. Requiring more than a simple majority voting shares, for mergers or changes to the charter or bylaws, may permit managements to entrench themselves by blocking amendments that are in the best interests

of shareholders.

Cumulative Voting: Case-by-Case

Cumulative voting allows shareholders to “stack” their votes behind one or a few directors running for the board, thereby enabling minority shareholders to secure board representation. RCM evaluates management proposals regarding cumulative voting, on a case-by-case basis. For companies that do not have a record of strong corporate governance policies, we will generally vote FOR shareholder proposals to restore or provide for cumulative voting.

Shareholder Action by Written Consent: Case-by-Case

Written consent allows shareholders to initiate and carry out a shareholder action without waiting until the annual meeting or by calling a special meeting. It permits action to be taken by the written consent of the same percentage of outstanding shares that would be required to effect the proposed action at a shareholder meeting.

RCM will vote FOR shareholder proposals to allow shareholder action by written consent, and we will oppose management proposals that restrict or prohibit shareholder ability to take action by written consent.

Shareholder’s Right to Call Special Meeting: FOR

RCM votes FOR proposals to restore or expand shareholder rights to call special meetings. We vote AGAINST management proposals requiring higher vote requirements in order to call special meetings, and AGAINST proposals that prohibit the right to call meetings.

Confidential Voting: FOR

RCM votes for shareholder proposals requesting companies to adopt confidential voting because confidential voting may eliminate undue pressure from company management. Furthermore, RCM maintains records which allow our clients to have access to our voting decisions.

Social and Environmental Issues

Shareholder Proposals Regarding Social and Environmental Issues: Case-by-Case

In evaluating social and environmental proposals, RCM first determines whether the issue should be addressed on a company-specific basis. Many social and environmental proposals are beyond the scope of any one company and are more properly the province of government and broader regulatory action. If this is the case, RCM recommends voting against the proposal. Most proposals raising issues of public concern require shareholders to apply subjective criteria in determining their voting decisions. While broad social and environmental issues are of concern to everyone, institutional shareholders acting as representatives of their beneficiaries must consider only the economic impact of the proposal on the target company, which in many cases cannot be clearly demonstrated.

RCM considers the following factors in evaluating proposals that address social and environmental issues:

	•		Cost to implement proposed requirement

	•		Whether any actual abuses exist

	•		Whether the company has taken any action to address the problem

	•		The extent, if any, to which the proposal would interfere with the day-to-day management of the company.

RCM generally supports proposals that encourage corporate social responsibility. However, RCM does not support proposals that require a company to cease particular operations, monitor the affairs of other companies with whom it does business, impose quotas, or otherwise interfere with the day-to-day management of a company. In the absence of compelling evidence that a proposal will have a positive economic impact, RCM believes that these matters are best left to the judgment of management.

Sign or Endorse the CERES Principles: Case-by-Case

The CERES Principles represent a voluntary commitment of corporations to continued environmental improvement beyond what is required by government regulation. CERES was formed by the Coalition of Environmentally Responsible Economies in the wake of the March 1989 Exxon Valdez oil spill, to address environmental issues such as protection of the biosphere, sustainable use of natural resources, reduction and disposal of wastes, energy conservation, and employee and community risk reduction. Endorsers of the CERES Principles are required to pay annual fees based on annual revenue of the company.

RCM generally supports shareholder requests for reports on activities related to the goals of the CERES Principles or other in-house environmental programs. Proposals to adopt the CERES Principles are voted on a case-by-case basis, taking into account the company’s current environmental disclosure, its environmental track record, and the practices of peer companies.

RiverSource Investments, LLC
Information Regarding Proxy Voting Policies and Procedures

The RiverSource Investments proxy voting policies and procedures are designed to satisfy our fiduciary obligation with respect to proxy voting in situations where we have been vested with proxy voting authority. In voting proxies on behalf of our advisory clients, RiverSource Investments applies the following general principles in an effort to satisfy this fiduciary obligation:

Maximizing shareholder value;
considering all relevant factors; and
voting without undue influence from individuals or groups.

RiverSource Investments has adopted proxy voting guidelines covering certain types of proposals. These guidelines indicate whether we vote for or against a particular proposal, or whether the matter should be considered on a case-by-case basis. When vested with proxy voting authority and in the absence of specific client guidelines, we will generally vote in the same manner as proxies being voted by our affiliates on behalf of their own clients who have adopted the same voting guidelines. However, recognizing that we and our affiliates each have an independent fiduciary obligation with respect to the voting of proxies, the proxy voting policies fully preserve our ability, and the ability of each affiliate, to vote in a manner contrary to other affiliates.

Examples of the approach taken in RiverSource Investments’ proxy voting guidelines with respect to certain types of proposals include:

Corporate governance matters - RiverSource Investments supports proxy proposals that we believe are tied to the interests of shareholders and votes against proxy proposals that appear to entrench management. For example, we support the annual election of all directors and proposals to eliminate classes of directors. In a routine election of directors, we will generally vote with management’s recommendations because we believe that management is in the best position to know what qualifications are required of directors to form an effective board. However, we will generally vote against a nominee who has been assigned to the audit, compensation, or nominating committee if the nominee is not independent of management based on established criteria.

Stock option plans and other management compensation issues - RiverSource Investments expects company management to give thoughtful consideration to providing competitive long-term employee incentives directly tied to the interest of shareholders. We believe that equity compensation awards can be a useful tool, when not abused, for retaining and motivating employees to engage in conduct that will improve the performance of the company. In this regard, we generally favor minimum holding periods of stock obtained by senior management pursuant to an options plan and will vote against compensation plans for executives that we deem excessive.

In exercising our proxy voting responsibilities, we may consider the recommendations of a third party research provider and may rely upon the recommendations of this research provider in situations where it is possible to establish voting criteria that are consistent with the intent of our voting guidelines. A complete copy of our discretionary proxy voting guidelines is available upon request.

Where RiverSource Investments is vested with proxy voting authority, it is our policy to vote all proxies on behalf of the client. Because of the volume and complexity of the proxy voting process, including inherent inefficiencies in the process that are outside our control, not all proxies may be voted. In addition voting proxies for companies not domiciled in the United States may involve greater effort and cost due to the variety of regulatory schemes and corporate practices. Certain non-U.S. countries require securities to be blocked prior to a vote, which means that the securities to be voted may not be traded within a specified number of days before the shareholder meeting. RiverSource Investments typically will not vote securities

in non-U.S. countries that require securities to be blocked as the need for liquidity of the securities in the funds will typically outweigh the benefit of voting. There may be additional costs associated with voting in non-U.S. countries such that we may determine that the cost of voting outweighs the potential benefit.

The administration of our proxy voting process is handled by a central point of administration at RiverSource Investments (the “Proxy Administrator”) servicing us and our affiliates that have adopted the same proxy voting guidelines. Among other duties, the Proxy Administrator coordinates with our third party proxy voting and research providers. The Proxy Administrator also identifies situations where the guidelines do not clearly require that we vote in a particular manner and assists in researching and making voting recommendations. Our investment personnel may also make recommendations about voting on a proposal, which may include a recommendation to vote in a manner contrary to our guidelines. In addition, while we and each of our affiliates ultimately decides how each proxy will be voted, a Proxy Voting Committee reviews policies and procedures and helps ensure quality and objectivity in connection with our proxy voting procedures. The Committee provides a general oversight function designed to ensure that each affiliate’s interests are represented with respect to proxy voting procedures.

In voting proxies on behalf of clients, RiverSource Investments seeks to carry out our responsibilities without undue influence from individuals or groups who may have an economic interest in the outcome of a proxy vote. To identify and address potential conflicts of interest, the Proxy Administrator identifies those instances in which we or one of our affiliates intends to vote in a manner inconsistent with the guidelines or when a proxy proposal is not covered by the guidelines. In these cases, certain conflict of interest reviews are conducted. If a conflict is identified, the Proxy Administrator will coordinate facilitation of a resolution that is consistent with our fiduciary obligations. With respect to Ameriprise Financial, Inc. proxies, we vote in accordance with the recommendation of an independent third party.

On an annual basis, or more frequently as determined necessary, we review our existing voting guidelines or add new guidelines. In connection with this review, we consider, among other things, industry trends and the frequency that similar proposals appear on company ballots.

The proxy voting structure adopted by RiverSource Investments and its affiliates is designed to ensure that each affiliate is satisfying its fiduciary and other regulatory obligations that govern the voting of proxies while allowing each affiliate to vote proxies based on what it believes is prudent and will maximize long-term shareholder value.

RiverSource Investments maintains proxy voting records and related records designed to meet our obligations under applicable law. Where permitted by and in accordance with applicable law, we may rely on third parties to make and retain, on our behalf, a copy of the relevant records. Clients may obtain a complete copy of our proxy voting policies and other information regarding how their proxies were voted upon request by writing to RiverSource Investments at 50605 Ameriprise Financial Center, Minneapolis, MN 55474 or calling (612) 678 - 1762.

CITIGROUP ASSET MANAGEMENT ⁴⁷ (CAM)
Proxy Voting Policies and Procedures

o TYPES OF ACCOUNTS FOR WHICH CAM VOTES PROXIES

Citigroup Asset Management (CAM) votes proxies for each client that has specifically authorized us to vote them in the investment management contract or otherwise; votes proxies for each United States Registered Investment Company (mutual fund) for which we act as adviser or sub-adviser with the power to vote proxies; and votes proxies for each ERISA account unless the plan document or investment advisory agreement specifically reserves the responsibility to vote proxies to the plan trustees or other named fiduciary. These policies and procedures are intended to fulfill applicable requirements imposed on CAM by the Investment Advisers Act of 1940, as amended, the Investment Company Act of 1940, as amended, and the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations adopted under these laws.

o GENERAL GUIDELINES

In voting proxies, we are guided by general fiduciary principles. Our goal is to act prudently, solely in the best interest of the beneficial owners of the accounts we manages, and, in the case of ERISA accounts, for the exclusive purpose of providing economic benefits to such persons. We attempt to provide for the consideration of all factors that could affect the value of the investment and will vote proxies in the manner that we believe will be consistent with efforts to maximize shareholder values.

o HOW CAM VOTES

Section V of these policies and procedures set forth certain stated positions. In the case of a proxy issue for which there is a stated position we generally votes in accordance with such stated position. In the case of a proxy issue for which there is a list of factors set forth in Section V that we considers in voting on such issue, we votes on a case-by-case basis in accordance with the general principles set forth above and considering such enumerated factors. In the case of a proxy issue for which there is no stated position or list of factors that we considers in voting on such issue, we votes on a case-by-case basis in accordance with the general principles set forth above. We may utilize an external service provider to provide us with information and/or a recommendation with regard to proxy votes in accordance with our stated positions, but we are not required to follow


⁴⁷		Citigroup Asset Management comprises CAM North America, LLC, Salomon Brothers Asset Management Inc, Smith Barney Fund Management LLC, and other affiliated investment advisory firms. On December 1, 2005, Citigroup Inc. (“Citigroup”) sold substantially all of its worldwide asset management business, Citigroup Asset Management, to Legg Mason, Inc. (“Legg Mason”). As part of this transaction, CAM North America, LLC, Salomon Brothers Asset Management Inc and Smith Barney Fund Management LLC became wholly-owned subsidiaries of Legg Mason. Under a licensing agreement between Citigroup and Legg Mason, the names of CAM North America, LLC, Salomon Brothers Asset Management Inc, Smith Barney Fund Management LLC and their affiliated advisory entities, as well as all logos, trademarks, and service marks related to Citigroup or any of its affiliates (“Citi Marks”) are licensed for use by Legg Mason. Citi Marks include, but are not limited to, “Citigroup Asset Management,” “Salomon Brothers Asset Management” and “CAM”. All Citi Marks are owned by Citigroup, and are licensed for use until no later than one year after the date of the licensing agreement. Legg Mason and its subsidiaries, including CAM North America, LLC, Salomon Brothers Asset Management Inc, and Smith Barney Fund Management LLC are not affiliated with Citigroup.

any such recommendations. However, a particular business unit or investment team may utilize such an external service provider with the intention of following the recommendations of such service provider in all or substantially all cases, even where our policies do not contain a stated position. The use of an external service provider does not relieve the business unit of its responsibility for the proxy vote.

IV. CONFLICTS OF INTEREST

In furtherance of CAM’s goal to vote proxies in the best interests of clients, CAM follows procedures designed to identify and address material conflicts that may arise between CAM’s interests and those of its clients before voting proxies on behalf of such clients.

(1) Procedures for Identifying Conflicts of Interest

CAM relies on the following to seek to identify conflicts of interest with respect to proxy voting:

A. The policy memorandum attached hereto as Appendix A will be distributed periodically to CAM employees. The policy memorandum alerts CAM employees that they are under an obligation (i) to be aware of the potential for conflicts of interest on the part of CAM with respect to voting proxies on behalf of client accounts both as a result of their personal relationships and due to special circumstances that may arise during the conduct of CAM’s business, and (ii) to bring conflicts of interest of which they become aware to the attention of CAM Compliance.

B. CAM Financial Control shall maintain and make available to CAM Compliance and proxy voting personnel an up to date list of all client relationships that have historically accounted for or are projected to account for greater than 1% of CAM’s annual revenues. CAM relies on the policy memorandum directive described in Section IV. (1) A. to identify conflicts of interest arising due to potential client relationships with proxy issuers.

C. As a general matter, CAM takes the position that relationships between a non-CAM Legg Mason affiliate and an issuer (e.g. investment management relationship between an issuer and a non-CAM Legg Mason affiliate) do not present a conflict of interest for CAM in voting proxies with respect to such issuer because CAM operates as an independent business unit from other Legg Mason business units and because of the existence of information barriers between CAM and certain other Legg Mason business units. Special circumstances, such as contact between CAM and non-CAM personnel, may cause CAM to consider whether non-CAM relationships between Legg Mason and an issuer present a conflict of interest for CAM with respect to such issuer. As noted in Section IV. (1) A., CAM employees are under an obligation to be aware of the potential for conflicts of interest in voting proxies and to bring such conflicts of interest, including conflicts of interest which may arise because of such special circumstances (such as any attempt by a Legg Mason business unit or Legg Mason officer or employee to influence proxy voting by CAM) to the attention of CAM Compliance. Also, CAM is sensitive to the fact that a significant, publicized relationship between an issuer and a non-CAM Legg Mason affiliate might appear to the public to influence the manner in which CAM decides to vote a proxy with respect to such issuer. For prudential reasons, CAM treats such significant, publicized relationships as creating a potential conflict of interest for CAM in voting proxies

D. Based on information furnished by CAM employees or maintained by CAM Compliance pursuant to Section IV. (1) A. and C. and by CAM Financial Control pursuant to Section IV. (1) B., CAM Compliance shall maintain an up to date list of issuers with respect to which CAM has a potential conflict of interest in voting proxies on behalf of client accounts. CAM shall not vote proxies relating to issuers on such list on behalf of client accounts until it has been determined that the conflict of interest is not material or a method for resolving such conflict of interest has been agreed upon and implemented, as described in this Section IV below. Exceptions apply: (i) with respect to a proxy issue that will be voted in accordance with a stated CAM position on such issue, and (ii) with respect to a proxy issue that will be voted in accordance with the recommendation of

an independent third party based on application of the policies set forth herein. Such issues generally are not brought to the attention of the Proxy Voting Committee described in Section IV. (2) because CAM’s position is that any conflict of interest issues are resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party based on application of the policies set forth herein.

(2) Procedures for Assessing Materiality of Conflicts of Interest and for Addressing Material Conflicts of Interest

A. CAM shall maintain a Proxy Voting Committee to review and address conflicts of interest brought to its attention. The Proxy Voting Committee shall be comprised of such CAM personnel as are designated from time to time. The current members of the Proxy Voting Committee are set forth on Appendix B hereto.

B. All conflicts of interest identified pursuant to the procedures outlined in Section IV.(1) must be brought to the attention of the Proxy Voting Committee by CAM Compliance for resolution. As noted above, a proxy issue that will be voted in accordance with a stated CAM position on such issue or in accordance with the recommendation of an independent third party generally is not brought to the attention of the Proxy Voting Committee for a conflict of interest review because CAM’s position is that any conflict of interest issues are resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party.

C. The Proxy Voting Committee shall determine whether a conflict of interest is material. A conflict of interest will be considered material to the extent that it is determined that such conflict is likely to influence, or appear to influence, CAM’s decision-making in voting the proxy. All materiality determinations will be based on an assessment of the particular facts and circumstances. CAM Compliance shall maintain a written record of all materiality determinations made by the Proxy Voting Committee.

D. If it is determined by the Proxy Voting Committee that a conflict of interest is not material, CAM may vote proxies notwithstanding the existence of the conflict.

E. If it is determined by the Proxy Voting Committee that a conflict of interest is material, the Proxy Voting Committee shall determine an appropriate method to resolve such conflict of interest before the proxy affected by the conflict of interest is voted. Such determination shall be based on the particular facts and circumstances, including the importance of the proxy issue, the nature of the conflict of interest, etc. Such methods may include:

i. disclosing the conflict to clients and obtaining their consent before voting;

ii. suggesting to clients that they engage another party to vote the proxy on their behalf;

iii. in the case of a conflict of interest resulting from a particular employee’s personal relationships, removing such employee from the decision-making process with respect to such proxy vote; or

iv. such other method as is deemed appropriate given the particular facts and circumstances, including the importance of the proxy issue, the nature of the conflict of interest, etc.^*


^*		Especially in the case of an apparent, as opposed to actual, conflict of interest, the Proxy Voting Committee may resolve such conflict of interest by satisfying itself that CAM’s proposed vote on a proxy issue is in the best interest of client accounts and is not being influenced by the conflict of interest.

CAM Compliance shall maintain a written record of the method used to resolve a material conflict of interest.

(3) Third Party Proxy Voting Firm — Conflicts of Interests

With respect to a third party proxy voting firm described herein, CAM will periodically review and assess such firm’s policies, procedures and practices with respect to the disclosure and handling of conflicts of interest.

V. VOTING POLICY

These are policy guidelines that can always be superseded, subject to the duty to act solely in the best interest of the beneficial owners of accounts, by the investment management professionals responsible for the account holding the shares being voted. As a result of the independent investment advisory services provided by distinct business units, there may be occasions when different business units or different portfolio managers within the same business unit vote differently on the same issue. A CAM business unit or investment team (e.g. CAM’s Social Awareness Investment team) may adopt proxy voting policies that supplement these policies and procedures. In addition, in the case of Taft-Hartley clients, CAM will comply with a client direction to vote proxies in accordance with Institutional Shareholder Services’ (ISS) PVS Proxy Voting Guidelines, which ISS represents to be fully consistent with AFL-CIO guidelines.

1. Election of Directors

Voting on Director Nominees in Uncontested Elections.

o We vote for director nominees.

Chairman and CEO is the Same Person.

1. We vote on a case-by-case basis on shareholder proposals that would require the positions of the Chairman and CEO to be held by different persons. We would generally vote FOR such a proposal unless there are compelling reasons to vote against the proposal, including:

1.		Designation of a lead director

2.		Majority of independent directors (supermajority)

3.		All independent key committees

4.		Size of the company (based on market capitalization)

5.		Established governance guidelines

6.		Company performance

Majority of Independent Directors

o We vote for shareholder proposals that request that the board be comprised of a majority of independent directors. Generally that would require that the director have no connection to the company other than the board seat. In determining whether an independent director is truly independent (e.g. when voting on a slate of director candidates), we consider certain factors including, but not necessarily limited to, the following: whether the director or his/her company provided professional services to the company or its affiliates either currently or in the past year; whether the director has any transactional relationship with the company; whether the director is a significant customer or supplier of the company; whether the director is employed by a foundation or university that received significant grants or endowments from the company or its affiliates; and whether there are interlocking directorships.

o We vote for shareholder proposals that request that the board audit, compensation and/or nominating committees include independent directors exclusively.

Stock Ownership Requirements

o We vote against shareholder proposals requiring directors to own a minimum amount of company stock in order to qualify as a director, or to remain on the board.

Term of Office

1. We vote against shareholder proposals to limit the tenure of independent directors.

Director and Officer Indemnification and Liability Protection

o Subject to subparagraphs 2, 3, and 4 below, we vote for proposals concerning director and officer indemnification and liability protection.

o We vote for proposals to limit and against proposals to eliminate entirely director and officer liability for monetary damages for violating the duty of care.

o We vote against indemnification proposals that would expand coverage beyond just legal expenses to acts, such as negligence, that are more serious violations of fiduciary obligations than mere carelessness.

o We vote for only those proposals that provide such expanded coverage noted in subparagraph 3 above in cases when a director’s or officer’s legal defense was unsuccessful if: (1) the director was found to have acted in good faith and in a manner that he reasonably believed was in the best interests of the company, and (2) if only the director’s legal expenses would be covered.

Director Qualifications

• We vote case-by-case on proposals that establish or amend director qualifications. Considerations include how reasonable the criteria are and to what degree they may preclude dissident nominees from joining the board.

• We vote against shareholder proposals requiring two candidates per board seat.

2. Proxy Contests

• Voting for Director Nominees in Contested Elections

a) We vote on a case-by-case basis in contested elections of directors. Considerations include: chronology of events leading up to the proxy contest; qualifications of director nominees (incumbents and dissidents); for incumbents, whether the board is comprised of a majority of outside directors; whether key committees (ie: nominating, audit, compensation) comprise solely of independent outsiders; discussion with the respective portfolio manager(s).

• Reimburse Proxy Solicitation Expenses

1. We vote on a case-by-case basis on proposals to provide full reimbursement for dissidents waging a proxy contest. Considerations include: identity of persons who will pay solicitation expenses; cost of solicitation; percentage that will be paid to proxy solicitation firms.

3. Auditors

4. Ratifying Auditors

D. We vote for proposals to ratify auditors, unless an auditor has a financial interest in or association with the company, and is therefore not independent; or there is reason to believe that the independent auditor has rendered an opinion that is neither accurate nor indicative of the company’s financial position or there is reason to believe the independent auditor has not followed the highest level of ethical conduct. Specifically, we will vote to ratify auditors if the auditors only provide the company audit services and such other audit-related and non-audit services the provision of which will not cause such auditors to lose their independence under applicable laws, rules and regulations.

5. Financial Statements and Director and Auditor Reports

9. We generally vote for management proposals seeking approval of financial accounts and reports and the discharge of management and supervisory board members, unless there is concern about the past actions of the company’s auditors or directors.

C. Remuneration of Auditors

1. We vote for proposals to authorize the board or an audit committee of the board to determine the remuneration of auditors, unless there is evidence of excessive compensation relative to the size and nature of the company.

D. Indemnification of Auditors

1. We vote against proposals to indemnify auditors.

4. Proxy Contest Defenses

e. Board Structure: Staggered vs. Annual Elections

• We vote against proposals to classify the board.

• We vote for proposals to repeal classified boards and to elect all directors annually.

f. Shareholder Ability to Remove Directors

A. We vote against proposals that provide that directors may be removed only for cause.

B. We vote for proposals to restore shareholder ability to remove directors with or without cause.

C. We vote against proposals that provide that only continuing directors may elect replacements to fill board vacancies.

D. We vote for proposals that permit shareholders to elect directors to fill board vacancies.

g. Cumulative Voting

(1) We vote against proposals to eliminate cumulative voting.

(2) We vote for proposals to permit cumulative voting.

h. Shareholder Ability to Call Special Meetings

I. We vote against proposals to restrict or prohibit shareholder ability to call special meetings.

II. We vote for proposals that remove restrictions on the right of shareholders to act independently of management.

i. Shareholder Ability to Act by Written Consent

1. We vote against proposals to restrict or prohibit shareholder ability to take action by written consent.

2. We vote for proposals to allow or make easier shareholder action by written consent.

j. Shareholder Ability to Alter the Size of the Board

1. We vote for proposals that seek to fix the size of the board.

2. We vote against proposals that give management the ability to alter the size of the board without shareholder approval.

k. Advance Notice Proposals

1. We vote on advance notice proposals on a case-by-case basis, giving support to those proposals which allow shareholders to submit proposals as close to the meeting date as reasonably possible and within the broadest window possible.

l. Amendment of By-Laws

1. We vote against proposals giving the board exclusive authority to amend the by-laws.

2. We vote for proposals giving the board the ability to amend the by-laws in addition to shareholders.

I. Article Amendments (not otherwise covered by CAM Proxy Voting Policies and Procedures).

We review on a case-by-case basis all proposals seeking amendments to the articles of association.

We vote for article amendments if:

•		shareholder rights are protected;

•		there is negligible or positive impact on shareholder value;

•		management provides adequate reasons for the amendments; and

•		the company is required to do so by law (if applicable).

5. Tender Offer Defenses

1. Poison Pills

1. We vote for shareholder proposals that ask a company to submit its poison pill for shareholder ratification.

2. We vote on a case-by-case basis on shareholder proposals to redeem a company’s poison pill. Considerations include: when the plan was originally adopted; financial condition of the company; terms of the poison pill.

3. We vote on a case-by-case basis on management proposals to ratify a poison pill. Considerations include: sunset provision — poison pill is submitted to shareholders for ratification or rejection every 2 to 3 years; shareholder redemption feature -10% of the shares may call a special meeting or seek a written consent to vote on rescinding the rights plan.

2. Fair Price Provisions

1. We vote for fair price proposals, as long as the shareholder vote requirement embedded in the provision is no more than a majority of disinterested shares.

2. We vote for shareholder proposals to lower the shareholder vote requirement in existing fair price provisions.

3. Greenmail

A. We vote for proposals to adopt anti-greenmail charter or bylaw amendments or otherwise restrict a company’s ability to make greenmail payments.

B. We vote on a case-by-case basis on anti-greenmail proposals when they are bundled with other charter or bylaw amendments.

4. Unequal Voting Rights

A. We vote against dual class exchange offers.

B. We vote against dual class re-capitalization.

5. Supermajority Shareholder Vote Requirement to Amend the Charter or Bylaws

1. We vote against management proposals to require a supermajority shareholder vote to approve charter and bylaw amendments.

2. We vote for shareholder proposals to lower supermajority shareholder vote requirements for charter and bylaw amendments.

6. Supermajority Shareholder Vote Requirement to Approve Mergers

A. We vote against management proposals to require a supermajority shareholder vote to approve mergers and other significant business combinations.

B. We vote for shareholder proposals to lower supermajority shareholder vote requirements for mergers and other significant business combinations.

7. White Squire Placements

1. We vote for shareholder proposals to require approval of blank check preferred stock issues.

6. Miscellaneous Governance Provisions

1. Confidential Voting

1. We vote for shareholder proposals that request corporations to adopt confidential voting, use independent tabulators and use independent inspectors of election as long as the proposals include clauses for proxy contests as follows: in the case of a contested election, management is

permitted to request that the dissident group honor its confidential voting policy. If the dissidents agree, the policy remains in place. If the dissidents do not agree, the confidential voting policy is waived.

2. We vote for management proposals to adopt confidential voting subject to the proviso for contested elections set forth in sub-paragraph A.1 above.

2. Equal Access

1. We vote for shareholder proposals that would allow significant company shareholders equal access to management’s proxy material in order to evaluate and propose voting recommendations on proxy proposals and director nominees, and in order to nominate their own candidates to the board.

3. Bundled Proposals

1. We vote on a case-by-case basis on bundled or “conditioned” proxy proposals. In the case of items that are conditioned upon each other, we examine the benefits and costs of the packaged items. In instances when the joint effect of the conditioned items is not in shareholders’ best interests and therefore not in the best interests of the beneficial owners of accounts, we vote against the proposals. If the combined effect is positive, we support such proposals.

4. Shareholder Advisory Committees

1. We vote on a case-by-case basis on proposals to establish a shareholder advisory committee. Considerations include: rationale and cost to the firm to form such a committee. We generally vote against such proposals if the board and key nominating committees are comprised solely of independent/outside directors.

E. Other Business

We vote for proposals that seek to bring forth other business matters.

F. Adjourn Meeting

We vote on a case-by-case basis on proposals that seek to adjourn a shareholder meeting in order to solicit additional votes.

G. Lack of Information

We vote against proposals if a company fails to provide shareholders with adequate information upon which to base their voting decision.

7. Capital Structure

1. Common Stock Authorization

A. We vote on a case-by-case basis on proposals to increase the number of shares of common stock authorized for issue, except as described in paragraph 2 below.

B. Subject to paragraph 3, below we vote for the approval requesting increases in authorized shares if the company meets certain criteria:

1. Company has already issued a certain percentage (i.e. greater than 50%) of the company’s allotment.

2. The proposed increase is reasonable (i.e. less than 150% of current inventory) based on an analysis of the company’s historical stock management or future growth outlook of the company.

3. We vote on a case-by-case basis, based on the input of affected portfolio managers, if holding is greater than 1% of an account.

2. Stock Distributions: Splits and Dividends

1. We vote on a case-by-case basis on management proposals to increase common share authorization for a stock split, provided that the split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the split.

3. Reverse Stock Splits

1. We vote for management proposals to implement a reverse stock split, provided that the reverse split does not result in an increase of authorized but unissued shares of more than 100% after giving effect to the shares needed for the reverse split.

4. Blank Check Preferred Stock

1. We vote against proposals to create, authorize or increase the number of shares with regard to blank check preferred stock with unspecified voting, conversion, dividend distribution and other rights.

2. We vote for proposals to create “declawed” blank check preferred stock (stock that cannot be used as a takeover defense).

3. We vote for proposals to authorize preferred stock in cases where the company specifies the voting, dividend, conversion, and other rights of such stock and the terms of the preferred stock appear reasonable.

4. We vote for proposals requiring a shareholder vote for blank check preferred stock issues.

5. Adjust Par Value of Common Stock

1. We vote for management proposals to reduce the par value of common stock.

6. Preemptive Rights

1. We vote on a case-by-case basis for shareholder proposals seeking to establish them and consider the following factors:

10. Size of the Company.

b) Characteristics of the size of the holding (holder owning more than 1% of the outstanding shares).

c) Percentage of the rights offering (rule of thumb less than 5%).

2. We vote on a case-by-case basis for shareholder proposals seeking the elimination of pre-emptive rights.

7. Debt Restructuring

1. We vote on a case-by-case basis for proposals to increase common and/or preferred shares and to issue shares as part of a debt-restructuring plan. Generally, we approve proposals that facilitate debt restructuring.

8. Share Repurchase Programs

1. We vote for management proposals to institute open-market share repurchase plans in which all shareholders may participate on equal terms.

9. Dual-Class Stock

1. We vote for proposals to create a new class of nonvoting or subvoting common stock if:

1. It is intended for financing purposes with minimal or no dilution to current shareholders

2. It is not designed to preserve the voting power of an insider or significant shareholder

J. Issue Stock for Use with Rights Plan

1. We vote against proposals that increase authorized common stock for the explicit purpose of implementing a shareholder rights plan (poison pill).

K. Debt Issuance Requests

When evaluating a debt issuance request, the issuing company’s present financial situation is examined. The main factor for analysis is the company’s current debt-to-equity ratio, or gearing level. A high gearing level may incline markets and financial analysts to downgrade the company’s bond rating, increasing its investment risk factor in the process. A gearing level up to 100 percent is considered acceptable.

We vote for debt issuances for companies when the gearing level is between zero and 100 percent.

We view on a case-by-case basis proposals where the issuance of debt will result in the gearing level being greater than 100 percent. Any proposed debt issuance is compared to industry and market standards.

L. Financing Plans

We generally vote for the adopting of financing plans if we believe they are in the best economic interests of shareholders.

8. Executive and Director Compensation

In general, we vote for executive and director compensation plans, with the view that viable compensation programs reward the creation of stockholder wealth by having high payout sensitivity to increases in shareholder value. Certain factors, however, such as repricing underwater stock options without shareholder approval, would cause us to vote against a plan. Additionally, in some cases we would vote against a plan deemed unnecessary.

o OBRA-Related Compensation Proposals

A. Amendments that Place a Cap on Annual Grant or Amend Administrative Features

1. We vote for plans that simply amend shareholder-approved plans to include administrative features or place a cap on the annual grants any one participant may receive to comply with the provisions of Section 162(m) of the Internal Revenue Code.

B. Amendments to Added Performance-Based Goals

1. We vote for amendments to add performance goals to existing compensation plans to comply with the provisions of Section 162(m) of the Internal Revenue Code.

C. Amendments to Increase Shares and Retain Tax Deductions Under OBRA

1. We vote for amendments to existing plans to increase shares reserved and to qualify the plan for favorable tax treatment under the provisions of Section 162(m) the Internal Revenue Code.

D. Approval of Cash or Cash-and-Stock Bonus Plans

A. We vote for cash or cash-and-stock bonus plans to exempt the compensation from taxes under the provisions of Section 162(m) of the Internal Revenue Code.

B. Expensing of Options

We vote for proposals to expense stock options on financial statements.

C. Index Stock Options

We vote on a case by case basis with respect to proposals seeking to index stock options. Considerations include whether the issuer expenses stock options on its financial statements and whether the issuer’s compensation committee is comprised solely of independent directors.

D. Shareholder Proposals to Limit Executive and Director Pay

1. We vote on a case-by-case basis on all shareholder proposals that seek additional disclosure of executive and director pay information. Considerations include: cost and form of disclosure. We vote for such proposals if additional disclosure is relevant to shareholder’s needs and would not put the company at a competitive disadvantage relative to its industry.

2. We vote on a case-by-case basis on all other shareholder proposals that seek to limit executive and director pay.

We have a policy of voting to reasonably limit the level of options and other equity-based compensation arrangements available to management to reasonably limit shareholder dilution and management compensation. For options and equity-based compensation arrangements, we vote FOR proposals or amendments that would result in the available awards being less than 10% of fully diluted outstanding shares (i.e. if the combined total of shares, common share equivalents and options available to be awarded under all current and proposed compensation plans is less than 10% of fully diluted shares). In the event the available awards exceed the 10% threshold, we would also consider the % relative to the common practice of its specific industry (e.g. technology firms). Other considerations would include, without limitation, the following:

•		Compensation committee comprised of independent outside directors

•		Maximum award limits

•		Repricing without shareholder approval prohibited

E. Golden Parachutes

1. We vote for shareholder proposals to have golden parachutes submitted for shareholder ratification.

2. We vote on a case-by-case basis on all proposals to ratify or cancel golden parachutes. Considerations include: the amount should not exceed 3 times average base salary plus guaranteed

benefits; golden parachute should be less attractive than an ongoing employment opportunity with the firm.

F. Employee Stock Ownership Plans (ESOPs)

1. We vote for proposals that request shareholder approval in order to implement an ESOP or to increase authorized shares for existing ESOPs, except in cases when the number of shares allocated to the ESOP is “excessive” (i.e., generally greater than five percent of outstanding shares).

G. 401(k) Employee Benefit Plans

1. We vote for proposals to implement a 401(k) savings plan for employees.

H. Stock Compensation Plans

1. We vote for stock compensation plans which provide a dollar-for-dollar cash for stock exchange.

2. We vote on a case-by-case basis for stock compensation plans which do not provide a dollar-for-dollar cash for stock exchange using a quantitative model.

I. Directors Retirement Plans

1. We vote against retirement plans for nonemployee directors.

2. We vote for shareholder proposals to eliminate retirement plans for nonemployee directors.

10. Management Proposals to Reprice Options

1. We vote on a case-by-case basis on management proposals seeking approval to reprice options. Considerations include the following:

1.		Historic trading patterns

2.		Rationale for the repricing

3.		Value-for-value exchange

4.		Option vesting

5.		Term of the option

6.		Exercise price

7.		Participation

11. Shareholder Proposals Recording Executive and Director Pay

A. We vote against shareholder proposals seeking to set absolute levels on compensation or otherwise dictate the amount or form of compensation.

B. We vote against shareholder proposals requiring director fees be paid in stock only.

C. We vote for shareholder proposals to put option repricing to a shareholder vote.

D. We vote on a case-by-case basis for all other shareholder proposals regarding executive and director pay, taking unto account company performance, pay level versus peers, pay level versus industry, and long term corporate outlook.

9. State/Country of Incorporation

1.		Voting on State Takeover Statutes

1.		We vote for proposals to opt out of state freezeout provisions.

2.		We vote for proposals to opt out of state disgorgement provisions.

2.		Voting on Re-incorporation Proposals

(1) We vote on a case-by-case basis on proposals to change a company’s state or country of incorporation. Considerations include: reasons for re-incorporation (i.e. financial, restructuring, etc); advantages/benefits for change (i.e. lower taxes); compare the differences in state/country laws governing the corporation.

3. Control Share Acquisition Provisions

a) We vote against proposals to amend the charter to include control share acquisition provisions.

b) We vote for proposals to opt out of control share acquisition statutes unless doing so would enable the completion of a takeover that would be detrimental to shareholders.

c) We vote for proposals to restore voting rights to the control shares.

d) We vote for proposals to opt out of control share cashout statutes.

10. Mergers and Corporate Restructuring

a) Mergers and Acquisitions

a) We vote on a case-by-case basis on mergers and acquisitions. Considerations include: benefits/advantages of the combined companies (i.e. economies of scale, operating synergies, increase in market power/share, etc...); offer price (premium or discount); change in the capital structure; impact on shareholder rights.

b) Corporate Restructuring

a) We vote on a case-by-case basis on corporate restructuring proposals involving minority squeeze outs and leveraged buyouts. Considerations include: offer price, other alternatives/offers considered and review of fairness opinions.

c) Spin-offs

1. We vote on a case-by-case basis on spin-offs. Considerations include the tax and regulatory advantages, planned use of sale proceeds, market focus, and managerial incentives.

d) Asset Sales

1. We vote on a case-by-case basis on asset sales. Considerations include the impact on the balance sheet/working capital, value received for the asset, and potential elimination of diseconomies.

e) Liquidations

1. We vote on a case-by-case basis on liquidations after reviewing management’s efforts to pursue other alternatives, appraisal value of assets, and the compensation plan for executives managing the liquidation.

f) Appraisal Rights

I. We vote for proposals to restore, or provide shareholders with, rights of appraisal.

g) Changing Corporate Name

1. We vote for proposals to change the “corporate name”, unless the proposed name change bears a negative connotation.

h) Conversion of Securities

1. We vote on a case-by-case basis on proposals regarding conversion of securities. Considerations include the dilution to existing shareholders, the conversion price relative to market value, financial issues, control issues, termination penalties, and conflicts of interest.

i) Stakeholder Provisions

1. We vote against proposals that ask the board to consider nonshareholder constituencies or other nonfinancial effects when evaluating a merger or business combination.

11. Social and Environmental Issues

1. In general we vote on a case-by-case basis on shareholder social and environmental proposals, on the basis that their impact on share value can rarely be anticipated with any high degree of confidence. In most cases, however, we vote for disclosure reports that seek additional information, particularly when it appears the company has not adequately addressed shareholders’ social and environmental concerns. In determining our vote on shareholder social and environmental proposals, we also analyze the following factors:

A. whether adoption of the proposal would have either a positive or negative impact on the company’s short-term or long-term share value;

B. the percentage of sales, assets and earnings affected;

C. the degree to which the company’s stated position on the issues could affect its reputation or sales, or leave it vulnerable to boycott or selective purchasing;

D. whether the issues presented should be dealt with through government or company-specific action;

E. whether the company has already responded in some appropriate manner to the request embodied in a proposal;

F. whether the company’s analysis and voting recommendation to shareholders is persuasive;

G. what other companies have done in response to the issue;

H. whether the proposal itself is well framed and reasonable;

I. whether implementation of the proposal would achieve the objectives sought in the proposal; and

J. whether the subject of the proposal is best left to the discretion of the board.

2. Among the social and environmental issues to which we apply this analysis are the following:

1.		Energy and Environment

2.		Equal Employment Opportunity and Discrimination

3.		Product Integrity and Marketing

4.		Human Resources Issues

(12) Miscellaneous

A. Charitable Contributions

1. We vote against proposals to eliminate, direct or otherwise restrict charitable contributions.

B. Operational Items

A. We vote against proposals to provide management with the authority to adjourn an annual or special meeting absent compelling reasons to support the proposal.

B. We vote against proposals to reduce quorum requirements for shareholder meetings below a majority of the shares outstanding unless there are compelling reasons to support the proposal.

C. We vote for by-law or charter changes that are of a housekeeping nature (updates or corrections).

D. We vote for management proposals to change the date/time/location of the annual meeting unless the proposed change is unreasonable.

E. We vote against shareholder proposals to change the date/time/location of the annual meeting unless the current scheduling or location is unreasonable.

F. We vote against proposals to approve other business when it appears as voting item.

C. Routine Agenda Items

In some markets, shareholders are routinely asked to approve:

1.		the opening of the shareholder meeting

2.		that the meeting has been convened under local regulatory requirements

3.		the presence of a quorum

4.		the agenda for the shareholder meeting

5.		the election of the chair of the meeting

6.		regulatory filings

7.		the allowance of questions

8.		the publication of minutes

9.		the closing of the shareholder meeting

We generally vote for these and similar routine management proposals.

