<PAGE>
Registration No. 2-94479
811-4161
As filed with the Securities and Exchange Commission on September 5, 1997.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
----------------------
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
Pre-effective Amendment No.
Post-effective Amendment No. 19 /X/
and/or
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 20 /X/
----------------------
Chubb America Fund, Inc.
(Exact name of Registrant as Specified in Charter)
One Granite Place
Concord, New Hampshire 03301
(Address of Principal Executive Offices)
603-226-5000
(Registrant's Telephone Number)
Ronald R. Angarella, President
One Granite Place
Concord, New Hampshire 03301
(Name and Address of Agent for Service)
Copies To:
THOMAS H. ELWOOD, Esq. JOAN BOROS, Esq.
Chubb America Fund, Inc. Katten Muchin & Zavis
One Granite Place 1025 Thomas Jefferson Street, N.W.
Concord, NH 03301 Washington, D.C. 20007
It is proposed that this filing will become effective on November 15, 1997
pursuant to paragraph (a)(1).
The Registrant has registered an indefinite number or amount of its shares of
common stock under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. The Registrant filed a Rule 24f-2 Notice on
February 27, 1997.
<PAGE>
CHUBB AMERICA FUND, INC.
CROSS REFERENCE SHEET
Cross reference sheet showing location in the Prospectus of information
required by the Items in Part A of Form N-1A.
Item
Number Heading In Prospectus
- -------
1 Cover Page
2 *(Synopsis)
3 Financial Highlights
4 Investment Objectives and Policies, Capital Stock
5 Management of the Fund
6 Capital Stock, Taxes and Dividends
7 Offering and Redemption of Shares
8 Offering and Redemption of Shares
9 *(Legal Proceedings)
- --------------
* Indicates inapplicable or negative.
<PAGE>
- -------------------------------------------------------------------------------
CHUBB AMERICA FUND, INC.
ONE GRANITE PLACE
CONCORD, NEW HAMPSHIRE 03301
(603) 226-5000
- -------------------------------------------------------------------------------
Chubb America Fund, Inc. (the "Fund") is an open-end management investment
company which was incorporated in Maryland on October 19, 1984. The Fund is
composed of twelve separate Portfolios which operate as distinct investment
vehicles. The names and investment objectives of the Portfolios are as
follows:
World Growth Stock Portfolio: seeks to achieve long-term capital growth
through a policy of investing primarily in stocks of companies organized in
the United States or in any foreign nation. A portion of the Portfolio may
also be invested in debt obligations of companies and governments of any
nation. Any income realized will be incidental.
International Equity Portfolio: seeks long-term growth of capital through
investments in securities whose primary trading markets are outside the United
States.
Money Market Portfolio: seeks to achieve as high a level of current income
as is consistent with preservation of capital and liquidity. AN INVESTMENT IN
THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT.
Gold Stock Portfolio: to realize long-term capital appreciation, while
retaining the option to take current income into account, by investing
primarily, and sometimes exclusively, in common stocks of gold mining
companies.
Bond Portfolio: to provide a stable level of income, consistent with
limiting risk to principal, by investing primarily in high quality corporate
debt securities and U.S. Government debt obligations.
High Yield Bond Portfolio: seeks a high level of current income by investing
primarily in corporate obligations with emphasis on higher yielding, higher
risk, lower-rated or unrated securities. These securities may be considered
speculative and involve greater risks, including risk of default, than higher
rated securities. Investors should carefully consider these risks before
investing.
Domestic Growth Stock Portfolio: to achieve reasonable income and growth of
capital by investing primarily in a diversified portfolio of equity securities
issued by companies organized in the U.S. and considered by the Sub-Investment
Manager to be undervalued in light of the company's earning power and growth
potential.
Growth Portfolio: seeks capital growth by investing primarily in equity
securities that the Sub-Investment Manager believes have above-average growth
prospects.
Growth and Income Portfolio: to seek long-term growth of capital by
investing primarily in a wide range of equity issues that may offer capital
appreciation and, secondarily, to seek a reasonable level of current income.
Capital Growth Portfolio: to seek capital growth. Realization of income is
not a significant investment consideration and any income realized will be
incidental.
Balanced Portfolio: to seek reasonable current income and long-term capital
growth, consistent with conservation of capital, by investing primarily in
common stocks and fixed income securities.
Emerging Growth Portfolio: seeks to provide long-term growth of capital.
Dividend and interest income from portfolio securities, if any, is incidental
to the Portfolio's investment objective of long-term growth. THE PORTFOLIO IS
INTENDED FOR INVESTORS WHO UNDERSTAND AND ARE WILLING TO ACCEPT RISKS ENTAILED
IN SEEKING LONG-TERM GROWTH OF CAPITAL.
The World Growth Stock Portfolio, International Equity Portfolio, the Gold
Stock Portfolio, High Yield Bond Portfolio, the Growth and Income Portfolio,
the Growth Portfolio, the Capital Growth Portfolio, the Balanced Portfolio and
the Emerging Growth Portfolio permit investments in any nation, and
investments in these Portfolios involve special considerations and risks.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE UNITED STATES GOVERNMENT. INVESTMENTS IN THE PORTFOLIOS ARE
NOT BANK DEPOSITS AND ARE NOT INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE SUPPORTED BY THE FDIC OR ANY BANK. AN INVESTMENT IN ANY OF THE
PORTFOLIOS IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE INVESTMENT TO
FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE HIGHER OR
LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
This Prospectus sets forth concisely the information about the Fund and its
Portfolios that a prospective investor should know before investing. This
Prospectus should be read and retained for future reference.
A Statement of Additional Information for the Fund, dated November 15, 1997,
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. This Statement of Additional Information is available
upon request, and without charge, from the Fund by calling 1-800-452-4822 or
at the address or telephone number above. Inquiries about the Fund should be
directed to the Fund at the same address or telephone number.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 15, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL HIGHLIGHTS....................................................... 3
PERFORMANCE AND YIELD INFORMATION.......................................... 17
PORTFOLIOS................................................................. 17
INVESTMENT OBJECTIVES AND POLICIES......................................... 18
World Growth Stock Portfolio............................................. 18
Investment Objectives.................................................. 18
Investment Policies.................................................... 18
Risk Factors........................................................... 19
International Equity Portfolio........................................... 19
Investment Objectives..................................................
Investment Policies....................................................
Risk Factors...........................................................
Money Market Portfolio................................................... 20
Investment Objectives.................................................. 20
Investment Policies.................................................... 20
Risk Factors........................................................... 21
Gold Stock Portfolio..................................................... 21
Investment Objectives.................................................. 21
Investment Policies.................................................... 21
Risk Factors........................................................... 21
Bond Portfolio........................................................... 22
Investment Objectives.................................................. 22
Investment Policies.................................................... 22
Risk Factors........................................................... 22
High Yield Bond Portfolio................................................ 23
Investment Objectives.................................................. 23
Investment Policies....................................................