D. Allocation of Income and Dividends

We generally vote for management proposals concerning allocation of income and the distribution of dividends, unless the amount of the distribution is consistently and unusually small or large.

E. Stock (Scrip) Dividend Alternatives

1. We vote for most stock (scrip) dividend proposals.

2. We vote against proposals that do not allow for a cash option unless management demonstrates that the cash option is harmful to shareholder value.

(13) CAM has determined that registered investment companies, particularly closed end investment companies, raise special policy issues making specific voting guidelines frequently inapplicable. To the extent that CAM has proxy voting authority with respect to shares of registered investment companies, CAM shall vote such shares in the best interest of client accounts and subject to the general fiduciary principles set forth herein without regard to the specific voting guidelines set forth in Section V. (1) through (12).

The voting policy guidelines set forth in this Section V may be changed from time to time by CAM in its sole discretion.

VI. OTHER CONSIDERATIONS

In certain situations, CAM may determine not to vote proxies on behalf of a client because CAM believes that the expected benefit to the client of voting shares is outweighed by countervailing considerations. Examples of situations in which CAM may determine not to vote proxies on behalf of a client include:

(1) Share Blocking

Proxy voting in certain countries requires “share blocking.” This means that shareholders wishing to vote their proxies must deposit their shares shortly before the date of the meeting (e.g. one week) with a designated depositary. During the blocking period, shares that will be voted at the meeting cannot be sold until the meeting has taken place and the shares have been returned to client accounts by the designated depositary. In deciding whether to vote shares subject to share blocking, CAM will consider and weigh, based on the particular facts and circumstances, the expected benefit to clients of voting in relation to the detriment to clients of not being able to sell such shares during the applicable period.

(2) Securities on Loan

Certain clients of CAM, such as an institutional client or a mutual fund for which CAM acts as a sub-adviser, may engage in securities lending with respect to the securities in their accounts. CAM typically does not direct or oversee such securities lending activities. To the extent feasible and practical under the circumstances, CAM will request that the client recall shares that are on loan so that such shares can be voted if CAM believes that the expected benefit to the client of voting such shares outweighs the detriment to the client of recalling such shares (e.g. foregone income). The ability to timely recall shares for proxy voting purposes typically is not entirely within the control of CAM and requires the cooperation of the client and its other service providers. Under certain circumstances, the recall of shares in time for such shares to be voted may not be possible due to applicable proxy voting record dates and administrative considerations.

VII. DISCLOSURE OF PROXY VOTING

CAM employees may not disclose to others outside of CAM (including employees of other Legg Mason business units) how CAM intends to vote a proxy absent prior approval from CAM Legal/Compliance, except that a CAM investment professional may disclose to a third party (other than an employee of another Legg Mason business unit) how it intends to vote without obtaining prior approval from CAM Legal/Compliance if (1) the disclosure is intended to facilitate a discussion of publicly available information by CAM personnel with a representative of a company whose securities are the subject of the proxy, (2) the company’s market capitalization exceeds $1 billion and (3) CAM has voting power with respect to less than 5% of the outstanding common stock of the company.

If a CAM employee receives a request to disclose CAM’s proxy voting intentions to, or is otherwise contacted by, another person outside of CAM (including an employee of another Legg Mason business unit) in connection with an upcoming proxy voting matter, he/she should immediately notify CAM Legal/Compliance.

VIII. RECORD KEEPING AND OVERSIGHT

CAM shall maintain the following records relating to proxy voting:

2. a copy of these policies and procedures;

3. a copy of each proxy form (as voted);

4. a copy of each proxy solicitation (including proxy statements) and related materials with regard to each vote;

5. documentation relating to the identification and resolution of conflicts of interest;

6. any documents created by CAM that were material to a proxy voting decision or that memorialized the basis for that decision; and

7. a copy of each written client request for information on how CAM voted proxies on behalf of the client, and a copy of any written response by CAM to any (written or oral) client request for information on how CAM voted proxies on behalf of the requesting client.

Such records shall be maintained and preserved in an easily accessible place for a period of not less than five years from the end of the fiscal year during which the last entry was made on such record, the first two years in an appropriate office of the CAM adviser.

Each adviser to a United States Registered Investment Company shall maintain such records as are necessary to allow such fund to comply with its recordkeeping, reporting and disclosure obligations under applicable laws, rules and regulations.

In lieu of keeping copies of proxy statements, CAM may rely on proxy statements filed on the EDGAR system as well as on third party records of proxy statements and votes cast if the third party provides an undertaking to provide the documents promptly upon request.

CAM Compliance will review the proxy voting process, record retention and related matters on a periodic basis.

Appendix A

Memorandum


To:		All CAM Employees
From:		Legal and Compliance
Date:		May , 2006
Re:		Updated CAM Proxy Voting Policies and Procedures Conflicts of Interest with respect to Proxy Voting

Citigroup Asset Management (CAM) currently has in place proxy voting policies and procedures designed to ensure that CAM votes proxies in the best interest of client accounts. Accompanying this memorandum is a copy of CAM’s Proxy Voting Policies and Procedures that have been updated, effective as of May 2006. The proxy voting policies and procedures are designed to comply with the SEC rule under the Investment Advisers Act that addresses an investment adviser’s fiduciary obligation to its clients when voting proxies. AS DISCUSSED IN MORE DETAIL BELOW, CAM EMPLOYEES ARE UNDER AN OBLIGATION (i) TO BE AWARE OF THE POTENTIAL FOR CONFLICTS OF INTEREST ON THE PART OF CAM IN VOTING PROXIES ON BEHALF OF CLIENT ACCOUNTS BOTH AS A RESULT OF AN EMPLOYEE’S PERSONAL RELATIONSHIPS AND DUE TO SPECIAL CIRCUMSTANCES THAT MAY ARISE DURING THE CONDUCT OF CAM’S BUSINESS, AND (ii) TO BRING CONFLICTS OF INTEREST OF WHICH THEY BECOME AWARE TO THE ATTENTION OF CAM COMPLIANCE.

The updated proxy voting policies and procedures are substantially similar to the policies and procedures currently in effect in terms of CAM’s stated position on certain types of proxy issues and the factors and considerations taken into account by CAM in voting on certain other types of proxy issues.

While, as described in Section IV of the updated policies and procedures, CAM will seek to identify significant CAM client relationships and significant, publicized non-CAM Legg Mason affiliate client relationships¹ which could present CAM with a conflict of interest in voting proxies, all CAM employees must play an important role in helping our organization identify potential conflicts of interest that could impact CAM’s proxy voting. CAM employees need to (i) be aware of the potential for conflicts of interest on the part of CAM in voting proxies on behalf of client accounts both as a result of an employee’s personal relationships and due to special circumstances that may arise during the conduct of CAM’s business, and (ii) bring conflicts of interest of which they become aware to the attention of a CAM compliance officer.

A conflict of interest arises when the existence of a personal or business relationship on the part of CAM or one of its employees or special circumstances that arise during the conduct of CAM’s business might influence, or appear to influence, the manner in which CAM decides to vote a proxy. An example of a personal relationship that creates a potential conflict of interest would be a situation in which a CAM employee (such as a portfolio manager or senior level executive) has a spouse or other close relative who serves as a director or senior executive of a company. An example of “special circumstances” would be explicit or implicit pressure exerted by a CAM relationship to try to influence CAM’s vote on a proxy with respect to which the CAM relationship is the issuer. Another example would be a situation in which there was contact between CAM and non-CAM personnel in which the non-CAM Legg Mason personnel, on their own initiative or at the prompting of a client of a non-CAM unit of Legg Mason, tried to exert

pressure to influence CAM’s proxy vote². Of course, the foregoing examples are not exhaustive, and a variety of situations may arise that raise conflict of interest questions for CAM. You are encouraged to raise and discuss with CAM Compliance particular facts and circumstances that you believe may raise conflict of interest issues for CAM.

As described in Section IV of the updated policies and procedures, CAM has established a Proxy Voting Committee to assess the materiality of conflicts of interest brought to its attention by CAM Compliance as well as to agree upon appropriate methods to resolve material conflicts of interest before proxies affected by the conflicts of interest are voted³. As described in the updated policies and procedures, there are a variety of methods and approaches that the Proxy Voting Committee may utilize to resolve material conflicts of interest. Please note that CAM employees should report all conflicts of interest of which they become aware to CAM Compliance. It is up to the Proxy Voting Committee to assess the materiality of conflicts of interest brought to its attention and to agree upon an appropriate resolution with respect to conflicts of interest determined to be material.

The obligation of CAM employees to be sensitive to the issue of conflicts of interest and to bring conflicts of interest to the attention of CAM Compliance is a serious one. Failure to do so can lead to negative legal, regulatory, and reputational consequences for the firm as well as to negative regulatory and disciplinary consequences for the CAM employee. Please consult with a CAM Compliance officer if you have any questions concerning your obligations with respect to conflicts of interest under the updated proxy voting policies and procedures.


^1,2		As a general matter, CAM takes the position that relationships between a non-CAM Legg Mason affiliate and an issuer (e.g. investment management relationship between an issuer and a non-CAM Legg Mason affiliate) do not present a conflict of interest for CAM in voting proxies with respect to such issuer. Such position is based on the fact that CAM is operated as an independent business unit from other Legg Mason business units as well as on the existence of information barriers between CAM and certain other Legg Mason business units. CAM is sensitive to the fact that a significant, publicized relationship between an issuer and a non-CAM Legg Mason affiliate might appear to the public to influence the manner in which CAM decides to vote a proxy with respect to such issuer. As noted, CAM seeks to identify such significant, publicized relationships, and for prudential reasons brings such identified situations to the attention of the Proxy Voting Committee, as described herein. Special circumstances, such as those described in the noted examples, also could cause CAM to consider whether non-CAM relationships between a Legg Mason affiliate and an issuer present a conflict of interest for CAM with respect to such issuer.

³		Exceptions apply: (i) with respect to a proxy issue that will be voted in accordance with a stated CAM position on such issue, and (ii) with respect to a proxy issue that will be voted in accordance with the recommendation of an independent third party. Such issues are not brought to the attention of the Proxy Voting Committee because CAM’s position is that to the extent a conflict of interest issue exists, it is resolved by voting in accordance with a pre-determined policy or in accordance with the recommendation of an independent third party.

Proxy Voting Policy


		Funds Management, Inc.

Introduction

SSgA Funds Management, Inc. (“FM”) seeks to vote proxies for which it has discretionary authority in the best interests of its clients. This entails voting proxies in a way which FM believes will maximize the monetary value of each portfolio’s holdings with respect to proposals that are reasonably anticipated to have an impact on the current or potential value of a security. Absent unusual circumstances or specific client instructions, we vote proxies on a particular matter in the same way for all clients, regardless of their investment style or strategies. FM takes the view that voting in a manner consistent with maximizing the value of our clients’ holdings will benefit our direct clients (e.g. investment funds) and, indirectly, the ultimate owners and beneficiaries of those clients (e.g. fund shareholders).

Oversight of the proxy voting process is the responsibility of the State Street Global Advisors (“SSgA”) Investment Committee. The SSgA Investment Committee reviews and approves amendments to the FM Proxy Voting Policy and delegates authority to vote in accordance with this policy to the FM Proxy Review Committee, a subcommittee of the SSgA Investment Committee. FM retains the final authority and responsibility for voting. In addition to voting proxies, FM:

	1)		describes its proxy voting procedures to its clients in Part II of its Form ADV;

	2)		provides the client with this written proxy policy, upon request;

	3)		discloses to its clients how they may obtain information on how FM voted the client’s proxies;

	4)		matches proxies received with holdings as of record date;

	5)		reconciles holdings as of record date and rectifies any discrepancies;

	6)		generally applies its proxy voting policy consistently and keeps records of votes for each client;

	7)		documents the reason(s) for voting for all non-routine items; and

	8)		keeps records of such proxy voting available for inspection by the client or governmental agencies.

Process

The FM Manager of Corporate Governance is responsible for monitoring proxy voting on behalf of our clients and executing the day to day implementation of this Proxy Voting Policy. As stated above, oversight of the proxy voting process is the responsibility of the SSgA Investment Committee.

In order to facilitate our proxy voting process, FM retains Institutional Shareholder Services (“ISS”), a firm with expertise in the proxy voting and corporate governance fields. ISS assists in the proxy voting process, including acting as our voting agent (i.e. actually processing the proxies), advising us as to current and emerging governance issues that we may wish to address, interpreting this policy and applying it to individual proxy items, and providing analytical information concerning specific issuers and proxy items as well as governance trends and developments. This Policy does not address all issues as to which we may receive proxies nor does it seek to describe in detail all factors that we may consider relevant to any particular proposal. To assist ISS in interpreting and applying this Policy, we meet with ISS at least annually, provide written guidance on certain topics generally on an annual basis and communicate more regularly as necessary to discuss how specific issues should be addressed. This guidance permits ISS to apply this Policy without consulting us as to each proxy but in a manner that is consistent with our investment view and not their own governance opinions. If an issue raised by a proxy is not addressed by this Policy or our prior guidance to ISS, ISS refers the proxy to us for direction on voting. On issues that we do not believe affect the economic value of our portfolio holdings or are considered by us to be routine

matters as to which we have not provided specific guidance, we have agreed with ISS to act as our voting agent in voting such proxies in accordance with its own recommendations which, to the extent possible, take into account this Policy and FM’s general positions on similar matters. The Manager of Corporate Governance is responsible, working with ISS, for submitting proxies in a timely manner and in accordance with our policy. The Manager of Corporate Governance works with ISS to establish and update detailed procedures to implement this policy.

From time to time, proxy votes will be solicited which fall into one of the following categories:

	(i)		proxies which involve special circumstances and require additional research and discussion (e.g. a material merger or acquisition, or a material governance issue with the potential to become a significant precedent in corporate governance); or

	(ii)		proxies which are not directly addressed by our policies and which are reasonably anticipated to have an impact on the current or potential value of a security or which we do not consider to be routine.

These proxies are identified through a number of methods, including but not limited to notification from ISS, concerns of clients, review by internal proxy specialists, and questions from consultants. The role of third parties in identifying special circumstances does not mean that we will depart from our guidelines; these third parties are all treated as information sources. If they raise issues that we determine to be prudent before voting a particular proxy or departing from our prior guidance to ISS, we will weigh the issue along with other relevant factors before making an informed decision. In all cases, we vote proxies as to which we have voting discretion in a manner that we determine to be in the best interest of our clients. As stated above, if the proposal has a quantifiable effect on shareholder value, we seek to maximize the value of a portfolio’s holdings. With respect to matters that are not so quantifiable, we exercise greater judgment but still seek to maximize long-term value by promoting sound governance policies. The goal of the Proxy Voting Committee is to make the most informed decision possible.

In instances of special circumstances or issues not directly addressed by our policies or guidance to ISS, the FM Manager of Corporate Governance will refer the item to the Chairman of the Investment Committee for a determination of the proxy vote. The first determination is whether there is a material conflict of interest between the interests of our client and those of FM or its affiliates (as explained in greater detail below under “Potential Conflicts”). If the Manager of Corporate Governance and the Chairman of the Investment Committee determine that there is a material conflict, the process detailed below under “Potential Conflicts” is followed. If there is no material conflict, we examine the proposals that involve special circumstances or are not addressed by our policy or guidance in detail in seeking to determine what vote would be in the best interests of our clients. At this point, the Chairman of the Investment Committee makes a voting decision in our clients’ best interest. However, the Chairman of the Investment Committee may determine that a proxy involves the consideration of particularly significant issues and present the proxy item to the Proxy Review Committee and/or to the entire Investment Committee for a final decision on voting the proxy. The Investment Committee will use the same rationale for determining the appropriate vote.

FM reviews proxies of non-US issuers in the context of these guidelines. However, FM also endeavors to show sensitivity to local market practices when voting these proxies, which may lead to different votes. For example, in certain foreign markets, items are put to vote which have little or no effect on shareholder value, but which are routinely voted on in those jurisdictions; in the absence of material effect on our clients, we will follow market practice. FM votes in all markets where it is feasible to do so. Note that certain custodians utilized by our clients do not offer proxy voting in every foreign jurisdiction. In such a case, FM will be unable to vote such a proxy.

Voting

For most issues and in most circumstances, we abide by the following general guidelines. However, it is important to remember that these are simply guidelines. As discussed above, in certain circumstances, we may determine that it would be in the best interests of our clients to deviate from these guidelines.

I. Generally, FM votes for the following ballot items:

Board of Directors

	•		Elections of directors who (i) we determine to be adequately independent of management and (ii) do not simultaneously serve on an unreasonable (as determined by FM) number of other boards (other than those affiliated with the issuer). Factors that we consider in evaluating independence include whether the nominee is an employee of or related to an employee of the issuer or its auditor, whether the nominee provides professional services to the issuer, or whether the nominee receives non-board related compensation from the issuer

	•		Directors’ compensation, provided the amounts are not excessive relative to other issuers in the market or industry. In making such a determination, we review whether the compensation is overly dilutive to existing shareholders.

	•		Proposals to limit directors’ liability and/or expand indemnification of directors, provided that a director shall only be eligible for indemnification and liability protection if he or she has not acted in bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office

	•		Discharge of board members’ duties^*, in the absence of pending litigation, governmental investigation, charges of fraud or other indicia of significant concern

	•		The establishment of annual elections of the board of directors unless the board is composed by a majority of independent directors, the board’s key committees (auditing, nominating and compensation) are composed of independent directors, and there are no other material governance issues or performance issues.

	•		Mandates requiring a majority of independent directors on the Board of Directors

	•		Mandates that Audit, Compensation and Nominating Committee members should all be independent directors

	•		Mandates giving the Audit Committee the sole responsibility for the selection and dismissal of the auditing firm and any subsequent result of audits are reported to the audit committee

	•		Elimination of cumulative voting

	•		Establishment of confidential voting

Auditors

•

Approval of auditors, unless the fees paid to auditors are excessive; auditors’ fees will be deemed excessive if the non-audit fees for the prior year constituted 50% or more of the total fees paid to the auditors


^*		Common for non-US issuers; request from the issuer to discharge from liability the directors or auditors with respect to actions taken by them during the previous year.

	•		Auditors’ compensation, provided the issuer has properly disclosed audit and non-audit fees relative to market practice and that non-audit fees for the prior year constituted no more than 50% of the total fees paid to the auditors

	•		Discharge of auditors^*

	•		Approval of financial statements, auditor reports and allocation of income

	•		Requirements that auditors attend the annual meeting of shareholders

	•		Disclosure of Auditor and Consulting relationships when the same or related entities are conducting both activities

	•		Establishment of a selection committee responsible for the final approval of significant management consultant contract awards where existing firms are already acting in an auditing function

Capitalization

	•		Dividend payouts that are greater than or equal to country and industry standards; we generally support a dividend which constitutes 30% or more of net income

	•		Authorization of share repurchase programs, unless the issuer does not clearly state the business purpose for the program, a definitive number of shares to be repurchased, and the time frame for the repurchase

	•		Capitalization changes which eliminate other classes of stock and/or unequal voting rights

	•		Changes in capitalization authorization for stock splits, stock dividends, and other specified needs which are no more than 50% of the existing authorization for U.S. companies and no more than 100% of existing authorization for non-U.S. companies.

	•		Elimination of pre-emptive rights for share issuance of less than a certain percentage (country specific — ranging from 5% to 20%) of the outstanding shares, unless even such small amount could have a material dilutive effect on existing shareholders (e.g. in illiquid markets)

Anti-Takeover Measures

	•		Elimination of shareholder rights plans (“poison pill”)

	•		Amendment to a shareholder rights plans (“poison pill”) where the terms of the new plans are more favorable to shareholders’ ability to accept unsolicited offers (i.e. if one of the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20%, (ii) maximum term of three years, (iii) no “dead hand,” “slow hand,” “no hand” or similar feature that limits the ability of a future board to redeem the pill, and (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced)


^* Common for non-US issuers; request from the issuer to discharge from liability the directors or auditors with respect to actions taken by them during the previous year.

	•		Adoption or renewal of a non-US issuer’s shareholder rights plans (“poison pill”) if the following conditions are met: (i) minimum trigger, flip-in or flip-over of 20%, (ii) maximum term of three years, (iii) no “dead hand,” “slow hand,” “no hand” or similar feature that limits the ability of a future board to redeem the pill, and (iv) inclusion of a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced

	•		Reduction or elimination of super-majority vote requirements, unless management of the issuer was concurrently seeking to or had previously made such reduction or elimination

	•		Mandates requiring shareholder approval of a shareholder rights plans (“poison pill”)

	•		Repeals of various anti-takeover related provisions

Executive Compensation/Equity Compensation

	•		Stock purchase plans with an exercise price of not less that 85% of fair market value

	•		Stock option plans which are incentive based and not excessively dilutive. In order to assess the dilutive effect, we divide the number of shares required to fully fund the proposed plan, the number of authorized but unissued shares, and the issued but unexercised shares by fully diluted share count. We review that number in light of certain factors, including the industry of the issuer, in order to make our determination as to whether the dilution is excessive.

	•		Other stock-based plans which are not excessively dilutive, using the same process set forth in the preceding bullet

	•		Expansions to reporting of financial or compensation-related information, within reason

	•		Proposals requiring the disclosure of executive retirement benefits if the issuer does not have an independent compensation committee

Routine Business Items

	•		General updating of or corrective amendments to charter not otherwise specifically addressed herein, unless such amendments would reasonably be expected to diminish shareholder rights (e.g. extension of directors’ term limits, amending shareholder vote requirement to amend the charter documents, insufficient information provided as to the reason behind the amendment)

	•		Change in Corporation Name

	•		Mandates that amendments to bylaws or charters have shareholder approval

Other

	•		Adoption of anti-“greenmail” provisions, provided that the proposal: (i) defines greenmail; (ii) prohibits buyback offers to large block holders (holders of at least 1% of the outstanding shares and in certain cases, a greater amount, as determined by the Proxy Review Committee) not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other provisions restricting the rights of shareholders

	•		Repeals or prohibitions of “greenmail” provisions

•

“Opting-out” of business combination provision

II. Generally, FM votes against the following items:

Board of Directors

	•		Establishment of classified boards of directors, unless 80% of the board is independent

	•		Proposals requesting re-election of insiders or affiliated directors who serve on audit, compensation, or nominating committees

	•		Limits to tenure of directors

	•		Requirements that candidates for directorships own large amounts of stock before being eligible to be elected

	•		Restoration of cumulative voting in the election of directors

	•		Removal of a director, unless we determine the director (i) is not adequately independent of management or (ii) simultaneously serves on an unreasonable (as determined by FM) number of other boards (other than those affiliated with the issuer). Factors that we consider in evaluating independence include whether the director is an employee of or related to an employee of the issuer or its auditor, whether the director provides professional services to the issuer, or whether the director receives non-board related compensation from the issuer Elimination of Shareholders’ Right to Call Special Meetings

	•		Proposals that relate to the “transaction of other business as properly comes before the meeting”, which extend “blank check” powers to those acting as proxy

	•		Approval of Directors who have failed to act on a shareholder proposal that has been approved by a majority of outstanding shares

	•		Directors at companies where prior non-cash compensation was improperly “backdated” or “springloaded” where one of the following scenarios exists:

	o		(i) it is unknown whether the Compensation Committee had knowledge of such backdating at the time, (ii) the Compensation Committee was not independent at the time, and (iii) the director seeking reelection served on the Compensation Committee at the time; or

	o		(i) it is unknown whether the Compensation Committee had knowledge of such backdating at the time, (ii) the Compensation Committee was independent at the time, and (iii) sufficient controls have not been implemented to avoid similar improper payments going forward; or

	o		(i) the Compensation Committee had knowledge of such backdating at the time, and (ii) the director seeking reelection served on the Compensation Committee at the time; or

	o		(i) the Compensation Committee did not have knowledge of such backdating at the time, and (ii) sufficient controls have not been implemented to avoid similar improper payments going forward

Capitalization

	•		Capitalization changes that add “blank check” classes of stock (i.e. classes of stock with undefined voting rights) or classes that dilute the voting interests of existing shareholders

	•		Capitalization changes that exceed 100% of the issuer’s current authorized capital unless management provides an appropriate rationale for such change

Anti-Takeover Measures

	•		Anti-takeover and related provisions that serve to prevent the majority of shareholders from exercising their rights or effectively deter appropriate tender offers and other offers

	•		Adjournment of Meeting to Solicit Additional Votes

	•		Shareholder rights plans that do not include a shareholder redemption feature (qualifying offer clause), permitting ten percent of the shares to call a special meeting or seek a written consent to vote on rescinding the pill if the board refuses to redeem the pill 90 days after a qualifying offer is announced

	•		Adoption or renewal of a US issuer’s shareholder rights plan (“poison pill”)

Executive Compensation/Equity Compensation

	•		Excessive compensation (i.e. compensation plans which are deemed by FM to be overly dilutive)

	•		Retirement bonuses for non-executive directors and auditors

	•		Proposals requiring the disclosure of executive retirement benefits if the issuer has an independent compensation committee

Routine Business Items

	•		Amendments to bylaws which would require super-majority shareholder votes to pass or repeal certain provisions

	•		Reincorporation in a location which has more stringent anti-takeover and related provisions

	•		Proposals asking the board to adopt any form of majority voting, unless the majority standard indicated is based on a majority of shares outstanding.

Other

	•		Requirements that the company provide costly, duplicative, or redundant reports, or reports of a non-business nature

	•		Restrictions related to social, political, or special interest issues which affect the ability of the company to do business or be competitive and which have significant financial or best-interest impact

	•		Proposals which require inappropriate endorsements or corporate actions

	•		Proposals asking companies to adopt full tenure holding periods for their executives

III. FM evaluates Mergers and Acquisitions on a case-by-case basis. Consistent with our proxy policy, we support management in seeking to achieve their objectives for shareholders. However, in all cases, FM uses its discretion in order to maximize shareholder value. FM generally votes as follows:

	•		Against offers with potentially damaging consequences for minority shareholders because of illiquid stock, especially in some non-US markets

	•		Against offers when we believe that reasonable prospects exist for an enhanced bid or other bidders

	•		Against offers where, at the time of voting, the current market price of the security exceeds the bid price

	•		For proposals to restructure or liquidate closed end investment funds in which the secondary market price is substantially lower than the net asset value

	•		For offers made at a premium where no other higher bidder exists

Protecting Shareholder Value

We at FM agree entirely with the United States Department of Labor’s position that “where proxy voting decisions may have an effect on the economic value of the plan’s underlying investment, plan fiduciaries should make proxy voting decisions with a view to enhancing the value of the shares of stock” (IB 94-2). Our proxy voting policy and procedures are designed with the intent that our clients receive the best possible returns on their investments. We meet directly with corporation representatives and participate in conference calls and third-party inquiries in order to ensure our processes are as fully informed as possible. However, we use each piece of information we receive – whether from clients, consultants, the media, the issuer, ISS or other sources — as one part of our analysis in seeking to carry out our duties as a fiduciary and act in the best interest of our clients. We are not unduly influenced by the identity of any particular source, but use all the information to form our opinion as to the best outcome for our clients.

Through our membership in the Council of Institutional Investors as well as our contact with corporate pension plans, public funds, and unions, we are also able to communicate extensively with other shareholders regarding events and issues relevant to individual corporations, general industry, and current shareholder concerns.

In addition, FM monitors ”target” lists of underperforming companies prepared by various shareholder groups, including: California Public Employee Retirement System, The City of New York - Office of the Comptroller, International Brotherhood of Teamsters, and Council of Institutional Investors. Companies, so identified, receive an individual, systematic review by the FM Manager of Corporate Governance and the Proxy Review Committee, as necessary.

As an active shareholder, FM’s role is to support corporate policies that serve the best interests of our clients. Though we do not seek involvement in the day-to-day operations of an organization, we recognize the need for conscientious oversight of and input into management decisions that may affect a company’s value. To that end, our monitoring of corporate management and industry events is substantially more detailed than that of the typical shareholder. We have demonstrated our willingness to vote against management-sponsored initiatives and to support shareholder proposals when appropriate. To date we have not filed proposals or initiated letter-writing or other campaigns, but have used our active participation in the corporate governance process — especially the proxy voting process — as the most effective means by which to communicate our and our clients’ legitimate shareholder concerns. Should an issue arise in conjunction with a specific corporation that cannot be satisfactorily resolved through these means, we shall consider other approaches.

Potential Conflicts

As discussed above under Process, from time to time, FM will review a proxy which may present a potential conflict of interest. As a fiduciary to its clients, FM takes these potential conflicts very seriously While FM’s only goal in addressing any such potential conflict is to ensure that proxy votes are cast in the clients’ best interests and are not affected by FM’s potential conflict, there are a number of courses FM may take. Although various relationships could be deemed to give rise to a conflict of interest, we have determined that two categories of relationships present a sufficiently serious concern to warrant an alternative process: customers of FM or its affiliates which are among the top 100 clients of FM and its affiliates based upon revenue; and the 10 largest broker-dealers used by SSgA, based upon revenue (a “Material Relationship”).

When the matter falls clearly within the polices set forth above or the guidance previously provided by FM to ISS and the proxy is to be voted in accordance with that guidance, we do not believe that such decision represents a conflict of interest and no special procedures are warranted.

In circumstances where either (i) the matter does not fall clearly within the policies set forth above or the guidance previously provided to ISS, or (ii) FM determines that voting in accordance with such policies or guidance is not in the best interests of its clients, the Manager of Corporate Governance will compare the name of the issuer against a list of the top 100 revenue generating clients of State Street Corporation and its affiliates and a list of the top 10 broker-dealer relationships to determine if a Material Relationship exists. (These lists are updated quarterly.) If the issuer’s name appears on either list and the pre-determined policy is not being followed, FM will employ the services of a third party, wholly independent of FM, its affiliates and those parties involved in the proxy issue, to determine the appropriate vote. However, in certain circumstances the Proxy Review Committee may determine that the use of a third party fiduciary is not necessary or appropriate, either because the matter involved does not involve a material issue or because the issue in question affects the underlying value of the portfolio position and it is appropriate for FM, notwithstanding the potential conflict of interest, to vote the security in a manner that it determines will maximize the value to its client. In such situations, the Proxy Committee, or if a broader discussion is warranted, the SSgA Investment Committee, shall make a decision as to the voting of the proxy. The basis for the voting decision, including the basis for the determination that the decision is in the best interests of FM’s clients, shall be formalized in writing as a part of the minutes to the Investment Committee.

Recordkeeping

In accordance with applicable law, FM shall retain the following documents for not less than five years from the end of the year in which the proxies were voted, the first two years in FM’s office:

	1)		FM’s Proxy Voting Policy and any additional procedures created pursuant to such Policy;

	2)		a copy of each proxy statement FM receives regarding securities held by its clients (note: this requirement may be satisfied by a third party who has agreed in writing to do so or by obtaining a copy of the proxy statement from the EDGAR database);

	3)		a record of each vote cast by FM (note: this requirement may be satisfied by a third party who has agreed in writing to do so);

	4)		a copy of any document created by FM that was material in making its voting decision or that memorializes the basis for such decision; and

	5)		a copy of each written request from a client, and response to the client, for information on how FM voted the client’s proxies.

T. ROWE PRICE PROXY VOTING – PROCESS AND POLICIES

T. Rowe Price Associates, Inc. and T. Rowe Price International, Inc. (“T. Rowe Price”) recognize and adhere to the principle that one of the privileges of owning stock in a company is the right to vote on issues submitted to shareholder vote—such as election of directors and important matters affecting a company’s structure and operations. As an investment adviser with a fiduciary responsibility to its clients, T. Rowe Price analyzes the proxy statements of issuers whose stock is owned by the investment companies that it sponsors and serves as investment adviser. T. Rowe Price also is involved in the proxy process on behalf of its institutional and private counsel clients who have requested such service. For those private counsel clients who have not delegated their voting responsibility but who request advice, T. Rowe Price makes recommendations regarding proxy voting. T. Rowe Price reserves the right to decline to vote proxies in accordance with client-specific voting guidelines.

Proxy Administration

The T. Rowe Price Proxy Committee develops our firm’s positions on all major corporate and social responsibility issues, creates guidelines, and oversees the voting process. The Proxy Committee, composed of portfolio managers, investment operations managers, and internal legal counsel, analyzes proxy policies based on whether they would adversely affect shareholders’ interests and make a company less attractive to own. In evaluating proxy policies each year, the Proxy Committee relies upon our own fundamental research, independent proxy research provided by third parties such as RiskMetrics Group (“RMG”) (formerly known as Institutional Shareholder Services) and Glass Lewis, and information presented by company managements and shareholder groups.

Once the Proxy Committee establishes its recommendations, they are distributed to the firm’s portfolio managers as voting guidelines. Ultimately, the portfolio manager decides how to vote on the proxy proposals of companies in his or her portfolio. Because portfolio managers may have differences of opinion on portfolio companies and their proxies, or their portfolios may have different investment objectives, these factors, among others, may lead to different votes between portfolios on the same proxies. When portfolio managers cast votes that are counter to the Proxy Committee’s guidelines, they are required to document their reasons in writing to the Proxy Committee. Annually, the Proxy Committee reviews T. Rowe Price’s proxy voting process, policies, and voting records.

T. Rowe Price has retained RMG, an expert in the proxy voting and corporate governance area, to provide proxy advisory and voting services. These services include in-depth research, analysis, and voting recommendations as well as vote execution, reporting, auditing and consulting assistance for the handling of proxy voting responsibility and corporate governance-related efforts. While the Proxy Committee relies upon RMG research in establishing T. Rowe Price’s voting guidelines—many of which are consistent with RMG positions—T. Rowe Price occasionally may deviate from RMG recommendations on some general policy issues and a number of specific proxy proposals.

Fiduciary Considerations

T. Rowe Price’s decisions with respect to proxy issues are made in light of the anticipated impact of the issue on the desirability of investing in the portfolio company. Proxies are voted solely in the interests of the client, Price Fund shareholders or, where employee benefit plan assets are involved, in the interests of plan participants and beneficiaries. Practicalities and costs involved with international investing may make it impossible at times, and at other times disadvantageous, to vote proxies in every instance. For example, we might refrain from voting if we or our agents are required to appear in person at a shareholder meeting or if the exercise of voting rights results in the imposition of trading or other ownership restrictions.

Consideration Given Management Recommendations

When determining whether to invest in a particular company, one of the primary factors T. Rowe Price considers is the quality and depth of its management. As a result, T. Rowe Price believes that

recommendations of management on most issues should be given weight in determining how proxy issues should be voted.

T. Rowe Price Voting Policies

Specific voting guidelines have been established by the Proxy Committee for recurring issues that appear on proxies, which are available to clients upon request. The following is a summary of the more significant T. Rowe Price policies:

Election of Directors

T. Rowe Price generally supports slates with a majority of independent directors. We vote against outside directors that do not meet certain criteria relating to their independence but who serve on key board committees. We vote against directors who are unable to dedicate sufficient time to their board duties due to their commitment to other boards. T. Rowe Price also votes against inside directors serving on key board committees and directors who miss more than one-fourth of the scheduled board meetings. We may vote against directors for failing to establish a formal nominating committee, as well as compensation committee members who approve excessive compensation plans. We support efforts to elect all board members annually because boards with staggered terms act as deterrents to takeover proposals. To strengthen boards’ accountability to shareholders, T. Rowe Price generally supports proposals calling for a majority vote threshold for the election of directors.

Executive Compensation

Our goal is to assure that a company’s equity-based compensation plan is aligned with shareholders’ long-term interests. While we evaluate plans on a case-by-case basis, T. Rowe Price generally opposes compensation packages that provide what we view as excessive awards to a few senior executives or that contain excessively dilutive stock option plans. We base our review on criteria such as the costs associated with the plan, plan features, burn rates which are excessive in relation to the company’s peers, dilution to shareholders and comparability to plans in the company’s peer group. We generally oppose plans that give a company the ability to reprice options or to grant options at below market prices, unless such plans appropriately balance shareholder and employee interests, and the retention of key personnel has become a genuine risk to the company’s business. For companies with particularly egregious pay practices we may vote against compensation committee members. Finally, we vote for proposals (either management or shareholder-sponsored) calling for shareholder ratification of a company’s executive compensation practices (“Say-on-Pay” proposals) a majority of the time.

Mergers and Acquisitions – T. Rowe Price considers takeover offers, mergers, and other extraordinary corporate transactions on a case-by-case basis to determine if they are beneficial to shareholders’ current and future earnings stream and to ensure that our Price Funds and clients are receiving fair compensation in exchange for their investment.

Anti-takeover, Capital Structure and Corporate Governance Issues
T. Rowe Price generally opposes anti-takeover measures and other proposals designed to limit the ability of shareholders to act on possible transactions. Such anti-takeover mechanisms include classified boards, supermajority voting requirements, dual share classes and poison pills. We also oppose proposals which give management a “blank check” to create new classes of stock with disparate rights and privileges. When voting on capital structure proposals, we will consider the dilutive impact to shareholders and the effect on shareholder rights. We generally support shareholder proposals that call for the separation of the Chairman and CEO positions unless there are sufficient governance safeguards already in place. With respect to proposals for the approval of a company’s auditor, we typically oppose auditors who have a significant non-audit relationship with the company.

Social and Corporate Responsibility Issues
T. Rowe Price generally votes with a company’s management on social, environmental and corporate responsibility issues unless they have substantial investment implications for the company’s business and operations that have not been adequately addressed by management. T. Rowe Price supports well-targeted shareholder proposals on environmental and other public policy issues that are particularly relevant to a company’s businesses.

Monitoring and Resolving Conflicts of Interest

The Proxy Committee is also responsible for monitoring and resolving possible material conflicts between the interests of T. Rowe Price and those of its clients with respect to proxy voting. We have adopted safeguards to ensure that our proxy voting is not influenced by interests other than those of our clients. While membership on the Proxy Committee is diverse, it does not include individuals whose primary duties relate to client relationship management, marketing or sales. Since our voting guidelines are pre-determined by the Proxy Committee using recommendations from RMG, an independent third party, application of the T. Rowe Price guidelines to vote clients’ proxies should in most instances adequately address any possible conflicts of interest. However, for proxy votes inconsistent with T. Rowe Price guidelines, the Proxy Committee reviews all such proxy votes in order to determine whether the portfolio manager’s voting rationale appears reasonable. The Proxy Committee also assesses whether any business or other relationships between T. Rowe Price and a portfolio company could have influenced an inconsistent vote on that company’s proxy. Issues raising possible conflicts of interest are referred to designated members of the Proxy Committee for immediate resolution prior to the time T. Rowe Price casts its vote. With respect to personal conflicts of interest, T. Rowe Price’s Code of Ethics requires all employees to avoid placing themselves in a “compromising position” where their interests may conflict with those of our clients and restricts their ability to engage in certain outside business activities. Portfolio managers or Proxy Committee members with a personal conflict of interest regarding a particular proxy vote must recuse themselves and not participate in the voting decisions with respect to that proxy.

TEMPLETON GLOBAL ADVISORS LIMITED
PROXY VOTING POLICIES & PROCEDURES

RESPONSIBILITY OF INVESTMENT MANAGER TO VOTE PROXIES

Templeton Global Advisors Limited (hereinafter “Investment Manager”) has delegated its administrative duties with respect to voting proxies to the Proxy Group within Franklin Templeton Companies, LLC (the “Proxy Group”), a wholly-owned subsidiary of Franklin Resources, Inc. Franklin Templeton Companies, LLC provides a variety of general corporate services to its affiliates, including but not limited to legal and compliance activities. Proxy duties consist of analyzing proxy statements of issuers whose stock is owned by any client (including both investment companies and any separate accounts managed by Investment Manager) that has either delegated proxy voting administrative responsibility to Investment Manager or has asked for information and/or recommendations on the issues to be voted. The Proxy Group will process proxy votes on behalf of, and Investment Manager votes proxies solely in the interests of, separate account clients, Investment Manager-managed mutual fund shareholders, or, where employee benefit plan assets are involved, in the interests of the plan participants and beneficiaries (collectively, “Advisory Clients”) that have properly delegated such responsibility or will inform Advisory Clients that have not delegated the voting responsibility but that have requested voting advice about Investment Manager’s views on such proxy votes. The Proxy Group also provides these services to other advisory affiliates of Investment Manager.

HOW INVESTMENT MANAGER VOTES PROXIES

Fiduciary Considerations

Conflicts of Interest

	13.		The issuer is a client⁴⁸ of Investment Manager or its affiliates;

	14.		The issuer is a vendor whose products or services are material or significant to the business of Investment Manager or its affiliates;

	15.		The issuer is an entity participating to a material extent in the distribution of investment products advised, administered or sponsored by Investment Manager or its affiliates (e.g., a broker, dealer or bank);⁴⁹

	16.		An Access Person⁵⁰ of Investment Manager or its affiliates also serves as a director or officer of the issuer;

	17.		A director or trustee of Franklin Resources, Inc. or of a Franklin Templeton investment product, or an immediate family member⁵¹ of such director or trustee, also serves as an officer or director of the issuer; or

	18.		The issuer is Franklin Resources, Inc. or any of its proprietary investment products.

Nonetheless, even though a potential conflict of interest exists, the Investment Manager may vote in opposition to the recommendations of an issuer’s management.


⁴⁸		For purposes of this section, a “client” does not include underlying investors in a commingled trust, Canadian pooled fund, or other pooled investment vehicle managed by the Investment Manager or its affiliates. Sponsors of funds sub-advised by Investment Manager or its affiliates will be considered a “client.”

⁴⁹		The top 40 executing broker-dealers (based on gross brokerage commissions and client commissions), and distributors (based on aggregate 12b-1 distribution fees), as determined on a quarterly basis, will be considered to present a potential conflict of interest. In addition, any insurance company that has entered into a participation agreement with a Franklin Templeton entity to distribute the Franklin Templeton Variable Insurance Products Trust or other variable products will be considered to present a potential conflict of interest.

⁵⁰		“Access Person” shall have the meaning provided under the current Code of Ethics of Franklin Resources, Inc.

⁵¹		The term “immediate family member” means a person’s spouse; child residing in the person’s household (including step and adoptive children); and any dependent of the person, as defined in Section 152 of the Internal Revenue Code (26 U.S.C. 152).

Manager), Fund Administration, Legal and Compliance Departments within Franklin Templeton for evaluation and voting instructions. The Proxy Review Committee may defer to the voting recommendation of RiskMetrics, Glass Lewis, or those of another independent third party provider of proxy services or send the proxy directly to the relevant Advisory Clients.

Weight Given Management Recommendations

THE PROXY GROUP

The Proxy Group is part of the Franklin Templeton Companies, LLC Legal Department and is overseen by legal counsel. Full-time staff members are devoted to proxy voting administration and providing support and assistance where needed. On a daily basis, the Proxy Group will review each proxy upon receipt as well as any agendas, materials and recommendations that they receive from RiskMetrics, Glass Lewis, or other sources. The Proxy Group maintains a log of all shareholder meetings that are scheduled for companies whose securities are held by Investment Manager’s managed funds and accounts. For each shareholder meeting, a member of the Proxy Group will consult with the research analyst that follows the security and provide the analyst with the meeting notice, agenda, RiskMetrics and/or Glass Lewis analyses, recommendations and any other available information. Except in situations identified as presenting material conflicts of interest, Investment Manager’s research analyst and relevant portfolio manager(s) are responsible for making the final voting decision based on their review of the agenda, RiskMetrics and/or Glass Lewis analyses, their knowledge of the company and any other information readily available. In situations where the Investment Manager has not responded with vote recommendations to the Proxy Group by the deadline date, the Proxy Group may defer to the vote recommendations of an independent third party provider of proxy services. Except in cases where the Proxy Group is deferring to the voting recommendation of an independent third party service provider, the Proxy Group must obtain voting instructions from Investment Manager’s research analyst, relevant portfolio manager(s), legal counsel and/or the Advisory Client or Proxy Review Committee prior to submitting the vote.

GENERAL PROXY VOTING GUIDELINES

INVESTMENT MANAGER’S PROXY VOTING POLICIES AND PRINCIPLES

The following guidelines reflect what Investment Manager believes to be good corporate governance and behavior:

proposals to require a majority vote standard for the election of directors; however, if these proposals are binding, the Investment Manager will give careful review on a case-by-case basis of the potential ramifications of such implementation.

PROXY PROCEDURES

The following describes the standard procedures that are to be followed with respect to carrying out Investment Manager’s proxy policy:

	31.		The Proxy Group will identify all Advisory Clients, maintain a list of those clients, and indicate those Advisory Clients who have delegated proxy voting authority to the Investment Manager. The Proxy Group will periodically review and update this list.

	32.		All relevant information in the proxy materials received (e.g., the record date of the meeting) will be recorded immediately by the Proxy Group in a database to maintain control over such materials. The Proxy Group will confirm each relevant Advisory Client’s holdings of the securities and that the client is eligible to vote.

	33.		The Proxy Group will review and compile information on each proxy upon receipt of any agendas, materials, reports, recommendations from RiskMetrics and/or Glass Lewis, or other information. The Proxy Group will then forward this information to the appropriate research analyst and/or

			legal counsel for review and voting instructions.

	34.		In determining how to vote, Investment Manager’s analysts and relevant portfolio manager(s) will consider the General Proxy Voting Guidelines set forth above, their in-depth knowledge of the company, any readily available information and research about the company and its agenda items, and the recommendations put forth by RiskMetrics, Glass Lewis, or other independent third party providers of proxy services.

	35.		The Proxy Group is responsible for maintaining the documentation that supports Investment Manager’s voting position. Such documentation may include, but is not limited to, any information provided by RiskMetrics, Glass Lewis, or other proxy service providers, and, especially as to non-routine, materially significant or controversial matters, memoranda describing the position it has taken. Additionally, the Proxy Group may include documentation obtained from the research analyst, portfolio manager, legal counsel and/or the Proxy Review Committee.

	36.		After the proxy is completed but before it is returned to the issuer and/or its agent, the Proxy Group may review those situations including special or unique documentation to determine that the appropriate documentation has been created, including conflict of interest screening.

	37.		The Proxy Group will attempt to submit Investment Manager’s vote on all proxies to RiskMetrics for processing at least three days prior to the meeting for U.S. securities and 10 days prior to the meeting for foreign securities. However, in certain foreign jurisdictions it may be impossible to return the proxy 10 days in advance of the meeting. In these situations, the Proxy Group will use its best efforts to send the proxy vote to RiskMetrics in sufficient time for the vote to be processed.

	38.		The Proxy Group prepares reports for each client that has requested a record of votes cast. The report specifies the proxy issues that have been voted for the client during the requested period and the position taken with respect to each issue. The Proxy Group sends one copy to the client, retains a copy in the Proxy Group’s files and forwards a copy to either the appropriate portfolio manager or the client service representative. While many Advisory Clients prefer quarterly or annual reports, the Proxy Group will provide reports for any timeframe requested by a client.

	39.		If the Franklin Templeton Services, LLC Fund Treasury Department learns of a vote on a material event that will affect a security on loan, the Fund Treasury Department will notify Investment Manager and obtain instructions regarding whether Investment Manager desires the Fund Treasury Department to contact the custodian bank in an effort to retrieve the securities. If so requested by Investment Manager, the Fund Treasury Department shall use its best efforts to recall any security on loan and will use other practicable and legally enforceable means to ensure that Investment Manager is able to fulfill its fiduciary duty to vote proxies for Advisory Clients with respect to such loaned securities. The Fund Treasury Department will advise the Proxy Group of all recalled securities.

	40.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, on a timely basis, will file all required Form N-PXs, with respect to investment company clients, disclose that its proxy voting record is available on the web site, and will make available the information disclosed in its Form N-PX as soon as is reasonably practicable after filing Form N-PX with the SEC.

	41.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, will ensure that all required disclosure about proxy voting of the investment company clients is made in such clients’ financial statements and disclosure documents.

	42.		The Proxy Group will review the guidelines of RiskMetrics and Glass Lewis, with special emphasis on the factors they use with respect to proxy voting recommendations.

	43.		The Proxy Group will familiarize itself with the procedures of RiskMetrics that govern the transmission of proxy voting information from the Proxy Group to RiskMetrics and periodically review how well this process is functioning.

	44.		The Proxy Group will investigate, or cause others to investigate, any and all instances where these Procedures have been violated or there is evidence that they are not being followed. Based upon the findings of these investigations, the Proxy Group, if practicable, will recommend amendments to these Procedures to minimize the likelihood of the reoccurrence of non-compliance.

	45.		At least annually, the Proxy Group will verify that:

	•		Each proxy or a sample of proxies received has been voted in a manner consistent with these Procedures and the Proxy Voting Guidelines;

	•		Each proxy or sample of proxies received has been voted in accordance with the instructions of the Investment Manager;

	•		Adequate disclosure has been made to clients and fund shareholders about the procedures and how proxies were voted; and

	•		Timely filings were made with applicable regulators related to proxy voting.

As of January 2, 2008

TEMPLETON INVESTMENT COUNSEL, LLC
PROXY VOTING POLICIES & PROCEDURES

RESPONSIBILITY OF INVESTMENT MANAGER TO VOTE PROXIES

Templeton Investment Counsel, LLC (hereinafter “Investment Manager”) has delegated its administrative duties with respect to voting proxies to the Proxy Group within Franklin Templeton Companies, LLC (the “Proxy Group”), a wholly-owned subsidiary of Franklin Resources, Inc. Franklin Templeton Companies, LLC provides a variety of general corporate services to its affiliates, including but not limited to legal and compliance activities. Proxy duties consist of analyzing proxy statements of issuers whose stock is owned by any client (including both investment companies and any separate accounts managed by Investment Manager) that has either delegated proxy voting administrative responsibility to Investment Manager or has asked for information and/or recommendations on the issues to be voted. The Proxy Group will process proxy votes on behalf of, and Investment Manager votes proxies solely in the interests of, separate account clients, Investment Manager-managed mutual fund shareholders, or, where employee benefit plan assets are involved, in the interests of the plan participants and beneficiaries (collectively, “Advisory Clients”) that have properly delegated such responsibility or will inform Advisory Clients that have not delegated the voting responsibility but that have requested voting advice about Investment Manager’s views on such proxy votes. The Proxy Group also provides these services to other advisory affiliates of Investment Manager.

HOW INVESTMENT MANAGER VOTES PROXIES

Fiduciary Considerations

All proxies received by the Proxy Group will be voted based upon Investment Manager’s instructions and/or policies. To assist it in analyzing proxies, Investment Manager subscribes to RiskMetrics Group (“RiskMetrics”), an unaffiliated third party corporate governance research service that provides in-depth analyses of shareholder meeting agendas, vote recommendations, record keeping and vote disclosure services. In addition, Investment Manager subscribes to Glass Lewis & Co., LLC (“Glass Lewis”), an unaffiliated third party analytical research firm, to receive analyses and vote recommendations on the shareholder meetings of publicly held U.S. companies. Although RiskMetrics’ and/or Glass Lewis’ analyses are thoroughly reviewed and considered in making a final voting decision, Investment Manager does not consider recommendations from RiskMetrics, Glass Lewis, or any other third party to be determinative of Investment Manager’s ultimate decision. As a matter of policy, the officers, directors and employees of Investment Manager and the Proxy Group will not be influenced by outside sources whose interests conflict with the interests of Advisory Clients.

Conflicts of Interest

	19.		The issuer is a client⁵² of Investment Manager or its affiliates;

	20.		The issuer is a vendor whose products or services are material or significant to the business of Investment Manager or its affiliates;

	21.		The issuer is an entity participating to a material extent in the distribution of investment products advised, administered or sponsored by Investment Manager or its affiliates (e.g., a broker, dealer or bank);⁵³

	22.		An Access Person⁵⁴ of Investment Manager or its affiliates also serves as a director or officer of the issuer;

	23.		A director or trustee of Franklin Resources, Inc. or of a Franklin Templeton investment product, or an immediate family member⁵⁵ of such director or trustee, also serves as an officer or director of the issuer; or

	24.		The issuer is Franklin Resources, Inc. or any of its proprietary investment products.

Nonetheless, even though a potential conflict of interest exists, the Investment Manager may vote in opposition to the recommendations of an issuer’s management.


⁵²		For purposes of this section, a “client” does not include underlying investors in a commingled trust, Canadian pooled fund, or other pooled investment vehicle managed by the Investment Manager or its affiliates. Sponsors of funds sub-advised by Investment Manager or its affiliates will be considered a “client.”

⁵³		The top 40 executing broker-dealers (based on gross brokerage commissions and client commissions), and distributors (based on aggregate 12b-1 distribution fees), as determined on a quarterly basis, will be considered to present a potential conflict of interest. In addition, any insurance company that has entered into a participation agreement with a Franklin Templeton entity to distribute the Franklin Templeton Variable Insurance Products Trust or other variable products will be considered to present a potential conflict of interest.

⁵⁴		“Access Person” shall have the meaning provided under the current Code of Ethics of Franklin Resources, Inc.

⁵⁵		The term “immediate family member” means a person’s spouse; child residing in the person’s household (including step and adoptive children); and any dependent of the person, as defined in Section 152 of the Internal Revenue Code (26 U.S.C. 152).

Weight Given Management Recommendations

One of the primary factors Investment Manager considers when determining the desirability of investing in a particular company is the quality and depth of that company’s management. Accordingly, the recommendation of management on any issue is a factor that Investment Manager considers in determining how proxies should be voted. However, Investment Manager does not consider recommendations from management to be determinative of Investment Manager’s ultimate decision. As a matter of practice, the votes with respect to most issues are cast in accordance with the position of the company’s management. Each issue, however, is considered on its own merits, and Investment Manager will not support the position of a company’s management in any situation where it determines that the ratification of management’s position would adversely affect the investment merits of owning that company’s shares.

THE PROXY GROUP

GENERAL PROXY VOTING GUIDELINES

INVESTMENT MANAGER’S PROXY VOTING POLICIES AND PRINCIPLES

The following guidelines reflect what Investment Manager believes to be good corporate governance and behavior:

PROXY PROCEDURES

The following describes the standard procedures that are to be followed with respect to carrying out Investment Manager’s proxy policy:

	46.		The Proxy Group will identify all Advisory Clients, maintain a list of those clients, and indicate those Advisory Clients who have delegated proxy voting authority to the Investment Manager. The Proxy Group will periodically review and update this list.

	47.		All relevant information in the proxy materials received (e.g., the record date of the meeting) will be recorded immediately by the Proxy Group in a database to maintain control over such materials. The Proxy Group will confirm each relevant Advisory Client’s holdings of the securities and that the client is eligible to vote.

	48.		The Proxy Group will review and compile information on each proxy upon receipt of any agendas, materials, reports, recommendations from RiskMetrics and/or Glass Lewis, or other information. The Proxy Group will then forward this information to the appropriate research analyst and/or

			legal counsel for review and voting instructions.

	49.		In determining how to vote, Investment Manager’s analysts and relevant portfolio manager(s) will consider the General Proxy Voting Guidelines set forth above, their in-depth knowledge of the company, any readily available information and research about the company and its agenda items, and the recommendations put forth by RiskMetrics, Glass Lewis, or other independent third party providers of proxy services.

	50.		The Proxy Group is responsible for maintaining the documentation that supports Investment Manager’s voting position. Such documentation may include, but is not limited to, any information provided by RiskMetrics, Glass Lewis, or other proxy service providers, and, especially as to non-routine, materially significant or controversial matters, memoranda describing the position it has taken. Additionally, the Proxy Group may include documentation obtained from the research analyst, portfolio manager, legal counsel and/or the Proxy Review Committee.

	51.		After the proxy is completed but before it is returned to the issuer and/or its agent, the Proxy Group may review those situations including special or unique documentation to determine that the appropriate documentation has been created, including conflict of interest screening.

	52.		The Proxy Group will attempt to submit Investment Manager’s vote on all proxies to RiskMetrics for processing at least three days prior to the meeting for U.S. securities and 10 days prior to the meeting for foreign securities. However, in certain foreign jurisdictions it may be impossible to return the proxy 10 days in advance of the meeting. In these situations, the Proxy Group will use its best efforts to send the proxy vote to RiskMetrics in sufficient time for the vote to be processed.

	53.		The Proxy Group prepares reports for each client that has requested a record of votes cast. The report specifies the proxy issues that have been voted for the client during the requested period and the position taken with respect to each issue. The Proxy Group sends one copy to the client, retains a copy in the Proxy Group’s files and forwards a copy to either the appropriate portfolio manager or the client service representative. While many Advisory Clients prefer quarterly or annual reports, the Proxy Group will provide reports for any timeframe requested by a client.

	54.		If the Franklin Templeton Services, LLC Fund Treasury Department learns of a vote on a material event that will affect a security on loan, the Fund Treasury Department will notify Investment Manager and obtain instructions regarding whether Investment Manager desires the Fund Treasury Department to contact the custodian bank in an effort to retrieve the securities. If so requested by Investment Manager, the Fund Treasury Department shall use its best efforts to recall any security on loan and will use other practicable and legally enforceable means to ensure that Investment Manager is able to fulfill its fiduciary duty to vote proxies for Advisory Clients with respect to such loaned securities. The Fund Treasury Department will advise the Proxy Group of all recalled securities.

	55.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, on a timely basis, will file all required Form N-PXs, with respect to investment company clients, disclose that its proxy voting record is available on the web site, and will make available the information disclosed in its Form N-PX as soon as is reasonably practicable after filing Form N-PX with the SEC.

	56.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, will ensure that all required disclosure about proxy voting of the investment company clients is made in such clients’ financial statements and disclosure documents.

	57.		The Proxy Group will review the guidelines of RiskMetrics and Glass Lewis, with special emphasis on the factors they use with respect to proxy voting recommendations.

	58.		The Proxy Group will familiarize itself with the procedures of RiskMetrics that govern the transmission of proxy voting information from the Proxy Group to RiskMetrics and periodically review how well this process is functioning.

	59.		The Proxy Group will investigate, or cause others to investigate, any and all instances where these Procedures have been violated or there is evidence that they are not being followed. Based upon the findings of these investigations, the Proxy Group, if practicable, will recommend amendments to these Procedures to minimize the likelihood of the reoccurrence of non-compliance.

	60.		At least annually, the Proxy Group will verify that:

	•		Each proxy or a sample of proxies received has been voted in a manner consistent with these Procedures and the Proxy Voting Guidelines;

	•		Each proxy or sample of proxies received has been voted in accordance with the instructions of the Investment Manager;

	•		Adequate disclosure has been made to clients and fund shareholders about the procedures and how proxies were voted; and

	•		Timely filings were made with applicable regulators related to proxy voting.

As of January 2, 2008

TEMPLETON INVESTMENT MANAGEMENT
a division of Franklin Templeton Investments Corp.
PROXY VOTING POLICIES & PROCEDURES

RESPONSIBILITY OF INVESTMENT MANAGER TO VOTE PROXIES

Templeton Investment Management (hereinafter “Investment Manager”) has delegated its administrative duties with respect to voting proxies to the Proxy Group within Franklin Templeton Companies, LLC (the “Proxy Group”), a wholly-owned subsidiary of Franklin Resources, Inc. Franklin Templeton Companies, LLC provides a variety of general corporate services to its affiliates, including but not limited to legal and compliance activities. Proxy duties consist of analyzing proxy statements of issuers whose stock is owned by any client (including both investment companies and any separate accounts managed by Investment Manager) that has either delegated proxy voting administrative responsibility to Investment Manager or has asked for information and/or recommendations on the issues to be voted. The Proxy Group will process proxy votes on behalf of, and Investment Manager votes proxies solely in the interests of, separate account clients, Investment Manager-managed mutual fund shareholders, or, where employee benefit plan assets are involved, in the interests of the plan participants and beneficiaries (collectively, “Advisory Clients”) that have properly delegated such responsibility or will inform Advisory Clients that have not delegated the voting responsibility but that have requested voting advice about Investment Manager’s views on such proxy votes. The Proxy Group also provides these services to other advisory affiliates of Investment Manager.

HOW INVESTMENT MANAGER VOTES PROXIES

Fiduciary Considerations
All proxies received by the Proxy Group will be voted based upon Investment Manager’s instructions and/or policies. To assist it in analyzing proxies, Investment Manager subscribes to RiskMetrics Group (“RiskMetrics”), an unaffiliated third party corporate governance research service that provides in-depth analyses of shareholder meeting agendas, vote recommendations, record keeping and vote disclosure services. In addition, Investment Manager subscribes to Glass Lewis & Co., LLC (“Glass Lewis”), an unaffiliated third party analytical research firm, to receive analyses and vote recommendations on the shareholder meetings of publicly held U.S. companies. Although RiskMetrics’ and/or Glass Lewis’ analyses are thoroughly reviewed and considered in making a final voting decision, Investment Manager does not consider recommendations from RiskMetrics, Glass Lewis, or any other third party to be determinative of Investment Manager’s ultimate decision. As a matter of policy, the officers, directors and employees of Investment Manager and the Proxy Group will not be influenced by outside sources whose interests conflict with the interests of Advisory Clients.

Conflicts of Interest

	25.		The issuer is a client⁵⁶ of Investment Manager or its affiliates;

	26.		The issuer is a vendor whose products or services are material or significant to the business of Investment Manager or its affiliates;

	27.		The issuer is an entity participating to a material extent in the distribution of investment products advised, administered or sponsored by Investment Manager or its affiliates (e.g., a broker, dealer or bank);⁵⁷

	28.		An Access Person⁵⁸ of Investment Manager or its affiliates also serves as a director or officer of the issuer;

	29.		A director or trustee of Franklin Resources, Inc. or of a Franklin Templeton investment product, or an immediate family member⁵⁹ of such director or trustee, also serves as an officer or director of the issuer; or

	30.		The issuer is Franklin Resources, Inc. or any of its proprietary investment products.

Nonetheless, even though a potential conflict of interest exists, the Investment Manager may vote in opposition to the recommendations of an issuer’s management.


⁵⁶		For purposes of this section, a “client” does not include underlying investors in a commingled trust, Canadian pooled fund, or other pooled investment vehicle managed by the Investment Manager or its affiliates. Sponsors of funds sub-advised by Investment Manager or its affiliates will be considered a “client.”

⁵⁷		The top 40 executing broker-dealers (based on gross brokerage commissions and client commissions), and distributors (based on aggregate 12b-1 distribution fees), as determined on a quarterly basis, will be considered to present a potential conflict of interest. In addition, any insurance company that has entered into a participation agreement with a Franklin Templeton entity to distribute the Franklin Templeton Variable Insurance Products Trust or other variable products will be considered to present a potential conflict of interest.

⁵⁸		“Access Person” shall have the meaning provided under the current Code of Ethics of Franklin Resources, Inc.

⁵⁹		The term “immediate family member” means a person’s spouse; child residing in the person’s household (including step and adoptive children); and any dependent of the person, as defined in Section 152 of the Internal Revenue Code (26 U.S.C. 152).

Weight Given Management Recommendations
One of the primary factors Investment Manager considers when determining the desirability of investing in a particular company is the quality and depth of that company’s management. Accordingly, the recommendation of management on any issue is a factor that Investment Manager considers in determining how proxies should be voted. However, Investment Manager does not consider recommendations from management to be determinative of Investment Manager’s ultimate decision. As a matter of practice, the votes with respect to most issues are cast in accordance with the position of the company’s management. Each issue, however, is considered on its own merits, and Investment Manager will not support the position of a company’s management in any situation where it determines that the ratification of management’s position would adversely affect the investment merits of owning that company’s shares.

THE PROXY GROUP

GENERAL PROXY VOTING GUIDELINES

INVESTMENT MANAGER’S PROXY VOTING POLICIES AND PRINCIPLES

The following guidelines reflect what Investment Manager believes to be good corporate governance and behavior:

PROXY PROCEDURES

The following describes the standard procedures that are to be followed with respect to carrying out Investment Manager’s proxy policy:

	61.		The Proxy Group will identify all Advisory Clients, maintain a list of those clients, and indicate those Advisory Clients who have delegated proxy voting authority to the Investment Manager. The Proxy Group will periodically review and update this list.

	62.		All relevant information in the proxy materials received (e.g., the record date of the meeting) will be recorded immediately by the Proxy Group in a database to maintain control over such materials. The Proxy Group will confirm each relevant Advisory Client’s holdings of the securities and that the client is eligible to vote.

	63.		The Proxy Group will review and compile information on each proxy upon receipt of any agendas, materials, reports, recommendations from RiskMetrics and/or Glass Lewis, or other information. The Proxy Group will then forward this information to the appropriate research analyst and/or

			legal counsel for review and voting instructions.

	64.		In determining how to vote, Investment Manager’s analysts and relevant portfolio manager(s) will consider the General Proxy Voting Guidelines set forth above, their in-depth knowledge of the company, any readily available information and research about the company and its agenda items, and the recommendations put forth by RiskMetrics, Glass Lewis, or other independent third party providers of proxy services.

	65.		The Proxy Group is responsible for maintaining the documentation that supports Investment Manager’s voting position. Such documentation may include, but is not limited to, any information provided by RiskMetrics, Glass Lewis, or other proxy service providers, and, especially as to non-routine, materially significant or controversial matters, memoranda describing the position it has taken. Additionally, the Proxy Group may include documentation obtained from the research analyst, portfolio manager, legal counsel and/or the Proxy Review Committee.

	66.		After the proxy is completed but before it is returned to the issuer and/or its agent, the Proxy Group may review those situations including special or unique documentation to determine that the appropriate documentation has been created, including conflict of interest screening.

	67.		The Proxy Group will attempt to submit Investment Manager’s vote on all proxies to RiskMetrics for processing at least three days prior to the meeting for U.S. securities and 10 days prior to the meeting for foreign securities. However, in certain foreign jurisdictions it may be impossible to return the proxy 10 days in advance of the meeting. In these situations, the Proxy Group will use its best efforts to send the proxy vote to RiskMetrics in sufficient time for the vote to be processed.

	68.		The Proxy Group prepares reports for each client that has requested a record of votes cast. The report specifies the proxy issues that have been voted for the client during the requested period and the position taken with respect to each issue. The Proxy Group sends one copy to the client, retains a copy in the Proxy Group’s files and forwards a copy to either the appropriate portfolio manager or the client service representative. While many Advisory Clients prefer quarterly or annual reports, the Proxy Group will provide reports for any timeframe requested by a client.

	69.		If the Franklin Templeton Services, LLC Fund Treasury Department learns of a vote on a material event that will affect a security on loan, the Fund Treasury Department will notify Investment Manager and obtain instructions regarding whether Investment Manager desires the Fund Treasury Department to contact the custodian bank in an effort to retrieve the securities. If so requested by Investment Manager, the Fund Treasury Department shall use its best efforts to recall any security on loan and will use other practicable and legally enforceable means to ensure that Investment Manager is able to fulfill its fiduciary duty to vote proxies for Advisory Clients with respect to such loaned securities. The Fund Treasury Department will advise the Proxy Group of all recalled securities.

	70.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, on a timely basis, will file all required Form N-PXs, with respect to investment company clients, disclose that its proxy voting record is available on the web site, and will make available the information disclosed in its Form N-PX as soon as is reasonably practicable after filing Form N-PX with the SEC.

	71.		The Proxy Group, in conjunction with Legal Staff responsible for coordinating Fund disclosure, will ensure that all required disclosure about proxy voting of the investment company clients is made in such clients’ financial statements and disclosure documents.

	72.		The Proxy Group will review the guidelines of RiskMetrics and Glass Lewis, with special emphasis on the factors they use with respect to proxy voting recommendations.

	73.		The Proxy Group will familiarize itself with the procedures of RiskMetrics that govern the transmission of proxy voting information from the Proxy Group to RiskMetrics and periodically review how well this process is functioning.

	74.		The Proxy Group will investigate, or cause others to investigate, any and all instances where these Procedures have been violated or there is evidence that they are not being followed. Based upon the findings of these investigations, the Proxy Group, if practicable, will recommend amendments to these Procedures to minimize the likelihood of the reoccurrence of non-compliance.

	75.		At least annually, the Proxy Group will verify that:

	•		Each proxy or a sample of proxies received has been voted in a manner consistent with these Procedures and the Proxy Voting Guidelines;

	•		Each proxy or sample of proxies received has been voted in accordance with the instructions of the Investment Manager;

	•		Adequate disclosure has been made to clients and fund shareholders about the procedures and how proxies were voted; and

	•		Timely filings were made with applicable regulators related to proxy voting.

As of January 2, 2008


		Effective May 13, 2008

UBS GLOBAL ASSET MANAGEMENT AMERICAS
CORPORATE GOVERNANCE AND PROXY VOTING
POLICY AND PROCEDURES

Policy Summary

Underlying our voting and corporate governance policies we have two fundamental objectives:

1. We seek to act in the best financial interests of our clients to enhance the long-term value of their investments.

2. As an investment advisor, we have a strong commercial interest that companies in which we invest on behalf of our clients are successful. We promote best practice in the boardroom.

To achieve these objectives, we have implemented this Policy, which we believe is reasonably designed to guide our exercise of voting rights and the taking of other appropriate actions, and to support and encourage sound corporate governance practice.

This policy helps to maximize the economic value of our clients’ investments by establishing proxy voting standards that conform with UBS Global Asset Management’s philosophy of good corporate governance.

Risks Addressed by this Policy

This policy is designed to addresses the following risks:

	•		Failure to provide required disclosures for investment advisers and registered investment companies.

	•		Failure to vote proxies in best interest of clients and funds.

	•		Failure to identify and address conflicts of interest.

	•		Failure to provide adequate oversight of third party service providers.

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TABLE OF CONTENTS


Voting and Corporate Governance Policy

A. Global Corporate Governance Principles			2

B. Macro-Rationales and Explanations for Proxy Voting			4

C. Global Voting and Corporate Governance Procedures			11

I. Corporate Governance Committees			12

II. Interaction with Company and Board of Directors			13

III. Contacting the Media			14

IV. Proxy Voting Process			14

V. Proxy Voting Disclosure Guidelines			15

VI. Proxy Voting Conflict Guidelines			16

VII. Record Keeping			16

Appendix A — Special Disclosure Guidelines for Registered Investment Company Clients			17

A. Global Corporate Governance Principles

Overview

These principles describe the approach of UBS Global Asset Management (Americas) Inc., (UBS Global AM) to corporate governance and to the exercise of voting rights on behalf of its clients (which include funds, individuals, pension schemes, and all other advisory clients).

Where clients of UBS Global AM have delegated the discretion to exercise the voting rights for shares they beneficially own, UBS Global AM has a fiduciary duty to vote shares in the clients’ best interests. These principles set forth UBS Global AM’s approach to corporate governance and to the exercise of voting rights when clients have delegated their voting rights to UBS Global AM.

Key principles

UBS Global AM’s global corporate governance principles are based on our active investment style and structure whereby we have detailed knowledge of the investments we make on behalf of our clients and therefore are in a position to judge what is in the best interests of our clients as beneficial owners.

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We believe voting rights have economic value and should be treated accordingly. Where we have been given the discretion to vote on clients’ behalves, we will exercise our delegated fiduciary responsibility by voting in a manner we believe will most favorably impact the economic value of their investments.

Good corporate governance should, in the long term, lead towards both better corporate performance and improved shareholder value. Thus, we expect board members of companies in which we have invested to act in the service of the shareholders, view themselves as stewards of the company, exercise good judgment and practice diligent oversight of the management of the company. A commitment to acting in as transparent a manner as possible is fundamental to good governance.

Underlying our voting and corporate governance principles we have two fundamental objectives:

	1.		We seek to act in the best financial interests of our clients to enhance the long-term value of their investments.

	2.		As an investment advisor, we have a strong commercial interest that companies in which we invest, on behalf of our clients are successful. We promote best practice in the boardroom.

To achieve these objectives, we have established this Policy, which we believe is reasonably designed to guide our exercise of voting rights and the taking of other appropriate actions, and to support and encourage sound corporate governance practice. These Principles are implemented globally to harmonize our philosophies across UBS Global AM offices worldwide. However, these Principles permit individual regions or countries within UBS Global AM the discretion to reflect local laws or standards where appropriate.

While there is no absolute set of standards that determine appropriate governance under all circumstances and no set of values will guarantee ethical board behavior, there are certain principles, which provide evidence of good corporate governance. We will, therefore, generally exercise voting rights on behalf of clients in accordance with the following principles.

Board Structure

Some significant factors for an effective board structure include:

•		An effective Chairman is key;

•		The roles of Chairman and Chief Executive generally should be separated;

•		Board members should have appropriate and diverse experience and be capable of providing good judgment and diligent oversight of the management of the company;

•		The Board should include executive and non-executive directors; and

•		Non-executive directors should provide a challenging, but generally supportive environment for the executive directors.

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Board Responsibilities

Some significant factors for effective discharge of board responsibilities include:

•		The whole Board should be fully involved in endorsing strategy and in all major strategic decisions (e.g., mergers and acquisitions).

•		The Board should ensure that at all times:

	•		Appropriate management succession plans are in place;

	•		The interests of executives and shareholders are aligned;

	•		The financial audit is independent and accurate;

	•		The brand and reputation of the company is protected and enhanced;

	•		A constructive dialogue with shareholders is encouraged; and

	•		It receives all the information necessary to hold management to account.

Areas of Focus

Some examples of areas of concern related to our Corporate Governance focus include the following:

•		Economic value resulting from acquisitions or disposals;

•		Operational performance;

•		Quality of management;

•		Independent non-executive directors not holding executive management to account;

•		Quality of internal controls;

•		Lack of transparency;

•		Inadequate succession planning;

•		Poor approach to corporate social responsibility;

•		Inefficient management structure; and

•		Corporate activity designed to frustrate the ability of shareholders to hold the Board to account or realize the maximum value of their investment.

B. Macro-Rationales and Explanations for Proxy Voting

Overview

These macro-rationales and explanations detail UBS Global AM’s approach to the exercise of voting rights on behalf of its clients (which includes funds, individuals, pension schemes, and all other advisory clients). The basis of the macro rationales and explanations is to define guidelines for voting shares held on behalf of our advisory clients in their best interests.

Macro-Rationales are used to help explain our proxy vote. The Macro-Rationales reflect our global governance principles and local policies, enables voting consistency and provides flexibility our analyst can reflect specific knowledge of the company as it relates to a proposal. Explanations are associated with each Macro-Rationale and are used in our proxy voting operations to communicate our voting decision internally and on client reports.

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PROXY VOTING MACRO RATIONALES & EXPLAINATIONS


Macro Rationale		Explanation
1. General Guidelines

a. When our view of the management is favorable, we generally support current management initiatives. When our view is that changes to the management structure would probably increase shareholder value, we may not support existing management proposals.		1. View of management is Favorable. 2. View of management is Un-Favorable.

b. If management’s performance has been questionable we may abstain or vote against specific proxy proposals.		1. Management performance is questionable.

c. Where there is a clear conflict between management and shareholder interests, even in those cases where management has been doing a good job, we may elect to vote against management.		1. A conflict exists between the board and shareholder interests.

d. In general, we oppose proposals, which in our view, act to entrench management.		1. Proposal entrenches management.

e. In some instances, even though we strongly support management, there are some corporate governance issues that, in spite of management objections, we believe should be subject to shareholder approval.		1. While we support management, this proposal should be voted on by shareholders.

2. Board of Directors and Auditors

a. Unless our objection to management’s recommendation is strenuous, if we believe auditors are competent and professional, we support continuity in the appointed auditing firm subject to regular review.		1. We believe the auditors are competent. 2. We object to these auditors. 3. Nominee for independent Internal Statutory Auditor not considered independent.

b. We generally vote for proposals that seek to fix the size of the board and/or require shareholder approval to alter the size of the board and that allow shareholders to remove directors with or without cause.		1. Shareholders should be able to set the size of the board.

c. We generally vote for proposals that permit shareholders to act by written consent and/or give the right to shareholders to call a special meeting.		1. Shareholders should have the right to call a special meeting.

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Macro Rationale		Explanation
d. We will vote for separation of Chairman and CEO if we believe it will lead to better company management, otherwise, we will support an outside lead director board structure.		1. Company does not have a lead director. 2. Company has a lead director. 3. Combined Chairman and Chief Executive, contrary to best practice.

e. We will normally vote for all board members unless we determine conflicts exist or the board is not independent.		1. Board ignored shareholder vote. 2. Executive contract exceeds 1 year in length. 3. Not considered independent insufficient independent non-executives.

		4. Member of the Audit or Remuneration Committee(s), not considered Independent.

		5. Bundled resolution for election of Directors not appropriate.

		6. Not Independent, serves on the Compensation and Nomination Committees.

		7. Executive contract exceeds 4 years.

		8. Not in shareholders’ interests.

3. Compensation

a. We will not try to micro-manage compensation schemes; however, we believe remuneration should not be excessive, and we will not support compensation plans that are poorly structured or otherwise egregious.		1. We will not-micro manage compensation. 2. The overall quantum of remuneration is too high.

b. Senior management compensation should be set by independent directors according to industry standards, taking advice from benefits consultants where appropriate.		1. Compensation should be set by the board, not shareholders.

c. All senior management and board compensation should be disclosed within annual financial statements, including the value of fringe benefits, company pension contributions, deferred compensation and any company loans.		1. Transparency in compensation is desired.

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Macro Rationale		Explanation
d. We may vote against a compensation or incentive program if it is not adequately tied to a company’s fundamental financial performance; is vague; is not in line with market practices; allows for option re-pricing; does not have adequate performance hurdles or is highly dilutive.		1. Remuneration policy insufficiently aligned with shareholder interests. 2. The vesting conditions are inappropriate. 3. The vesting conditions are insufficiently challenging. 4. The matching awards are too generous. 5. The re-pricing of options is against best practice. 6. Dilution of executive remuneration scheme exceeds best practice guidelines. 7. Plan structure does not provide suitable long term incentive. 8. Performance conditions unsatisfactory. 9. Contrary to best market practice.

e. Where company and management’s performance has been poor, we may object to the issuance of additional shares for option purposes such that management is rewarded for poor performance or further entrenches its position.		1. Rewards for poor performance are unacceptable.

f. Given the increased level of responsibility and oversight required of directors, it is reasonable to expect that compensation should increase commensurably. We consider that there should be an appropriate balance between fixed and variable elements of compensation and between short and long term incentives.		1. Compensation should be balanced.

g. In order to increase reporting transparency and approximate accuracy, we believe stock options should be expensed.		1. Stock Options should be expensed.

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Rationale		Explanation
4. Governance Provisions

a. We believe that votes at company meetings should be determined on the basis of one share one vote. We will vote against cumulative voting proposals.		1. One Share, One Vote.

b. We believe that “poison pill” proposals, which dilute an issuer’s stock when triggered by particular events, such as take-over bids or buy-outs, should be voted on by the shareholders and will support attempts to bring them before the shareholders.		1. Poison Pill proposals should have shareholder approval. 2. Current anti-takeover provisions are adequate.

c. Any substantial new share issuance should require prior shareholder approval.		1. Significant share increase should have shareholder approval.

d. We believe proposals that authorize the issuance of new stock without defined terms or have conditions that are intended to thwart a take-over or restrict effective control by shareholders should be discouraged.		1. Blank check stock issuance is not acceptable. 2. Anti-takeover defense, not in shareholders interests. 3. General authority to issue shares without pre-emption rights not in shareholders interests.

e. We will support directives to increase the independence of the board of directors when we believe that the measures will improve shareholder value.		1. We support efforts to improve board independence.

f. We generally do not oppose management’s recommendation to implement a staggered or classified board and generally support the regular re-election of directors on a rotational basis as it may provide some continuity of oversight.		1. Staggered or classified boards provide continuity. 2. Annual election of directors agreeable with management approval.

g. We will support reasonable proposals that enable shareholders to directly nominate directors.		1. Proposal to nominate directors is reasonable. 2. Proposal to nominate directors is questionable.

h. We will vote for shareholder proposals requesting directors be elected by a Majority Vote unless the company has cumulative voting, a director resignation policy in place or is very likely to have one in place by the next meeting.		1. A director resignation policy is in place. 2. A director resignation policy is not in place.

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Macro Rationale		Explanation
i. We will normally vote for proposals that reduce supermajority voting limits.		1. We support reductions in super majority voting. 2. Existing super majority voting conditions are reasonable.

j. We will vote in favour of shareholder resolutions for confidential voting.		1. We encourage confidential voting.

5. Capital Structure and Corporate Restructuring

a. It is difficult to direct where a company should incorporate, however, in instances where a move is motivated solely to entrench management or restrict effective corporate governance, we will vote accordingly.		1. Companies are free to incorporate anywhere. 2. Actions motivated to entrench management.

b. In general we will oppose management initiatives to create dual classes of stock, which serves to insulate company management from shareholder opinion and action. We support shareholder proposals to eliminate dual class schemes.		1. Dual classes of stock are inappropriate.

6. Mergers, Tenders Offers & Proxy Contests

a. Based on our analysis and research we will support proposals that increase shareholder value and vote against proposals that do not.		1. We agree with the merger. 2. We object to the merger.

7. Social, Environmental, Political & Cultural

a. Depending on the situation, we do not typically vote to prohibit a company from doing business anywhere in the world.		1. Companies should feel free to compete anywhere in the world.