Risk Factors...........................................................
Domestic Growth Stock Portfolio.......................................... 24
Investment Objectives.................................................. 24
Investment Policies.................................................... 24
Risk Factors........................................................... 24
Growth Portfolio......................................................... 24
Investment Objectives.................................................. 24
Investment Policies....................................................
Risk Factors...........................................................
Growth and Income Portfolio.............................................. 25
Investment Objectives.................................................. 25
Investment Policies.................................................... 25
Risk Factors........................................................... 26
Capital Growth Portfolio................................................. 26
Investment Objectives.................................................. 26
Investment Policies.................................................... 26
Risk Factors........................................................... 27
Balanced Portfolio....................................................... 27
Investment Objectives.................................................. 27
Investment Policies.................................................... 27
Risk Factors........................................................... 27
Emerging Growth Portfolio................................................ 27
Investment Objective................................................... 27
Investment Policies.................................................... 28
Risk Factors........................................................... 28
Additional Risk Factors.................................................. 29
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Convertible Securities................................................... 30
Foreign Securities....................................................... 30
Foreign Currencies....................................................... 30
Brady Bonds.............................................................. 31
Non-Diversified Status................................................... 31
Emerging Market Securities............................................... 31
Depository Receipts...................................................... 32
Forward Foreign Currency Exchange Contracts.............................. 32
Repurchase Agreements.................................................... 32
High Yield Securities.................................................... 33
Zero Coupon Bonds........................................................ 34
Securities and Index Options............................................. 34
Purchasing Put and Call Options.......................................... 34
Futures Contracts........................................................ 34
Lending of Securities.................................................... 35
When Issued Securities................................................... 35
Mortgage Backed and Corporate Asset-Backed Securities.................... 35
Warrants................................................................. 36
Restricted and Illiquid Securities....................................... 36
Dollar Roll Transactions................................................. 37
Swap Transactions........................................................ 38
Loan Participations and Other Direct Indebtedness........................ 38
INVESTMENT RESTRICTIONS.................................................... 38
Portfolio Turnover....................................................... 38
MANAGEMENT OF THE FUND..................................................... 38
CAPITAL STOCK.............................................................. 42
TAXES AND DIVIDENDS........................................................ 43
OFFERING AND REDEMPTION OF SHARES.......................................... 43
OTHER INFORMATION.......................................................... 44
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN THE STATEMENT OF ADDITIONAL INFORMATION, AND IN THE
ATTACHED PROSPECTUS FOR THE POLICY.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following tables include selected data for a share of capital stock
outstanding for each portfolio throughout the periods indicated. The related
financial statements and report of Ernst & Young LLP, independent auditors,
are incorporated by reference into the Statement of Additional Information and
both are available upon request and without charge by calling 1-800-452-4822.
For a share outstanding throughout the year:
<TABLE>
<CAPTION>
WORLD GROWTH STOCK PORTFOLIO
------------------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 21.20 $ 19.00 $ 20.89 $ 16.73
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. 0.49 0.45 0.25 0.24
Net realized and
unrealized gains
(losses) on securi-
ties and foreign cur-
rencies.............. 3.56 2.65 (0.89) 5.40
----------- ----------- ----------- -----------
Total from investment
operations........... 4.05 3.10 (0.64) 5.64
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (0.48) (0.43) (0.25) (0.24)
Dividends in excess of
net investment in-
come.................
Distributions from
capital gains........ (1.46) (0.47) (0.81) (1.24)
Distributions in ex-
cess of capital
gains................ (0.19)
Returns of capital....
----------- ----------- ----------- -----------
Total distributions... (1.94) (0.90) (1.25) (1.48)
Net asset value, end of
year................... $ 23.31 $ 21.20 $ 19.00 $ 20.89
=========== =========== =========== ===========
Total Return (A)........ 19.22% 16.35% (3.05%) 33.73%
Ratios to Average Net
Assets:
Expenses.............. 0.88% 0.96% 1.00% 1.04%
Net investment in-
come................. 2.20% 2.31% 1.56% 1.64%
Portfolio Turnover
Rate................... 27.50% 18.09% 18.47% 34.90%
Average Commission Rate
Paid................... $ 0.0155
Net Assets, At End of
Year................... $91,995,634 $73,692,357 $52,903,768 $42,031,141
</TABLE>
- -------
(A) Total return assumes reinvestment of all dividends during the year and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost.
3
<PAGE>
<TABLE>
<CAPTION>
WORLD GROWTH STOCK PORTFOLIO
---------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 1991 1990 1989 1988 1987
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 16.45 $ 13.70 $ 16.07 $ 12.77 $ 11.48 $ 13.75
0.35 0.34 0.36 0.32 0.18 0.06
0.65 2.75 (2.00) 3.34 1.32 (0.91)
----------- ----------- ----------- ----------- ---------- ----------
1.00 3.09 (1.64) 3.66 1.50 (0.85)
(0.35) (0.34) (0.37) (0.36) (0.18) (0.34)
(0.37) (0.36) (0.03) (1.08)
----------- ----------- ----------- ----------- ---------- ----------
(0.72) (0.34) (0.73) (0.36) (0.21) (1.42)
$ 16.73 $ 16.45 $ 13.70 $ 16.07 $ 12.77 $ 11.48
=========== =========== =========== =========== ========== ==========
6.10% 22.53% (10.38%) 28.62% 13.10% (7.74%)
1.17% 1.14% 1.22% 1.42% 1.60% 1.81%
2.19% 2.40% 2.65% 2.46% 1.80% 1.14%
32.27% 50.06% 25.79% 5.73% 14.75% 8.88%
$25,416,357 $22,659,930 $16,052,089 $14,467,050 $8,781,827 $5,253,616
</TABLE>
4
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
For a share outstanding throughout the year (A):
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
----------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $ 10.27 $ 10.25 $ 10.26 $ 10.22 $ 10.22
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income............... 0.50 0.50 0.35 0.20 0.29
Net realized and
unrealized gains
(losses) on
securities........... (0.02) 0.02 (0.01) 0.04
---------- ---------- ---------- ---------- ----------
Total from investment
operations........... 0.48 0.52 0.34 0.24 0.29
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income.... (0.50) (0.50) (0.35) (0.20) (0.29)
Dividends in excess of
net investment
income...............
Distributions from
capital gains........
Distributions in
excess of capital
gains................
Returns of capital....
---------- ---------- ---------- ---------- ----------
Total distributions... (0.50) (0.50) (0.35) (0.20) (0.29)
Net asset value, end of
year................... $ 10.25 $ 10.27 $ 10.25 $ 10.26 $ 10.22
========== ========== ========== ========== ==========
Total Return (B)........ 4.65% 5.06% 3.28% 2.32% 2.83%
Ratios to Average Net
Assets:
Expenses.............. 0.62% 0.63% 0.65% 0.74% 0.85%
Net investment
income............... 4.54% 4.89% 3.31% 2.32% 2.81%
Portfolio Turnover Rate
(C).................... N/A N/A N/A N/A N/A
Average Commission Rate
Paid (D)............... N/A
Net Assets, At End of
Year................... $7,896,257 $8,312,676 $7,680,485 $5,061,181 $3,956,152
</TABLE>
- -------
(A) The per share amounts which are shown have been computed based on the
average number of shares outstanding during each year.