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Macro Rationale		Explanation
b. There are occasional issues, we support, that encourage management to make changes or adopt more constructive policies with respect to social, environmental, political and other special interest issues, but in many cases we believe that the shareholder proposal may be too binding or restrict management’s ability to find an optimal solution. While we wish to remain sensitive to these issues, we believe there are better ways to resolve them than through a proxy proposal. We prefer to address these issues through engagement.		1. Special interest proposals should not be addressed in the proxy.

c. Unless directed by clients to vote in favour of social, environmental, political and other special interest proposals, we are generally opposed to special interest proposals that involve an economic cost to the company or that restrict the freedom of management to operate in the best interest of the company and its shareholders.		1. Proposal poses an unnecessary economic cost on the company

8. Administrative and Operations

a. Occasionally, stockholder proposals, such as asking for reports, conducting studies and making donations to the poor, are presented in a way that appear to be honest attempts at bringing up a worthwhile issue. Nevertheless, judgment must be exercised with care, as we do not expect our shareholder companies to be charitable institutions.		1. Special reports, studies and disclosures are not considered economic.

b. We are sympathetic to shareholders who are long-term holders of a company’s stock, who desire to make concise statements about the long-term operations of the company in the proxy statement. However, because regulatory agencies do not require such actions, we may abstain unless we believe there are compelling reasons to vote for or against.		1. Regulatory agencies do not require this action.

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Macro Rationale		Explanation
9. Miscellaneous

a. Where a client has given specific direction as to how to exercise voting rights on its behalf, we will vote in accordance with a client’s direction.		1. Voted in accordance with a client guideline.

b. Where we have determined that the voting of a particular proxy is of limited benefit to clients or where the costs of voting a proxy outweigh the benefit to clients, we may abstain or choose not to vote. Among others, such costs may include the cost of translating a proxy, a requirement to vote in person at a shareholders meeting or if the process of voting restricts our ability to sell for a period of time (an opportunity cost).		1. Obstacles exist to effectively voting this proxy. 2. Local voting practices could restrict our ability to manage the portfolio.

c. For holdings managed pursuant to quantitative, index or index-like strategies, we may delegate the authority to exercise voting rights for such strategies to an independent proxy voting and research service with the direction that the votes be exercised in accordance with this Policy. If such holdings are also held in an actively managed strategy, we will exercise the voting rights for the passive holdings according to the active strategy.		1. Voting delegated to a proxy voting service per our guidelines.

d. In certain instances when we do not have enough information we may choose to abstain or vote against a particular proposal.		1. Lack of details on proposals.

C. Global Voting and Corporate Governance Procedures

Overview

Where clients have delegated the discretion to exercise the voting rights for shares they beneficially own to UBS Global AM, we have a fiduciary duty to vote shares in the clients’ best interests. These procedures provide a structure for appropriately discharging this duty, including the handling of conflicts of interest.

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I. Corporate Governance Committees

Members

The UBS Global Asset Management Global Corporate Governance Committee (the “Global Committee) will approve the membership of the UBS Global AM Corporate Governance Committee (the “Americas Committee”). The membership in the Global Committee will be approved by the Equities Investment Committee of UBS Global Asset Management.

Responsibilities of the Global Committee

•		To review, approve and oversee the implementation of the Global Corporate Governance Principles.

•		Keep abreast of and share trends in corporate governance and update these principles as necessary.

•		To provide a forum for discussing corporate governance issues between regions.

•		Coordinate with the Communications group on all corporate or other communication related to global proxy issues.

•		Consult with Analysts, Research Directors and others regarding issues relevant to portfolio companies.

•		Engage and oversee any independent proxy voting services being used.

•		Oversee the activities of the Local Corporate Governance Committees.

•		Review and resolve conflicts of interest.

Meetings

Meetings will be held at least quarterly.

Local Corporate Governance Committees

Each office or region, as applicable, will set up a Local Corporate Governance Committee to discuss local corporate governance issues and to review proxies. Each Local Corporate Governance Committee will set its own agenda. The Global Committee will nominate the chairs for the Local Corporate Governance Committees. The local chair will nominate, for approval by the Global Committee, additional persons as candidates for membership on the local committee.

Responsibilities of the Americas Committee

The Americas Committee will serve as the local committee and is responsible for implementing this Policy in the Americas Region.

•

Keep abreast of and share trends in corporate governance and update local policy as necessary.

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•		Provide a forum for discussing corporate governance issues within a region.

•		Oversee the proxy voting process.

•		Coordinate with the Communications group all corporate or other communication related to local proxy issues.

•		Consult with Analysts, Research Directors and others regarding issues relevant to portfolio companies.

•		Interpret the Global Corporate Governance Principles in the context of local legal requirements and practice, updating local policy as necessary.

•		Minutes of meetings to be sent to the Global Committee.

Meetings

Meetings will be held at least twice a year.

II. Interaction with Company and Board of Directors

Relationship with the Company and the Board of Directors

•		On behalf of our clients, we aim to be supportive, long-term shareholders. We seek to develop both a long-term relationship and an understanding of mutual objectives and concerns with the companies in which we invest.

•		We do this through meetings between our investment analysts and portfolio managers, on the one hand, and company management and the board of directors, on the other.

•		These meetings enable us to have discussions with company management and the board of directors about corporate strategy and objectives and to make an assessment of management’s performance. They also allow us to monitor a particular company’s development over time and assess progress against our expectations as investors. They also give us an opportunity to outline what our expectations are and to explain our views on important issues.

Formal Communications with the Board

•		Where we suspect poor corporate governance may negatively impact the long-term valuation of the company (including loss of confidence in senior management), we will attempt to gather further information from the company and standard information sources.

•		If action is considered necessary, we will attempt to arrange an informal meeting with one or more non-executive (outside) directors to gather additional information and to learn more about the company’s corporate governance practices. The intent of the meeting with non-executive (outside) directors is to understand the company better and to communicate our concerns.

•		All efforts to contact management or the board of directors regarding specific corporate governance issues should be approved by the Global Committee or if time is of the essence the Head or Deputy Head of Global Equity, and the Legal & Compliance Department.

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•

If it is determined that appropriate corporate governance practices are not present or likely to be put in place, then we may

	•		Formally communicate with the Chairman of the Board or the full Board of Directors;

	•		Withdraw our support for the common stock;

	•		Reflect our positions in our proxy vote opportunities; or

	•		Contact other shareholders regarding our concerns.

Any such steps may only be taken in compliance with applicable law.

III. Contacting the Media

UBS Global AM generally will not comment on any matters relating to corporate governance or proxy issues of any individual company. This policy is based on issues of client privilege as well as assuring compliance with various regulations. Requests from the media for general information relating to this Policy, comments on corporate governance or proxy issues relating to a specific security or general, non-specific issues related to corporate governance, must be directed via Communications/Marketing (country/region/business/investment/global) to the relevant investment area and Legal & Compliance Department. They will determine if there is to be an exception to this rule and inform the relevant Marketing/Communications team. The situation will be explained to UBS Media Relations who will notify the journalist of our position.

IV. Proxy Voting Process

Given the magnitude of the effort, availability of resources and local customs, certain functions and responsibilities may be delegated to the Local Corporate Governance Committees or others for the efficient processing of the votes. All operational proxy voting matters will be managed by a dedicated team located in the London office, irrespective of where the underlying client is managed.

The Global and Local Corporate Governance Committees, as appropriate, will bring Legal & Compliance into the decision making process on complex issues and on issues involving conflicts of interests.

The Americas Committee will appoint a deputy who is responsible for voting of all routine proxy matters in accordance with these policies and procedures. The deputy will contact the appropriate industry analyst and/or the members of the Americas Committee for guidance on how to vote non-routine matters.

The Americas Committee, or its delegate, will:

•

Take necessary steps to determine that we are receiving ballots for all accounts over which we have voting authority and where we intend to vote;

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•		Instruct the Head of Operations to recall, if possible, securities that are currently on loan so that they may be voted on non-routine proxy matters;

•		Implement procedures to identify conflicts and vote such proxies in accordance with Section VI of these procedures;

•		Implement procedures to vote proxies in accordance with client direction if applicable; and

•		Conduct periodic due diligence on any proxy voting services being employed.

V. Proxy Voting Disclosure Guidelines

General

•		Upon request or as required by law or regulation, UBS Global AM will disclose to a client or client’s fiduciaries, the manner in which we exercised voting rights on behalf of the client.

•		Upon request, we will inform a client of our intended vote. Note, however, in some cases, because of the controversial nature of a particular proxy, our intended vote may not be available until just prior to the deadline. If the request involves a conflict due to the client’s relationship with the company that has issued the proxy, the Legal & Compliance Department should be contacted immediately to ensure adherence to UBS Global AM Corporate Governance principles. (See Proxy Voting Conflict Guidelines below).

•		Other than as described herein, we will not disclose our voting intentions or make public statements to any third party (except electronically to our proxy vote processor or regulatory agencies) including but not limited to proxy solicitors, non-clients, the media, or other UBS divisions, but we may inform such parties of the provisions of our Policy. We may communicate with other shareholders regarding a specific proposal but will not disclose our voting intentions or agree to vote in concert with another shareholder without approval from the Chairman of the Global Corporate Governance Committee and regional Legal & Compliance Department.

•		Any employee, officer or director of UBS Global Asset Management receiving an inquiry directly from a company will notify the appropriate industry analyst and persons responsible for voting the company’s proxies.

•		Companies may be provided with the number of shares we own in them.

•		Proxy solicitors will not be provided with either our votes or the number of shares we own in a particular company.

•		In response to a proxy solicitor or company agent, we will acknowledge receipt of the proxy materials, inform them of our intent to vote or that we have voted, but not the manner in which we voted.

•		We may inform the company (not their agent) where we have decided to vote against any material resolution at their company.

The Chairman of the Global Committee and the Chair of the Americas Committee must approve exceptions to this disclosure policy.

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VI. Proxy Voting Conflict Guidelines

In addition to the Proxy Voting Disclosure Guidelines above, UBS Global AM has implemented the following guidelines to address conflicts of interests that arise in connection with our exercise of voting rights on behalf of clients:

•		Under no circumstances will general business, sales or marketing issues influence our proxy votes.

•		UBS Global AM and its affiliates engaged in banking, broker-dealer and investment banking activities (“Affiliates”) have policies in place prohibiting the sharing of certain sensitive information. These policies prohibit our personnel from disclosing information regarding our voting intentions to any Affiliate. Any of our personnel involved in the proxy voting process who are contacted by an Affiliate regarding the manner in which we intend to vote on a specific issue, must terminate the contact and notify the Legal & Compliance Department immediately. {Note: Legal & Compliance personnel may have contact with their counterparts working for an Affiliate on matters involving information barriers.} In the event of any issue arising in relation to Affiliates, the Chair of the Global Committee must be advised, who will in turn advise the Chief Risk Officer.

•		Where UBS Global AM is aware of a conflict of interest in voting a particular proxy, the Americas Committee will be notified of the conflict and will determine how such proxy should be voted.

VII. Record Keeping

UBS Global AM will maintain records of proxies voted. Such records include copies of:

•		Our policies and procedures;

•		Proxy statements received;

•		Votes cast per client;

•		Number of shares voted;

•		Communications received and internal documents created that were material to the voting decision; and

•		A list of all proxies where it was determined a conflict existed and any written rationale created or approved by the Local Corporate Governance Committee supporting its voting decision.

Nothing in these procedures should be interpreted to prevent dialogue with the company and its advisers by the industry analyst, proxy voting delegates or other appropriate senior investment personnel when a company approaches us to discuss governance issues or resolutions they wish to include in their policy statement.

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Appendix A

Special Disclosure Guidelines for Registered Investment Company Clients

Registration Statement (Open-end and Closed-End Funds) Management is responsible for ensuring the following:

	•		That this policy and procedures, which are the policy and procedures used by the investment adviser on the Funds’ behalf, are described in the Statement of Additional Information (SAI). The policy and procedures may be described in the SAI or attached as an exhibit to the registration statement.

	•		That the SAI disclosure includes the procedures that are used when a vote presents a conflict between the interests of Fund shareholders, on the one hand, and those of the Funds’ investment adviser, principal underwriter or any affiliated person of the Fund, its investment adviser or principal underwriter, on the other.

	•		That the SAI disclosure states that information regarding how the Fund voted proxies during the most recent 12-month period ended June 30 is available (i) without charge, upon request, by calling a specified toll-free (or collect) telephone number; or on or through the Fund’s website, or both; and (ii) on the Securities and Exchange Commission’s (Commission) website. If a request for the proxy voting record is received, the Fund must comply within three business days by first class mail. If website disclosure is elected, Form N-PX must be posted as soon as reasonable practicable after filing the report with the Commission, and must remain available on the website as long the Fund discloses that it is available on the website.

Shareholder Annual and Semi-annual Report (Open-End and Closed-End Funds) Management is responsible for ensuring the following:

	•		That each Fund’s shareholders report contain a statement that a description of this policy and procedures is available (i) without charge, upon request, by calling a toll free or collect telephone number; (ii) on the Fund’s website, if applicable; and (iii) on the Commission’s website. If a request for the proxy voting record is received, the Fund must comply within three business days by first class mail.

	•		That the report contain a statement that information regarding how the Fund voted proxies during the most recent 12-month period ended June 30 is available (i) without charge, upon request, by calling a specified toll-free (or collect) telephone number; or on or through the Fund’s website, or both; and (ii) on the Commission’s website. If a request for the proxy voting record is received, the Fund must comply within three business days by first class mail. If website disclosure is elected, Form N-PX must be posted as soon as reasonable practicable after filing the report with the Commission, and must remain available on the website as long the Fund discloses that it is available on the website.

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Form N-PX (Open-End and Closed-End Funds) Management is responsible for ensuring the following:

	•		That this policy and procedures are described in Form N-CSR. In lieu of describing these documents, a copy of this policy and procedures may simply be included with the filing. However, the Commission’s preference is that the procedures by included directly in Form N-CSR and not attached as an exhibit to the N-CSR filing.

	•		That the N-CSR disclosure includes the procedures that are used when a vote presents a conflict between the interests of Fund shareholders, on the one hand, and those of the Funds’ investment adviser, principal underwriter, or any affiliated person of the Fund, its investment adviser or principal underwriter, on the other hand.

Form N-PX (Open-End and Closed-End Funds) Management is responsible for ensuring the following:

	•		That the securities lending agreement used by a Fund will provide that when voting or consent rights that accompany a loan pass to the borrower, the Fund making the loan will have the right to call the loaned securities to permit the exercise of such rights if the matters involved would have a material affect on the applicable Fund’s investment in the loaned security.

	•		That each fund files its complete proxy voting records on Form N-PX for the twelve month period ended June 30 by no later than August 31 of each year.

	•		Fund management is responsible for reporting to the Funds’ Chief Compliance Officer any material issues that arise in connection with the voting of Fund proxies or the preparation, review and filing of the Funds’ Form N-PX.

Oversight of Disclosure:

•

The Funds’ Chief Compliance Officer shall be responsible for ensuring that the required disclosures listed in these procedures are implemented and complied with. The Funds’ Chief Compliance Officer shall recommend to each Fund’s Board any changes to these policies and procedures that he or she deems necessary or appropriate to ensure that Funds’ compliance with relevant federal securities laws.

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		Effective May 13, 2008

Responsible Parties

The following parties will be responsible for implementing and enforcing this policy: The Americas Committee and Chief Compliance Office of UBS Global AM or his/her designees

Documentation

Monitoring and testing of this policy will be documented in the following ways:

	•		Annual review by Funds’ and UBS Global AM’s Chief Compliance Officer of effectiveness of these procedures

	•		Annual Report of Funds’ Chief Compliance Officer regarding the effectiveness of these procedures

	•		Periodic review of any proxy service vendor by the Chief Compliance Officer

	•		Periodic review of any proxy votes by the Americas Committee

Compliance Dates

	•		File Form N-PX by August 31 for each registered investment company client

	•		Annual review by the Funds’ and UBS Global AM’s Chief Compliance Officer of the effectiveness of these procedures

	•		Annual Report of Funds’ Chief Compliance Officer regarding the effectiveness of these procedures

	•		Form N-CSR, Shareholder Annual and Semi-Annual Reports, and annual updates to Fund registration statements as applicable

	•		Periodic review of any proxy service vendor by the Chief Compliance Officer

	•		Periodic review of proxy votes by the Americas Committee

Other Policies

Other policies that this policy may affect include:

	•		Recordkeeping Policy

	•		Affiliated Transaction Policy

	•		Code of Ethics

	•		Supervision of Service Providers Policy

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Wellington Management Company, LLP

Global Proxy Policies and Procedures

Introduction

Wellington Management Company, LLP (“Wellington Management”) has adopted and implemented policies and procedures that it believes are reasonably designed to ensure that proxies are voted in the best economic interests of its clients around the world.

Wellington Management’s Proxy Voting Guidelines (the Guidelines), which are incorporated by reference to these Global Proxy Policies and Procedures, set forth the sets of guidelines that Wellington Management uses in voting specific proposals presented by the boards of directors or shareholders of companies whose securities are held in client portfolios for which Wellington Management has voting discretion. While the Guidelines set forth general sets of guidelines for voting proxies, it should be noted that these are guidelines and not rigid rules. Many of the Guidelines are accompanied by explanatory language that describes criteria that may affect our vote decision. The criteria as described are to be read as part of the guideline, and votes cast according to the criteria will be considered within guidelines. In some circumstances, the merits of a particular proposal may cause us to enter a vote that differs from the Guidelines.

Statement of Policies

As a matter of policy, Wellington Management:

1 Takes responsibility for voting client proxies only upon a client’s written request.

2 Votes all proxies in the best interests of its clients as shareholders, i.e., to maximize economic value.

3 Develops and maintains broad guidelines setting out positions on common proxy issues, but also considers each proposal in the context of the issuer, industry, and country or countries in which its business is conducted.

4 Evaluates all factors it deems relevant when considering a vote, and may determine in certain instances that it is in the best interest of one or more clients to refrain from voting a given proxy ballot.

5 Identifies and resolves all material proxy-related conflicts of interest between the firm and its clients in the best interests of the client.

6 Believes that sound corporate governance practices can enhance shareholder value and therefore encourages consideration of an issuer’s corporate governance as part of the investment process.

7 Believes that proxy voting is a valuable tool that can be used to promote sound corporate governance to the ultimate benefit of the client as shareholder.

8 Provides all clients, upon request, with copies of these Global Proxy Policies and Procedures, the Proxy Voting Guidelines, and related reports, with such frequency as required to fulfill obligations under applicable law or as reasonably requested by clients.

9 Reviews regularly the voting record to ensure that proxies are voted in accordance with these Global Proxy Policies and Procedures and the set of Proxy Voting Guidelines selected by the client from those provided by Wellington Management; and ensures that procedures, documentation, and reports relating to the voting of proxies are promptly and properly prepared and disseminated.

Responsibility and Oversight

Wellington Management has a Corporate Governance Committee, established by action of the firm’s Executive Committee, that is responsible for the review and approval of the firm’s written Global Proxy Policies and Procedures and its Proxy Voting Guidelines, and for providing advice and guidance on specific proxy votes for individual issuers. The firm’s Legal Services Department monitors regulatory requirements with respect to proxy voting on a global basis and works with the Corporate Governance Committee to develop policies that implement those requirements. Day-to-day administration of the proxy voting process at Wellington Management is the responsibility of the Corporate Governance Group within the Corporate Operations Department. In addition, the Corporate Governance Group acts as a resource for portfolio managers and research analysts on proxy matters, as needed.

Statement of Procedures

Wellington Management has in place certain procedures for implementing its proxy voting policies.

General Proxy Voting

Authorization to Vote

Wellington Management will vote only those proxies for which its clients have affirmatively delegated proxy-voting authority.

Receipt of Proxy

Proxy materials from an issuer or its information agent are forwarded to registered owners of record, typically the client’s custodian bank. If a client requests that Wellington Management votes proxies on its behalf, the client must instruct its custodian bank to deliver all relevant voting material to Wellington Management or its voting agent. Wellington Management, or its voting agent, may receive this voting information by mail, fax, or other electronic means.

Reconciliation

To the extent reasonably practicable, each public security proxy received by electronic means is matched to the securities eligible to be voted and a reminder is sent to any custodian or trustee that has not forwarded the proxies as due. Although proxies received for private securities, as well as those received in non-electronic format, are voted as received, Wellington Management is not able to reconcile these proxies to holdings, nor does it notify custodians of non-receipt.

Research

In addition to proprietary investment research undertaken by Wellington Management investment professionals, the firm conducts proxy research internally, and uses the resources of a number of external sources to keep abreast of developments in corporate governance around the world and of current practices of specific companies.

Proxy Voting

Following the reconciliation process, each proxy is compared against the set of Proxy Voting Guidelines selected by the client, and handled as follows:

o Generally, issues for which explicit proxy voting guidance is provided in the Proxy Voting Guidelines (i.e., “For”, “Against”, “Abstain”) are reviewed by the Corporate Governance Group and voted in accordance with the Proxy Voting Guidelines.

o Issues identified as “case-by-case” in the Proxy Voting Guidelines are further reviewed by the Corporate Governance Group. In certain circumstances, further input is needed, so the issues are forwarded to the relevant research analyst and/or portfolio manager(s) for their input.

o Absent a material conflict of interest, the portfolio manager has the authority to decide the final vote. Different portfolio managers holding the same securities may arrive at different voting conclusions for their clients’ proxies.

Material Conflict of Interest Identification and Resolution Processes

Wellington Management’s broadly diversified client base and functional lines of responsibility serve to minimize the number of, but not prevent, material conflicts of interest it faces in voting proxies. Annually, the Corporate Governance Committee sets standards for identifying material conflicts based on client, vendor, and lender relationships, and publishes those standards to individuals involved in the proxy voting process. In addition, the Corporate Governance Committee encourages all personnel to contact the Corporate Governance Group about apparent conflicts of interest, even if the apparent conflict does not meet the published materiality criteria. Apparent conflicts are reviewed by designated members of the Corporate Governance Committee to determine if there is a conflict, and if so whether the conflict is material.

If a proxy is identified as presenting a material conflict of interest, the matter must be reviewed by designated members of the Corporate Governance Committee, who will resolve the conflict and direct the vote. In certain circumstances, the designated members may determine that the full Corporate Governance Committee should convene. Any Corporate Governance Committee member who is himself or herself subject to the identified conflict will not participate in the decision on whether and how to vote the proxy in question.

Other Considerations

In certain instances, Wellington Management may be unable to vote or may determine not to vote a proxy on behalf of one or more clients. While not exhaustive, the following list of considerations highlights some potential instances in which a proxy vote might not be entered.

Securities Lending

Wellington Management may be unable to vote proxies when the underlying securities have been lent out pursuant to a client’s securities lending program. In general, Wellington Management does not know when securities have been lent out and are therefore unavailable to be voted. Efforts to recall loaned securities are not always effective, but, in rare circumstances, Wellington Management may recommend that a client attempt to have its custodian recall the security to permit voting of related proxies.

Share Blocking and Re-registration

Certain countries require shareholders to stop trading securities for a period of time prior to and/or after a shareholder meeting in that country (i.e., share blocking). When reviewing proxies in share blocking countries, Wellington Management evaluates each proposal in light of the trading restrictions imposed and determines whether a proxy issue is sufficiently important that Wellington Management would consider the possibility of blocking shares. The portfolio manager retains the final authority to determine whether to block the shares in the client’s portfolio or to pass on voting the meeting.

In certain countries, re-registration of shares is required to enter a proxy vote. As with share blocking, re-registration can prevent Wellington Management from exercising its investment discretion to sell shares held in a client’s portfolio for a substantial period of time. The decision process in blocking countries as discussed above is also employed in instances where re-registration is necessary.

Lack of Adequate Information, Untimely Receipt of Proxy Materials, or Excessive Costs

Wellington Management may be unable to enter an informed vote in certain circumstances due to the lack of information provided in the proxy statement or by the issuer or other resolution sponsor, and may abstain from voting in those instances. Proxy materials not delivered in a timely fashion may prevent analysis or entry of a vote by voting deadlines. In addition, Wellington Management’s practice is to abstain from voting a proxy in circumstances where, in its judgment, the costs exceed the expected benefits to clients. Requirements for Powers of Attorney and consularization are examples of such circumstances.

Additional Information

Wellington Management maintains records of proxies voted pursuant to Section 204-2 of the Investment Advisers Act of 1940 (the “Advisers Act”), the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and other applicable laws.

Wellington Management’s Global Proxy Policies and Procedures may be amended from time to time by Wellington Management. Wellington Management provides clients with a copy of its Global Proxy Policies and Procedures, including the Proxy Voting Guidelines, upon written request. In addition, Wellington Management will make specific client information relating to proxy voting available to a client upon reasonable written request.

Dated: April 1, 2007

WELLINGTON MANAGEMENT COMPANY, LLP
Global Proxy Voting Guidelines

Introduction

Upon a client’s written request, Wellington Management Company, LLP (“Wellington Management”) votes securities that are held in the client’s account in response to proxies solicited by the issuers of such securities. Wellington Management established these Global Proxy Voting Guidelines to document positions generally taken on common proxy issues voted on behalf of clients.

These guidelines are based on Wellington Management’s fiduciary obligation to act in the best economic interest of its clients as shareholders. Hence, Wellington Management examines and votes each proposal so that the long-term effect of the vote will ultimately increase shareholder value for our clients. Because ethical considerations can have an impact on the long-term value of assets, our voting practices are also attentive to these issues and votes will be cast against unlawful and unethical activity. Further, Wellington Management’s experience in voting proposals has shown that similar proposals often have different

consequences for different companies. Moreover, while these Global Proxy Voting Guidelines are written to apply globally, differences in local practice and law make universal application impractical. Therefore, each proposal is evaluated on its merits, taking into account its effects on the specific company in question, and on the company within its industry. It should be noted that the following are guidelines, and not rigid rules, and Wellington Management reserves the right in all cases to vote contrary to guidelines where doing so is judged to represent the best economic interest of its clients.

Following is a list of common proposals and the guidelines on how Wellington Management anticipates voting on these proposals. The “(SP)” after a proposal indicates that the proposal is usually presented as a Shareholder Proposal.

Voting Guidelines

Composition and Role of the Board of Directors

•

Election of Directors:
Case-by-Case

Wellington Management believes that shareholders’ ability to elect directors annually is the most important right shareholders have. We generally support management nominees, but will withhold votes from any director who is demonstrated to have acted contrary to the best economic interest of shareholders. We may also withhold votes from directors who failed to implement shareholder proposals that received majority support, implemented dead-hand or no-hand poison pills, or failed to attend at least 75% of scheduled board meetings.

•		Classify Board of Directors: Against

		We will also vote in favor of shareholder proposals seeking to declassify boards.

•		Adopt Director Tenure/Retirement Age (SP): Against

•		Adopt Director & Officer Indemnification: For

		We generally support director and officer indemnification as critical to the attraction and retention of qualified candidates to the board. Such proposals must incorporate the duty of care.

•		Allow Special Interest Representation to Board (SP): Against

•		Require Board Independence: For

Wellington Management believes that, in the absence of a compelling counter-argument or prevailing market norms, at least 65% of a board should be comprised of independent directors, with independence defined by the local market regulatory authority. Our support for this level of independence may include withholding approval for non-independent directors, as well as votes in support of shareholder proposals calling for independence.

•

Require Key Board Committees to be Independent.
For

Key board committees are the Nominating, Audit, and Compensation Committees. Exceptions will be made, as above, in respect of local market conventions.

•		Require a Separation of Chair and CEO or Require a Lead Director: For

•		Approve Directors’ Fees: For

•		Approve Bonuses for Retiring Directors: Case-by-Case

•		Elect Supervisory Board/Corporate Assembly: For

•		Elect/Establish Board Committee: For

•		Adopt Shareholder Access/Majority Vote on Election of Directors (SP): Case-by-Case

Wellington Management believes that the election of directors by a majority of votes cast is the appropriate standard for companies to adopt and therefore generally will support those proposals that seek to adopt such a standard. Our support for such proposals will extend typically to situations where the relevant company has an existing resignation policy in place for directors that receive a majority of “withhold” votes. We believe that it is important for majority voting to be defined within the company’s charter and not simply within the company’s corporate governance policy.

Generally we will not support proposals that fail to provide for the exceptional use of a plurality standard in the case of contested elections. Further, we will not support proposals that seek to adopt a majority of votes outstanding (i.e., total votes eligible to be cast as opposed to actually cast) standard.

Management Compensation

•		Adopt/Amend Stock Option Plans: Case-by-Case

•		Adopt/Amend Employee Stock Purchase Plans: For

•		Approve/Amend Bonus Plans: Case-by-Case

In the US, Bonus Plans are customarily presented for shareholder approval pursuant to Section 162(m) of the Omnibus Budget Reconciliation Act of 1992 (“OBRA”). OBRA stipulates that certain forms of compensation are not tax-deductible unless approved by shareholders and subject to performance criteria. Because OBRA does not prevent the payment of subject compensation, we generally vote “for” these proposals. Nevertheless, occasionally these proposals are presented in a bundled form seeking 162 (m) approval and approval of a stock option plan. In such cases, failure of the proposal prevents the awards from being granted. We will vote against these proposals where the grant portion of the proposal fails our guidelines for the evaluation of stock option plans.

•

Approve Remuneration Policy:
Case-by-Case

•

Exchange Underwater Options:
Case-by-Case

Wellington Management may support value-neutral exchanges in which senior management is ineligible to participate.

•

Eliminate or Limit Severance Agreements (Golden Parachutes):
Case-by-Case

We will oppose excessively generous arrangements, but may support agreements structured to encourage management to negotiate in shareholders’ best economic interest.

•

Shareholder Approval of Future Severance Agreements Covering Senior Executives (SP):
Case-by-Case

We believe that severance arrangements require special scrutiny, and are generally supportive of proposals that call for shareholder ratification thereof. But, we are also mindful of the board’s need for flexibility in recruitment and retention and will therefore oppose limitations on board compensation policy where respect for industry practice and reasonable overall levels of compensation have been demonstrated.

•		Expense Future Stock Options (SP): For

•		Shareholder Approval of All Stock Option Plans (SP): For

•		Disclose All Executive Compensation (SP): For

Reporting of Results

•		Approve Financial Statements: For

•		Set Dividends and Allocate Profits: For

•		Limit Non-Audit Services Provided by Auditors (SP): Case-by-Case

We follow the guidelines established by the Public Company Accounting Oversight Board regarding permissible levels of non-audit fees payable to auditors.

•

Ratify Selection of Auditors and Set Their Fees:
Case-by-Case

Wellington Management will generally support management’s choice of auditors, unless the auditors have demonstrated failure to act in shareholders’ best economic interest.

•

Elect Statutory Auditors:
Case-by-Case

•

Shareholder Approval of Auditors (SP):
For

Shareholder Voting Rights

•

Adopt Cumulative Voting (SP):
Against

We are likely to support cumulative voting proposals at “controlled” companies (i.e., companies with a single majority shareholder), or at companies with two-tiered voting rights.

•

Shareholder Rights Plans
Case-by-Case

Also known as Poison Pills, these plans can enable boards of directors to negotiate higher takeover prices on behalf of shareholders. However, these plans also may be misused to entrench management. The following criteria are used to evaluate both management and shareholder proposals regarding shareholder rights plans.

We generally support plans that include:

Shareholder approval requirement
Sunset provision

Permitted bid feature (i.e., bids that are made for all shares and demonstrate evidence of financing must be submitted to a shareholder vote).

Because boards generally have the authority to adopt shareholder rights plans without shareholder approval, we are equally vigilant in our assessment of requests for authorization of blank check preferred shares (see below).

•

Authorize Blank Check Preferred Stock:
Case-by-Case

We may support authorization requests that specifically proscribe the use of such shares for anti-takeover purposes.

•

Eliminate Right to Call a Special Meeting:
Against

•

Increase Supermajority Vote Requirement:
Against

We likely will support shareholder and management proposals to remove existing supermajority vote requirements.

•		Adopt Anti-Greenmail Provision: For

•		Adopt Confidential Voting (SP): Case-by-Case

We require such proposals to include a provision to suspend confidential voting during contested elections so that management is not subject to constraints that do not apply to dissidents.

•

Remove Right to Act by Written Consent:
Against

Capital Structure

Miscellaneous

•		Approve Other Business: Against

•		Approve Reincorporation: Case-by-Case

•		Approve Third-Party Transactions: Case-by-Case

Dated: December 6, 2007

Wells Capital Management

Proxy Voting Policies and Procedures

I. Introduction:

As a fiduciary, Wells Capital Management (“WellsCap”) is obligated to vote proxies in the best interests of its clients. WellsCap has developed a structure that is designed to ensure that proxy voting is conducted in an appropriate manner, consistent with the clients’ best interest and within the framework of this Proxy Voting Policy (“Policy”). WellsCap has adopted this Policy in order to satisfy its fiduciary obligation. It is intended that this Policy also satisfies the requirements of Rule 206(4)-6 under the Investment Advisers Act of 940, as amended (the “Advisers’ Act”).

WellsCap manages assets for a variety of clients: Taft-Hartley plans, governmental plans, foundations and endowments, corporations, and investment companies and other collective investment vehicles. Unless the client specifically reserves the right to vote their own proxies, WellsCap will vote proxies with a goal of maximizing shareholder value as a long-term investor and consistent with the governing laws and investment policies of each portfolio. While securities are not purchased to exercise control or to seek to effect corporate change through share ownership, Wells Capital Management supports sound corporate governance practices within companies in which they invest.

II. Voting

Philosophy:

When WellsCap accepts delegation from its clients to vote proxies, it does not delegate that authority to any other person or entity, but retains complete authority for voting all proxies on behalf of its clients. Not all clients delegate proxy-voting authority to WellsCap, however, and WellsCap will not vote proxies, or provide advice to clients on how to vote proxies in the absence of specific delegation of authority, a pre-existing contractual agreement, or an obligation under the applicable law. For example, securities that are held in an investment advisory account for which WellsCap exercises no investment discretion are not voted by WellsCap. Also, WellsCap may not exercise discretion over shares that the client has committed to a stock loan program, which passes voting rights to the party with possession of the shares. From time to time, WellsCap may participate with a dissident group to vote proxies. In such case, WellsCap’s appointment of an agent for limited purposes will not be deemed a delegation of authority under this Policy. WellsCap relies on a third party to provide research, administration and

vote execution. Notwithstanding, WellsCap retains final authority and fiduciary responsibility for proxy voting.

Responsibilities

1.		Proxy Administrator

		WellsCap’s proxy voting process is administered by its Operations Department (“Proxy Administrator”), who reports to WellsCap’s Chief Operations Officer. The Proxy Administrator is responsible for administering and overseeing the proxy voting process to ensure the implementation of the Procedures. The Proxy Administrator monitors third party voting of proxies to ensure it’s being done in a timely and responsible manner. The Proxy Administrator in conjunction with the Proxy Committee reviews the continuing appropriateness of the Procedures set forth herein, recommends revisions as necessary and provides an annual update on the proxy voting process.

2.		The Proxy Committee: The Proxy Committee is chaired by the Head of Equity Investments. The Committee members are selected from portfolio management groups and include investment risk personnel. Members of the Committee are identified as Appendix A of this Policy and are subject to change upon approval from the Committee Chair.

3.		WellsCap Legal/Compliance Department provides oversight and guidance to the Committee as necessary.

4.		Third Parties

		To assist in its proxy-voting responsibilities, WellsCap subscribes to research and other proxy-administration services. Currently, WellsCap has contracted with RiskMetrics Group (formally ISS), a provider of proxy-voting services, to provide the following services to WellsCap:

	•		Independently analyze and make recommendations for proxy proposals in accordance with the relevant voting platform as identified in Appendix B, et seq.;

	•		Receive all proxy information sent by custodians that hold securities of WellsCap’s Proxy Clients;

	•		Posts proxy information on its password-protected website, including meeting dates, agendas, and RiskMetrics’ analysis.

	•		Provides WellsCap with vote administration and execution, recordkeeping (proxy statements and votes), and reporting support services.

Methodology

Except in instances where clients have retained voting authority, WellsCap will instruct custodians of client accounts to forward all proxy statements and materials received in respect of client accounts to RiskMetrics. The Proxy Administrator reviews this information regularly and communicates with representatives of RiskMetrics to ensure that all agendas are considered and proxies are voted on a timely basis.

Voting Guidelines. WellsCap, through its agent (RiskMetrics), votes proxies on different platforms subject to the client’s expressed goals. The two key platforms are: (i) the custom WellsCap Proxy Guideline, and (ii) RiskMetrics’ Taft Hartley Advisory Services platform, which researches recommendations made by the AFL-CIO. These Guidelines set forth how proxies will be voted on the issues specified. Depending upon the proposal and the platform, the guidelines may provide that proxies be voted “for” or “against” the proposal, or that the proposal should be considered on a case-by-case basis. The guideline may also be silent on a particular proposal, especially regarding foreign securities. RiskMetrics will vote proxies for or against as directed by the guidelines. Where the guidelines specify a “case by case” determination for a particular issue, RiskMetrics will evaluate the proxies based on thresholds

			established in the proxy guidelines relative to the platform. In addition, for proxies relating to issues not addressed in the guidelines, WellsCap will defer to RiskMetrics’ Proxy Guidelines as appropriate. Finally, the Proxy Administrator shall have the authority to direct RiskMetrics to forward the proxy to him or her for a discretionary vote, in consultation with the Proxy Committee or the portfolio manager covering the subject security, if the Proxy Committee or the portfolio manager determines that a case-by-case review of such matter is warranted. Where a potential conflict of interest is identified (as described herein), WellsCap may not deviate from the Procedures unless it has a documented compelling purpose to do so.

	2.		Voting Discretion. In all cases, the Proxy Administrator will exercise its voting discretion in accordance with the voting philosophy of the selected guideline. In cases where a proxy is forwarded by RiskMetrics to the Proxy Administrator, the Proxy Administrator may be assisted in its voting decision through receipt of: (i) independent research and voting recommendations provided by RiskMetrics, Portfolio Management or other independent sources; or (ii) information provided by company managements and shareholder groups. WellsCap believes that input from a portfolio manager or research analyst with knowledge of the issuer and its securities (collectively “Portfolio Manager”) is essential. Portfolio Management is, in WellsCap’s view, best able to evaluate the impact that the outcome on a particular proposal will have on the value of the issues shares. In the event that the Proxy Administrator is aware of a material conflict of interest involving Wells Fargo/Wells Capital Management or any of its affiliates regarding a proxy that has been forwarded to him or her, the Proxy Administrator will, absent compelling circumstances, return the proxy to RiskMetrics to be voted in conformance with the voting guidelines of RiskMetrics.

Voting decisions made by the Proxy Administrator will be reported to RiskMetrics to ensure that the vote is registered in a timely manner.

	3.		Securities on Loan. As a general matter, securities on loan will not be recalled to facilitate proxy voting (in which case the borrower of the security shall be entitled to vote the proxy).

	4.		Conflicts of Interest. WellsCap has obtained a copy of RiskMetrics policies, procedures and practices regarding potential conflicts of interest that could arise in RiskMetrics proxy voting services to WellsCap as a result of business conducted by RiskMetrics. WellsCap believes that potential conflicts of interest by RiskMetrics are minimized by these policies, procedures and practices. In addition, Wells Fargo and/or Wells Capital Management may have a conflict of interest regarding a proxy to be voted upon if, for example, Wells Fargo and/or Wells Capital Management or its affiliates have other relationships with the issuer of the proxy. WellsCap believes that, in most instances, any material conflicts of interest will be minimized through a strict and objective application by RiskMetrics of the voting guidelines attached hereto. However, when the Proxy Administrator is aware of a material conflict of interest regarding a matter that would otherwise require a vote by WellsCap, the Proxy Administrator shall defer to RiskMetrics to vote in conformance with the voting guidelines of RiskMetrics. In addition, the Proxy Administrator will seek to avoid any undue influence as a result of any material conflict of interest that exists between the interest of a client and WellsCap or any of its affiliates. To this end, an independent fiduciary engaged by Wells Fargo will direct the Proxy Administrator on voting instructions for the Wells Fargo proxy.

III. Other Provisions

Guideline Review

The Proxy Committee meets at least semi-annually to review this Policy and consider changes to it or changes to specific proxy voting guidelines (the “Approved Guidelines” — discussed below). Meetings may be convened more frequently (for example, to discuss a specific proxy agenda or proposal) as requested by the Manager of Proxy Administration, any member of the Proxy Committee, or WellsCap’s Chief

Compliance Officer. A representative of WellsCap’s Compliance Department will be present (on a best efforts basis) at all Proxy Committee meetings, but will not vote on the proxies.

Record Retention

WellsCap will maintain the following records relating to the implementation of the Procedures:

			§ A copy of these proxy voting polices and procedures;

			§ Proxy statements received for client securities (which will be satisfied by relying on RiskMetrics);

			§ Records of votes cast on behalf of clients (which RiskMetrics maintains on behalf of WellsCap);

			§ Records of each written client request for proxy voting records and WellsCap’s written response to any client request (written or oral) for such records; and

			§ Any documents prepared by WellsCap or RiskMetrics that were material to making a proxy voting decision.

Such proxy voting books and records shall be maintained at an office of WellsCap in an easily accessible place for a period of five years.

Disclosure of Policies and Procedures

WellsCap will disclose to its clients a summary description of its proxy voting policy and procedures via mail. A detail copy of the policy and procedures will be provided to clients upon request by calling 1-800-736-2316.

WellsCap will also provide proxy statements and any records as to how we voted proxies on behalf of client upon request. Clients may contact us at 1-800-736-2316 or by e-mail at riskmgt@wellsfargo.com to request a record of proxies voted on their behalf.

Except as otherwise required by law, WellsCap has a general policy of not disclosing to any issuer or third party how its client proxies are voted.

Appendix A

Voting Members of WellsCap Proxy Committee

Kirk Hartman- Chief Investment Officer
Jon Baranko-Director of Equity Investments
Frank Esposito-Portfolio Manager, Fundamental Growth Equity
Jerome (Cam) Philpot- Managing Director and Senior Portfolio Manager, Montgomery Small Cap Growth Equity

John Hockers- Director of Equity Risk Management, Investment Risk Management
Jennifer Vraney-Operations Manager

Consulting members of WellsCap Proxy Committee

Mai Shiver- Director of Business Risk Management


Procedure:		*Proxy Voting*
Departments Impacted:		Investment Management, Compliance, Investment Support, Client Services

References:		WA Compliance Manual –Section R — Proxy Voting WAML Compliance Manual – Section 4.11 — Proxy Voting Investment Advisers Act Rule 206(4)-6 and Rule 204-2 ERISA DOL Bulletin 94-2 C.F.R. 2509.94-2

Effective:		August 1, 2003

Background

Western Asset Management Company (“WA”) and Western Asset Management Company Limited (“WAML”) (together “Western Asset”) have adopted and implemented policies and procedures that we believe are reasonably designed to ensure that proxies are voted in the best interest of clients, in accordance with our fiduciary duties and SEC Rule 206(4)-6 under the Investment Advisers Act of 1940 (“Advisers Act”). Our authority to vote the proxies of our clients is established through investment management agreements or comparable documents, and our proxy voting guidelines have been tailored to reflect these specific contractual obligations. In addition to SEC requirements governing advisers, our proxy voting policies reflect the long-standing fiduciary standards and responsibilities for ERISA accounts. Unless a manager of ERISA assets has been expressly precluded from voting proxies, the Department of Labor has determined that the responsibility for these votes lies with the Investment Manager.

In exercising its voting authority, Western Asset will not consult or enter into agreements with officers, directors or employees of Legg Mason Inc. or any of its affiliates (except that WA and WAML may so consult and agree with each other) regarding the voting of any securities owned by its clients.

Policy

Western Asset’s proxy voting procedures are designed and implemented in a way that is reasonably expected to ensure that proxy matters are handled in the best interest of our clients. While the guidelines included in the procedures are intended to provide a benchmark for voting standards, each vote is ultimately cast on a case-by-case basis, taking into consideration Western Asset’s contractual obligations to our clients and all other relevant facts and circumstances at the time of the vote (such that these guidelines may be overridden to the extent Western Asset deems appropriate).

Western Asset Management Company

385 East Colorado Blvd. Pasadena, CA 91101 • Tel: (626) 844-9400 • Fax: (626) 844-9450

Procedures

Responsibility and Oversight

The Western Asset Compliance Department (“Compliance Department”) is responsible for administering and overseeing the proxy voting process. The gathering of proxies is coordinated through the Corporate Actions area of Investment Support (“Corporate Actions”). Research analysts and portfolio managers are responsible for determining appropriate voting positions on each proxy utilizing any applicable guidelines contained in these procedures.

Client Authority

Prior to August 1, 2003, all existing client investment management agreements (“IMAs”) will be reviewed to determine whether Western Asset has authority to vote client proxies. At account start-up, or upon amendment of an IMA, the applicable client IMA are similarly reviewed. If an agreement is silent on proxy voting, but contains an overall delegation of discretionary authority or if the account represents assets of an ERISA plan, Western Asset will assume responsibility for proxy voting. The Client Account Transition Team maintains a matrix of proxy voting authority.

Proxy Gathering

Registered owners of record, client custodians, client banks and trustees (“Proxy Recipients”) that receive proxy materials on behalf of clients should forward them to Corporate Actions. Prior to August 1, 2003, Proxy Recipients of existing clients will be reminded of the appropriate routing to Corporate Actions for proxy materials received and reminded of their responsibility to forward all proxy materials on a timely basis. Proxy Recipients for new clients (or, if Western Asset becomes aware that the applicable Proxy Recipient for an existing client has changed, the Proxy Recipient for the existing client) are notified at start-up of appropriate routing to Corporate Actions of proxy materials received and reminded of their responsibility to forward all proxy materials on a timely basis. If Western Asset personnel other than Corporate Actions receive proxy materials, they should promptly forward the materials to Corporate Actions.

Proxy Voting

Once proxy materials are received by Corporate Actions, they are forwarded to the Compliance Department for coordination and the following actions:

	e.		Proxies are reviewed to determine accounts impacted.

	f.		Impacted accounts are checked to confirm Western Asset voting authority.

	g.		Compliance Department staff reviews proxy issues to determine any material conflicts of interest. (See conflicts of interest section of these procedures for further information on determining material conflicts of interest.)

	h.		If a material conflict of interest exists, (i) to the extent reasonably practicable and permitted by applicable law, the client is promptly notified, the conflict is disclosed and Western Asset obtains the client’s proxy voting instructions, and (ii) to the extent that it is not reasonably practicable or permitted by applicable law to notify the client and obtain

			such instructions (e.g., the client is a mutual fund or other commingled vehicle or is an ERISA plan client), Western Asset seeks voting instructions from an independent third party.

	i.		Compliance Department staff provides proxy material to the appropriate research analyst or portfolio manager to obtain their recommended vote. Research analysts and portfolio managers determine votes on a case-by-case basis taking into account the voting guidelines contained in these procedures. For avoidance of doubt, depending on the best interest of each individual client, Western Asset may vote the same proxy differently for different clients. The analyst’s or portfolio manager’s basis for their decision is documented and maintained by the Compliance Department.

	j.		Compliance Department staff votes the proxy pursuant to the instructions received in (d) or (e) and returns the voted proxy as indicated in the proxy materials.

Timing

Western Asset personnel act in such a manner to ensure that, absent special circumstances, the proxy gathering and proxy voting steps noted above can be completed before the applicable deadline for returning proxy votes.

Recordkeeping

Western Asset maintains records of proxies voted pursuant to Section 204-2 of the Advisers Act and ERISA DOL Bulletin 94-2. These records include:

	g.		A copy of Western Asset’s policies and procedures.

	h.		Copies of proxy statements received regarding client securities.

	i.		A copy of any document created by Western Asset that was material to making a decision how to vote proxies.

	j.		Each written client request for proxy voting records and Western Asset’s written response to both verbal and written client requests.

	k.		A proxy log including:

	1.		Issuer name;

	2.		Exchange ticker symbol of the issuer’s shares to be voted;

	3.		Council on Uniform Securities Identification Procedures (“CUSIP”) number for the shares to be voted;

	4.		A brief identification of the matter voted on;

	5.		Whether the matter was proposed by the issuer or by a shareholder of the issuer;

	6.		Whether a vote was cast on the matter;

	7.		A record of how the vote was cast; and

	8.		Whether the vote was cast for or against the recommendation of the issuer’s management team.

Records are maintained in an easily accessible place for five years, the first two in Western Asset’s offices.

Disclosure

Part II of both the WA Form ADV and the WAML Form ADV contain a description of Western Asset’s proxy policies. Prior to August 1, 2003, Western Asset will deliver Part II of its revised Form ADV to all existing clients, along with a letter identifying the new disclosure. Clients will be provided a copy of these policies and procedures upon request. In addition, upon request, clients may receive reports on how their proxies have been voted.

Conflicts of Interest

All proxies are reviewed by the Compliance Department for material conflicts of interest. Issues to be reviewed include, but are not limited to:

	5.		Whether Western Asset (or, to the extent required to be considered by applicable law, its affiliates) manages assets for the company or an employee group of the company or otherwise has an interest in the company;

	6.		Whether Western Asset or an officer or director of Western Asset or the applicable portfolio manager or analyst responsible for recommending the proxy vote (together, “Voting Persons”) is a close relative of or has a personal or business relationship with an executive, director or person who is a candidate for director of the company or is a participant in a proxy contest; and

	7.		Whether there is any other business or personal relationship where a Voting Person has a personal interest in the outcome of the matter before shareholders.

Voting Guidelines

Western Asset’s substantive voting decisions turn on the particular facts and circumstances of each proxy vote and are evaluated by the designated research analyst or portfolio manager. The examples outlined below are meant as guidelines to aid in the decision making process.

Guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals which have been approved and are recommended by a company’s board of directors; Part II deals with proposals submitted by shareholders for inclusion in proxy statements; Part III addresses issues relating to voting shares of investment companies; and Part IV addresses unique considerations pertaining to foreign issuers.

VII. Board Approved Proposals

The vast majority of matters presented to shareholders for a vote involve proposals made by a company itself that have been approved and recommended by its board of directors. In view of the enhanced corporate governance practices currently being implemented in public companies, Western Asset generally votes in support of decisions reached by independent boards of directors. More specific guidelines related to certain board-approved proposals are as follows:

Matters relating to the Board of Directors

Western Asset votes proxies for the election of the company’s nominees for directors and for board-approved proposals on other matters relating to the board of directors with the following exceptions:

	a.		Votes are withheld for the entire board of directors if the board does not have a majority of independent directors or the board does not have nominating, audit and compensation committees composed solely of independent directors.

	b.		Votes are withheld for any nominee for director who is considered an independent director by the company and who has received compensation from the company other than for service as a director.

	c.		Votes are withheld for any nominee for director who attends less than 75% of board and committee meetings without valid reasons for absences.

	d.		Votes are cast on a case-by-case basis in contested elections of directors.

	4.		Matters relating to Executive Compensation

Western Asset generally favors compensation programs that relate executive compensation to a company’s long-term performance. Votes are cast on a case-by-case basis on board-approved proposals relating to executive compensation, except as follows:

	f.		Except where the firm is otherwise withholding votes for the entire board of directors, Western Asset votes for stock option plans that will result in a minimal annual dilution.

	g.		Western Asset votes against stock option plans or proposals that permit replacing or repricing of underwater options.

	h.		Western Asset votes against stock option plans that permit issuance of options with an exercise price below the stock’s current market price.

	i.		Except where the firm is otherwise withholding votes for the entire board of directors, Western Asset votes for employee stock purchase plans that limit the discount for shares purchased under the plan to no more than 15% of their market value, have an offering period of 27 months or less and result in dilution of 10% or less.

	5.		Matters relating to Capitalization

The management of a company’s capital structure involves a number of important issues, including cash flows, financing needs and market conditions that are unique to the circumstances of each company. As a result, Western Asset votes on a case-by-case basis on board-approved proposals involving changes to a company’s capitalization except where Western Asset is otherwise withholding votes for the entire board of directors.

	g.		Western Asset votes for proposals relating to the authorization of additional common stock.

	h.		Western Asset votes for proposals to effect stock splits (excluding reverse stock splits).

	i.		Western Asset votes for proposals authorizing share repurchase programs.

	6.		Matters relating to Acquisitions, Mergers, Reorganizations and Other Transactions

Western Asset votes these issues on a case-by-case basis on board-approved transactions.

Matters relating to Anti-Takeover Measures

Western Asset votes against board-approved proposals to adopt anti-takeover measures except as follows:

	e.		Western Asset votes on a case-by-case basis on proposals to ratify or approve shareholder rights plans.

	f.		Western Asset votes on a case-by-case basis on proposals to adopt fair price provisions.

	8.		Other Business Matters

Western Asset votes for board-approved proposals approving such routine business matters such as changing the company’s name, ratifying the appointment of auditors and procedural matters relating to the shareholder meeting.

	d.		Western Asset votes on a case-by-case basis on proposals to amend a company’s charter or bylaws.

	e.		Western Asset votes against authorization to transact other unidentified, substantive business at the meeting.

VIII. Shareholder Proposals

SEC regulations permit shareholders to submit proposals for inclusion in a company’s proxy statement. These proposals generally seek to change some aspect of a company’s corporate governance structure or to change some aspect of its business operations. Western Asset votes in accordance with the recommendation of the company’s board of directors on all shareholder proposals, except as follows:

1. Western Asset votes for shareholder proposals to require shareholder approval of shareholder rights plans.

2. Western Asset votes for shareholder proposals that are consistent with Western Asset’s proxy voting guidelines for board-approved proposals.

3. Western Asset votes on a case-by-case basis on other shareholder proposals where the firm is otherwise withholding votes for the entire board of directors.

IX. Voting Shares of Investment Companies

Western Asset may utilize shares of open or closed-end investment companies to implement its investment strategies. Shareholder votes for investment companies that fall within the categories listed in Parts I and II above are voted in accordance with those guidelines.

1. Western Asset votes on a case-by-case basis on proposals relating to changes in the investment objectives of an investment company taking into account the original intent of the fund and the role the fund plays in the clients’ portfolios.

2. Western Asset votes on a case-by-case basis all proposals that would result in increases in expenses (e.g., proposals to adopt 12b-1 plans, alter investment advisory arrangements or approve fund mergers) taking into account comparable expenses for similar funds and the services to be provided.

X. Voting Shares of Foreign Issuers

In the event Western Asset is required to vote on securities held in foreign issuers – i.e. issuers that are incorporated under the laws of a foreign jurisdiction and that are not listed on a U.S. securities exchange or the NASDAQ stock market, the following guidelines are used, which are premised on the existence of a sound corporate governance and disclosure framework. These guidelines, however, may not be appropriate under some circumstances for foreign issuers and therefore apply only where applicable.

1. Western Asset votes for shareholder proposals calling for a majority of the directors to be independent of management.

2. Western Asset votes for shareholder proposals seeking to increase the independence of board nominating, audit and compensation committees.

3. Western Asset votes for shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.

4. Western Asset votes on a case-by-case basis on proposals relating to (1) the issuance of common stock in excess of 20% of a company’s outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of a company’s outstanding common stock where shareholders have preemptive rights.

TABLE OF CONTENTS


MASTER-FEEDER STRUCTURE			3
ADDITIONAL RISKS OF INVESTING IN EACH FUND			3
INVESTMENT POLICIES AND RESTRICTIONS			4
PORTFOLIO TURNOVER			7
MANAGEMENT OF JHT			7
INVESTMENT MANAGEMENT ARRANGEMENTS			14
DISTRIBUTOR; RULE 12B-1 PLANS OF THE FUNDS			14
PORTFOLIO BROKERAGE			16
PURCHASE AND REDEMPTION OF SHARES			16
DETERMINATION OF NET ASSET VALUE OF THE MASTER FUND			17
POLICY REGARDING DISCLOSURE OF PORTFOLIO HOLDINGS			17
SHAREHOLDERS OF JHT			18
HISTORY OF JHT			19
ORGANIZATION OF JHT			19
ADDITIONAL INFORMATION CONCERNING TAXES			20
LEGAL AND REGULATORY MATTERS			23
REPORTS TO SHAREHOLDERS			24
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			24
CUSTODIAN			24
CODE OF ETHICS			24
PROXY VOTING POLICIES			24
APPENDIX I: Disclosure Regarding Portfolio Managers of the JHT Feeder Funds Capital Research Management Company			25

Applicable to : American Asset Allocation Trust, American Bond Trust, American Blue Chip Income and Growth Trust, American Global Growth Trust, American Global Small Capitalization Trust, American Growth Trust, American Growth-Income Trust, American High-Income Bond Trust, American International Trust and American New World Trust.


APPENDIX II: Proxy Voting Policies			29

Applicable to :

American Asset Allocation Trust, American Bond Trust, American Blue Chip
Income and Growth Trust, American Global Growth Trust, American Global Small Capitalization Trust, American Growth Trust, American Growth-Income Trust, American High-Income Bond Trust, American International Trust and American New World Trust.

MASTER-FEEDER STRUCTURE

Each portfolio described in this SAI operates as a “feeder fund,” which means that the portfolio does not buy investment securities directly. Instead, it invests in a “master fund,” which in turn purchases investment securities. Each JHT Feeder Fund has the same investment objective and limitations as its master fund. Each master fund is a series of American Funds Insurance Series (“AFIS”) (each a “Master Fund” and collectively the “Master Funds”). Each JHT Feeder Fund’s Master Fund is listed below:


JHT FEEDER FUND		MASTER FUND
American Asset Allocation Trust		Asset Allocation Fund (Class 1 shares)
American Blue Chip Income and Growth Trust		Blue Chip Income and Growth Fund (Class 1 shares)*
American Bond Trust		Bond Fund (Class 1 shares)
American Global Growth Trust		Global Growth Fund (Class 1 shares)
American Global Small Capitalization Trust		Global Small Capitalization Fund (Class 1 shares)
American Growth Trust		Growth Fund (Class 1 shares)*
American Growth-Income Trust		Growth-Income Fund (Class 1 shares)*
American High-Income Bond Trust		High-Income Bond Fund (Class 1 shares)*
American International Trust		International Fund (Class 1 shares)*
American New World Trust		New World Fund (Class 1 shares)


*		Prior to April 28, 2008, the American Blue Chip Income and Growth Trust, the American Growth Trust, the American Growth-Income Trust, the American High-Income Bond Trust, and the American International Trust invested in Class 2 shares of the corresponding American Fund Master Fund which is subject to a 0.25% Rule 12b-1 fee. Effective April 28, 2008 each of these JHT Feeder Funds commenced investing in Class 1 shares of the corresponding American Fund Master Fund that is not subject to a Rule 12b-1 fee and increased the Rule 12b-1 fee for each class of shares of the JHT Feeder Fund by 0.25% to the following rates: 0.75% for Series II shares, 0.60% for Series I shares and 0.25% for Series III shares.

A portfolio may withdraw its entire investment from a Master Fund at any time the Board of Trustees of JHT (the “Board”) decides it is in the best interest of the portfolio and its shareholders to do so.

The Board of the Master Fund formulates the general policies of each Master Fund and meets periodically to review each Master Fund’s performance, monitor investment activities and practices and discuss other matter affecting each Master Fund.

THE STATEMENT OF ADDITIONAL INFORMATION FOR THE MASTER FUNDS IS DELIVERED TOGETHER WITH THIS STATEMENT OF ADDITIONAL INFORMATION.

ADDITIONAL RISKS OF INVESTING IN EACH FUND

The following supplements the disclosure in the Prospectus regarding the risks of investing in each portfolio.

Each of the portfolios, except the American Blue Chip Income Trust, American Bond Trust and American Growth Trust, may invest in securities of small and medium sized companies. The risks of investing in such securities are set forth below.

RECENT EVENTS

U.S. Government support of American International Group and Citigroup, the sale of Wachovia to Wells Fargo, reports of credit and liquidity issues involving certain money market mutual funds, and emergency measures by the U.S. and foreign governments banning short-selling. Both domestic and foreign equity markets have been experiencing increased volatility and turmoil, with issuers that have exposure to the real estate, mortgage and credit markets particularly affected, and it is uncertain whether or for how long these conditions will continue.

SMALL OR UNSEASONED COMPANIES

o		Survival of Small or Unseasoned Companies. Companies that are small or unseasoned (less than 3 years of operating history) are more likely than larger or established companies to fail or not accomplish their goals. As a result, the value of their securities could decline significantly. These companies are less likely to survive since they are often dependent upon a small number of products, may have limited financial resources and may have a small management group.

o		Changes in Earnings and Business Prospects. Small or unseasoned companies often have a greater degree of change in earnings and business prospects than larger or established companies, resulting in more volatility in the price of their securities.

o		Liquidity. The securities of small or unseasoned companies may have limited marketability. This factor could cause the value of a portfolio’s investments to decrease if it needs to sell such securities when there are few interested buyers.

o		Impact of Buying or Selling Shares. Small or unseasoned companies usually have fewer outstanding shares than larger or established companies. Therefore, it may be more difficult to buy or sell large amounts of these shares without unfavorably impacting the price of the security.

o		Publicly Available Information. There may be less publicly available information about small or unseasoned companies. Therefore, when making a decision to purchase a security for a portfolio, a subadviser may not be aware of problems associated with the company issuing the security.

MEDIUM SIZE COMPANIES

Investments in the securities of medium sized companies present risks similar to those associated with small or unseasoned companies although to a lesser degree due to the larger size of the companies.

INVESTMENT POLICIES AND RESTRICTIONS

The investment policies and restrictions of each Master Fund are described in the statement of additional information for the Master Funds, which is delivered together with this SAI.

REPURCHASE AGREEMENTS

Each of the portfolios may invest in repurchase agreements. The following information supplements the information in the Prospectus regarding repurchase agreements.

Repurchase agreements are arrangements involving the purchase of an obligation by a portfolio and the simultaneous agreement to resell the same obligation on demand or at a specified future date and at an agreed upon price. A repurchase agreement can be viewed as a loan made by a portfolio to the seller of the

obligation with such obligation serving as collateral for the seller’s agreement to repay the amount borrowed with interest. Repurchase agreements permit a portfolio the opportunity to earn a return on cash that is only temporarily available. A portfolio may enter into a repurchase agreement with banks, brokers or dealers. However, a portfolio will enter into a repurchase agreement with a broker or dealer only if the broker or dealer agrees to deposit additional collateral should the value of the obligation purchased by the portfolio decrease below the resale price.

The portfolios shall engage in a repurchase agreement transactions only with those banks or broker/dealers that meet the portfolios quantitative and qualitative criteria regarding creditworthiness, asset size and collateralization requirements. The counterparties to a repurchase agreement transaction are limited to a:

o		Federal Reserve System member bank,

o		primary government securities dealer reporting to the Federal Reserve Bank of New York’s Market Reports Division, or

o		broker/dealer that reports U.S. Government securities positions to the Federal Reserve Board.

Each portfolio will continuously monitor the transaction to ensure that the collateral held with respect to a repurchase agreement equals or exceeds the amount of the respective obligation.

The risk to a portfolio in a repurchase agreement transaction is limited to the ability of the seller to pay the agreed-upon sum on the delivery date. If an issuer of a repurchase agreement fails to repurchase the underlying obligation, the loss to the portfolio, if any, would be the difference between the repurchase price and the underlying obligation’s market value. A portfolio might also incur certain costs in liquidating the underlying obligation. Moreover, if bankruptcy or other insolvency proceedings are commenced with respect to the seller, realization upon the underlying obligation by JHT might be delayed or limited.

INVESTMENT RESTRICTIONS

Each portfolio has adopted the following nonfundamental investment restriction to enable it to invest in its corresponding Master Fund:

Notwithstanding any other investment policy of the portfolio, the portfolio may invest all of its net assets in an open-end management investment company having substantially the same investment objective and limitations as the portfolio.

Each portfolio has also adopted the same investment restrictions as the Master Fund in which it invests. Each of the restrictions is fundamental in the case of the Master Fund. In the case of each portfolio, restrictions 6, 9, 10, 11 and 12 are nonfundamental and all other restrictions are fundamental. Fundamental restrictions may only be changed by a vote of a majority of the outstanding voting securities of a portfolio, which means a vote of the lesser of (i) 67% or more of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares.

When submitting an investment restriction change to the holders of JHT’s outstanding voting securities, the matter shall be deemed to have been effectively acted upon with respect to a particular portfolio if a majority of the outstanding voting securities of the portfolio as described above vote for the approval of the matter, notwithstanding (1) that the matter has not been approved by the holders of a majority of the outstanding voting securities of any other portfolio affected by the matter, and (2) that the matter has not been approved by the vote of a majority of the outstanding voting securities of JHT.

INVESTMENT RESTRICTIONS OF THE JHT FEEDER FUNDS

Each portfolio may not:

1. Invest more than 5% of the value of its the total assets in the securities of any one issuer provided that this limitation shall apply only to 75% of the value of its total assets and, provided further, that the limitation shall not apply to obligations of the government of the U.S. under a general Act of Congress. The short-term obligations of commercial banks are excluded from this 5% limitation with respect to 25% of the portfolio’s total assets.

2. As to 75% of its total assets, purchase more than 10% of the outstanding voting securities of an issuer.

3. Invest more than 25% of its total assets in the securities of issuers in the same industry. Obligations of the U.S. government, its agencies and instrumentalities, are not subject to this 25% limitation on industry concentration. In addition, the portfolio may, if deemed advisable, invest more than 25% of its assets in the obligations of domestic commercial banks.

4. Invest in real estate (including limited partnership interests but excluding securities of companies, such as real estate investment trusts, which deal in real estate or interests therein).

5. Purchase commodities or commodity contracts; except that the American Asset Allocation Trust, the American Bond Trust, the American High-Income Trust, the American International Trust, American Small Capitalization Trust, American New World Trust and American High-Income Trust may engage in transactions involving currencies (including forward or futures contracts and put and call options).

6. Invest in companies for the purpose of exercising control or management.

7. Make loans to others except for (a) the purchase of debt securities; (b) entering into repurchase agreements; (c) the loaning of its portfolio securities; and (d) entering into loan participations.

8. Borrow money, except from banks for temporary purposes, and then in an amount not in excess of 5% of the value of the fund’s total assets. Moreover, in the event that the asset coverage for such borrowings falls below 300%, the portfolio will reduce, within three days, the amount of its borrowings in order to provide for 300% asset coverage.

9. Purchase securities on margin.

10. Sell securities short, except to the extent that the portfolio contemporaneously owns or has the right to acquire at no additional cost, securities identical to those sold short.

11. Invest in puts, calls, straddles, spreads or any combination thereof; except as described above in Investment Restriction number 5.

12. Invest in securities of other investment companies, except as permitted by the Investment Company Act of 1940, as amended (the “1940 Act”).

13. Engage in underwriting of securities issued by others, except to the extent it may be deemed to be acting as an underwriter in the purchase or resale of portfolio securities.

Non-fundamental policies — The following non-fundamental policies of the American Global Growth Trust, American Global Small Capitalization Trust, American Growth Trust, American International Trust, American New World Trust, American Blue Chip Income and Growth Trust, American Growth-Income Trust, American Asset Allocation Trust, American Bond Trust, American High-Income Bond Trust may be changed without shareholder approval:

1. The portfolio may not invest more than 15% of its net assets in illiquid securities.

2. The portfolio may not issue senior securities, except as permitted by the 1940 Act.

Notwithstanding Investment Restriction number 12, the Master Funds may invest in securities of other managed investment companies if deemed advisable by their officers in connection with the administration of a deferred compensation plan adopted by Trustees pursuant to an exemptive order granted by the United States Securities and Exchange Commission (“SEC”).

Notwithstanding Investment Restriction number 13, the portfolios may not engage in the business of underwriting securities of other issuers, except to the extent that the disposal of an investment position may technically constitute the fund an underwriter as that term is defined under the Securities Act of 1933, as amended.

Nothwithstanding investment restriction number 7, the American Bond Trust and the American Global Bond Trust may purchase loan assignments.

Investment Restrictions that May Only be Changed Upon 60 Days’ Notice to Shareholders

Rule 35d-1 under the 1940 Act requires a registered investment company with a name that suggests that the fund focuses its investments in a particular type of investment or investments in a particular industry to invest at least 80% of its assets in the type of investment suggested by the fund’s name. The American Growth Trust, American International Trust, American Growth-Income Trust, the American Blue Chip Income and Growth Trust, American Global Growth Trust, American New World Trust and the American Asset Allocation Trust are not subject to this requirement.

The American Bond Trust is subject to this requirement and its Master Fund, the Bond Fund of AFIS, normally invests at least 80% of its assets in bonds. This investment policy is subject to change only upon 60 days prior notice to shareholders.

The American Global Small Capitalization Trust is subject to this requirement and its Master Fund, the Global Small Capitalization Fund of AFIS, normally invests at least 80% of its assets in equity securities of companies with small market capitalization, measured at the time of purchase. This investment policy is subject to change only upon 60 days prior notice to shareholders.

The American High-Income Bond Trust is subject to this requirement and its Master Fund, the High-Income Bond Fund of AFIS normally invests at least 80% of its assets in bonds. This investment policy is subject to change only upon 60 days prior notice to shareholders.

PORTFOLIO TURNOVER

The portfolio turnover of the Master Funds is described in the prospectus for the Master Funds which is delivered together with the prospectus for the portfolios.

MANAGEMENT OF JHT

Independent Trustees


			Number of John Hancock
Name, Address ¹		Principal Occupation(s) and other	Funds Overseen
And Year of Birth	Position with JHT ²	Directorships During Past 5 Years	by Trustee
Charles L. Bardelis (1941)	Trustee (since 1988)	Director, Island Commuter Corp. (Marine Transport).		212
		Trustee of John Hancock Funds II (“JHF II”) (since 2005).

Peter S. Burgess (1942)	Trustee (since 2005)	Consultant (financial, accounting and auditing matters) (since 1999); Certified Public Accountant; Partner, Arthur Andersen (independent public accounting firm) (prior to 1999).		212

		Director of the following publicly traded companies: PMA Capital Corporation (since 2004) and Lincoln Educational Services Corporation (since 2004).

		Trustee of JHF II (since 2005).

Elizabeth G. Cook (1937)	Trustee (since 2005)	Expressive Arts Therapist, Massachusetts General Hospital (September 2001 to June 2007); Expressive Arts Therapist, Dana Farber Cancer Institute (September 2000 to January 2004).		212

		Trustee of JHF II (since 2005).

Theron S. Hoffman ³ (1947)	Trustee (since September 2008)	Chief Executive Officer, T. Hoffman Associates, LLC (2003 – Present); Director, The Todd Organization (2003 – Present); President, Westport Resources Management (2006 – 2008); Partner / Operating Head & Senior Managing Director, Putnam Investments (2000 – 2003).		212

		Trustee of JHF II (since 2008).

Hassell H. McClellan (1945)	Trustee (since 2005)	Associate Professor, The Graduate School of The Wallace E. Carroll School of Management, Boston College.		212

		Trustee of JHF II (since 2005) and Trustee of Phoenix Edge Series Fund (since 2008).

James M. Oates (1946)	Trustee (since 2004)	Managing Director, Wydown Group (financial consulting firm)(since 1994); Chairman, Emerson Investment Management, Inc. (since 2000); Chairman, Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc.) (financial services		212


			Number of John Hancock
Name, Address ¹		Principal Occupation(s) and other	Funds Overseen
And Year of Birth	Position with JHT ²	Directorships During Past 5 Years	by Trustee
		company) (1997 to 2006); Independent Chairman, Hudson Castle Group, Inc. (formerly IBEX Capital Markets, Inc. (financial services company) (1997 to 2006).

		Director of the following publicly traded companies:
		Stifel Financial (since 1996); Investor Financial Services Corporation (1995 - 2007); and Connecticut River Bancorp, (since 1998).

		Director of the following mutual funds: Director, Virtus Funds (formerly, Phoenix Mutual Funds (since 1988)); and Emerson Investment Management (since 2000).

		Trustee of JHF II (since 2005).

Steven M. Roberts³ (1944)	Trustee (since September 2008)	Board of Governors Deputy Director, Federal Reserve System (2005 - 2008); Partner, KPMG (1987 - 2004).		212

		Trustee of JHF II (since 2008).

F. David Rolwing (1934)	Trustee (since 1997)	Former Chairman, President and CEO, Montgomery Mutual Insurance Company, 1991 to 1999. (Retired 1999).		125


1		The business address of all Trustees and officers is 601 Congress Street, Boston, Massachusetts 02210-2805.

2		Because JHT does not hold regular annual shareholders meetings, each Trustee holds office for an indefinite term until his/her successor is duly elected and qualified or until he/she dies, retires, resigns, is removed or becomes disqualified.

3		Mr. Hoffman and Mr. Roberts were appointed by the Board as Trustees on September 26, 2008.

Non-Independent Trustees


			Number of
			John Hancock
			Funds
Name, Address ¹		Principal Occupation(s) and other	Overseen by
And Year of Birth	Position with JHT ²	Directorships During Past 5 Years	Trustee
James R. Boyle ³ (1959)	Trustee (since 2005)	Executive Vice President, Manulife Financial Corporation (since 1999); Director and President, John Hancock Variable Life Insurance Company (since 2007); Director and Executive Vice President, John Hancock Life		273


			Number of
			John Hancock
			Funds
Name, Address ¹		Principal Occupation(s) and other	Overseen by
And Year of Birth	Position with JHT ²	Directorships During Past 5 Years	Trustee
		Insurance Company (since 2004); Chairman and Director, John Hancock Advisers, LLC (“JHA”), The Berkeley Financial Group, LLC (“The Berkeley Group”) (holding company) and John Hancock Funds, LLC (“John Hancock Funds”) (since 2005); Chairman and Director, the Adviser (since 2006); Senior Vice President, The Manufacturers Life Insurance Company (U.S.A) (until 2004).

Grace K. Fey ⁴ (1946)	Trustee (since September 2008)	Trustee of JHF II (since 2008); Chief Executive Officer, Grace Fey Advisors (since 2007); Director & Executive Vice President, Frontier Capital Management Company (1988 to 2007); Director, Fiduciary Trust (since 2009).		212

Trustee Emeritus John D. Richardson ⁵ (1938)	Trustee Emeritus (since December 2006); Non-Independent Trustee (prior to December 2006)	Non-Independent Trustee of John Hancock Trust prior to December 14, 2006. Retired; Former Senior Executive Vice President, Office of the President, Manulife Financial (2000 to 2002) (Retired, March, 2002); Executive Vice President and General Manager, U.S. Operations, Manulife Financial (1995 to 2000).		212

		Director of BNS Split Corp and BNS Split Corp II, each of which is a publicly traded company listed on the Toronto Stock Exchange (2005 to 2007).


(1)		The business address of all Trustees and officers is 601 Congress Street, Boston, Massachusetts 02210-2805.

(2)		Because JHT does not hold regular annual shareholders meetings, each Trustee holds office for an indefinite term until his successor is duly elected and qualified or until he dies, retires, resigns, is removed or becomes disqualified.

(3)		Mr. Boyle is an “interested person” (as defined in the 1940 Act) due to his positions with Manulife Financial Corporation (and its affiliates), the ultimate controlling parent of the Adviser.

(4)		Ms. Fey was appointed by the Board as a Trustee on September 26, 2008. Ms. Fey is an “interested person” (as defined in the 1940 Act) due to a deferred compensation arrangement with her former employer, Frontier Capital Management Company, which is a sub-adviser of certain funds of JHF II and JHT.

(4)		Mr. Richardson retired as Trustee effective December 14, 2006. On such date, Mr. Richardson became a non-voting Trustee Emeritus.

Principal Officers who are not Trustees


Name, Address ¹		Principal Occupation(s) and other Directorships
And Year of Birth	Position with JHT	During Past 5 Years
Keith F. Hartstein ² (1956)	President (since 2005)	Senior Vice President, Manulife Financial Corporation (since 2004); Director, President and Chief Executive Officer, JHA, The Berkeley Group, John Hancock Funds (since 2005); Director, MFC Global Investment Management (U.S.), LLC (“MFC Global (U.S.)”) (since 2005); Chairman and Director, John Hancock Signature Services, Inc. (since 2005); Director, President and Chief Executive Officer, the Adviser (since 2006); President and Chief Executive Officer, John Hancock Funds (“JHF”) JHF II, JHF III, and JHT; Director, Chairman and President, NM Capital Management, Inc. (since 2005); Member and former Chairman, Investment Company Institute Sales Force Marketing Committee (since 2003); President and Chief Executive Officer, MFC Global (U.S.) (2005-2006); Executive Vice President, John Hancock Funds (until 2005).

Thomas M. Kinzler² (1955)	Chief Legal Officer and Secretary (since 2006)	Vice President and Counsel, John Hancock Life Insurance Company (U.S.A.) (since 2006); Secretary and Chief Legal Officer, JHF, JHF II and JHT (since 2006); Vice President and Associate General Counsel, Massachusetts Mutual Life Insurance Company (1999-2006); Secretary and Chief Legal Counsel, MML Series Investment Fund (2000-2006); Secretary and Chief Legal Counsel, MassMutual Institutional Funds (2000-2004); Secretary and Chief Legal Counsel, MassMutual Select Funds and MassMutual Premier Funds (2004-2006).

Francis V. Knox, Jr.² (1947)	Chief Compliance Officer (“CCO”) (since 2005)	Vice President and CCO, the Adviser, JHA and MFC Global (U.S.) (since 2005); Vice President and CCO, JHF, JHF II, JHF III and JHT (since 2005); Vice President and Assistant Treasurer, Fidelity Group of Funds (until 2004).

Charles A. Rizzo ² (1959)	Chief Financial Officer (since 2007)	Chief Financial Officer, JHF, JHF II, JHFIII and JHT (since 2007); Assistant Treasurer, Goldman Sachs Mutual Fund Complex (registered investment companies) (2005-2007); Vice President, Goldman Sachs (2005-2007); Managing Director and Treasurer of Scudder Funds, Deutsche Asset Management (2003-2005); Director, Tax and Financial Reporting, Deutsche Asset Management (2002-2003).


Name, Address ¹		Principal Occupation(s) and other Directorships
And Year of Birth	Position with JHT	During Past 5 Years
Gordon M. Shone² (1956)	Treasurer (since 2005)	Senior Vice President, John Hancock Life Insurance Company (U.S.A.) (since 2001); Treasurer for JHF (since 2006); JHFII, JHF III and JHT (since 2005); Vice President and Chief Financial Officer, JHT (2003-2005); Vice President, the Adviser, John Hancock Advisers (since 2006).

John G. Vrysen² (1955)	Chief Operating Officer (since 2007) Chief Financial Officer (2005-2007)	Senior Vice President, MFC (since 2006); Director, Executive Vice President and Chief Operating Officer, JHA, The Berkley Group, the Adviser and John Hancock Funds (since 2007); Chief Operating Officer, John Hancock Funds, JHFII, JHFIII and JHT (since 2007), Director, John Hancock Signature Services, Inc. (since 2005); Chief Financial Officer, JHA, The Berkley Group, MFC Global (U.S.), the Adviser, JHF, JHF II, JHF III and JHT (2005-2007); Vice President, MFC (until 2006).


(1)		The business address of all Trustees and officers is 601 Congress Street, Boston, Massachusetts 02210-2805.

(2)		Affiliated with the Adviser.

Duties and Compensation of Trustees

M. Roberts and David Rolwing; Investment Committee C: Hassell H. McClellan, James R. Boyle, Peter S. Burgess, Grace K. Fey. Each Investment Committee met five times during the last fiscal year.

Compensation Table (1)(2)


		TOTAL COMPENSATION
		FROM JOHN HANCOCK
	AGGREGATE COMPENSATION FROM	FUND COMPLEX FOR
	JHT FISCAL YEAR ENDED DECEMBER 31, 2008	FISCAL YEAR ENDED
NAMES OF TRUSTEE	(1)	DECEMBER 31, 2008 (2)
Independent Trustees:
Charles L. Bardelis	$170,000	$230,000
Peter S. Burgess	$180,000	$245,000
Elizabeth Cook	$177,500	$240,000
Theron S. Hoffman	$ 39,000	$ 53,000
Hassell H. McClellan	$170,000	$230,000
James M. Oates	$230,000	$320,000
Steven M. Roberts	$ 39,000	$ 53,000
F. David Rolwing	$131,000	$131,000
Interested Trustees:
James R. Boyle
Grace K. Fey	$ 39,000	$ 53,000
Trustee Emeritus
John D. Richardson (3)	$156,000	$212,000


(1)		Compensation received for services as a Trustee. JHT does not have a pension, retirement or deferred compensation plan for any of its Trustees or officers.

(2)		As noted above, Ms. Cook and Messrs. Bardelis, Boyle, Burgess, McClellan and Oates are also Trustees of JHF II, which is within the same family of investment companies as JHT.

(3)		Mr. Richardson is a non-voting “emeritus” Trustee.

Trustee Ownership of Funds

A — $0

B — $1 up to and including $10,000

C — $10,001 up to and including $50,000

D — $50,001 up to and including $100,000

E — $100,001 or more

Total

John

Real

Small

Hancock

Lifestyle

Global

Return

Financial

Natural

Company

Money

Fund

Agressive

Growth

Balanced

Bond

Services

Resources

Value

Balanced

Market

Complex

FUNDS*

Charles L. Bardelis

Peter S. Burgess

Elizabeth G. Cook

Theron S. Hoffman

Hassell H. McClellan

James M. Oates

Steven M. Roberts

F. David Rolwing

James R. Boyle

Grace K. Fey


•		Only funds owned by a Trustee are listed.

INVESTMENT MANAGEMENT ARRANGEMENTS

The funds are feeder funds and as such do not have an investment adviser. The portfolio management does not occur at the feeder fund level but at the master fund level. For information regarding the investment adviser to the Master Funds see the Master Fund statement of additional information, which is delivered together with this statement of additional information.