(B) Total return assumes reinvestment of all dividends during the year and
does not reflect account fees and charges that apply to the separate
account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less
than the original cost.
(C) There were no purchase and/or sales of securities other than short term
obligations during the year. Therefore, the portfolio turnover rate has
not been calculated.
(D) During the period, the portfolio held less than 10% of the value of
average net assets in equity securities. Therefore, the Average Commission
Rate Paid has not been calculated.
5
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
----------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1990 1989 1988 1987
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.21 $ 10.18 $ 10.16 $ 10.09 $ 10.56
0.52 0.73 0.78 0.63 0.49
0.01
---------- ---------- ---------- ---------- ----------
0.53 0.73 0.78 0.63 0.49
(0.52) (0.70) (0.76) (0.56) (0.96)
---------- ---------- ---------- ---------- ----------
(0.52) (0.70) (0.76) (0.56) (0.96)
$ 10.22 $ 10.21 $ 10.18 $ 10.16 $ 10.09
========== ========== ========== ========== ==========
5.18% 7.15% 7.63% 6.33% 4.85%
0.85% 1.09% 1.37% 1.79% 1.81%
4.95% 6.90% 7.35% 6.16% 4.75%
N/A N/A N/A N/A N/A
$3,672,941 $2,910,677 $2,496,140 $2,228,190 $1,539,184
</TABLE>
6
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
For a share outstanding throughout the year:
<TABLE>
<CAPTION>
GOLD STOCK PORTFOLIO
-----------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value,
beginning of year....... $ 16.61 $ 16.25 $ 19.00 $ 11.57
INCOME FROM INVESTMENT
OPERATIONS
Net investment income
(loss)................ (0.03) 0.05 0.03 0.02
Net realized and
unrealized gains
(losses) on securities
and foreign
currencies............ 0.45 0.40 (2.65) 7.43
---------- ---------- ---------- ----------
Total from investment
operations............ 0.42 0.45 (2.62) 7.45
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income..... (0.05) (0.03) (0.02)
Dividends in excess of
net investment
income................ (0.04)
Distributions from
capital gains......... (0.43)
Distributions in excess
of capital gains...... (0.10)
Returns of capital.....
---------- ---------- ---------- ----------
Total distributions.... (0.43) (0.09) (0.13) (0.02)
Net asset value, end of
year.................... $ 16.60 $ 16.61 $ 16.25 $ 19.00
========== ========== ========== ==========
Total Return (A)......... 2.57% 2.76% (13.77%) 63.90%
Ratios to Average Net
Assets:
Expenses............... 1.04% 1.01% 0.99% 1.01%
Net investment income.. (0.11%) 0.24% 0.18% 0.14%
Portfolio Turnover Rate.. 64.78% 23.98% 11.12% 7.32%
Average Commission Rate
Paid.................... $ 0.0151
Net Assets, At End of
Year.................... $7,554,427 $6,867,645 $7,351,625 $7,863,581
</TABLE>
- -------
(A) Total return assumes reinvestment of all dividends during the year and
does not reflect deduction of account fees and charges that apply to the
separate current or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost.
7
<PAGE>
<TABLE>
<CAPTION>
GOLD STOCK PORTFOLIO
---------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 1991 1990 1989 1988 1987
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 11.99 $ 12.76 $ 16.95 $ 14.37 $ 18.24 $ 13.59
0.03 0.07 0.07 0.06 (0.03) (0.03)
(0.42) (0.77) (4.19) 2.70 (3.84) 4.69
---------- ---------- ---------- ---------- ---------- ----------
(0.39) (0.70) (4.12) 2.76 (3.87) 4.66
(0.03) (0.07) (0.07) (0.05)
(0.12) (0.01)
(0.01)
---------- ---------- ---------- ---------- ---------- ----------
(0.03) (0.07) (0.07) (0.18) (0.01)
$ 11.57 $ 11.99 $ 12.76 $ 16.95 $ 14.37 $ 18.24
========== ========== ========== ========== ========== ==========
(3.29%) (5.48%) (24.28%) 19.24% (21.24%) 34.29%
1.13% 1.16% 1.36% 1.39% 1.62% 1.92%
0.24% 0.57% 0.59% 0.39% (0.38%) (0.24%)
7.78% 14.23% 17.61% 3.05% 9.92% 7.02%
$4,338,297 $4,646,951 $5,390,279 $5,969,256 $4,258,297 $3,821,605
</TABLE>
8
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
For a share outstanding throughout the year:
<TABLE>
<CAPTION>
DOMESTIC GROWTH STOCK PORTFOLIO
--------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 17.87 $ 15.94 $ 16.14 $ 15.16 $ 12.96
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income............... .06 0.15 0.09 0.12 0.14
Net realized and
unrealized gains
(losses) on
securities........... 2.85 4.48 1.12 2.29 3.27
----------- ----------- ----------- ----------- -----------
Total from investment
operations........... 2.91 4.63 1.21 2.41 3.41
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income.... (.06) (0.15) (0.09) (0.12) (0.14)
Dividends in excess of
net investment
income...............
Distributions from
captal gains......... (2.53) (2.55) (1.32) (1.31) (1.07)
Distributions in
excess of capital
gains................
Returns of capital....
----------- ----------- ----------- ----------- -----------
Total distributions... (2.59) (2.70) (1.41) (1.43) (1.21)
Net asset value, end of
year................... $ 18.19 $ 17.87 $ 15.94 $ 16.14 $ 15.16
=========== =========== =========== =========== ===========
Total Return (A)........ 16.46% 29.72% 7.66% 15.89% 26.50%
Ratios to Average Net
Assets:
Expenses.............. .85% 0.87% 0.89% 0.97% 1.07%
Net investment
income............... .31% 0.95% 0.63% 0.76% 1.07%
Portfolio Turnover
Rate................... 49.75% 64.17% 46.65% 49.47% 41.36%
Average Commission Rate
Paid................... $0.0555
Net Assets, At End of
Year................... $62,166,366 $48,517,886 $31,458,666 $25,072,289 $19,985,838
</TABLE>
- -------
(A) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost.
9
<PAGE>
<TABLE>
<CAPTION>
DOMESTIC GROWTH STOCK PORTFOLIO
--------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1990 1989 1988 1987
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 10.15 $ 13.25 $ 11.71 $ 9.54 $ 10.57
0.24 0.26 0.18 0.11 0.04
3.13 (2.71) 2.06 2.40 (0.11)
----------- ----------- ----------- ---------- ----------
3.37 (2.45) 2.24 2.51 (0.07)
(0.24) (0.26) (0.21) (0.10) (0.12)
(0.32) (0.39) (0.49) (0.24) (0.84)
----------- ----------- ----------- ---------- ----------
(0.56) (0.65) (0.70) (0.34) (0.96)
$ 12.96 $ 10.15 $ 13.25 $ 11.71 $ 9.54
=========== =========== =========== ========== ==========
33.18% (18.55%) 19.36% 26.31% (1.61%)
1.13% 1.25% 1.45% 1.70% 1.75%
2.02% 2.38% 1.59% 1.26% 0.71%
40.93% 15.17% 10.32% 22.69% 13.53%
$15,583,806 $10,517,783 $11,320,279 $6,893,776 $3,448,383
</TABLE>
10
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
For a share outstanding throughout the year:
<TABLE>
<CAPTION>
BOND PORTFOLIO
-------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 10.59 $ 9.70 $ 10.28 $ 10.21 $ 10.61
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. 0.56 0.74 0.35 0.74 0.66
Net realized and
unrealized gains
(losses) on securi-
ties................. (0.29) 0.89 (0.58) 0.13 0.13
----------- ---------- ----------- ---------- ----------
Total from investment
operations........... 0.27 1.63 (0.23) 0.87 0.79
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (0.56) (0.74) (0.35) (0.74) (0.66)
Dividends in excess of
net investment
income...............
Distributions from
capital gains........ (0.03) (0.06) (0.53)
Distributions in ex-
cess of capital
gains................
Returns of capital....
----------- ---------- ----------- ---------- ----------
Total distributions... (0.59) (0.74) (0.35) (0.80) (1.19)
Net asset value, end of
year................... $ 10.27 $ 10.59 $ 9.70 $ 10.28 $ 10.21
----------- ========== =========== ========== ==========
Total Return (A)........ 2.47% 16.76% (2.28%) 8.68% 7.46%
Ratios to Average Net
Assets:
Expenses.............. 0.60% 0.63% 0.68% 0.74% 0.88%
Net investment in-
come................. 5.93% 6.43% 6.07% 7.59% 6.83%
Portfolio Turnover
Rate................... 23.25% 127.74% 140.30% 112.66% 81.23%
Average Commission Rate
Paid (B)............... N/A
Net Assets, At End of
Year................... $11,717,693 $9,230,090 $13,066,445 $5,461,879 $4,042,506
</TABLE>
- -------
(A) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost.
(B) During the period, the portfolio held less than 10% of the value of its
average net assets in equity securities. Therefore, the Average Commission
Rate Paid has not been calculated.
11
<PAGE>
<TABLE>
<CAPTION>
BOND PORTFOLIO
-------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1991 1990 1989 1988 1987
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 9.83 $ 9.76 $ 9.29 $ 9.38 $ 10.47
0.72 0.75 0.73 0.62 0.55
0.79 0.06 0.47 (0.09) (0.65)
---------- ---------- ---------- ---------- ----------
1.51 0.81 1.20 0.53 (0.10)
(0.73) (0.74) (0.73) (0.62) (0.94)
(0.05)
---------- ---------- ---------- ---------- ----------
(0.73) (0.74) (0.73) (0.62) (0.99)
$ 10.61 $ 9.83 $ 9.76 $ 9.29 $ 9.38
========== ========== ========== ========== ==========
15.34% 8.44% 12.92% 5.62% (1.04%)
1.03% 1.21% 1.60% 1.80% 1.96%
7.12% 7.97% 7.62% 6.85% 6.43%
23.73% 29.25% 7.64% 13.80% 53.17%
$3,516,314 $2,905,564 $2,289,788 $1,730,229 $1,302,390
</TABLE>
12
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO
---------------------------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED ENDED MAY 1, 1992 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 (A)
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 14.41 $ 11.22 $ 12.35 $ 11.10 $ 10.27
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. 0.18 0.15 0.13 0.12 0.02
Net realized and
unrealized gains
(losses) on securi-
ties................. 3.12 3.62 (0.65) 1.53 0.83
----------- ----------- ---------- ---------- ----------
Total from investment
operations........... 3.30 3.77 (0.52) 1.65 0.85
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (0.18) (0.15) (0.13) (0.12) (0.02)
Dividends in excess of
net investment
income...............
Distributions from
capital gains........ (0.62) (0.29) (0.48) (0.28)
Distributions in ex-
cess of capital
gains................ (0.14)
Returns of capital....
----------- ----------- ---------- ---------- ----------
Total distributions... (0.80) (0.58) (0.61) (0.40) (0.02)
Net asset value, end of
period................. $ 16.91 $ 14.41 $ 11.22 $ 12.35 $ 11.10
=========== =========== ========== ========== ==========
Total Return (B)........ 22.88% 33.58% (4.24%) 14.94% 12.48%
Ratios to Average Net
Assets:
Expenses.............. 0.88% 0.92% 1.10% 1.35% 2.09%(C)
Net investment in-
come................. 1.39% 1.50% 1.52% 1.38% 0.36%(C)
Portfolio Turnover
Rate................... 35.69% 32.30% 38.17% 77.68% 54.11%
Average Commission Rate
Paid................... $0.0700
Net Assets, At End of
Period................. $23,711,696 $13,126,023 $5,610,472 $2,831,442 $1,489,179
</TABLE>
- -------
(A) Per share data calculated from the initial offering date, May 1, 1992, for
sale to Chubb Separate Account A.
(B) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total Return for periods of less than
one year have not been annualized.
(C) Per share data and ratios calculated on an annualized basis.
13
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
CAPITAL GROWTH PORTFOLIO
------------------------------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED ENDED MAY 1, 1992 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 (A)
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of period......... $ 17.38 $ 13.38 $ 14.26 $ 12.42 $ 9.95
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. 0.05 0.03 0.03 (0.01)
Net realized and
unrealized gains
(losses) on securi-
ties and foreign cur-
rencies.............. 3.24 5.56 (0.49) 3.03 2.69
----------- ----------- ----------- ----------- ----------
Total from investment
operations........... 3.29 5.59 (0.46) 3.03 2.68
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (0.05) (0.03) (0.03)
Dividends in excess of
net investment
income...............
Distributions from
capital gains........ (3.36) (1.56) (0.33) (1.19) (0.21)
Distributions in ex-
cess of capital
gains................ (0.06)
Returns of capital....