DISTRIBUTOR; RULE 12B-1 PLANS OF THE FUNDS

John Hancock Distributors, LLC, located at 601 Congress Street, Boston, MA 02210, is the distributor and principal underwriter of JHT and distributes shares of JHT on a continuous basis. Other than the Rule 12b-1 payments described below, the Distributor does not receive compensation from JHT.

The Board has approved Rule 12b-1 Plans (the “Plans”) for Series I; Series II shares and for Series III of each Fund. The purpose of each Plan is to encourage the growth and retention of assets of the series of each Fund subject to the Plan.

	o		Series I shares of each Fund are subject to a Rule 12b-1 fee of .60% of Series I share average daily net assets (of which 0.25% of the Series I Rule 12b-1 fee is a “service fee” as defined in Rule 2830(b)(9) of the Conduct Rules of the National Association of Securities Dealers, Inc (“NASD”)). Each Fund invests in Class 1 shares of its corresponding Master Fund, which do not pay a Rule 12b-1 fee.

	o		Prior to April 28, 2008, the American Growth Trust, American International Trust, American Growth-Income Trust, American Bond Trust and American Blue Chip Income and Growth Trust were subject to a Rule 12b-1 fee of .35% of Series I share average daily net assets. In addition, each Fund invested in Class 2 shares of its corresponding Master Fund that pay a Rule 12b-1 fee of .25% of average net assets of the Master Fund.

	o		Series II Shares of each fund are subject to a Rule 12b-1 fee of .75% of Series II share average daily net assets (of which 0.25% of the Series II Rule 12b-1 fee is a “service fee” as defined in Rule

			2830(b)(9) of the Conduct Rules of the NASD). Each Fund invests in Class 1 shares of its corresponding Master Fund, which do not pay a Rule 12b-1 fee.

	o		Prior to April 28, 2008, the American Growth Trust, American International Trust, American Growth-Income Trust, American Bond Trust and American Blue Chip Income and Growth Trust were subject to a Rule 12b-1 fee of .50% of Series II share average daily net assets. In addition, each Fund invested in Class 2 shares of its corresponding Master Fund that pay a Rule 12b-1 fee of .25% of average net assets of the Master Fund.

Series III shares of each Fund are subject to a Rule 12b-1 fee of 0.25% of Series III share average daily net assets (all of which is a “service fee” as defined in Rule 2830(b)(9) of the Conduct Rules of the NASD):

Payments made on the Series I, Series II and Series III Rule 12b-1 Plans for the year ended December 31, 2008 are as follows:

SERIES I SHARES


PORTFOLIO	DISTRIBUTION PAYMENT
American Growth Trust	$	516,774
American International Trust	$	453,355
American Growth-Income Trust	$	138,160
American Blue Chip Income and Growth Trust	$	100,093
American Bond Trust	$	46,244
American Global Growth Trust	$	0
American Global Small Capitalization Trust	$	0
American New World Trust	$	0
American Asset Allocation Trust	$	3,344
American High-Income Bond Trust	$	0

SERIES II SHARES

PORTFOLIO	DISTRIBUTION PAYMENT
American Growth Trust	$	9,084,663
American International Trust	$	5,992,705
American Growth-Income Trust	$	7,690,509
American Blue Chip Income and Growth Trust	$	756,891
American Bond Trust	$	6,021,332
American Global Growth Trust	$	1,578,774
American Global Small Capitalization Trust	$	524,527
American New World Trust	$	514,878
American Asset Allocation Trust	$	5,364,495
American High-Income Bond Trust	$	346,529

SERIES III SHARES

PORTFOLIO	DISTRIBUTION PAYMENT
American Growth Trust	$	7,039
American International Trust	$	307
American Growth-Income Trust	$	9,259
American Blue Chip Income and Growth Trust	$	11,665
American Bond Trust	$	14,910
American Global Growth Trust	$	221
American Global Small Capitalization Trust	$	3,515
American New World Trust	$	99
American Asset Allocation Trust	$	27,238
American High-Income Bond Trust	$	61

PORTFOLIO BROKERAGE

For information regarding portfolio brokerage of each Master Fund see the Master Funds statement of additional information which is delivered together with this statement of additional information.

PURCHASE AND REDEMPTION OF SHARES

JHT will redeem all full and fractional portfolio shares for cash at the net asset value per share of each Fund. Payment for shares redeemed will generally be made within seven days after receipt of a proper notice of redemption. However, JHT may suspend the right of redemption or postpone the date of payment beyond seven days during any period when:

o		trading on the New York Stock Exchange is restricted, as determined by the SEC, or such exchange is closed for other than weekends and holidays;

o		an emergency exists, as determined by the SEC, as a result of which disposal by JHT of securities owned by it is not reasonably practicable or it is not reasonably practicable for JHT to fairly determine the value of its net assets; or

o		the SEC by order so permits for the protection of security holders of JHT.

–		the distribution is effected through a pro rata distribution of the distributing fund’s portfolio securities;

–		the distributed securities are valued in the same manner as they are in computing the fund’s NAV;

–		neither the affiliated shareholder nor any other party with the ability and the pecuniary incentive to influence the redemption in kind may select or influence the selection of the distributed securities; and

–		the Trustees of JHT, including a majority of the Independent Trustees, must determine on a quarterly basis that any redemptions in kind to affiliated shareholders made during the prior quarter were effected in accordance with the Procedures, did not favor the affiliated shareholder to the detriment of any other shareholder and were in the best interests of the fund.

DETERMINATION OF NET ASSET VALUE OF THE MASTER FUND

Each portfolio net asset value will be based on the net asset value of the corresponding master fund, adjusted to reflect the portfolios other assets, if any, and expenses.

For information regarding the determination of net asset value of the Master Fund see the Master Fund statement of additional information which is delivered together with the SAI.

POLICY REGARDING DISCLOSURE OF PORTFOLIO HOLDINGS

The Board of Trustees of JHT has adopted the Policy Regarding Disclosure of Portfolio Holdings to protect the interests of the shareholders of JHT and to address potential conflicts of interest that could arise between the interests of shareholders and the interests of the Adviser, or the interests of a Fund’s subadvisers, principal underwriter or affiliated persons of a Fund’s Adviser or principal underwriter. JHT’s general policy with respect to the release of portfolio holdings to nonaffiliated persons is to do so only in limited circumstances and only to provide nonpublic information regarding portfolio holdings to any person, including affiliated persons, on a “need to know” basis and, when released, to release such information only as consistent with applicable legal requirements and the fiduciary duties owed to shareholders. JHT applies its policy uniformly to all, including individual and institutional investors, intermediaries, affiliated persons of a Fund, and to all third party service providers and rating agencies.

Portfolio holdings information that is not publicly available will be released only pursuant to the exceptions described in the Policy Regarding Disclosure of Portfolio Holdings. Material nonpublic holdings information may be provided to nonaffiliated persons as part of the investment activities of a Fund to: entities which, by explicit agreement, are required to maintain the confidentiality of the information disclosed; rating organizations, such as Morningstar and Lipper; Vestek (Thompson Financial) or other entities for the purpose of compiling reports and preparing data; proxy voting services for the purpose of voting proxies; entities providing computer software; courts (including bankruptcy courts) or regulators with jurisdiction over JHT, and its affiliates; and, institutional traders to assist in research and trade execution. Exceptions to the portfolio holdings release policy can only be approved by JHT’s Chief Compliance Officer (“CCO”) or his duly authorized delegate after considering: (a) the purpose of providing such information; (b) the procedures that will be used to ensure that such information remains confidential and is not traded upon; and (c) whether such disclosure is in the best interest of the shareholders.

At this time, the entities receiving information described in the preceding paragraph are: Vestek (holdings, monthly with 30 day lag); Evare (holdings, daily); Morningstar (holdings, monthly with 32 day lag); Lipper (holdings, monthly with 32 day lag); Fact Set (holdings, daily); PricewaterhouseCoopers (prices, annual audits); Confluence (holdings, daily); ISS (holdings, daily); Elkins McSherry (purchases and sales, quarterly); NASDQ (NAVs, daily); Standard & Poor’s (holdings, monthly with 32 day lag); Charles River (holdings and securities details, daily); and DST (NAVs, daily).

The CCO shall report to the Board of Trustees whenever additional disclosures of portfolio holdings are approved. The CCO’s report shall be at the Board meeting following such approval. The CCO then provides annually a report to the Board of Trustees regarding the operation of the policy and any material changes recommended as a result of such review.

When the CCO believes that the disclosure of nonpublic information to a nonaffiliated person is a potential conflict of interest between the interest of the shareholders and the interest of affiliated persons of JHT, the CCO shall refer the conflict to the Board of Trustees. The Board of Trustees shall then only permit such disclosure of the nonpublic information if in their reasonable business judgment they conclude such disclosure will be in the best interests of JHT’s shareholders.

The receipt of compensation by a Fund, the Adviser, a subadviser or an affiliate as consideration for disclosing nonpublic portfolio holdings information is not deemed a legitimate business purpose and is strictly forbidden.

JHT Portfolio Holdings Currently Posted on a Website. Each of the Funds of Funds invests in shares of other Funds. The holdings of each Fund of Funds in other Funds will be posted to the website listed below within 30 days after each calendar quarter end and within 30 days after any material changes are made to the holdings of a Fund of Fund. In addition, the ten largest holdings of each Fund will be posted to the website listed below 30 days after each calendar quarter end. The information described above will remain on the website until the date JHT files its Form N-CSR or Form N-Q with the SEC for the period that includes the date as of which the website information is current. JHT’s Form N-CSR and Form N-Q will contain each Fund’s entire portfolio holdings as of the applicable calendar quarter end.

http://www.johnhancockannuities.com/Marketing/Portfolio/PortfolioIndexPage.aspx

SHAREHOLDERS OF JHT

JHT currently serves as the underlying investment medium for premiums and purchase payments invested in variable contracts issued by insurance companies affiliated with MFC.

Control Persons. As of March 31, 2008, no one was considered a control person of any of the portfolios of JHT. A control person is one who has beneficial ownership of more than 25% of the voting securities of a portfolio or who acknowledges or asserts having or is adjudicated to have control of a portfolio.

Shareholders. As of March 31, 2008, the JHT Shareholders are as follows:

	(a)		the insurance companies affiliated with Manulife Financial discussed above (the “Manulife Insurance Companies”). (Each insurance company that is a shareholder of JHT holds of record in its separate accounts JHT shares attributable to variable contracts),

	(b)		the Lifestyle Trusts, the Franklin Templeton Founding Allocation Trust, the Index Allocation Trust and the Absolute Return Trust, each of which invests in and holds of record shares of underlying JHT portfolios. (These portfolios are not shareholders of any of JHT Feeder Funds.)

Entities Eligible to Be JHT Shareholders. In order to reflect the conditions of Section 817(h) and other provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations thereunder, shares of JHT may be purchased only by the following eligible shareholders:

	(a)		separate accounts of the Manulife Insurance Companies and other insurance companies;

	(b)		the Manulife Insurance Companies and certain of their affiliates; and

	(c)		any trustee of a qualified pension or retirement plan.

Voting of Shares by the Insurance Companies and JHT. The Manulife Insurance Companies have the right to vote upon matters that may be voted upon at any JHT shareholders’ meeting. These companies will vote all shares of the portfolios of JHT issued to them in proportion to the timely voting instructions received from owners of variable contracts participating in the separate accounts of such companies that are registered under the 1940 Act (“Contract Owner Instructions”). In addition, JHT will vote all shares of the portfolios issued to the Lifestyle Trusts, the Index Allocation Trust and the Absolute Return Trust in proportion to Contract Owner Instructions.

Mixed Funding. Shares of JHT may be sold to JHT Shareholders described above. JHT currently does not foresee any disadvantages to any JHT Shareholders arising from the fact that the interests of those investors may differ. Nevertheless, JHT’s Board of Trustees will monitor events in order to identify any material irreconcilable conflicts, which may possibly arise due to differences of tax treatment or other considerations and to determine what action, if any, should be taken in response thereto. Such an action could include the withdrawal of a JHT Shareholder from investing in JHT.

Principal Holders. As of March 31, 2009, four of the Manulife Insurance Companies — John Hancock Life Insurance Company (USA (“JHLICO (USA)”), John Hancock Life Insurance Company of New York (“JHLICO New York”), John Hancock Life Insurance Company (“JHLICO”) and John Hancock Variable Life Insurance Company (“JHVLICO”) — owned of record all of the outstanding Series I and II shares of each Fund.

Trustees and officers of JHT, in the aggregate, own or have the right to provide voting instructions for less than 1% of the outstanding shares of the JHT Feeder Funds.

HISTORY OF JHT

JHT Name Change. Prior to January 1, 2005, the name of JHT was Manufacturers Investment Trust. Prior to October 1, 1997, the name of JHT was NASL Series Trust.

Organization of JHT. JHT was originally organized on August 3, 1984 as “NASL Series Fund, Inc.” (the “Fund”), a Maryland corporation. Effective December 31, 1988, the Fund was reorganized as a Massachusetts business trust. Pursuant to such reorganization, JHT assumed all the assets and liabilities of the Fund and carried on its business and operations with the same investment management arrangements as were in effect for the Fund at the time of the reorganization. The assets and liabilities of each of the Fund’s separate portfolios were assumed by the corresponding portfolios of JHT.

ORGANIZATION OF JHT

Classification. JHT is a no-load, open-end management investment company registered with the SEC under the 1940 Act. Each of the portfolios described in this SAI is diversified for purposes of the 1940 Act.

Powers of the Trustees of JHT. Under Massachusetts law and JHT’s Declaration of Trust and By-Laws, the management of the business and affairs of JHT is the responsibility of its Trustees.

The Declaration of Trust authorizes the Trustees of JHT without shareholder approval to do the following:

–		Issue an unlimited number of full and fractional shares of beneficial interest having a par value of $.01 per share;

–		Divide such shares into an unlimited number of series of shares and to designate the relative rights and preferences thereof;

–		Issue additional series of shares or separate classes of existing series of shares;

–		Approve mergers of series (to the extent consistent with applicable laws and regulations); and

–		Designate a class of shares of a series as a separate series.

Shares of JHT. The shares of each portfolio, when issued and paid for, will be fully paid and non-assessable and will have no preemptive or conversion rights. Shares of each portfolio have equal rights with regard to redemptions, dividends, distributions and liquidations with respect to that portfolio. Holders of shares of any portfolio are entitled to redeem their shares as set forth under “Purchase and Redemption of Shares.”

Each issued and outstanding share is entitled to participate equally in dividends and distributions declared by the respective portfolio and upon liquidation in the net assets of such portfolio remaining after satisfaction of outstanding liabilities. For these purposes and for purposes of determining the sale and redemption prices of shares, any assets that are not clearly allocable to a particular portfolio will be allocated in the manner determined by the Trustees. Accrued liabilities that are not clearly allocable to one or more portfolios will also be allocated among the portfolios in the manner determined by the Trustees.

Shareholder Voting. Shareholders of each portfolio of JHT are entitled to one vote for each full share held (and fractional votes for fractional shares held) irrespective of the relative net asset values of the shares of the portfolio. All shares entitled to vote are voted by series. However, when voting for the election of Trustees and when otherwise permitted by the 1940 Act, shares are voted in the aggregate and not by series. Only shares of a particular portfolio are entitled to vote on matters determined by the Trustees to affect only the interests of that portfolio. Pursuant to the 1940 Act and the rules and regulations thereunder, certain matters approved by a vote of a majority of all the shareholders of JHT may not be binding on a portfolio whose shareholders have not approved such matter. There will normally be no meetings of shareholders for the purpose of electing Trustees unless and until less than a majority of the Trustees holding office has been elected by shareholders, at which time the Trustees then in office will call a shareholders’ meeting for the election of Trustees. Holders of not less than two-thirds of the outstanding shares of JHT may remove a Trustee by a vote cast in person or by proxy at a meeting called for such purpose. Shares of JHT do not have cumulative voting rights, which means that the holders of more than 50% of JHT’s shares voting for the election of Trustees can elect all of the Trustees if they so choose. In such event, the holders of the remaining shares would not be able to elect any Trustees.

Shareholder Liability. Under Massachusetts law, shareholders of JHT could, under certain circumstances, be held personally liable for the obligations of JHT. However, the Declaration of Trust contains an express disclaimer of shareholder liability for acts or obligations of JHT and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the Trustees or any officer of JHT. The Declaration of Trust also provides for indemnification out of the property of a JHT portfolio for all losses and expenses of any shareholder held personally liable for the obligations of such portfolio. In addition, the Declaration of Trust provides that JHT shall, upon request, assume the defense of any claim made against any shareholder for any act or obligation of JHT and satisfy any judgment thereon, but only out of the property of the affected portfolio. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which a particular portfolio would be unable to meet its obligations.

ADDITIONAL INFORMATION CONCERNING TAXES

its investment company taxable income, as that term is defined in the Code, determined without regard to the deduction for dividends paid) and net capital gain (i.e., the excess of its net realized long-term capital gain over its net realized short-term capital loss), if any, that it distributes to its shareholders in each taxable year, provided that it distributes to its shareholders at least 90% of its net investment income and 90% of its net tax-exempt interest income for such taxable year.

the same or similar trades or businesses or related trades or businesses, or of one or more qualified publicly traded partnerships.

The foregoing is a general and abbreviated summary of the applicable provisions of the Code and Treasury Regulations currently in effect. It is not intended to be a complete explanation or a substitute for consultation with individual tax advisors. For the complete provisions, reference should be made to the pertinent Code sections and the Treasury Regulations promulgated thereunder. The Code and Regulations are subject to change, possibly with retroactive effect.

LEGAL AND REGULATORY MATTERS

REPORTS TO SHAREHOLDERS

The financial statements of JHT at December 31, 2007, are incorporated herein by reference from JHT’s most recent Annual Report to Shareholders filed with the SEC on Form N-CSR pursuant to Rule 30b2-1 under the 1940 Act.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The financial statements of JHT at December 31, 2008, including the related financial highlights, which appear in the Prospectus, have been audited by PricewaterhouseCoopers LLP, independent registered public accounting firm as indicated in their report with respect thereto, and are included herein in reliance upon said report given on the authority of said firm as experts in accounting and auditing. PricewaterhouseCoopers LLP has offices at 125 High Street, Boston, MA 02110.

CUSTODIAN

State Street Bank and Trust Company, (“State Street”) 2 Avenue de Lafayette, Boston, Massachusetts 02111, currently acts as custodian and bookkeeping agent of all the Funds’ assets. State Street has selected various banks and trust companies in foreign countries to maintain custody of certain foreign securities. State Street is authorized to use the facilities of the Depository Trust Company, the Participants Trust Company and the book-entry system of the Federal Reserve Banks.

CODE OF ETHICS

JHT, the Adviser, the Distributor and each Subadviser have adopted Codes of Ethics that comply with Rule 17j-1 under the 1940 Act. Each Code permits personnel subject to the Code to invest in securities including securities that may be purchased or held by JHT.

PROXY VOTING POLICIES

The proxy voting policies of JHT and Capital Research Management, Inc. are set forth below in Appendix II. Information regarding how JHT voted proxies relating to portfolio securities during the most recent 12-moth period ended June 30 is available (1) without charge, upon request, by calling (800) 344-1029 (attention Gordon Shone) and (2) on the SEC’s website at http://www.sec.gov.

APPENDIX I
DISCLOSURE REGARDING PORTFOLIO MANAGERS OF THE MASTER FUNDS OF THE JHT
FEEDER FUNDS

Investment adviser — Capital Research and Management Company, the Series’ investment adviser, founded in 1931, maintains research facilities in the United States and abroad (Los Angeles, San Francisco, New York, Washington, DC, London, Geneva, Hong Kong, Singapore and Tokyo). These facilities are staffed with experienced investment professionals. The investment adviser is located at 333 South Hope Street, Los Angeles, CA 90071 and 6455 Irvine Center Drive, Irvine, CA 92618. It is a wholly owned subsidiary of The Capital Group Companies, Inc., a holding company for several investment management subsidiaries. Capital Research and Management Company manages equity assets through two investment divisions, Capital World Investors and Capital Research Global Investors, and manages fixed-income assets through its Fixed Income division. Capital World Investors and Capital Research Global Investors make investment decisions on an independent basis.

The investment adviser has adopted policies and procedures that address issues that may arise as a result of an investment professional’s management of the funds and other funds and accounts. Potential issues could involve allocation of investment opportunities and trades among funds and accounts, use of information regarding the timing of fund trades, investment professional compensation and voting relating to portfolio securities. The investment adviser believes that its policies and procedures are reasonably designed to address these issues.

Compensation of investment professionals — As described in the prospectus, the investment adviser uses a system of multiple portfolio counselors in managing fund assets. In addition, Capital Research and Management Company’s investment analysts may make investment decisions with respect to a portion of a fund’s portfolio within their research coverage.

Portfolio counselors and investment analysts are paid competitive salaries by Capital Research and Management Company. In addition, they may receive bonuses based on their individual portfolio results. Investment professionals also may participate in profit-sharing plans. The relative mix of compensation represented by bonuses, salary and profit-sharing plans will vary depending on the individual’s portfolio results, contributions to the organization and other factors.

To encourage a long-term focus, bonuses based on investment results are calculated by comparing pretax total investment returns to relevant benchmarks over the most recent year, a four-year rolling average and an eight-year rolling average with greater weight placed on the four-year and eight-year rolling averages. For portfolio counselors, benchmarks may include measures of the marketplaces in which the fund invests and measures of the results of comparable mutual funds. For investment analysts, benchmarks may include relevant market measures and appropriate industry or sector indexes reflecting their areas of expertise. Capital Research and Management Company makes periodic subjective assessments of analysts’ contributions to the investment process and this is an element of their overall compensation. The investment results of each of the funds’ portfolio counselors may be measured against one or more of the following benchmarks, depending on his or her investment focus:

Global Discovery Fund — Lipper Multi-Cap Growth Funds Index, Global Service and Information Index, Non-U.S. Service and Information Index;

Global Growth Fund — MSCI World Index, Lipper Global Funds Index;

Global Small Capitalization Fund — S&P Global <$3 Billion Index (formerly S&P/ Citigroup Global/World Indexes); Lipper Small Cap Growth Funds Index; Lipper International Small Cap Funds Index;

Growth Fund — S&P 500, Lipper Growth Funds Index;

International Fund — MSCI All Country World Index ex-USA, Lipper International Funds Index;

New World Fund — MSCI All Country World Index, Lipper Global Funds Index, Lipper Emerging Markets Funds Index, JP Morgan Emerging Markets Bond Index Global, MSCI Emerging Markets Index, Lipper Emerging Markets Debt Funds Average;

Blue Chip Income and Growth Fund — S&P 500, Lipper Growth & Income Funds Index;

Global Growth and Income Fund — MSCI World Index, Lipper Global Funds Index;

Growth-Income Fund — S&P 500, Lipper Growth & Income Funds Index;

International Growth and Income Fund — MSCI World Index (ex-U.S.), Lipper International Funds Index;

Asset Allocation Fund — S&P 500, Lipper Growth & Income Funds Index, Barclays Capital U.S. Aggregate Index (formerly Lehman Brothers U.S. Aggregate Index), Credit Suisse First Boston High Yield Bond Index, Lipper High Current Yield Bond Funds Average, Lipper Corporate Debt Funds A Rated Average;

Bond Fund — Barclays Capital U.S. Aggregate Index (formerly Lehman Brothers U.S. Aggregate Index), Lipper High Current Yield Bond Funds Average, Lipper Corporate Debt Funds A Rated Average;

Global Bond Fund — Barclays Capital Global Aggregate Bond Index (formerly Lehman Brothers Global Aggregate Bond Index), Barclays Capital US Corporate High Yield Index 2% Issuer Cap (formerly Lehman Brothers US Corporate High Yield Index 2% Issuer Cap), Lipper Global Income Funds Average;

High-Income Bond Fund — Credit Suisse First Boston High Yield Bond Index, Lipper High Current Yield Bond Funds Index; and

U.S. Government/AAA Rated Securities Fund — Citigroup Treasury/Government Sponsored/Mortgage Index and Lipper General U.S. Government Funds Average.

Portfolio counselor fund holdings and management of other accounts — Shares of the funds may only be owned by purchasing variable annuity and variable life insurance contracts. Each portfolio counselor’s need for variable annuity or variable life contracts and the role those contracts would play in his or her comprehensive investment portfolio will vary and depend on a number of factors including tax, estate planning, life insurance, alternative retirement plans or other considerations. The following portfolio counselor owns shares (through a variable insurance contract) in the dollar range noted: Robert W. Lovelace, Global Growth Fund, $10,001 - $50,000. The other portfolio counselors have determined that variable insurance or annuity contracts do not meet their current needs. Consequently, they do not hold shares of the funds.

The following table reflects information as of December 31, 2008:


	Other Registered					Other Pooled
	Investment Companies					Investment Vehicles					Other Accounts
	Number of					Number of					Number of
Portfolio Manager	Accounts		Assets			Accounts		Assets			Accounts		Assets
Carl M. Kawaja		4	$	115.7	B		1	$	0.71	B		0	$	0
David A. Hoag		3	$	80.6	B		0	$	0			0	$	0
Thomas H. Hogh		3	$	22.2	B		1	$	0.16	B		3	$	0.31
Gregory D. Johnson		3	$	92.0	B		0	$	0			0	$	0
Harold H. La		1	$	5.2	B		0	$	0			0	$	0
Jefferey T. Lager		0	$	0			0	$	0			0	$	0
Marcus B. Linden		1	$	9.1	B		0	$	0			0	$	0
Eugene P. Stein		1	$	48.8	B		0	$	0			0	$	0
Christopher M. Thomsen		0	$	0			0	$	0			0	$	0
Dylan J. Yolles		0	$	0			0	$	0			0	$	0

There are no accounts that pay fees based upon performance.

Ownership of fund shares. The portfolio managers listed in the above table did not beneficially own any shares of the fund that they managed as of December 31, 2008.

Potential Conflicts.

Capital Research and Management Company has adopted policies and procedures that address potential conflicts of interest that may arise between a portfolio counselor’s management of the fund and his or her management of other funds and accounts, such as conflicts relating to the allocation of investment opportunities, personal investing activities, portfolio counselor compensation and proxy voting of portfolio securities. While there is no guarantee that such policies and procedures will be effective in all cases, Capital Research and Management Company believes that all issues relating to potential material conflicts of interest involving the fund and its other managed funds and accounts have been addressed.

Ownership of Trust Shares. None of the Portfolio counselors beneficially owns any shares of the Trust.

APPENDIX II
PROXY VOTING POLICIES

JOHN HANCOCK FUNDS

PROXY VOTING POLICIES AND PROCEDURES

POLICY:

General

Delegation of Proxy Voting Responsibilities

The delegation by the Board of the authority to vote proxies relating to portfolio securities of the funds is entirely voluntary and may be revoked by the Board, in whole or in part, at any time.

Voting Proxies of Underlying Funds of a Fund of Funds

A. Where the Fund of Funds is not the Sole Shareholder of the Underlying Fund

With respect to voting proxies relating to the shares of an underlying fund (an “Underlying Fund”) held by a fund of the Trust operating as a fund of funds (a “Fund of Funds”) in reliance on Section 12(d)(1)(G) of the 1940 Act where the Underlying Fund has shareholders other than the Fund of Funds which are not other Fund of Funds, the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the vote of all other holders of such Underlying Fund shares.

B. Where the Fund of Funds is the Sole Shareholder of the Underlying Fund

In the event that one or more Funds of Funds are the sole shareholders of an Underlying Fund, the adviser to the Fund of Funds (the “Adviser”) or the Trust will vote proxies relating to the shares of the Underlying Fund as set forth below unless the Board elects to have the Fund of Funds seek voting instructions from the shareholders of the Funds of Funds in which case the Fund of Funds will vote proxies relating to shares of the Underlying Fund in the same proportion as the instructions timely received from such shareholders.

1. Where Both the Underlying Fund and the Fund of Funds are Voting on Substantially Identical Proposals

2. Where the Underlying Fund is Voting on a Proposal that is Not Being Voted on By the Fund of Funds

a. Where there is No Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser Relating to the Proposal

b. Where there is a Material Conflict of Interest Between the Interests of the Shareholders of the Underlying Fund and the Adviser Relating to the Proposal

Material Conflicts of Interest

Securities Lending Program

Disclosure of Proxy Voting Policies and Procedures in the Trust’s Statement of Additional Information (“SAI”)

Disclosure of Proxy Voting Policies and Procedures in Annual and Semi-Annual Shareholder Reports

Filing of Proxy Voting Record on Form N-PX

The Trust will annually file its complete proxy voting record with the SEC on Form N-PX. The Form N-PX shall be filed for the twelve months ended June 30 no later than August 31 of that year.

PROCEDURES:

Review of Subadvisers’ Proxy Voting

The Trust has delegated proxy voting authority with respect to fund portfolio securities in accordance with the Trust Policy, as set forth above.

Consistent with this delegation, each subadviser is responsible for the following:

	1)		Implementing written policies and procedures, in compliance with Rule 206(4)-6 under the Advisers Act, reasonably designed to ensure that the subadviser votes portfolio securities in the best interest of shareholders of the Trust.

	2)		Providing the adviser with a copy and description of the Subadviser Policy prior to being approved by the Board as a subadviser, accompanied by a certification that represents that the Subadviser Policy has been adopted in conformance with Rule 206(4)-6 under the Advisers Act. Thereafter, providing the adviser with notice of any amendment or revision to that Subadviser Policy or with a description thereof. The adviser is required to report all material changes to a Subadviser Policy quarterly to the Board. The CCO’s annual written compliance report to the Board will contain a summary of the material changes to each Subadviser Policy during the period covered by the report.

	3)		Providing the adviser with a quarterly certification indicating that the subadviser did vote proxies of the funds and that the proxy votes were executed in a manner consistent with the Subadviser Policy. If the subadviser voted any proxies in a manner inconsistent with the Subadviser Policy, the subadviser will provide the adviser with a report detailing the exceptions.

Adviser Responsibilities

Proxy Voting Procedures

Proxy Voting Service

The Trust has retained a proxy voting service to coordinate, collect, and maintain all proxy-related information, and to prepare and file the Trust’s reports on Form N-PX with the SEC.

The adviser, in accordance with its general oversight responsibilities, will periodically review the voting records maintained by the proxy voting service in accordance with the following procedures:

1)		Receive a file with the proxy voting information directly from each subadviser on a quarterly basis.

2)		Select a sample of proxy votes from the files submitted by the subadvisers and compare them against the proxy voting service files for accuracy of the votes.

3)		Deliver instructions to shareholders on how to access proxy voting information via the Trust’s semi-annual and annual shareholder reports.

Proxy Voting Service Responsibilities

Aggregation of Votes:

The proxy voting service’s proxy disclosure system will collect fund-specific and/or account-level voting records, including votes cast by multiple subadvisers or third party voting services.

Reporting:

The proxy voting service’s proxy disclosure system will provide the following reporting features:

	1)		multiple report export options;

	2)		report customization by fund-account, portfolio manager, security, etc.; and

	3)		account details available for vote auditing.

CAPITAL RESEARCH AND MANAGEMENT COMPANY
PROXY VOTING PROCEDURES AND PRINCIPLES

PROXY VOTING PROCEDURES AND PRINCIPLES — The Series and its investment adviser have adopted Proxy Voting Procedures and Principles (the “Principles”) with respect to voting proxies of securities held by the funds, other American Funds and Endowments. Certain American Funds have established separate proxy voting committees that vote proxies or delegate to a voting officer the authority to vote on behalf of those funds. Proxies for all other funds (including the Series) are voted by a committee of the investment adviser under authority delegated by those funds’ boards. Therefore, if more than one fund invests in the same company, they may vote differently on the same proposal.

All U.S. proxies are voted. Proxies for companies outside the U.S. also are voted, provided there is sufficient time and information available. After a proxy is received, the investment adviser prepares a summary of the proposals in the proxy. A discussion of any potential conflicts of interest is also included in the summary. For proxies of securities manged by a particular investment division of the investment adviser, the initial voting recommendation is made by one or more research analysts in that investment division familiar with the company and industry. A second recommendation is made by a proxy coordinator (a senior investment professional) within the appropriate investment division based on the individual’s knowledge of the Principles and familiarity with proxy-related issues. The proxy summary and voting recommendations are then sent to the appropriate proxy voting committee for the final voting decision.

The analyst and proxy coordinator making voting recommendations are responsible for noting any potential material conflicts of interest. One example might be where a director of one or more American Funds is also a director of a company whose proxy is being voted. In such instances, proxy voting committee members are alerted to the potential conflict. The proxy voting committee may then elect to vote the proxy or seek a third-party recommendation or vote of an ad hoc group of committee members.

The Principles, which have been in effect in substantially their current form for many years, provide an important framework for analysis and decision-making by all funds. However, they are not exhaustive and do not address all potential issues. The Principles provide a certain amount of flexibility so that all relevant facts and circumstances can be considered in connection with every vote. As a result, each proxy received is voted on a case-by-case basis considering the specific circumstances of each proposal. The voting process reflects the funds’ understanding of the company’s business, its management and its relationship with shareholders over time.

Information regarding how the fund voted proxies relating to portfolio securities during the 12-month period ended June 30 of each year will be available on or about September 1 of each year (a) without charge, upon request by calling American Funds Service Company at 800/421- 0180, (b) on the American Funds website at americanfunds.com and (c) on the SEC’s website at sec.gov.

The following summary sets forth the general positions of the American Funds, Endowments, the Series and the investment adviser on various proposals. A copy of the full Guidelines is available upon request, free of charge, by calling American Funds Service Company or visiting the American Funds website.

DIRECTOR MATTERS — The election of a company’s slate of nominees for director generally is supported. Votes may be withheld for some or all of the nominees if this is determined to be in the best interest of shareholders. Separation of the chairman and CEO positions may also be supported.

GOVERNANCE PROVISIONS — Typically, proposals to declassify the board (elect all directors annually) are supported based on the belief that this increases the directors’ sense of accountability to shareholders. Proposals for cumulative voting generally are supported in order to promote management and board accountability and an opportunity for leadership change. Proposals designed to make director elections more meaningful, either by requiring a majority vote or by requiring any director receiving more withhold votes to tender his or her resignation, generally are supported.

PART C

OTHER INFORMATION

Item 23. Exhibits


(a)(1)		Agreement and Declaration of Trust dated September 29, 1988 — previously filed as exhibit (1)(a) to post-effective amendment no. 31 filed on April 25, 1996, accession number 0000950135-96-001803.

(a)(2)		Redesignation of Series of Shares dated March 31, 1989 relating to Convertible Securities Trust — previously filed as exhibit (1)(b) to post-effective amendment no. 31 filed on April 25, 1996, accession number 0000950135-96-001803.

(a)(3)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated March 31, 1989 relating to Conservative, Moderate and Aggressive Asset Allocation Trusts — previously filed as exhibit (1)(c) to post-effective amendment no. 31 filed on April 25, 1996, accession number 0000950135-96-001803.

(a)(4)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated February 1, 1991 relating to Growth & Income Trust — previously filed as exhibit (1)(d) to post-effective amendment no. 31 filed on April 25, 1996, accession number 0000950135-96-001803.

(a)(5)		Redesignation of Series of Shares dated April 3, 1991 relating to Bond Trust — previously filed as exhibit (1)(e) to post-effective amendment no. 31 filed on April 25, 1996, accession number 0000950135-96-001803.

(a)(6)		Redesignation of Series of Shares dated April 17 1991 relating to U.S. Government Bond Trust — previously filed as exhibit (1)(f) to post-effective amendment no. 31 filed on April 25, 1996, accession number 0000950135-96-001803.

(a)(7)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated August 7, 1992 relating to Pasadena Growth Trust, Growth Trust, and Strategic Income Trust — previously filed as exhibit (1)(g) to post-effective amendment no. 31 filed on April 25, 1996, accession number 0000950135-96-001803.

(a)(8)		Redesignation of Series of Shares dated April 4, 1993 relating to Growth Trust and Strategic Income Trust — previously filed as exhibit (1)(h) to post-effective amendment no. 31 filed on April 25, 1996, accession number 0000950135-96-001803.

(a)(9)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated December 28, 1994 relating to International Growth and Income Trust — previously filed as exhibit (1)(i) to post-effective amendment no. 31 filed on April 25, 1996, accession number 0000950135-96-001803.

(a)(10)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated February 1, 1996 relating to Small/Mid Cap Trust— previously filed as exhibit (1)(j) to post-effective amendment no. 34 filed on October 4, 1996, accession number 0000950133-96-002099.

(a)(11)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated February 1, 1996 relating to- International Small Cap Trust — previously filed as exhibit (1)(k) to post-effective amendment no. 34 filed on October 4, 1996, accession number 0000950133-96-002099.

(a)(12)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated July 9, 1996 relating to Growth Trust — previously filed as exhibit (1)(l) to post-effective amendment no. 34 filed on October 4, 1996, accession number 0000950133-96-002099.

(a)(13)		Redesignation of Series of Shares dated October 1, 1996 relating to Pasadena Growth Trust — previously filed as exhibit (1)(m) to post-effective amendment no. 35 filed on December 19, 1996, accession number 0000950135-96-005355.


(a)(14)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated December 31, 1996 relating to Value, High Yield, International Stock, Science & Technology, Balanced, Worldwide Growth, Emerging Growth, Pilgrim Baxter Growth, Pacific Rim Emerging Markets, Real Estate Securities, Capital Growth Bond, Equity Index, Quantitative Equity, Lifestyle Conservative 280, Lifestyle Moderate 460, Lifestyle Balanced 640, Lifestyle Growth 820, Lifestyle Aggressive 1000 Trusts previously filed as exhibit (a)(14) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(15)		Redesignation of Series of Shares dated December 31, 1996 relating to Value Equity Trust previously filed as exhibit (a)(15) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(16)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated September 30, 1997 relating to Small Company Value Trust — previously filed as exhibit (1)(m) to post-effective amendment no. 39 filed on March 2, 1998, accession number 0000950135-98-001303.

(a)(17)		Amendment dated October 1, 1997 to the Agreement and Declaration of Trust dated September 29, 1988 relating to Trust name change to Manufacturers Investment Trust — previously filed as exhibit (1)(n) to post-effective amendment no. 39 filed on March 2, 1998, accession number 0000950135-98-001303.

(a)(18)		Redesignation of Series of Shares dated November 2, 1998 relating to Emerging Growth Trust previously filed as exhibit (a)(18) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(19)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated May 1, 1999 relating to Small Company Blend, U.S. Large Cap Value, Total Return, International Value and Mid Cap Stock Trusts previously filed as exhibit (a)(19) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(20)		Redesignation of Series of Shares dated May 1, 1999 relating to Conservative Asset Allocation, Moderate Asset Allocation, Small/Mid Cap, International Growth and Income, Global Government Bond, Pilgrim Baxter Growth, Aggressive Asset Allocation, and Equity Trusts previously filed as exhibit (a)(20) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(21)		Termination of Series of Shares dated May 1, 1999 relating to Capital Growth Bond Trust and Worldwide Growth Trust previously filed as exhibit (a)(21) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(22)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated May 1, 2000 relating to Dynamic Growth, Internet Technologies, Tactical Allocation, Mid Cap Index, Small Cap Index, Total Stock Market Index, International Index, and 500 Index Trusts previously filed as exhibit (a)(22) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(23)		Redesignation of Series of Shares dated May 1, 2000 relating to Mid Cap Growth Trust previously filed as exhibit (a)(23) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(24)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated October 31, 2000 relating to Capital Appreciation Trust previously filed as exhibit (a)(24) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(25)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated April 30, 2001 relating to Telecommunications, Health Sciences, Mid Cap Growth, Mid Cap Opportunities, Financial Services, All Cap Value, Quantitative Mid Cap, Strategic Growth, Capital Opportunities, Utilities, Mid Cap Value, and Fundamental Value Trusts previously filed as


		exhibit (a)(25) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(26)		Redesignation of Series of Shares dated April 30, 2001 relating to Mid Cap Blend Trust previously filed as exhibit (a)(26) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(27)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated July 16, 2001 relating to Small-Mid Cap Growth, Small-Mid Cap, International Equity Select, Select Growth, Global Equity Select, Core Value and High Grade Bond Trusts previously filed as exhibit (a)(27) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(28)		Establishment and Designation of Additional Class of Shares dated January 2, 2002 relating to Class A Shares and Class B Shares of beneficial interest previously filed as exhibit (a)(28) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(29)		Redesignation of Class of Shares dated May 1, 2002 relating to Class A Shares and Class B Shares of beneficial interest previously filed as exhibit (a)(29) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(30)		Redesignation of Series of Shares dated November 25, 2002 relating to Growth Trust previously filed as exhibit (a)(30) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(31)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated May 1, 2003 relating to American Growth Trust, American International Trust, American Blue Chip Income and Growth Trust, and American Growth-Income Trust previously filed as exhibit (a)(31) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(32)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated May 1, 2003 relating to Natural Resources, Real Return Bond, Mid Cap Core, Large Cap Value, Quantitative All Cap, Emerging Growth, Special Value, and Small Cap Opportunities Trusts previously filed as exhibit (a)(32) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(33)		Redesignation of Series of Shares dated May 1, 2003 relating to U.S. Large Cap Value Trust, Capital Opportunities Trust and Tactical Allocation Trust previously filed as exhibit (a)(33) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(34)		Termination of Series of Shares dated May 1, 2003 relating to Telecommunications Trust, Internet Technologies Trust, Mid Cap Growth Trust, and Mid Cap Opportunities Trust previously filed as exhibit (a)(34) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(35)		Establishment and Designation of Additional Class of Shares dated July 1, 2003 relating to Class III Shares of beneficial interest previously filed as exhibit (a)(35) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(36)		Establishment and Designation of Additional Class of Shares dated July 8, 2003 relating to Class I Shares of beneficial interest for American Growth Trust, American International Trust, American Blue Chip Income and Growth Trust, and American Growth-Income Trust previously filed as exhibit (a)(36) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.