----------- ----------- ----------- ----------- ----------
Total distributions... (3.41) (1.59) (0.42) (1.19) (0.21)
Net asset value, end of
period................. $ 17.26 $ 17.38 $ 13.38 $ 14.26 $ 12.42
=========== =========== =========== =========== ==========
Total Return (B)........ 19.25% 41.74% (3.26%) 24.73% 40.40%
Ratios to Average Net
Assets:
Expenses.............. 1.13% 1.15% 1.22% 1.33% 1.96% (C)
Net investment in-
come................. 0.30% 0.21% 0.25% (0.11%) (0.37%)(C)
Portfolio Turnover
Rate................... 147.82% 170.32% 202.04% 162.79% 104.76%
Average Commission Rate
Paid................... $0.0502
Net Assets, At End of
Period................. $70,832,162 $49,853,029 $27,564,086 $15,373,489 $5,343,734
</TABLE>
- -------
(A) Per share data calculated from the initial offering date, May 1, 1992 for
sale to Chubb Separate Account A.
(B) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total Return for periods of less than
one year have not been annualized.
(C) Per share data and ratios calculated on an annualized basis.
14
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
BALANCED PORTFOLIO
----------------------------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED ENDED MAY 1, 1992 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 (A)
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period.... $ 11.91 $ 10.62 $ 11.22 $ 10.77 $ 10.10
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income............... 0.26 0.37 0.32 0.25 0.16
Net realized and
unrealized gains
(losses) on
securities........... 0.99 1.99 (0.47) 0.74 0.67
----------- ----------- ----------- ----------- ----------
Total from investment
operations........... 1.25 2.36 (0.15) 0.99 0.83
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income.... (0.26) (0.37) (0.32) (0.25) (0.16)
Dividends in excess of
net investment
income...............
Distributions from
capital gains........ (0.83) (0.70) (0.13) (0.25)
Distributions in
excess of capital
gains................ (0.04)
Returns of capital....
----------- ----------- ----------- ----------- ----------
Total distributions... (1.09) (1.07) (0.45) (0.54) (0.16)
Net asset value, end of
period................. $ 12.07 $ 11.91 $ 10.62 $ 11.22 $ 10.77
=========== =========== =========== =========== ==========
Total Return (B)........ 10.56% 22.35% (1.33%) 9.27% 12.33%
Ratios to Average Net
Assets:
Expenses.............. 0.97% 0.99% 1.01% 1.07% 1.43%(C)
Net investment
income............... 2.20% 3.20% 3.34% 2.79% 2.80%(C)
Portfolio Turnover
Rate................... 222.35% 164.70% 103.68% 65.49% 77.33%
Average Commission Rate
Paid................... $ 0.0601
Net Assets, At End of
Period................. $18,256,430 $14,532,268 $14,764,853 $11,703,898 $6,944,437
</TABLE>
- -------
(A) Per share data calculated from the initial offering date, May 1, 1992, for
sale to Chubb Separate Account A.
(B) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total Return for periods of less than
one year have not been annualized.
(C) Per share data and ratios calculated on an annualized basis.
15
<PAGE>
FINANCIAL HIGHLIGHTS--(CONTINUED)
For a share outstanding throughout the year:
<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO
-----------------------------
FOR THE
YEAR PERIOD FROM
ENDED MAY 1, 1995 TO
DECEMBER 31, DECEMBER 31,
1996 1995 (A)
------------ --------------
<S> <C> <C>
Net asset value, beginning of period........... $ 13.29 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................. (0.05) (0.04)
Net realized and unrealized gains on
securities.................................. 2.48 3.33
----------- -----------
Total from investment operations............. 2.43 3.29
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.........
Dividends in excess of net investment
income......................................
Distributions from capital gains............. (0.49)
Distributions in excess of capital gains.....
Returns of capital...........................
----------- -----------
Total distributions.......................... (0.49) 0.00
Net asset value, end of period................. $ 15.23 $ 13.29
=========== ===========
Total Return (B)............................... 18.30% 32.91%
Ratios to Average Net Assets:
Expenses..................................... 1.16% 1.63% (C)
Net investment income........................ (0.48%) (0.84%)(C)
Portfolio Turnover Rate........................ 94.58% 30.31%
Average Commission Rate Paid................... $ 0.0390
Net Assets, At End of Period................... $30,794,030 $11,439,524
</TABLE>
- -------
(A) Per share data calculated from the initial offering date, May 1, 1995, for
sale to Chubb Separate Account A.
(B) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total return for periods of less than
one year have not been annualized.
(C) Per share data and ratios calculated on an annualized basis.
16
<PAGE>
PERFORMANCE AND YIELD INFORMATION
From time to time the Fund may advertise the yield and/or the average annual
total return of some or all of its twelve investment portfolios. These figures
are based on historical earnings and are not intended to indicate future
performance. Shares of the portfolios are presently offered only to
corresponding divisions of separate accounts established by Chubb Life
Insurance Company of America ("Chubb Life"), Jefferson Pilot Life ("Jefferson
Pilot"), Alexander Hamilton Life ("Hamilton") or their affiliated insurance
companies, to fund variable annuities and flexible premium life insurance
policies. None of these performance figures reflect fees and charges imposed
under such variable annuities or flexible premium life insurance policies,
which fees and charges will reduce the yield and total return to policyowners;
therefore, these performance figures may be of limited use for comparative
purposes.
The Money Market Portfolio's yield quotations represent the Portfolio's
investment income, less expenses, expressed as a percentage of assets on an
annualized basis for a seven-day period. The yield is expressed as both a
simple annualized yield and a compounded effective yield. The yield for the
non-money market portfolios is calculated by dividing the portfolio's net
investment income per share during a recent 30-day period by the maximum
offering price per share of that Portfolio (which is the net asset value of
that Portfolio) on the last day of the period.
The average annual total return quotations of the non-money market
portfolios are determined by computing the average annual percentage change in
value of a $1,000 investment, made at the maximum public offering price (which
is net asset value) for certain specified periods. This computation assumes
reinvestment of all dividends and distributions.
PORTFOLIOS
The Fund currently consists of twelve investment portfolios, namely the
World Growth Stock Portfolio, the International Equity Portfolio, the Money
Market Portfolio, the Gold Stock Portfolio, the Bond Portfolio, the High Yield
Bond Portfolio, the Domestic Growth Stock Portfolio, the Growth Portfolio, the
Growth and Income Portfolio, the Capital Growth Portfolio, the Balanced
Portfolio and the Emerging Growth Portfolio (the "Portfolios").
The separate accounts established by Chubb Life, Jefferson Pilot, Hamilton
or their affiliated insurance companies are used for the purpose of funding
variable annuities and Flexible Premium Variable Life Insurance Policies (the
"Policies") issued by Chubb Life, Jefferson Pilot, Hamilton or their
affiliated insurance companies and their successors or assigns. The owner of a
Policy may allocate among the Portfolios the amounts available for investment
under the Policy. Chubb Life, Jefferson Pilot and Hamilton (the "Affiliates")
are wholly-owned subsidiaries of Jefferson-Pilot Corporation, a North Carolina
Corporation.
In the future, the Fund may sell its shares to other separate accounts,
funding variable annuities and variable life insurance policies, established
by Chubb Life, its affiliates, successors or assigns, or by other insurance
companies with which Chubb Life may or may not be affiliated, and the Fund may
add or delete Portfolios.
Shares of each Portfolio are both offered and redeemed at their net asset
value without the addition of any sales load or redemption charge. See
"OFFERING AND REDEMPTION OF SHARES" in the Prospectus.
The investment manager to the Fund is Chubb Investment Advisory Corporation
("Chubb Investment Advisory"), a wholly-owned subsidiary of Chubb Life. Chubb
Investment Advisory and the Fund have contracted with ten unaffiliated
companies, Templeton Global Advisors, Inc. ("Templeton"), Lombard Odier
International Portfolio Management Limited ("Lombard Odier"), Van Eck
Associates Corporation ("Van Eck Associates"), Pioneering Management
Corporation ("Pioneer"), Janus Capital Corporation ("Janus"), J.P. Morgan
Investment Management, Inc. ("Morgan"), Massachusetts Financial Services
Company ("MFS"), Chubb Asset Managers, Inc. ("CAM"), Strong Capital
Management, Inc. ("Strong"), and Warburg Pincus Counsellors, Inc. ("Warburg")
to act as sub-investment advisers or managers to the World Growth Stock,
International Equity, Gold Stock, Domestic Growth Stock, Capital Growth,
Balanced, High Yield Bond, Emerging Growth and Money Market, Bond, Growth, and
Growth and Income Portfolios, respectively. (Collectively the "Sub-Investment
Managers"). The fees of the Sub-Investment Managers are paid directly by Chubb
Investment Advisory.
17
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and policies of each Portfolio are described
below. The investment objectives of a Portfolio, and certain investment
restrictions discussed in the Statement of Additional Information, may be
changed only with the approval of the stockholders of each Portfolio that are
affected by such change. The investment policies of a Portfolio, used to
achieve the Portfolio's objectives, may be changed by the Fund's Board of
Directors without the approval of the Portfolio's stockholders.
Because investment involves both opportunities for gain and risks of loss,
no assurance can be given that the Portfolios will achieve their objectives.
The difference in objectives and policies among the various Portfolios can be
expected to affect each Portfolio's investment return as well as the degree of
market and financial risks to which each Portfolio is subject. Prospective
purchasers of Policies should carefully review the objectives and policies of
the Portfolios and consider their ability to assume the risks involved before
purchasing Policies and allocating amounts thereunder to particular
Portfolios.
World Growth Stock Portfolio
Investment Objectives. The investment objective of the World Growth Stock
Portfolio is long-term capital growth, which it seeks to achieve through a
flexible policy of investing primarily in stocks of companies organized in the
United States or in any foreign nation. A portion of the Portfolio may also be
invested in debt obligations of companies and governments of any nation. Any
income realized will be incidental.
The Portfolio invests primarily in securities of companies of any size that
are (i) believed to be well-managed and possessing good growth potential or
(ii) are considered by Templeton, the Sub-Investment Manager, to be
undervalued. See "Foreign Securities," in the Prospectus.
Investment Policies. The Portfolio believes that in a world where investment
opportunities change rapidly, not only from company to company and from
industry to industry but also from one national economy to another, its
objective is more likely to be achieved through an investment policy that is
flexible and mobile. Accordingly, the Portfolio seeks investment opportunities
in all types of securities issued by companies or governments of any nation.
Investments are usually made in common stocks, but may also include preferred
stocks and certain debt securities, rated or unrated, such as convertible
bonds and bonds selling at a discount; all of these debt securities will have
credit ratings in the four highest rating categories of Standard & Poor's
Rating Service Corporation ("Standard & Poor's") or Moody's Investors Service,
Inc. ("Moody's") or other nationally recognized statistical rating
organizations ("NRSROs") or, if not rated, will be of comparable quality to
obligations so rated in the judgment of Templeton. Securities rated BBB or Baa
by Standard & Poor's or Moody's are considered investment-grade obligations
and are regarded as having adequate capacity to pay interest and repay
principal, although adverse economic conditions or changing circumstances are
more likely to lead to a weakening of such capacity than for higher grade
bonds. Such securities may be considered to have speculative characteristics.
See "DESCRIPTION OF CERTAIN INVESTMENTS" in the Statement of Additional
Information for a more complete description of investment ratings. In the
event that the ratings of securities held by the Portfolio fall below
investment grade, the Portfolio will not be obligated to dispose of such
securities and may continue to hold such securities if, in the opinion of the
Sub-Investment Manager, such investment is considered appropriate under the
circumstances.
Notwithstanding the investment objective of long-term capital growth, the
Portfolio may on occasion, for defensive purposes and without limitation as to
amount, invest in debt obligations of the U.S. Government, its agencies or
instrumentalities for the purpose of earning income; hold cash and time
deposits with banks in the U.S. or Canadian currencies or currencies of other
nations; acquire repurchase agreements with respect to U.S. or Canadian
government obligations; or invest in high-grade commercial paper. For a more
complete description of obligations of the U.S. Government, its agencies or
instrumentalities, see the description in the "Investment Policies" section of
the description of the Bond Portfolio. The Portfolio may also invest in
warrants, which are rights to buy certain securities at set prices during
specified time periods. See "DESCRIPTION OF CERTAIN INVESTMENTS" in the
Statement of Additional Information for more information concerning repurchase
agreements, warrants, and commercial paper. See also "Repurchase Agreements"
in the Prospectus.
The Portfolio may enter into agreements with banks or broker-dealers to
purchase some securities on a "forward commitment," "when issued" or on a
"delayed delivery" basis. Such agreements involve a commitment to purchase
securities at a price, which is fixed at the time of commitment, for delivery
at a future date, which may be up to three months in the future. The Portfolio
will not pay for the securities or begin earning interest on them until the
securities are paid for
18
<PAGE>
and received. The securities so purchased are subject to market fluctuations
so that at the time of delivery, the value of such securities may be more or
less than the purchase price.
The Portfolio will generally be composed of investments from among many
different industries. Although management may invest up to 25% of the
Portfolio's assets in a single industry, it has no present intention of doing
so. As a general matter, the Portfolio will be invested in a minimum of five
different foreign countries at all times. However, this minimum is reduced to
four when foreign country investments comprise less than 80% of the
Portfolio's net asset value; to three when less than 60% of such value; to two
when less than 40%; and to one when less than 20%.
Risk Factors. All or a significant portion of this Portfolio may be invested
in foreign securities, including Depository Receipts, and investors should
understand the special considerations and risks related to such an investment
emphasis. See "Foreign Securities" and "Depository Receipts" in the
Prospectus.
International Equity Portfolio
Investment Objective. The International Portfolio's investment objective is
long-term capital appreciation. The Portfolio will seek to achieve its
objective by investing substantially all, and at least 65%, of its total
assets in equity and equity-related securities of companies from countries
outside of the Untied States. The Portfolio will be "non-diversified" as
defined in the 1940 Act. See "Non-Diversified Status." The International
Equity Portfolio is intended for investors who can accept the risks involved
in investments in equity and equity-related securities of non-U.S. issuers, as
well as in foreign currencies and in the active management techniques, that
the Fund generally employs.