(a)(37)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated July 28, 2003 relating to Great Companies — America — previously filed as exhibit (a)(37) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(38)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated May 1, 2004 relating to Small Company, Core Equity, Classic Value, Quantitative Value, U.S. Global Leaders Growth, and Strategic Income Trusts previously filed as exhibit (a)(38) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(39)		Redesignation of Series of Shares dated May 1, 2004 relating to Pacific Rim Emerging Markets Trust and Global Equity Trust previously filed as exhibit (a)(39) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)40)		Amendment dated January 1, 2005 to the Agreement and Declaration of Trust dated September 29, 1988 relating to Trust name change to John Hancock Trust previously filed as exhibit (a)(40) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(41)		Establishment and Designation of Additional Class of Shares dated January 25, 2005 relating to Class NAV Shares of beneficial interest previously filed as exhibit (a)(41) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(42)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated January 25, 2005 relating to Money Market B, Index 500 B, International Index A, International Index B, Bond Index A, Bond Index B, Growth & Income II, Mid Value, Small Cap Value, Small Cap Growth, Overseas Equity, Active Bond, Short-Term Bond, and Managed Trusts previously filed as exhibit (a)(42) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(43)		Amendment dated April 29, 2005 to the Agreement and Declaration of Trust dated September 29, 1988 relating to amending and restating of Article IV, Section 4.1 previously filed as exhibit (a)(43) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(44)		Amendment dated April 29, 2005 to the Agreement and Declaration of Trust dated September 29, 1988 relating to amending and restating of Article VII, Section 7.2 previously filed as exhibit (a)(44) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(45)		Establishment and Designation of Additional Class of Shares dated April 29, 2005 relating to Class IIIA Shares of beneficial interest previously filed as exhibit (a)(45) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(46)		Establishment and Designation of Additional Series of Shares dated April 29, 2005 relating to Small Cap, International Opportunities, Core Bond, U.S. High Yield Bond, and Large Cap Trusts previously filed as exhibit (a)(46) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(47)		Termination of Series of Shares dated May 2, 2005 relating to Select Growth, Core Value, Small-Mid Cap, Small-Mid Cap Growth, High, Grade Bond, Global Equity Select, International Equity Select, and Great Companies- America Trusts previously filed as exhibit (a)(47) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(48)		Termination of Series of Shares dated May 2, 2005 relating to Strategic Growth, Small Company Blend, Overseas, Equity Index, Diversified Bond, and Aggressive Growth Trusts previously filed as exhibit (a)(48) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.


(a)(49)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated July 29, 2005 relating to American Bond Trust previously filed as exhibit (a)(49) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(50)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated October 12, 2005 relating to Small Company Growth, Growth Opportunities, Value Opportunities, Vista, Intrinsic Value, Growth, U.S. Multi Sector, International Growth, Spectrum Income, and Value & Restructuring Trusts previously filed as exhibit (a)(50) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(51)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated January 30, 2006 relating to Index Allocation Trust — previously filed as exhibit (a) (43) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(a)(52)		Redesignation of Series of Shares dated April 28, 2006 relating to Lifestyle Trusts, Growth & Income Trust, Growth & Income Trust II, and International Stock Trust — previously filed as exhibit (a) (40) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(a)(53)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated April 28, 2006 relating to International Small Company, Real Estate Equity, Mid Cap Value Equity, Global Real Estate, Absolute Return, and High Income Trusts — previously filed as exhibit (a) (42) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(a)(54)		Termination of Series of Shares dated May 2, 2006 relating to Large Cap Growth Trust — previously filed as exhibit (a) (41) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(a)(55)		Redesignation of Series of Shares dated June 30, 2006 relating to International Index Trust A and International Index Trust B previously filed as exhibit (a)(55) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(56)		Termination of Class of Shares dated September 29, 2006 relating to Class III Shares and Class IIIA beneficial interest for Lifestyle Trusts — previously filed as exhibit (a) (45) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(a)(57)		Termination of Series of Shares dated December 5, 2006 relating to Mid Cap Core Trust and Strategic Value Trust — previously filed as exhibit (a) (46) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(a)(58)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated April 30, 2007 relating to Small Cap Intrinsic Value, Founding Allocation, Income, Mutual Shares, Mid Cap Intersection, Emerging Markets Value, American Asset Allocation, American Global Growth, American Global Small Capitalization, American High-Income Bond, and American New World Trusts previously filed as exhibit (a)(58) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(59)		Termination of Series of Shares dated May 3, 2007 relating to Strategic Opportunities Trust previously filed as exhibit (a)(59) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(60)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated October 25, 2007 relating to American Fundamental Holdings Trust and American Global Diversification Trust previously filed as exhibit (a)(60) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.


(a)(61)		Termination of Series of Shares dated November 21, 2007 relating to Special Value Trust previously filed as exhibit (a)(61) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(62)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated December 14, 2007 relating to Floating Rate Income Trust, Global Asset Allocation Trust and Lifecycle Portfolios previously filed as exhibit (a)(62) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(63)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated April 28, 2008 relating to Disciplined Diversification Trust, Capital Appreciation Value Trust, and Growth Equity Trust previously filed as exhibit (a)(63) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(64)		Termination of Series of Shares dated May, 9, 2008 relating to U.S. Global Leaders Growth Trust, Growth & Income Trust, Quantitative Mid Cap Trust, and Dynamic Growth Trust previously filed as exhibit (a)(64) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(65)		Establishment and Designation of Additional Series of Shares of Beneficial Interest dated July 9, 2008 relating to American Diversified Growth & Income Trust previously filed as exhibit (a)(65) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(66)		Redesignation of Series of Shares dated July 9, 2008 relating to Quantitative Value Trust, Global Asset Allocation Trust, and Quantitative All Cap Trust previously filed as exhibit (a)(66) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(a)(67)		Establishment and Designation of Additional Series of Shares of Beneficial Interest September 26, 2008 relating to BlackRock Global Allocation Trust, Alpha Opportunities Trust, and Smaller Company Growth Trust dated previously filed as exhibit (a)(67) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(b)		Revised By-laws of the Trust dated June 30, 2006 — previously filed as exhibit (b)(2) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(b)(1)		Amendment dated December 13, 2006 to the By-laws of the Trust, dated June 30, 2006 — previously filed as exhibit (b)(3) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(c)		Specimen Share Certificate — previously filed as exhibit (2) to post-effective amendment no. 38 filed September 17, 1997.

(d)(1)		Amended and Restated Advisory Agreement dated September 26, 2008 between John Hancock Trust and John Hancock Investment Management Services, LLC previously filed as exhibit (d)(1) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(1)(A)		Chief Compliance Officer Services Agreement between the CCO, John Hancock Trust, and John Hancock Investment Management Services, LLC dated October 10, 2008 previously filed as exhibit (d)(1)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(1)(B)		Amendment dated December 19, 2008 to Amended and Restated Advisory Agreement dated September 26, 2008 regarding Short Term Government Income Trust, between John Hancock Trust and John Hancock Investment Management Services, LLC previously filed as exhibit


		(d)(1)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(1)(C)		Amendment dated March 20, 2009 to Amended and Restated Advisory Agreement dated September 26, 2008 regarding Mid Value Trust, between John Hancock Trust and John Hancock Investment Management Services, LLC — FILED HEREWITH.

(d)(1)(D)		Amendment dated April 29, 2009 to Amended and Restated Advisory Agreement dated September 26, 2008 regarding Balanced Trust, Core Fundamental Holdings Trust, Core Global Diversification Trust, Core Allocation Trust, Core Balanced Trust, Core Disciplined Diversification Trust and International Index Trust, between John Hancock Trust and John Hancock Investment Management Services, LLC — FILED HEREWITH.

(d)(2)		Subadvisory Agreement dated May 1, 2004 relating to Small Company Trust, between the Adviser and American Century Investment Management, Inc. previously filed as exhibit (d)(2) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(2)(A)		Amendment dated October 17, 2005 to Subadvisory Agreement dated May 1, 2004 relating to addition of Vista Trust, between the Adviser and American Century Investment Management, Inc. previously filed as exhibit (d)(2)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(2)(B)		Amendment dated June 30, 2006 to Subadvisory Agreement dated May 1, 2004 relating to Vista Trust, between the Adviser and American Century Investment Management, Inc. dated June 30, 2006 — previously filed as exhibit (d) (54) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(3)		Subadvisory Agreement dated September 30, 2006 relating to Large Cap Value Trust, between the Adviser and BlackRock Investment Management, LLC previously filed as exhibit (d)(3) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(3)(A)		Amendment dated December 1, 2006 to Subadvisory Agreement dated September 30, 2006 relating to Large Cap Value Trust between the Adviser and BlackRock Investment Management, LLC — previously filed as exhibit (d) (55) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(3)(B)		Participation Agreement dated October 1, 2008, among John Hancock Life Insurance Company (U.S.A.), John Hancock Life Insurance Company of New York, John Hancock Life Insurance Company, John Hancock Variable Life Insurance Company (collectively, “Manulife”), John Hancock Trust (“JHT”), BlackRock Variable Series Funds, Inc., BlackRock Advisors, LLC, and BlackRock Investments, Inc. previously filed as exhibit (d)(3)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(4)		Subadvisory Agreement dated January 25, 1999 relating to Diversified Bond Trust, Income & Value Trust, Small Company Blend Trust, and U.S. Large Cap Trust, between the Adviser and Capital Guardian Trust Company previously filed as exhibit (d)(4) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(4)(A)		Amendment dated December 30, 2001 to Subadvisory Agreement dated January 25, 1999 relating to U.S. Large Cap Value Trust and Diversified Bond Trust, between the Adviser and Capital Guardian Trust Company previously filed as exhibit (d)(4)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(4)(B)		Amendment dated April 29, 2005 to Subadvisory Agreement dated January 25, 1999 relating to addition of Overseas Equity Trust and Managed Trust, between the Adviser and Capital Guardian Trust Company previously filed as exhibit (d)(4)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.


(d)(4)(C)		Amendment June 30, 2006 to Subadvisory Agreement dated January 25, 1999 relating to Overseas Equity Trust and U.S. Large Cap Trust, between the Adviser and Capital Guardian Trust Company — previously filed as exhibit (d) (56) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(5)		Subadvisory Agreement dated May 30, 2008 relating to Value & Restructuring Trust, between the Adviser and Columbia Management Advisors, LLC previously filed as exhibit (d)(5) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(6)		Subadvisory Agreement dated April 30, 2001 relating to Financial Services Trust and Fundamental Value Trust, between the Adviser and Davis Selected Advisers, L.P. previously filed as exhibit (d)(6) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(6)(A)		Amendment dated April 30, 2005 to Subadvisory Agreement dated April 30, 2001 relating to Financial Services Trust and Fundamental Value Trust, between the Adviser and Davis Selected Advisers, L.P. previously filed as exhibit (d)(6)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(6)(B)		Amendment dated October 17, 2005 to Subadvisory Agreement dated April 30, 2001 relating to Financial Services Trust and Fundamental Value Trust, between the Adviser and Davis Selected Advisers, L.P. previously filed as exhibit (d)(6)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(6)(C)		Amendment dated June 9, 2008 to Subadvisory Agreement dated April 30, 2001 relating to U.S. Core Trust, between the Adviser and Davis Selected Advisers, L.P. previously filed as exhibit (d)(6)(C) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(6)(D)		Amendment dated December 19, 2008 to Subadvisory Agreement dated April 30, 2001 relating to Core Equity Trust, between the Adviser and Davis Selected Advisers, L.P. previously filed as exhibit (d)(6)(D) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(7)		Subadvisory Agreement dated April 29, 2005 relating to Active Bond Trust, Bond Index Trust A, Bond Index Trust B, Managed Trust, and Short-Term Bond Trust, between the Adviser and Declaration Management & Research LLC previously filed as exhibit (d)(7) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(7)(A)		Amendment dated October 17, 2005 to Subadvisory Agreement dated April 29, 2005 relating to Active Bond Trust, Bond Index Trust A, Bond Index Trust B, Managed Trust, and Short-Term Bond Trust, between the Adviser and Declaration Management & Research LLC previously filed as exhibit (d)(7)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(7)(B)		Amendment dated January 3, 2006 to Subadvisory Agreement dated April 29, 2005 relating to Active Bond Trust, Bond Index Trust A, Bond Index Trust B, Managed Trust, and Short-Term Bond Trust, between the Adviser and Declaration Management & Research LLC previously filed as exhibit (d)(7)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(8)		Subadvisory Agreement dated November 23, 2002 relating to All Cap Core Trust, Dynamic Growth Trust, and Real Estate Securities Trust, between the Adviser and Deutsche Asset Management, Inc. previously filed as exhibit (d)(8) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.


(d)(8)(A)		Amendment dated October 17, 2005 to Subadvisory Agreement dated November 23, 2002 relating to All Cap Core Trust, Dynamic Growth Trust, and Real Estate Securities Trust, between the Adviser and Deutsche Asset Management, Inc. previously filed as exhibit (d)(8)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(8)(B)		Sub-Subadvisory Agreement dated April 28, 2006 between Deutsche Asset Management (Hong Kong) Limited and RREEF America, L.L.C — previously filed as exhibit (d)(40) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(8)(C)		Sub-Subadvisory Agreement dated April 28, 2006 between Deutsche Asset Management International GMBH and RREEF America, L.L.C — previously filed as exhibit (d)(41) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(8)(D)		Sub-Subadvisory Agreement dated April 28, 2006 between Deutsche Investments Australia Limited and RREEF America, L.L.C — previously filed as exhibit (d)(42) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(8)(E)		Sub-Subadvisory Agreement dated April 28, 2006 between Deutsche Asset Management, Inc. and RREEF America L.L.C — previously filed as exhibit (d)(47) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(8)(F)		Sub-Subadvisory Agreement dated April 28, 2006 between RREEF America L.L.C and RREEF Global Advisers Limited — previously filed as exhibit (d)(48) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(8)(G)		Amendment dated April 28, 2006 to Subadvisory Agreement dated November 23, 2005 relating to Global Real Estate Trust, between the Adviser and Deutsche Asset Management, Inc. — previously filed as exhibit (d)(57) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(8)(H)		Amendment dated June 30, 2006 to Subadvisory Agreement dated November 23, 2005 relating to Dynamic Growth Trust, between the Adviser and Deutsche Asset Management, Inc. — previously filed as exhibit (d)(58) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(8)(I)		Agreement Regarding Transfer of Management Agreement dated November 8, 2006 between Deutsche Asset Management, Inc. (“DAMI”) and Deutsche Investment Management Americas Inc. (“DIMA”) previously filed as exhibit (d)(8)(I) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(9)		Subadvisory Agreement dated April 28, 2006 relating to International Small Company Trust, between the Adviser and Dimensional Fund Advisors Inc. — previously filed as exhibit (d)(43) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(9)(A)		Amendment dated April 30, 2007 to Subadvisory Agreement dated April 28, 2006 relating to addition of Emerging Markets Value Trust, between the Adviser and Dimensional Fund Advisors LP — previously filed as exhibit (d)(73) to post effective amendment no. 76 on October 12, 2007, accession number 0000950135-07-006125.

(d)(9)(B)		Amendment dated April 28, 2008 to Subadvisory Agreement dated April 28, 2006 relating to addition of Disciplined Diversification Trust, between the Adviser and Dimensional Fund Advisors Inc. previously filed as exhibit (d)(9)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.


(d)(9)(C)		Amendment dated December 19, 2008 to Subadvisory Agreement dated April 28, 2006 relating to addition of Small Cap Opportunities Trust, between the Adviser and Dimensional Fund Advisors LP previously filed as exhibit (d)(9)(C) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(10)		Subadvisory Agreement dated April 30, 2007 relating to Income Trust, between the Adviser and Franklin Advisers, Inc. — previously filed as exhibit (d)(50) to post effective amendment no. 76 on October 12, 2007, accession number 0000950135-07-006125.

(d)(11)		Subadvisory Agreements dated April 30, 2007 relating to Mutual Shares Trust, between the Adviser and Franklin Mutual Advisers, LLC — previously filed as exhibit (d)(50) to post effective amendment no. 76 on October 12, 2007, accession number 0000950135-07-006125.

(d)(12)		Subadvisory Agreements dated April 28, 2008 relating to International Small Cap Trust, between the Adviser and Franklin Templeton Investment Corp. previously filed as exhibit (d)(12) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(13)		Subadvisory Agreements dated September 26, 2008 relating to Smaller Company Growth Trust, between the Adviser and Frontier Capital Management Co., LLC previously filed as exhibit (d)(13) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(14)		Amended and Restated Subadvisory Agreement dated October 17, 2005 relating to Growth, Growth Opportunities, Growth & Income, International Growth, International Stock, Intrinsic Value, Managed, U.S. Multi Sector and Value Opportunities Trusts, between the Adviser and Grantham, Mayo, Van Otterloo & Co. LLC previously filed as exhibit (d)(14) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(15)		Subadvisory Agreement January 28, 1999 relating Aggressive Growth Trust and Mid Cap Growth Trust, between the Adviser and A I M Capital Management, Inc. previously filed as exhibit (d)(15) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(15)(A)		Amendment date December 30, 2001 to Subadvisory Agreement dated January 28, 2001 relating to All Cap Growth Trust, between the Adviser and A I M Capital Management, Inc. previously filed as exhibit (d)(15)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(15)(B)		Amendment dated May 1, 2003 to Subadvisory Agreement dated January 28, 1999 relating to Mid Cap Core Trust, between the Adviser and A I M Capital Management, Inc. — previously filed as exhibit (d)(15)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(15)(C)		Amendment dated October 17, 2005 to Subadvisory Agreement dated January 28, 1999 relating to Small Company Growth Trust, between the Adviser and A I M Capital Management, Inc. previously filed as exhibit (d)(15)(C) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(15)(D)		Amendment dated April 28, 2006 to Subadvisory Agreement dated January 28, 1999 relating to All Cap Growth Trust, between the Adviser and A I M Capital Management, Inc. — previously filed as exhibit (d)(52) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(15)(E)		Amendment dated June 30, 2006 to Subadvisory Agreement dated January 28, 1999 relating to Mid Cap Core Trust between the Adviser and A I M Capital Management, Inc. — previously filed as exhibit (d)(53) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.


(d)(15)(F)		Amendment dated July 1, 2007 to Subadvisory Agreement dated January 28, 1999 relating to All Cap Growth Trust between the Adviser and A I M Capital Management, Inc. — previously filed as exhibit (d)(76) to post effective amendment no. 76 on October 12, 2007, accession number 0000950135-07-006125.

(d)(15)(G)		Amendment dated June 19, 2008 to Subadvisory Agreement dated January 28, 1999 relating to subadviser name change to Invesco Aim Capital Management, Inc. between the Adviser and A I M Capital Management, Inc. previously filed as exhibit (d)(15)(G) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(15)(H)		Amendment dated September 26, 2008 to Subadvisory Agreement dated January 28, 1999 relating to subadviser use of agents between the Adviser and Invesco Aim Capital Management, Inc. previously filed as exhibit (d)(15)(H) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(16)		Subadvisory Agreement dated November 1, 2000 relating to Capital Appreciation Trust, between the Adviser and Jennison Associates LLC previously filed as exhibit (d)(16) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(16)(A)		Amendment dated October 17, 2005 to Subadvisory Agreement dated November 1, 2001 relating to Capital Appreciation Trust, between the Adviser and Jennison Associates LLC previously filed as exhibit (d)(16)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(16)(B)		Amendment dated April 28, 2006 to Subadvisory Agreement dated November 1, 2001 relating to Capital Appreciation Trust, between the Adviser and Jennison Associates LLC — previously filed as exhibit (d)(60) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(17)		Subadvisory Agreement dated April 30, 2001 relating to All Cap Value Trust and Mid Cap Value Trust, between the Adviser and Lord Abbett & Co. LLC — previously filed as exhibit (d)(1)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(17)(A)		Amendment dated May 1, 2003 to Subadvisory Agreement dated April 30, 2004 relating to All Cap Value Trust, between the Adviser and Lord Abbett & Co. LLC previously filed as exhibit (d)(17)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(17)(B)		Amendment dated October 17, 2005 to Subadvisory Agreement dated April 30, 2004 relating to All Cap Value Trust and Mid Cap Value Trust, between the Adviser and Lord Abbett & Co. LLC previously filed as exhibit (d)(17)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(18)		Subadvisory Agreement dated December 14, 2007 relating to International Opportunities Trust, between the Adviser and Marsico Capital Management, LLC dated April 28, 2006 previously filed as exhibit (d)(18) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(19)		Subadvisory Agreement dated April 28, 2006 relating to Emerging Growth Trust and High Income Trust, between the Adviser and MFC Global Investment Management (U.S.), LLC (formerly Sovereign Asset Management, LLC) — previously filed as exhibit (d)(67) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(19)(A)		Amendment dated April 30, 2007 to Subadvisory Agreement dated April 28, 2006 relating to Small Cap Intrinsic Value Trust, between the Adviser and MFC Global Investment Management (U.S.), LLC — previously filed as exhibit (d)(73) to post effective amendment no. 76 on October 12, 2007, accession number 0000950135-07-006125.


(d)(19)(B)		Amendment dated December 29, 2008 to Subadvisory Agreement dated April 28, 2006 relating to Short Term Government Income Trust between the Adviser and MFC Global Investment Management (U.S.), LLC previously filed as exhibit (d)(19)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)		Subadvisory Agreement dated May 1, 2003 between the Adviser and MFC Global Investment Management (U.S.A.) Limited previously filed as exhibit (d)(20) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(A)		Amended and Restated Subadvisory Consulting Agreement dated April 30, 2004 between the Adviser, MFC Global Investment Management (U.S.A.) Limited and Deutsche Asset Management, Inc. previously filed as exhibit (d)(20)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(B)		Amendment dated April 30, 2004 to Subadvisory Agreement dated May 1, 2003 relating to Quantitative Value Trust, between the Adviser and MFC Global Asset Management (U.S.A.) Limited previously filed as exhibit (d)(20)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(C)		Amendment dated April 29, 2005 to Subadvisory Agreement dated May 1, 2003 relating to Money Market Trust B, 500 Index Trust B and Quantitative Value Trust, between the Adviser and MFC Global Asset Management (U.S.A.) Limited previously filed as exhibit (d)(20)(C) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(D)		Amendment dated October 17, 2005 to Subadvisory Agreement dated May 1, 2003 relating to Lifestyle Aggressive 1000, Lifestyle Growth 820, Lifestyle Balanced 640, Lifestyle Moderate 460, and Lifestyle Conservative 280 Trusts, between the Adviser and MFC Global Asset Management (U.S.A.) Limited previously filed as exhibit (d)(20)(D) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(E)		Amendment dated October 17, 2005 to Amended and Restated Subadvisory Consulting Agreement dated April 30, 2004 relating to Lifestyle Aggressive 1000, Lifestyle Growth 820, Lifestyle Balanced 640, Lifestyle Moderate 460, and Lifestyle Conservative 280 Trusts, between the Adviser, MFC Global Investment Management (U.S.A.) Limited and Deutsche Asset Management, Inc. previously filed as exhibit (d)(20)(E) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(F)		Amendment dated January 30, 2006 to Subadvisory Agreement dated May 1, 2003 relating to Index Allocation Trust, between the Adviser and MFC Global Asset Management (U.S.A.) Limited previously filed as exhibit (d)(20)(F) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(G)		Amendment dated April 28, 2006 to Subadvisory Agreement dated May 1, 2003 relating to Absolute Return Trust, between the Adviser and MFC Global Investment Management (U.S.A.) Limited — previously filed as exhibit (d) (63) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(20)(H)		Subadvisory Consulting Agreement dated December 13, 2006 relating to Absolute Return Trust, between MFC Global Investment Management (U.S.), LLC and MFC Global Investment Management (U.S.A.), Limited previously filed as exhibit (d)(20)(H) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(I)		Amendment dated April 30, 2007 to Subadvisory Agreement dated May 1, 2003 relating to Franklin Templeton Founding Allocation Trust, between the Adviser and and MFC Global Investment Management (U.S.A.) Limited — previously filed as exhibit (d)(73) to post effective amendment no. 76 on October 12, 2007, accession number 0000950135-07-006125.


(d)(20)(J)		Amendment dated October 29, 2007 to Subadvisory Agreement dated May 1, 2003 relating to American Fundamental Holdings Trust and American Global Diversification Trust, between the Adviser and MFC Global Investment Management (U.S.A), Ltd. — previously filed as exhibit (d)(77) to post effective amendment no. 78 on February 13, 2008 accession number 0000950135-08-000895.

(d)(20)(K)		Amendment dated December 26, 2007 to Subadvisory Agreement dated May 1, 2003 relating to Lifecycle 2010, Lifecycle 2015, Lifecycle 2020, Lifecycle 2025, Lifecycle 2030, Lifecycle 2035, Lifecycle 2040, Lifecycle 2045, Lifecycle 2050, and Lifecycle Retirement Trusts, between the Adviser and MFC Global Investment Management (U.S.A), Ltd. — previously filed as exhibit (d)(78) to post effective amendment no. 78 on February 13, 2008 accession number 0000950135-08-000895.

(d)(20)(L)		Amendment dated December 26, 2007 to Amended and Restated Subadvisory Consulting Agreement dated April 30, 2004 relating to Lifecycle 2010, Lifecycle 2015, Lifecycle 2020, Lifecycle 2025, Lifecycle 2030, Lifecycle 2035, Lifecycle 2040, Lifecycle 2045, Lifecycle 2050, and Lifecycle Retirement Trusts, between the Adviser, MFC Global Investment Management (U.S.A.) Limited and Deutsche Investment Management Americas Inc. previously filed as exhibit (d)(20)(L) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(M)		Amendment dated April 25, 2008 to the Subadvisory Agreement dated May 1, 2003 relating to Quantitative All Cap Trust, between the Adviser and MFC Global Investment Management (U.S.A.) Limited — previously filed as exhibit (d)(85) to post effective amendment no. 79 on April 16, 2008 accession number 0000950135-08-002555.

(d)(20)(N)		Amendment dated April 28, 2008 to the Subadvisory Agreement dated May 1, 2003 relating to Absolute Return Trust, between the Adviser and MFC Global Investment Management (U.S.A.) Limited previously filed as exhibit (d)(20)(N) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(O)		Amendment dated June 27, 2008 to the Subadvisory Agreement dated May 1, 2003 relating to American Diversified Growth & Income, American Fundamental Holdings and American Global Diversification, between the Adviser and MFC Global Investment Management (U.S.A.) Limited previously filed as exhibit (d)(20)(O) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(P)		Amendment dated September 26, 2008 to the Subadvisory Agreement dated May 1, 2003 relating Smaller Company Growth Trust, between the Adviser and MFC Global Investment Management (U.S.A.) Limited previously filed as exhibit (d)(20)(P) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(20)(Q)		Amendment dated April 29, 2009 to Subadvisory Agreement dated May 1, 2003 relating to Core Fundamental Holdings Trust, Core Global Diversification Trust, Core Allocation Trust, Core Balanced Trust, Core Disciplined Diversification Trust and International Index Trust, between the Adviser and MFC Global Investment Management (U.S.A.) Limited — FILED HEREWITH.

(d)(21)		Subadvisory Agreement dated April 30, 2001 relating to Capital Opportunities Trust, Strategic Growth Trust, and Utilities Trust between the Adviser and Massachusetts Financial Services Company previously filed as exhibit (d)(21) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(21)(A)		Amendment October 17, 2005 to Subadvisory Agreement dated April 30, 2001 relating to Strategic Value Trust and Utilities Trust, between the Adviser and Massachusetts Financial Services Company previously filed as exhibit (d)(20)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(21)(B)		Amendment dated June 30, 2006 to Subadvisory Agreement dated April 30, 2001 relating to Strategic Value Trust and Utilities Trust, between the Adviser and Massachusetts Financial


		Services Company — previously filed as exhibit (d) (62) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(22)		Subadvisory Agreement dated December 31, 1996 relating to High Yield Trust and Value Trust, between the Adviser and Miller Anderson & Sherrerd, LLP (assigned to Morgan Stanley Investment Management Inc.) previously filed as exhibit (d)(22) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(22)(A)		Amendment dated December 30, 2001 to Subadvisory Agreement dated December 31, 1996 relating to High Yield Trust and Value Trust, between the Adviser and Miller Anderson & Sherrerd, LLP (assigned to Morgan Stanley Investment Management Inc.) previously filed as exhibit (d)(22)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(22)(B)		Amendment dated October 17, 2005 to Subadvisory Agreement dated December 31, 1996 relating to Value Trust, between the Adviser and Morgan Stanley Investment Management Inc. previously filed as exhibit (d)(22)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(23)		Subadvisory Agreement dated May 1, 2000 relating to Global Bond Trust and Total Return Trust, between the Adviser and Pacific Investment Management Company previously filed as exhibit (d)(23) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(23)(A)		Amendment dated December 30, 2001 to Subadvisory Agreement dated May 5, 2000 relating to Global Return Trust and Total Return Trust, between the Adviser and Pacific Investment Management Company previously filed as exhibit (d)(23)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(23)(B)		Amendment dated May 1, 2003 to Subadvisory Agreement dated May 5, 2000 relating to addition of Real Return Bond Trust, between the Adviser and Pacific Investment Management Company previously filed as exhibit (d)(23)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(23)(C)		Amendment dated June 29, 2007 to Subadvisory Agreement dated May 5, 2000 relating to Real Return Bond Trust, between the Adviser and Pacific Investment Management Company — previously filed as exhibit (d)(74) to post effective amendment no. 76 on October 12, 2007, accession number 0000950135-07-006125.

(d)(23)(D)		Amendment dated April 28, 2008 to Subadvisory Agreement dated May 5, 2000 relating to Total Return Bond Trust, between the Adviser and Pacific Investment Management Company previously filed as exhibit (d)(23)(D) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(24)		Subadvisory Agreement dated September 26, 2008 relating to Smaller Company Growth Trust, between the Adviser and Perimeter Capital Management previously filed as exhibit (d)(24) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(25)		Subadvisory Agreement dated April 28, 2008 relating to Growth Equity Trust, between the Adviser and Rainier Investment Management, Inc. previously filed as exhibit (d)(25) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(26)		Subadvisory Agreement dated April 28, 2006 relating to Emerging Small Company Trust, between the Adviser and RCM Capital Management LLC — previously filed as exhibit (d)(64) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.


(d)(26)(A)		Amendment dated October 6, 2006 to Subadvisory Agreement dated April, 28 2006 relating to Science & Technology Trust, between the Adviser and RCM Capital Management LLC — previously filed as exhibit (d) (65) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(27)		Subadvisory Agreement dated April 28, 2006 relating to Mid Cap Value Equity Trust, between the Adviser and RiverSource Investments, LLC — previously filed as exhibit (d) (46) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(28)		Subadvisory Agreement dated April 29, 2005 relating to International Equity Index Trust A and International Equity Index Trust B, between the Adviser and SSgA Funds Management, Inc. previously filed as exhibit (d)(28) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(28)(A)		Amendment dated October 10, 2005 to Subadvisory Agreement dated April 29, 2005 relating to International Equity Index Trust A and International Equity Index Trust B, between the Adviser and SSgA Funds Management, Inc. previously filed as exhibit (d)(28)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)		Subadvisory Agreement dated January 28, 1999 between Manufacturers Securities Services, LLC and T. Rowe Price Associates, Inc. previously filed as exhibit (d)(29) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)(A)		Amendment dated May 1, 2000 to Subadvisory Agreement dated January 28, 1999 relating to Science & Technology Portfolio, between the Adviser and T. Rowe Price Associates, Inc. previously filed as exhibit (d)(29)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)(B)		Amendment dated April 30, 2001 to Subadvisory Agreement dated January 28, 1999 relating to Health Sciences Trust and Small Company Value Trust, between the Adviser and T. Rowe Price Associates, Inc. previously filed as exhibit (d)(29)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)(C)		Amendment dated December 30, 2001 to Subadvisory Agreement dated January 28, 1999 relating to Blue Chip Growth Trust and Equity-Income Trust, between the Adviser and T. Rowe Price Associates, Inc. previously filed as exhibit (d)(29)(C) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)(D)		Amendment dated April 29, 2005 to Subadvisory Agreement dated January 28, 1999 relating to Mid Value Trust, between the Adviser and T. Rowe Price Associates, Inc. previously filed as exhibit (d)(29)(D) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)(E)		Amendment dated October 17, 2005 to Subadvisory Agreement dated January 28, 1999 relating to Spectrum Income Trust, between the Adviser and T. Rowe Price Associates, Inc. previously filed as exhibit (d)(29)(E) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)(F)		Amendment dated April 28, 2006 to Subadvisory Agreement dated January 28, 1999 relating to Real Estate Equity Trust, between the Adviser and T. Rowe Price Associates, Inc. — previously filed as exhibit (d) (68) to post effective amendment no. 69 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(29)(G)		Amendment dated October 6, 2006 to Subadvisory Agreement dated January 28, 1999 relating to Science & Technology Trust, between the Adviser and T. Rowe Price Associates, Inc. — previously filed as exhibit (d) (69) to post effective amendment no. 69 filed on February 13, 2007, accession number 0000950135-07-000767.



(d)(29)(H)		Amendment dated January 17, 2008 to Subadvisory Agreement dated January 28, 1999 relating to U.S. Global Leaders Growth Trust, between the Adviser and T. Rowe Price Associates, Inc. — previously filed as exhibit (d)(81) to post effective amendment no. 78 on February 13, 2008 accession number 0000950135-08-000895.

(d)(29)(I)		Amendment dated April 28, 2008 to Subadvisory Agreement dated January 28, 1999 relating to Capital Appreciation Value Trust, between the Adviser and T. Rowe Price Associates, Inc. previously filed as exhibit (d)(29)(I) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)(J)		Amendment dated December 19, 2008 to Subadvisory Agreement dated January 28, 1999 relating to Small Company Trust and Classic Value Trust, between the Adviser and T. Rowe Price Associates, Inc. previously filed as exhibit (d)(29)(J) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)(K)		Amendment dated January 9, 2009 to Subadvisory Agreement dated January 28, 1999 relating to Mid Cap Value Trust, between the Adviser and T. Rowe Price Associates, Inc. previously filed as exhibit (d)(29)(K) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(29)(L)		Amendment dated March 20, 2009 to Subadvisory Agreement dated April 29, 2009 relating to Balanced Trust, between the Adviser and T. Rowe Price Associates, Inc. — FILED HEREWITH.

(d)(29)(M)		Amendment dated April 29, 2009 to Subadvisory Agreement dated April 29, 2009 relating to Mid Value Trust, between the Adviser and T. Rowe Price Associates, Inc. — FILED HEREWITH.

(d)(30)		Subadvisory Agreement dated December 8, 2003 relating to Global Equity Trust, between the Adviser and Templeton Global Advisors, Limited previously filed as exhibit (d)(30) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(30)(A)		Amendment dated April 29, 2005 to Subadvisory Agreement dated December 8, 2003 relating to Global Equity Trust, between the Adviser and Templeton Global Advisors, Limited previously filed as exhibit (d)(30)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(30)(B)		Amendment dated October 17, 2005 to Subadvisory Agreement dated December 8, 2003 relating to Global Equity Trust, between the Adviser and Templeton Global Advisors, Limited previously filed as exhibit (d)(30)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(31)		Subadvisory Agreement dated February 1, 1999 relating to International Value Trust, between the Adviser and Templeton Investment Counsel, Inc. previously filed as exhibit (d)(31) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(31)(A)		Amendment dated May 1, 2003 to Subadvisory Agreement dated February 2, 1999 relating to International Value Trust, between the Adviser and Templeton Investment Counsel, Inc. previously filed as exhibit (d)(31)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(31)(B)		Amendment dated December 8, 2003 to Subadvisory Agreement dated February 2, 1999 relating to International Small Cap Trust, between the Adviser and Templeton Investment Counsel, Inc. previously filed as exhibit (d)(31)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.
(d)(31)(C)		Amendment dated April 29, 2005 to Subadvisory Agreement dated February 2, 1999 relating to International Value Trust, between the Adviser and Templeton Investment Counsel, Inc.


		previously filed as exhibit (d)(31)(C) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(31)(D)		Amendment dated October 17, 2005 to Subadvisory Agreement dated February 2, 1999 relating to International Small Cap Trust and International Value Trust, between the Adviser and Templeton Investment Counsel, Inc. previously filed as exhibit (d)(31)(D) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(31)(E)		Sub-Subadvisory Agreement dated December 14, 2007, between Templeton Investment Counsel, Inc. and Templeton Global Advisors, Limited previously filed as exhibit (d)(31)(E) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(32)		Subadvisory Agreement dated April 30, 2003 relating to Global Allocation Trust, between the Adviser and UBS Global Asset Management (Americas) Inc. previously filed as exhibit (d)(32) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(32)(A)		Amendment dated April 29, 2005 to Subadvisory Agreement dated April 30, 2003 relating to Large Cap Trust, between the Adviser and UBS Global Asset Management (Americas) Inc. previously filed as exhibit (d)(32)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(32)(B)		Amendment dated October 17, 2005 to Subadvisory Agreement dated April 30, 2003 relating to Global Allocation Trust and Large Cap Trust between the Adviser and UBS Global Asset Management (Americas) Inc. previously filed as exhibit (d)(32)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(32)(C)		Amendment dated June 30, 2006 to Subadvisory Agreement dated April 30, 2003 relating to Large Cap Trust, between the Adviser and UBS Global Asset Management (Americas) Inc. — previously filed as exhibit (d)(70) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(32)(D)		Amendment dated December 19, 2006 to Subadvisory Agreement dated April 30, 2003 relating to Strategic Opportunities Trust, between the Adviser and UBS Global Asset Management (Americas) Inc. — previously filed as exhibit (d)(71) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(33)		Subadvisory Agreement dated January 29, 1999 relating to Growth & Income Trust, Investment Quality Bond Trust, and Mid Cap Stock Trust, between the Adviser and Wellington Management Company, LLP previously filed as exhibit (d)(33) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(33)(A)		Amendment dated December 30, 2001 to Subadvisory Agreement dated January 29, 1999 relating to Growth & Income Trust, Investment Quality Bond Trust, and Mid Cap Stock Trust, between the Adviser and Wellington Management Company, LLP previously filed as exhibit (d)(33)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(33)(B)		Amendment dated May 1, 2003 to Subadvisory Agreement dated January 29, 1999 relating to Natural Resources Trust, between the Adviser and Wellington Management Company, LLP previously filed as exhibit (d)(33)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(33)(C)		Amendment dated April 29, 2005 to Subadvisory Agreement dated January 29, 1999 relating to Small Cap Growth Trust and Small Cap Value Trust, between the Adviser and Wellington Management Company, LLP previously filed as exhibit (d)(33)(C) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.


(d)(33)(D)		Amendment dated October 17, 2005 to Subadvisory Agreement dated January 29, 1999 relating to removal of Growth & Income Trust, between the Adviser and Wellington Management Company, LLP previously filed as exhibit (d)(33)(D) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(33)(E)		Amendment dated April 30, 2007 to Subadvisory Agreement dated January 29, 1999 relating to Mid Cap Intersection Trust, between the Adviser and Wellington Investment Management — previously filed as exhibit (d)(73) to post effective amendment no. 76 on October 12, 2007, accession number 0000950135-07-006125.

(d)(33)(F)		Amendment dated June 29, 2007 to Subadvisory Agreement dated January 29, 1999 relating to Special Value Trust, between the Adviser and Wellington Management Company, LLP, — previously filed as exhibit (d)(75) to post effective amendment no. 76 on October 12, 2007, accession number 0000950135-07-006125.