The equity and equity-related securities in which the International Equity
Portfolio will primarily invest are common stock, preferred stock, convertible
debt obligations, convertible preferred stock and warrants or other rights to
acquire stock that Lombard Odier International Portfolio Management Limited
("Lombard Odier"), the sub-adviser, believes offer the potential for long-term
capital appreciation. Issuers of such securities may include smaller, emerging
companies. The Portfolio also may invest in securities of foreign issuers in
the form of sponsored and unsponsored ADRs, EDRs, GDRs (see "Depository
Receipts" below), or other similar instruments representing securities of
foreign issuers. The Portfolio may purchase securities on a when-issued basis.
See "Investment Methods and Risks."
While the investment policy of the Portfolio is to be broadly diversified as
to both countries and individual issuers, Lombard Odier selects individual
countries and securities on the basis of several factors. Investments are
allocated among issuers in countries selected based on a comparison of values
between the equity markets in those countries. This comparison is based upon
criteria such as return on equity, book value, earnings, dividends, and
interest rates in each market. After evaluating these factors and others for
each country and comparing opportunities among countries, the sub-adviser
selects those countries which in its opinion, have the most attractive equity
markets. This evaluation is influential in deciding the amount of investment
in each equity market. Individual equity securities are selected within each
market. The International Equity Portfolio will invest in individual equity
securities based on factors such as book value, earnings per share and other
financial data. The sub-adviser will also endeavor to identify industry,
political, and geographical trends which may affect equity values within
individual countries or among a group of countries. The Portfolio may also
invest cash temporarily in short-term debt instruments to maintain liquidity
or pending other investment.
The International Equity Portfolio may purchase and sell foreign currency on
a spot basis in connection with the settlement of transactions in securities
traded in such foreign currency. The Portfolio will not purchase and sell
foreign currencies for speculative purposes. The Portfolio may enter into
forward foreign currency contacts and foreign currency futures contracts for
hedging purposes only. This includes entering into forward currency contracts
and foreign currency futures contracts as an anticipatory hedge.
The International Equity Portfolio may invest cash, held to meet redemption
requests and expenses, in obligations of the Untied States and of foreign
governments (including their political subdivisions), commercial paper,
bankers' acceptances, certificates of deposit and other short-term evidences
of indebtedness. The Portfolio will only purchase commercial paper if it is
rated Prime-1 or Prime-2 by Moody's or A-1 or A-2 by Standard & Poor's. The
Portfolio also may invest cash held for such purposes in short-term, high
grade foreign debt securities. The Portfolio may lend portfolio securities to
unaffiliated brokers, dealers and financial institutions provided that (a)
immediately after any such loan, the value of the securities loaned does not
exceed 15% of the total value of the Portfolio's assets, and (b) any
securities loan is collateralized in accordance with applicable regulatory
requirements.
19
<PAGE>
The International Equity Portfolio may invest up to 15% of its assets in
illiquid securities. The Portfolio also may make short sales and short sales
"against the box". The Portfolio may not make short sales or maintain a short
position if to do so would cause more than 25% of its total assets, taken at
market value, to be held as collateral for such sales.
The International Equity Portfolio's investments may include U.S. Government
Securities, restricted securities, mortgage-backed obligations, repurchase
agreements, debt obligations of corporate and asset-backed issuers, debt
obligations of foreign governments and their respective agencies,
instrumentalities, political subdivisions and authorities and debt obligations
issued or guaranteed by international or supranational entities that, in the
opinion of Lombard Odier, offer the potential to enhance total return. The
timing of purchase and sale transactions in debt obligations may result in
capital appreciation or depreciation because the vale of debt obligations
varies inversely with prevailing interest rates. Under normal circumstances,
the Portfolio will not invest more than 35%f of its total assets in such debt
obligations. The debt obligations in which the Portfolio may invest will be
rated BBB or higher by S&P or Baa or higher by Moody's or if unrated,
determined by the sub-adviser to be of comparable credit quality. The
Portfolio will limit its investment in corporate debt obligations to less than
35% of its total assets. A detailed discussion of the risks associated with
lower rated corporate debt obligations is found in "Investment Methods and
Risks" under "Lower Rated Corporate Debt Obligations" and in the SAI. See
Appendix A to the SAI for a description of the corporate bond ratings assigned
by Standard & Poor's and Moody's.
Notwithstanding the International Equity Portfolio's investment objective of
long-term capital appreciation through investment in equity and equity-related
securities of non-U.S. issuers or of companies whose securities are
principally traded outside the United States, the Portfolio may on occasion,
for temporary defensive purposes to preserve capital, hold part of all of its
assets in cash, money market instruments, non-convertible preferred stocks,
or, subject to certain tax restrictions, foreign currencies. The Portfolio may
assume a temporary defensive posture only when political and economic factors
affect foreign equity markets to such an extent that the sub-adviser believes
there to be extraordinary risks in being substantially invested in such
markets.
Money Market Portfolio
Investment Objectives. The primary objective of the Money Market Portfolio
is to seek as high a level of current income as is consistent with
preservation of capital and liquidity.
Investment Policies. The Portfolio invests exclusively in (1) obligations
whose timely payment of principal and interest is backed by the full faith and
credit of the U.S. Government or that of its agencies or instrumentalities
("U.S. Government Obligations") or which are secured or collateralized by such
obligations, (2) short-term obligations of U.S. banks which are members of the
Federal Deposit Insurance Corporation ("FDIC"), (3) U.S. dollar obligations of
foreign branches of U.S. banks, or (4) instruments fully secured or
collateralized by such bank obligations. Some of the obligations which the
Portfolio buys are insured by the FDIC up to $100,000. The Portfolio may also
invest in commercial paper, and may buy corporate or other notes if such notes
are guaranteed as to the payment of principal and interest by U.S. banks'
letters of credit or collateralized by U.S. Government Obligations. For a more
complete description of U.S. Government Obligations see the description in the
"Investment Policies" section of the description of the Bond Portfolio.
The Portfolio will invest only in securities which present minimal credit
risk and (1) which have been rated or whose issuer has received a rating at
the time of acquisition in one of the two highest rating categories for short-
term debt obligations by any two Nationally Recognized Securities Rating
Organization ("NRSROs"), or by one NRSRO if it is the only NRSRO to have
issued a rating, ("Requisite NRSROs") or (2) which are unrated securities of
comparable quality. The Portfolio will invest no more than 5% of the value of
its total assets, at time of acquisition, in the securities of any one issuer,
other than U.S. Government Obligations, except that the Portfolio may invest
more than 5% of its total assets in securities of a single issuer rated in the
highest rating category by the Requisite NRSROs for up to three business days
after purchase. The Portfolio will also invest no more than 5% of its total
assets, at time of acquisition, in securities rated in the second highest
rating category by the Requisite NRSROs, with investment in any one issuer
limited to no more than the greater of 1% of the Portfolio's total assets or
$1,000,000.