(d)(33)(G)		Amendment dated December 14, 2007 to Subadvisory Agreement dated January 29, 1999 relating to Dynamic Growth Trust, between the Adviser and Wellington Management Company, LLP — previously filed as exhibit (d)(57) to post effective amendment no. 78 on February 13, 2008 accession number 0000950135-08-000895.

(d)(33)(H)		Amendment dated January 2, 2008 to Subadvisory Agreement dated January 29, 1999 relating to Global Asset Allocation Trust, between the Adviser and Wellington Management Company, LLP — previously filed as exhibit (d)(79) to post effective amendment no. 78 on February 13, 2008 accession number 0000950135-08-000895.

(d)(33)(I)		Amendment dated September 26, 2008 to Subadvisory Agreement dated January 29, 1999 relating to Alpha Opportunities Trust, between the Adviser and Wellington Management Company, LLP previously filed as exhibit (d)(33)(I) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(34)		Subadvisory Agreement dated April 29, 2005 relating to U.S. High Yield Trust and Core Bond Trust, between the Adviser and Wells Capital Management, Incorporated previously filed as exhibit (d)(34) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(34)(A)		Amendment dated October 17, 2005 to Subadvisory Agreement dated April 29, 2005 relating to U.S. High Yield Trust and Core Bond Trust, between the Adviser and Wells Capital Management, Incorporated previously filed as exhibit (d)(34)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(d)(34)(B)		Amendment dated June 30, 2006 to Subadvisory Agreement dated April 29, 2005 relating to U.S. High Yield Trust and Core Bond Trust, between the Adviser and Wells Capital Management, Incorporated — previously filed as exhibit (d)(73) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(35)		Subadvisory Agreement dated April 28, 2006 relating to High Yield Trust, Strategic Bond Trust and U.S. Government Securities Trust, between the Adviser and Western Asset Management Company — previously filed as exhibit (d)(49) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(35)(A)		Sub-Subadvisory Agreement dated April 28, 2006 relating to High Yield Trust and Strategic Bond Trust, between Western Asset Management Company and Western Asset Management Company Limited — previously filed as exhibit (d) (50) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.

(d)(35)(B)		Amendment dated December 26, 2007 to Subadvisory Agreement dated April 28, 2006 relating to Floating Rate Income Trust, between the Adviser and Western Asset Management Company —


		previously filed as exhibit (d)(80) to post effective amendment no. 78 on February 13, 2008 accession number 0000950135-08-000895.

(d)(35)(C)		Amendment dated October 1, 2008 to Subadvisory Agreement dated April 28, 2006 relating to Floating Rate Income Trust (WA Portfolio #3073), between the Adviser and Western Asset Management Company previously filed as exhibit (d)(35)(C) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(e)		Distribution Agreement dated January 1, 2002 as amended June 26, 2003 previously filed as exhibit (d)(1)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(e)(1)		Distribution Agreement dated January 1, 2002 as amended June 26, 2003 previously filed as exhibit (d)(1)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(e)(2)		Amendment dated September 28, 2004 to Distribution Agreement dated January 1, 2002 as amended June 26, 2003 previously filed as exhibit (e)(2) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(f)		Not Applicable

(g)		Custodian Agreement dated September 26. 2008 between the Trust and State Street Bank and Trust Company previously filed as exhibit (g) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(h)(1)		Participation Agreement dated July 1, 2003, as amended May 1, 2004, April 20, 2005, March 26, 2007 among the Trust and The Manufacturers Life Insurance Company (U.S.A.), The Manufacturers Life Insurance Company of New York, John Hancock Life Insurance Company, and John Hancock Variable Life Insurance Company, each on behalf of itself and its variable annuity and variable life insurance separate accounts, and John Hancock Distributors, LLC previously filed as exhibit (h)(1) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(h)(1)(A)		Amendment dated September 29, 2007 to Participation Agreement dated May 1, 2003, as amended May 1, 2004, April 20, 2005, March 26, 2007 among the Trust and The Manufacturers Life Insurance Company (U.S.A.), The Manufacturers Life Insurance Company of New York, John Hancock Life Insurance Company, and John Hancock Variable Life Insurance Company, each on behalf of itself and its variable annuity and variable life insurance separate accounts, and John Hancock Distributors, LLC previously filed as exhibit (h)(1)(A) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(h)(1)(B)		Amendment dated October 1, 2007 to Participation Agreement dated May 1, 2003, as amended May 1, 2004, April 20, 2005, March 26, 2007 among the Trust and The Manufacturers Life Insurance Company (U.S.A.), The Manufacturers Life Insurance Company of New York, John Hancock Life Insurance Company, and John Hancock Variable Life Insurance Company, each on behalf of itself and its variable annuity and variable life insurance separate accounts, and John Hancock Distributors, LLC previously filed as exhibit (h)(1)(B) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(h)(2)		AFIS Fund Participation Agreement dated November 9, 2007, among the Trust, John Hancock Investment Management Services, LLC, John Hancock Life Insurance Company (U.S.A.), John Hancock Life Insurance Company of New York, John Hancock Life Insurance Company and John Hancock Variable Life Insurance Company, on behalf of themselves and certain of their separate accounts, and Capital Research and Management Company previously filed as exhibit (h)(2) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.


(h)(3)		Transfer Agency Agreement (Series III) dated July 1, 2003 between Boston Financial Data Services and the Trust previously filed as exhibit (h)(3) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(h)(4)		ClearSky Agreement (Series III) dated May 12, 2003 between Automated Business Development Corp and the Trust previously filed as exhibit (h)(4) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(i)		Legal Opinion and Consent regarding the new portfolios - Not Applicable

(j)		Consent of Independent Registered Public Accounting Firm dated April 27, 2009. — Filed Herewith

(k)		Not Applicable

(l)		Not Applicable

(m)		Series I Shares Rule 12b-1 Plan (formerly Class A Shares) dated September 21, 2001, as amended April 4, 2002, June 26, 2003, April 1, 2004, December 13, 2004, June 23, 2005, September 23, 2005, December 13, 2005, March 30, 2006, March 23, 2007, September 28, 2007, and June 27, 2008 previously filed as exhibit (m) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(m)(1)		Series II Shares Rule 12b-1 Plan (formerly Class B Shares) dated September 21, 2001, as amended April 4, 2002, June 26, 2003, April 1, 2004, December 13, 2004, June 23, 2005, September 23, 2005, December 13, 2005, March 30, 2006, March 23, 2007, September 28, 2007, and June 27, 2008 previously filed as exhibit (m)(1) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(n)		Rule 18f-3 Plan dated September 21, 2001, as amended April 4, 2002, June 26, 2003, December 13, 2004, June 23, 2005, December 13, 2005, March 30, 2006, March 23, 2007, September 28, 2007, and March 25, 2008. previously filed as exhibit (n) to post-effective amendment no. 84 filed on February 13, 2009, accession number 0000950135-09-000965.

(o)		Not Applicable

(p)		Codes of Ethics of the Registrant and its Investment Adviser and Subadvisers.

(p)(1)		Code of Ethics of the following entities: (a) the Trust, (b) the Adviser to the Trust, (c) the Distributor to the Trust, (d) A I M Capital Management, Inc., (e) American Century Investments, (f) BlackRock Investment Management LLC., (g) Capital Guardian Trust Company, (h) Capital Research Management Company, (j) Davis Selected Advisors, L.P., (k) Declaration Management & Research LLC, (l) Deutsche Asset Management, Inc. (U.S.), (m) Dimensional Fund Advisors, Inc., (n) Franklin Templeton, (o) Fund Asset Management, L.P.(Mercury Advisors)(Merrill Lynch Investment Managers), (p) Grantham, Mayo, Van Otterloo & Co. LLC, (q) Independence Investment LLC, (r) Jennison Associates LLC, (s) John Hancock Advisers, (t) Legg Mason Funds Management, Inc., (u) Lord, Abbett & Co., (v) MFC Global Investment Management (U.S.A.) Limited, (w) Marsico Capital Management, LLC, (x) Massachusetts Financial Services Company, (y) Morgan Stanley Investment Management, (z) Munder Capital Management, (aa) Pacific Investment Management Company, (bb) Pzena Investment Management, LLC., (cc) RCM Capital Management, (dd) RiverSource Investments (Ameriprise): Retail Access, (ee) Salomon Brothers (Citigroup) Asset Management Inc., (ff) SSgA Funds Management, Inc., (gg) Sovereign Asset Management (MFC Global Investment Management (U.S.), LLC., (hh) Sustainable Growth Advisers, L.P., (ii) T. Rowe Price Associates, Inc., (jj) UBS Global Asset Management, (kk) United States Trust Company, (ll) Wellington Management Company, LLP, (mm) Wells Capital Management, Inc., (nn) Western Asset Management. — previously filed as exhibit (p)(17) to post effective amendment no. 72 filed on February 13, 2007, accession number 0000950135-07-000767.


(p)(2)		Code of Ethics of Rainier Investment Management, Inc. dated January 2007 — previously filed as exhibit (p)(2) to post effective amendment no. 78 on February 13, 2008 accession # 0000950135-08-000895.

(p)(3)		Code of Ethics of Frontier Capital Management Company, LLC — previously filed as exhibit (p)(3) to post-effective amendment no. 81 filed on July 17, 2008.

(p)(4)		Code of Ethics of Perimeter Capital Management — previously filed as exhibit (p)(4) to post-effective amendment no. 81 filed on July 17, 2008.

(p)(5)		Code of Ethics of Columbia Management Advisors, LLC — Filed Herewith

(q)(1)		Power of Attorney dated October 1, 2008 — All Trustees — previously filed as exhibit (q)(1) to post effective amendment no. 83 filed on October 15, 2008.

Item 24. Persons Controlled by or Under Common Control with Registrant

Four of the Trust shareholders are:

(i)		John Hancock Life Insurance Company of New York (“John Hancock New York”),

(ii)		John Hancock Life Insurance Company (U.S.A.) (“John Hancock USA”),

(iii)		John Hancock Life Insurance Company (“JHLICO”), and

(iv)		John Hancock Variable Life Insurance Company (“JHVLICO”).

John Hancock New York, John Hancock USA, JHLICO and JHVLICO (collectively, the “Companies”) hold Trust shares attributable to variable contracts in their respective separate accounts. The Lifestyle Trusts, the Index Allocation Trust, Franklin Templeton Founding Allocation Trust, the Absolute Return Trust, the American Fundamental Holdings Trust and the American Global Diversification Trust are also shareholders of certain of the Trust portfolios. The Companies will vote all shares of each portfolio of the Trust issued to such companies in proportion to timely instructions received from owners of the contracts participating in separate accounts registered under the Investment Company Act of 1940, as amended. The Trust will vote all shares of a portfolio issued to a Lifestyle Trusts, the Index Allocation Trust, Franklin Templeton Founding Allocation Trust, the Absolute Return Trust, the American Fundamental Holdings Trust or the American Global Diversification Trust in proportion to such instructions.

Item 25. Indemnification

Sections 6.4 and 6.5 of the Agreement and Declaration of Trust of the Registrant provide that the Registrant shall indemnify each of its Trustees and officers against all liabilities, including but not limited to amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and against all expenses, including but not limited to accountants and counsel fees, reasonably incurred in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, before any court or administrative or legislative body, in which such Trustee or officer may be or may have been involved as a party or otherwise or with which such person may be or may have been threatened, while in office or thereafter, by reason of being or having been such a Trustee or officer, except that indemnification shall not be provided if it shall have been finally adjudicated in a decision on the merits by the court or other body before which the proceeding was brought that such Trustee or officer (i) did not act in good faith in the reasonable belief that his or her action was in the best interests of the Registrant or (ii) is liable to the Registrant or its shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (“Securities Act”), may be permitted to Trustees, officers and controlling persons of the Registrant pursuant to the provisions described in this Item 25, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

Item 26. Business and Other Connections of Investment Adviser

See “Management of the Trust” in the Prospectus and “Investment Management Arrangements” in the Statement of Additional Information for information regarding the business of the Adviser and each of the Subadvisers. For information as to the business, profession, vocation or employment of a substantial nature of each director, officer or partner of the Adviser and each of the Subadvisers reference is made to the respective Form ADV, as amended, filed under the Investment Advisers Act of 1940, as amended each of which is herein incorporated by reference.

Item 27. Principal Underwriters


a.	Name of Investment Company	Capacity In which acting
	John Hancock Life Insurance	Principal Underwriter
	Company (U.S.A.)
	Separate Account A

	John Hancock Life Insurance	Principal Underwriter
	Company (U.S.A.)
	Separate Account H

	John Hancock Life Insurance	Principal Underwriter
	Company (U.S.A.)
	Separate Account I


a.	Name of Investment Company	Capacity In which acting
	John Hancock Life Insurance	Principal Underwriter
	Company (U.S.A.)
	Separate Account L

	John Hancock Life Insurance	Principal Underwriter
	Company (U.S.A.)
	Separate Account M

	John Hancock Life Insurance	Principal Underwriter
	Company (U.S.A.)
	Separate Account N

	John Hancock Life Insurance	Principal Underwriter
	Company of New York
	Separate Account A

	John Hancock Life Insurance	Principal Underwriter
	Company of New York
	Separate Account B

	John Hancock Life Insurance Company	Principal Underwriter
	Separate Account UV

	John Hancock Variable Life Insurance Company	Principal Underwriter
	Separate Account S

	John Hancock Variable Life Insurance Company	Principal Underwriter
	Separate Account U

	John Hancock Variable Life Insurance Company	Principal Underwriter
	Separate Account V

John Hancock Life Insurance Company (U.S.A.) is the sole member of John Hancock Distributors LLC (JHD LLC) and the following officers of John Hancock Life Insurance Company (U.S.A.) have power to act on behalf of JHD LLC: John DesPrez III* (Chairman and President), Marc Costantini* (Executive Vice President and Chief Financial Officer) and Jonathan Chiel* (Executive Vice President and General Counsel). The board of managers of JHD LLC (consisting of Marc Costantini*, Kevin Hill*, Steve Finch***, Katherine MacMillan** and, Christopher M. Walker**) may also act on behalf of JHD LLC.


*		Principal business office is 601 Congress Street, Boston, MA 02210

**		200 Bloor Street East, Toronto, Ontario Canada On M4W 1E5

***		197 Clarendon St., Boston, MA 02116

b. John Hancock Life Insurance Company (U.S.A.) is the sole member of John Hancock Distributors LLC (JHD LLC). The management of JHD LLC is vested in its board of managers (consisting of Marc Costantini*, Kevin Hill*, Steve Finch***, Katherine MacMillan** and, Christopher M. Walker**) who have authority to act on behalf of JHD LLC.


*		Principal business office is 601 Congress Street, Boston, MA 02210

**		200 Bloor Street East, Toronto, Ontario Canada On M4W 1E5

***		197 Clarendon St., Boston, MA 02116

c.		None.

Item 28. Location of Accounts and Records

All accounts, books and other documents required to be maintained under Section 31(a) of the Investment Company Act of 1940 are kept by John Hancock Investment Management Services, LLC (formerly, Manufacturers Securities Services, LLC.), the Registrant’s investment adviser, at its offices at 601 Congress Street, Boston, Massachusetts 02108,

By the Registrant at its principal business offices located at 601 Congress Street, Boston, Massachusetts 02210 or

By State Street Bank and Trust Company, the custodian for the Registrant, at its offices at 2 Avenue de Lafayette, Boston, Massachusetts 02111.

By American Century Investment Management, Inc., the subadviser to the Vista Trust, at its offices at 4500 Main Street, Kansas City, Missouri 64111.

By BlackRock Investment Management, Inc., the subadviser to the Large Cap Value Trust, at its offices at 800 Scudders Mill Road, Plainsboro, New Jersey 08536.

By Capital Guardian Trust Company., the subadviser to the Income & Value Trust, Overseas Equity Trust and the U.S. Large Cap Trust, at its offices at 333 South Hope Street, Los Angeles, California 90071.

By Columbia Management Advisors, LLC, the subadviser to the Value & Restructuring Trust, at its offices at 100 Federal Street, Boston, MA 02110.

By Davis Selected Advisers, L.P., the subadviser to the Financial Services Trust, Fundamental Value Trust and the Core Equity Trust, at its offices at 2949 East Elvira Road, Suite 101, Tuscon, Arizona 85706.

By Declaration Management & Research LLC, the subadviser to the Active Bond Trust, Bond Index Trust A, Bond Index Trust B, and the Short-Term Bond Trust, at its offices at 1650 Tysons Blvd., McLean, VA 22102.

By Deutsche Investment Management Americas, Inc., the subadviser to the All Cap Core Trust, Global Real Estate Trust, Lifestyle Trusts, and the Real Estate Securities Trust, at its offices at 345 Park Avenue, New York, New York 10154.

By Dimensional Fund Advisors LP, the subadviser to the Disciplined Diversification Trust, Emerging Markets Value Trust, and the International Small Company Trust, at its offices at 1299 Ocean Avenue, Santa Monica, California 90401.

By Franklin Advisers, Inc., the investment adviser to the Income Trust, at its offices at One Franklin Parkway, San Mateo, California 94403.

By Franklin Mutual Advisers, Inc. the investment adviser to the Mutual Shares Trust, at its offices at John F. Kennedy Parkway, Short Hills, New Jersey 07078.

By Franklin Templeton Investment Corp. the subadviser to the International Small Cap Trust, at its offices at 200 King Street West, Toronto, Ontario, Canada M5H3T4.

By Frontier Capital Management, the subadviser to the Smaller Company Growth Trust, at its offices at 99 Summer Street, Boston, MA 02110.

By Grantham, Mayo, Van Otterloo & Co. LLC, the subadviser to the Growth Trust, Growth Opportunities Trust, International Core Trust, International Growth Trust, Intrinsic Value Trust, U.S. Multi Sector Trust, and the Value Opportunities Trust, at its offices at 40 Rowes Wharf, Boston, Massachusetts 02110.

By Invesco Aim Capital Management, Inc., the subadviser to the All Cap Growth Trust, Small Cap Opportunities Trust, and the Small Company Growth Trust, at its offices at 11 Greenway Plaza, Houston, Texas 77046.

By Jennison Associates LLC, the subadviser to the Capital Appreciation Trust, at its offices at 466 Lexington Avenue, New York, NY 10017.

By Lord Abbett & Co., the subadviser to the All Cap Value Trust, at its offices at 90 Hudson Street, Jersey City, New Jersey 07302-3973.

By Marsico Capital Management, LLC , the subadviser for the International Opportunities Trust, at its offices at 1200 17th Street, Denver, Colorado 80202.

By Massachusetts Financial Services Company, the subadviser to the Utilities Trust, at its offices at 500 Boylston Street, Boston, MA 02116.

By MFC Global Investment Management (U.S.), LLC, the subadviser to the Emerging Growth Trust, High Income Trust, Short-Term Government Income Trust, Small Cap Intrinsic Value Trust, and the Strategic Income Trust, at its offices at 101 Huntington Avenue, Boston, MA 02199-7603.

By MFC Global Investment Management (U.S.A.) Limited, the subadviser to the Lifestyle Trusts, Index 500 Trust, Index 500 Trust B, Absolute Return Trust, Active Bond Trust, American Diversification Growth & Income Trust, American Fundamental Holdings Trust, American Global Diversification Trust, Franklin Templeton Founding Allocation Trust, Index Allocation Trust, Lifecycle Portfolios, Lifestyle Portfolios, Mid Cap Index Trust, Money Market Trust, Money Market Trust B, Optimized All Cap Trust, Optimized Value Trust, Pacific Rim Trust, Small Cap Index Trust, Small Cap Intrinsic Value Trust, Smaller Company Growth Trust, and the Total Stock Market Index Trust, at its offices at 200 Bloor Street East, Toronto, Ontario, Canada M4W lE5.

By Morgan Stanley Asset Management Inc., the subadviser of the Value Trust, at its offices at 1221 Avenue of the Americas, New York, New York 10020.

By Pacific Investment Management Company LLC, the subadviser to the Global Bond Trust, Real Return Bond Trust, and the Total Return Trust, at its offices at 840 Newport Center Drive, Suite 300, Newport Beach, California 92660.

By Perimeter Capital Management LLC, the subadviser to Smaller Company Growth Trust, at its offices at Five Concourse Parkway, Suite 2725, Atlanta Georgia 30328.

By Rainer Investment Management Inc., the subadviser to the Growth Equity Trust, at its offices at 601 Union Street, Suite 2801, Seattle, Washington 98101.

By RCM Capital Management LLC, the subadviser to the Emerging Small Company Trust and the Science & Technology Trust, at its offices at Four Embarcadero Center, San Francisco, CA 94111.

By RiverSource Investments, LLC, the subadviser to the Mid Cap Value Equity Trust, at its offices at 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474.

By SSgA Funds Management, Inc., the subadviser to the International Equity Index Trust A and the International Equity Index Trust B, at its offices at One Lincoln Street, Boston, Massachusetts 02111.

By T. Rowe Price Associates, Inc., the subadviser to the Blue Chip Growth Trust, Capital Appreciation Trust, Classic Value Trust, Equity-Income Trust, Health Science Trust, Mid Cap Value Trust, Mid Value Trust, Real Estate Equity Trust, Science & Technology Trust, Small Company Trust, Small Company Value Trust, and the Spectrum Income Trust, at its offices at 100 East Pratt Street, Baltimore, MD 21202.

By Templeton Global Advisors Limited, the subadviser to the Global Trust, at its offices at Box N7759, Lyford Cay, Nassau, Bahamas.

By Templeton Investment Counsel, LLC, the subadviser to International Value Trust, at its offices at 777 Mariners Island Blvd., San Mateo, CA 94404.

By UBS Global Asset Management (Americas) Inc., the subadviser to the Global Allocation Trust and the Large Cap Trust, at its offices at 1 North Wacker Drive, Chicago, Illinois 60606.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Amendment to the Registration Statement under Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Boston and the Commonwealth of Massachusetts, on this 30^th day of April 2009.


	JOHN HANCOCK TRUST
	By:	/s/ Keith F. Hartstein
		Keith F. Hartstein
		President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date(s) indicated.


SIGNATURE	TITLE	DATE

/s/ Keith F. Harstein Keith F. Hartstein	President and Chief Executive Officer	April 30, 2009

/s/ Gordan M. Shone Gordon M. Shone	Treasurer (Principal Financial Officer and Principal Accounting Officer)	April 30, 2009

/s/ Charles L. Bardelis * Charles L. Bardelis	Trustee	April 30, 2009

/s/ James R. Boyle * James R. Boyle	Trustee	April 30, 2009

/s/ Peter S. Burgess * Peter S. Burgess	Trustee	April 30, 2009

/s/ Elizabeth G. Cook * Elizabeth G. Cook	Trustee	April 30, 2009

/s/ Grace K. Fey* Grace K. Fey	Trustee	April 30, 2009

/s/ Theron Steeley Hoffman* Theron Steeley Hoffman	Trustee	April 30, 2009

/s/ Hassell H. McClellan * Hassell H. McClellan	Trustee	April 30, 2009

/s/ James M. Oates * James M. Oates	Trustee	April 30, 2009

/s/ Steven M. Roberts* Steven M. Roberts	Trustee	April 30, 2009

/s/ F. David Rolwing * F. David Rolwing	Trustee	April 30, 2009

* By Power of Attorney
JOHN HANCOCK TRUST


By:		/s/ Betsy Anne Seel Betsy Anne Seel
		Attorney-In-Fact
		Pursuant to Power of Attorney
		Previously filed with Post-Effective Amendment
		No. 83 to the Trust’s Registration Statement On October 15, 2008

EXHIBIT INDEX


(d)(1)(C)		Amendment dated March 20, 2009 to Amended and Restated Advisory Agreement dated September 26, 2008 regarding Mid Value Trust, between John Hancock Trust and John Hancock Investment Management Services, LLC.

(d)(1)(D)		Amendment dated April 29, 2009 to Amended and Restated Advisory Agreement dated September 26, 2008 regarding Balanced Trust, Core Fundamental Holdings Trust, Core Global Diversification Trust, Core Allocation Trust, Core Balanced Trust, Core Disciplined Diversification Trust and International Index Trust, between John Hancock Trust and John Hancock Investment Management Services, LLC.

(d)(20)(Q)		Amendment dated April 29, 2009 to Subadvisory Agreement dated May 1, 2003 relating to Core Fundamental Holdings Trust, Core Global Diversification Trust, Core Allocation Trust, Core Balanced Trust, Core Disciplined Diversification Trust and International Index Trust, between the Adviser and MFC Global Investment Management (U.S.A.) Limited.

(d)(29)(L)		Amendment dated March 20, 2009 to Subadvisory Agreement dated April 29, 2009 relating to Balanced Trust, between the Adviser and T. Rowe Price Associates, Inc.

(d)(29)(M)		Amendment dated April 29, 2009 to Subadvisory Agreement dated April 29, 2009 relating to Mid Value Trust, between the Adviser and T. Rowe Price Associates, Inc.

(j)		Consent of Independent Registered Public Accounting Firm dated April 27, 2009.

(p)(5)		Code of Ethics of Columbia Management Advisors, LLC.



FUND DESCRIPTIONS: INVESTMENT OBJECTIVES AND STRATEGIES, RISKS AND PERFORMANCE		1

Small Cap Funds
Emerging Small Company Trust		26
Small Cap Growth Trust		27
Small Cap Intrinsic Value Trust		28
Small Cap Opportunities Trust		30
Small Cap Value Trust		32
Small Company Growth Trust		34
Small Company Value Trust		35
Smaller Company Growth Trust		37
Value Opportunities Trust		38

Mid Cap Funds
Growth Opportunities Trust		39
Mid Cap Intersection Trust		39
Mid Cap Stock Trust		41
Mid Cap Value Equity Trust		42
Mid Value Trust		43
Value Trust		45
Vista Trust		46

Large Cap Funds
All Cap Core Trust		49
All Cap Growth Trust		50
All Cap Value Trust		52
Alpha Opportunities Trust		53
Blue Chip Growth Trust		54
Capital Appreciation Trust		56
Equity-Income Trust		58
Fundamental Value Trust		60
Growth Trust		61
Growth Equity Trust		62
Intrinsic Value Trust		63
Large Cap Trust		64
Large Cap Value Trust		65
Optimized All Cap Trust		66
Optimized Value Trust		68
U.S. Multi-Sector Trust		69
Value & Restructuring Trust		70

International Funds
Emerging Markets Value Trust		72
Global Trust		74
International Core Trust		75
International Growth Trust		76
International Opportunities Trust		77
International Small Cap Trust		79
International Small Company Trust		80


Subadvisory Arrangements and Management Biographies		220

MULTICLASS PRICING; RULE 12B-1 PLANS		245
Multiple Classes of Shares		245
Rule 12b-1 Plans of Each Class		245

GENERAL INFORMATION		246
Taxes		246
Qualification as a Regulated Investment Company; Diversification Requirements Applicable to Insurance Company Separate Accounts		246
Tax-Qualified and Non-Qualified Contracts		246
Foreign Investments		247
Tax Implications for Insurance Contracts With Investments Allocated to JHT		247
Dividends		247
Purchase and Redemption of Shares		247
Disruptive Short Term Trading		249
Policy Regarding Disclosure of Fund Portfolio Holdings		250
Purchasers of Shares of JHT		250
Broker Compensation and Revenue Sharing Arrangements		250

FINANCIAL HIGHLIGHTS		251

APPENDIX A		328
SCHEDULE OF MANAGEMENT FEES		328

FOR MORE INFORMATION		340


Best Quarter:		0.88% (Quarter ended 6/30/2008) Worst Quarter: -14.27% (Quarter ended 9/30/2008)





2.04%	4.44%	7.67%	3.48%	12.23%	5.25%	1.07%	6.49%	2.76%	-9.82%

1999	2000	2001	2002	2003	2004	2005	2006	2007	2008


Best Quarter:		4.96% (Quarter ended 12/31/2002) Worst Quarter: -5.68% (Quarter ended 9/30/2008)


ORGANIZATION OF JOHN HANCOCK TRUST			4
INVESTMENT POLICIES			4
Emerging Markets Value Trust – Approved Markets			4
Money Market Instruments			4
U.S. Government and Government Agency Obligations			5
Municipal Obligations			5
Canadian and Provincial Government and Crown Agency Obligations			6
Certificates of Deposit, Time Deposits and Bankers’ Acceptances			7
Commercial Paper			7
Corporate Obligations			8
Repurchase Agreements			8
Foreign Repurchase Agreements			8
Other Instruments			9
Warrants & Rights			9
Reverse Repurchase Agreements			9
Mortgage Securities			9
Asset-Backed Securities			13
Zero Coupon Securities, Deferred Interest Bonds and Pay-In-Kind Bonds			14
Loans and Other Direct Debt Instruments			15
High Yield (High Risk) Domestic Corporate Debt Securities			15
Brady Bonds			15
Sovereign Debt Obligations			16
Depositary Receipts			18
Indexed Securities			16
Hybrid Instruments			17
Variable and Floating Rate Obligations			19
Exchange Traded Funds (“ETFs”)			19
ADDITIONAL INVESTMENT POLICIES			19
Lending Securities			19
When-Issued Securities/Forward Commitments			19
Mortgage Dollar Rolls			20
Illiquid Securities			20
Short Sales			21
Investment in Other Investment Companies			21
Loan Participations and Assignments			21
Index-Related Securities (“Equity Equivalents”)			22
Fixed-Income Securities			22
Market Capitalization Weighted Approach			23
RISK FACTORS			24
Non-Diversified			24
Equity Securities			24
Fixed-Income Securities			24
Investment Grade Fixed-Income Securities in the Lowest Rating Category			24
Lower Rated Fixed-Income Securities			25
Small and Medium Size Companies			25
Foreign Securities			26
Investment Company Securities			26
Fund of Funds Risk Factors			27
Stripped Securities			27
Mortgage-Backed and Asset-Backed Securities			27
Securities Linked to the Real Estate Market			28
Industry or Sector Investing			29
Initial Public Offerings (“IPOs”)			30


U.S. Government Securities		31
High Yield (High Risk) Securities		31
HEDGING AND OTHER STRATEGIC TRANSACTIONS		33
General Characteristics of Options		34
General Characteristics of Futures Contracts and Options on Futures Contracts		35
Stock Index Futures		36
Options on Securities Indices and Other Financial Indices		37
Yield Curve Options		37
Currency Transactions		37
Combined Transactions		39
Swap Agreements and Options on Swap Agreements		39
Eurodollar Instruments		41
Risks of Hedging and Other Strategic Transactions		41
Risks of Hedging and Other Strategic Transactions Outside the United States		42
Use of Segregated and Other Special Accounts		43
Other Limitations		44
INVESTMENT RESTRICTIONS		44
Fundamental		44
Non-Fundamental		45
ADDITIONAL INVESTMENT RESTRICTIONS		46
PORTFOLIO TURNOVER		52
MANAGEMENT OF JHT		54
Duties and Compensation of Trustees		58
Trustee Ownership of Funds		59
INVESTMENT MANAGEMENT ARRANGEMENTS AND OTHER SERVICES		60
The Advisory Agreement		60
Subadvisory Agreements		68
Additional Information Applicable to Subadvisory Agreements		71
OTHER SERVICES		74
Proxy Voting Policies		74
DISTRIBUTOR; RULE 12B-1 PLANS		75
PORTFOLIO BROKERAGE		80
REDEMPTION OF SHARES		86
DETERMINATION OF NET ASSET VALUE		87
POLICY REGARDING DISCLOSURE OF PORTFOLIO HOLDINGS		88
SHAREHOLDERS OF JHT		89
HISTORY OF JHT		92
ORGANIZATION OF JHT		94
ADDITIONAL INFORMATION CONCERNING TAXES		95
LEGAL AND REGULATORY MATTERS		98
REPORTS TO SHAREHOLDERS		99
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM		99
CUSTODIAN		99
CODE OF ETHICS		99
MANAGEMENT OF OTHER FUNDS BY THE ADVISER/SUBADVISER		99
APPENDIX I — DESCRIPTION OF BOND RATINGS		I-
APPENDIX II — STANDARD & POOR’S CORPORATION DISCLAIMERS	II-
APPENDIX III — PORTFOLIO MANAGER INFORMATION	III-
APPENDIX IV — PROXY VOTING POLICIES AND PROCEDURES	IV-


–		brokerage and research services provided; and

–		confidentiality and anonymity.


	Aggregate Value of Securities of each Regular
Regular Broker-Dealer	Broker or Dealer (or its Parent) held by Funds
Citigroup, Inc.	$	233,575,134
Merrill Lynch & Co., Inc.	$	166,839,650
The Goldman Sachs Group, Inc.	$	186,024,270
Credit Suisse Group AG	$	68,587,741
UBS AG	$	305,500,276
JPMorgan Chase & Co.	$	611,040,631
Morgan Stanley & Co., Inc.	$	160,766,889
Lehman Brothers, Inc.	$	45,202,000
Deutsche Bank AG	$	18,195,060
The Bear Stearns Companies, Inc.	$	177,531,331

	•		Amoritization schedule — the larger the final maturity relative to other maturities, the more likely it will be treated as note; and

	•		Source of payment — the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.

	•		Investment performance. A portfolio manager’s compensation is linked to the pre-tax investment performance of the funds/accounts managed by the portfolio manager. Investment performance is calculated for one-, three- and five-year periods measured against a fund’s/account’s primary benchmark (as set forth in the fund’s prospectus), indices and/or peer groups where applicable. Generally, the greatest weight is placed on the three- and five-year periods.

	•		Revenues generated by the investment companies, pooled investment vehicles and other accounts managed by the portfolio manager.

	•		Contribution to the business objectives of the Investment Adviser.

	•		The dollar amount of assets managed by the portfolio manager.

	•		Market compensation survey research by independent third parties.

	•		Other qualitative factors, such as contributions to client objectives.

	•		Performance of Morgan Stanley and Morgan Stanley Investment Management, and the overall performance of the investment team(s) of which the portfolio manager is a member.


⁶		Subject to the Proxy Voting Policies of Merrill Lynch Bank & Trust Company FSB, the Committee may also function jointly as the Proxy Voting Committee for Merrill Lynch Bank & Trust Company FSB trust accounts managed by personnel dually-employed by BlackRock.

	•		Performance of the fund’s NAV

	•		The fund’s history of shareholder relations

	•		The performance of other funds under the adviser’s management


•		Entity would act in accord with this Policy only on behalf of DeAM clients.

^*		Registration in process as of February 28, 2006.


I. BOARD OF DIRECTORS AND EXECUTIVES			54
A. Election of Directors			54
B. Classified Boards of Directors			54
C. Board and Committee Independence			54
D. Liability and Indemnification of Directors			54
E. Qualifications of Directors			55
F. Removal of Directors and Filling of Vacancies			55
G. Proposals to Fix the Size of the Board
H. PROPOSALS TO RESTRICT CHIEF EXECUTIVE OFFICER’S SERVICE ON MULTIPLE BOARDS
II. CAPITAL STRUCTURE			55
A. Authorization of Additional Shares			55
B. Authorization of “Blank Check” Preferred Stock			55
C. Stock Splits/Reverse Stock Splits			56
D. Dual Class/Supervoting Stock			56
E. Large Block Issuance			56
F. Recapitalization into a Single Class of Stock			56
G. Share Repurchases			56
H. Reductions in Par Value			56
III. CORPORATE GOVERNANCE ISSUES			56
A. Confidential Voting			56
B. Cumulative Voting			57
C. Supermajority Voting Requirements			57
D. Shareholder Right to Vote			57
IV. COMPENSATION			57
A. Executive and Director Stock Option Plans			58
B. Employee Stock Option/Purchase Plans			58
C. Golden Parachutes			58
D. Proposals to Limit Benefits or Executive Compensation			58
E. Option Expensing			59
V. ANTI-TAKEOVER RELATED ISSUES			59
A. Shareholder Rights Plans (“Poison Pills”)			59
B. Reincorporation			59
C. Fair-Price Proposals			59
D. Exemption from state takeover laws			59
E. Non-financial Effects of Takeover Bids			60
VI. MERGERS & ACQUISITIONS			60
VII. SOCIAL & POLITICAL ISSUES			60
A. Labor & Human Rights			60
B. Environmental Issues			60
C. Diversity & Equality			60
D. Health & Safety			61


E. Government/Military			61
F. Tobacco			61
VIII. MISCELLANEOUS ITEMS			62
A. Ratification of Auditors			62
B. Limitation of non-audit services provided by independent auditor			62
C. Audit firm rotation			62
D. Transaction of Other Business			62
E. Motions to Adjourn the Meeting			62
F. Bundled Proposals			62
G. Change of Company Name			62
H. Proposals Related to the Annual Meeting			62
I. Investment Company Proxies			63
J. International Proxy Voting			63


Proxy Issue		LMCM Guideline
Linked Proposals: with the objective of making one element of a proposal more acceptable		Against

Blank Check Preferred Shares: authorization of, or an increase in, blank check preferred shares		Against

Supermajority Approval of Business Transactions: management seeks to increase the number of votes required on an issue above two-thirds of the outstanding shares		Against

Increase in Authorized Shares: provided the amount requested is necessary for sound business reasons		For

Shareholder Proposals		Case-by-Case

Stakeholder Proposals		Case-by-Case

Issuance of Previously Authorized Shares with Voting Rights to be Determined by the Board without Prior Specific Shareholder Approval		Against

“Fair Price” Provisions: Measures to limit ability to buy back shares from particular shareholder at higher-than-market prices		For

Preemptive Rights		For

Actions altering Board/Shareholder Relationship Require Prior Shareholder Approval (including “anti-takeover” measures)		For

Allow Shareholder action by written consent		For

Allow Shareholders to call Special Meetings		For

Social and Environmental Issues		As recommended by Company Management

Reimbursing Proxy Solicitation Expenses		Case-by-Case


		Policy Amended:		July 19, 2006

		Approved by:		Steven Carlson /s/

		Title:		Chief Compliance Officer

		Effective Date:		July 19, 2006

	•		A record of each vote cast by RIM on behalf of clients, provided that RIM may rely on a third party to make and retain, on RIM’s behalf, pursuant to a written undertaking, records of votes cast;

	•		Copies of any documents created by RIM that were material to making a decision on how to vote proxies on behalf of a client or that memorialize the basis for that decision; and

	•		A record of each written client request for proxy voting information and a copy of any written response by RIM to any written or oral client request for information on how RIM voted proxies on behalf of the requesting client.

	•		Resulting fee structure;

	•		Performance of both funds;

	•		Continuity of management personnel;

	•		Changes in corporate governance and their impact on shareholder rights.

	•		Performance of the fund’s Net Asset Value (NAV);

	•		The fund’s history of shareholder relations;

	•		The performance of other funds under the advisor’s management.


Policy Statement and Voting Procedure		page 3

Resolving Conflicts of Interest		page 4

Cost-Benefit Analysis Involving Voting Proxies		page 4

Proxy Voting Guidelines		page 5

Ordinary Business Matters		page 5

Auditors		page 5

Board of Directors		page 6

Executive and Director Compensation		page 8

Capital Structure		page 10

Mergers and Corporate Restructuring		page 10

Antitakeover Defenses and Voting Related Issues		page 12

Social and Environmental Issues		page 14

	•		Whether any discrimination charges have been filed against the subject company within the past year;

	•		Whether the subject company has subscribed to the Fair Employment Agency’s, “Declaration of Principle and Intent.” (Northern Ireland governmental regulations); and

	•		Whether potentially offensive material is not allowed in the work area (flags, posters, etc.).

1.		TYPES OF ACCOUNTS FOR WHICH CAM VOTES PROXIES

2.		GENERAL GUIDELINES

3.		HOW CAM VOTES

4.		CONFLICTS OF INTEREST

5.		VOTING POLICY


o		Election of directors
o		Proxy contests
o		Auditors
o		Proxy contest defenses
o		Tender offer defenses
o		Miscellaneous governance provisions
o		Capital structure
o		Executive and director compensation
o		State of incorporation
o		Mergers and corporate restructuring
o		Social and environmental issues
o		Miscellaneous

6.		OTHER CONSIDERATIONS

(1)		Share Blocking

(2)		Securities on Loan

7.		DISCLOSURE OF PROXY VOTING

8.		RECORDKEEPING AND OVERSIGHT

•		Approve Merger or Acquisition: Case-by-Case

•		Approve Technical Amendments to Charter: Case-by-Case

•		Opt Out of State Takeover Statutes: For

•		Authorize Share Repurchase: For

•		Authorize Trade in Company Stock: For

•		Approve Stock Splits: Case-by-Case

•		Approve Recapitalization/Restructuring: Case-by-Case

•		Issue Stock with or without Preemptive Rights: For

•		Issue Debt Instruments: Case-by-Case

•		Endorse the Ceres Principles (SP): Case-by-Case

•		Disclose Political and PAC Gifts (SP): Case-by-Case