MFS, the Sub-Investment Manager, under the supervision of Chubb Investment
Advisory, will use its best judgment in selecting investments, taking into
consideration rates, terms, and marketability of obligations as well as the
capitalization, earnings, liquidity, and other indicators of the financial
condition of their issuers. Because the market value of debt obligations
fluctuates as an inverse function of changing interest rates, the Portfolio
seeks to minimize the effect of such fluctuations by investing in instruments
with a remaining maturity of 397 calendar days or less at the time of
investment, except for U.S. government obligations which may have a remaining
maturity of 762 calendar days or less. The Portfolio will maintain a dollar-
weighted average portfolio maturity of 90 days or less.
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The Portfolio may enter into repurchase agreements whereby it purchases
securities, subject to agreement by the other party to repurchase the
obligations at a specified price and date. Repurchase agreements may involve
certain additional risks. See "Repurchase Agreements" in the Prospectus and
"RISK CONSIDERATIONS" in the Statement of Additional Information for a
discussion of these risks. See "DESCRIPTION OF CERTAIN INVESTMENTS" in the
Statement of Additional Information for a more complete description of
repurchase agreements.
Risk Factors. The principal risk factors associated with investment in the
Money Market Portfolio are the risk of fluctuations in short-term interest
rates and the risk of default among one or more issuers of securities which
comprise the Portfolio's assets. Compared with the other available Portfolios,
the Money Market Portfolio could be considered the least risky of all the
Fund's Portfolios. See "RISK CONSIDERATIONS" in the Statement of Additional
Information for a description of the risks associated with investment in U.S.
dollar obligations of foreign branches of U.S. banks.
Gold Stock Portfolio
Investment Objectives. The primary investment objective of the Gold Stock
Portfolio is long-term capital appreciation while retaining, however, freedom
of action to take current income into consideration in selecting its
investments.
Investment Policies. The present policy is to concentrate investments in
common stocks of gold mining companies. Up to 100% of the value of the
Portfolio's assets may be invested in this industry. The Fund does not
currently plan to concentrate investments of the Gold Stock Portfolio in any
industry other than the gold mining industry. Under unusual economic,
political or financial conditions, it may temporarily place a substantial
portion (no more than 75%) of its investments in debt or equity securities
issued by foreign companies, debt obligations of one or more foreign
governments and/or U.S. Government Obligations. All such debt securities in
which the Portfolio invests will have credit ratings in the four highest
rating categories of Standard & Poor's or Moody's or other NRSROs or, if not
rated, will be of comparable quality to obligations so rated in the judgment
of Van Eck. Securities rated BBB or Baa by Standard & Poor's or Moody's are
considered investment-grade obligations and are regarded as having adequate
capacity to pay interest and repay principal, although adverse economic
conditions or changing circumstances are more likely to lead to a weakening of
such capacity than for higher grade bonds. Such securities may be considered
to have speculative characteristics. See "DESCRIPTION OF CERTAIN INVESTMENTS"
in the Statement of Additional Information for a more complete description of
investment ratings. In the event that the ratings of securities held by the
Portfolio fall below investment grade, the Portfolio will not be obligated to
dispose of such securities and may continue to hold such securities if, in the
opinion of the Sub-Investment Manager, such investment is considered
appropriate under the circumstances.
The Gold Stock Portfolio may invest in securities of U.S. companies and also
in the following types of securities: securities of companies, wherever
organized, whose properties, products or services are international in scope
or substantially in countries outside of the U.S.; securities of foreign
governments; and U.S. Government Obligations. The Portfolio may also invest in
American Depository Receipts ("ADRs") European Depository Receipts ("EDRs")
and Global Depository Receipts ("GDRs"). See "Foreign Securities" and
"Depository Receipts" in the Prospectus and "DESCRIPTION OF CERTAIN
INVESTMENTS" in the Statement of Additional Information for a description of
ADRs, EDRs and GDRs.
The Portfolio may also enter into repurchase agreements and invest in
warrants, which are rights to buy certain securities at set prices during
specified time periods. See "Repurchase Agreements" in the Prospectus and
"DESCRIPTION OF CERTAIN INVESTMENTS" in the Statement of Additional
Information for a description of repurchase agreements and warrants.
Risk Factors. All or a significant portion of this Portfolio may be invested
in foreign securities, including ADRs, EDRs and GDRs, and investors should
understand the special considerations and risks related to such an investment
emphasis. See "Foreign Securities" below. In addition, given the Portfolio's
concentration in stocks of gold mining companies, investors should be aware
that gold mining shares are at times volatile; there may be sharp fluctuations
in prices even during periods of general inflation and political conditions in
gold mining countries may affect the Fund's investment decisions relating to
gold mining shares. The price of gold may affect the value of investments in
the Gold Stock Portfolio. Gold has been subject to substantial price
fluctuations over short periods of time and may be affected by the actions of
certain governments and changes in existing governments, by unpredictable
international monetary and political policies such as currency devaluations or
revaluations, by economic and social conditions within a country, trade
imbalances or trade or currency restrictions between countries or political
unrest. See "RISK CONSIDERATIONS -- Gold Mining Shares" in the Statement of
Additional Information.
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Bond Portfolio
Investment Objectives. The investment objective of the Bond Portfolio is to
provide a stable level of income, consistent with limiting risk to principal,
by investing primarily in high quality corporate debt securities and U.S.
Government debt obligations.
Investment Policies. At least 85% of the assets of the Bond Portfolio are
invested in (a) U.S. Government Obligations, (b) debt securities, including
convertible securities, which are rated "AA" or higher by Standard & Poor's or
Moody's or other NRSROs or, if unrated, are considered by the Portfolio's Sub-
Investment Manager to be of comparable quality and (c) cash and cash
equivalents (such as bankers' acceptances, commercial paper and certificates
of deposit no greater than $100,000 per issuing bank, having ratings of A-1 or
Prime-1 by Standard & Poor's or Moody's or other NRSROs or, if unrated, are
considered by CAM, the Portfolio's Sub-Investment Manager, to be of comparable
quality.)
U.S. Government Obligations consist of marketable securities issued or
guaranteed as to the timely payment of both principal and interest by the U.S.
Government, its agencies or instrumentalities. Federal agency securities are
debt obligations issued by agencies of the U.S. Government established under
authority granted by Congress. Such obligations include, but are not limited
to, those issued by the Federal Housing Authority, Maritime Administration,
Government National Mortgage Association, the Tennessee Valley Authority, and
the General Services Administration. Instrumentalities include, for example,
each of the Federal Home Loan Banks, the National Bank for Cooperatives, the
Federal Home Loan Mortgage Corporation, the Farm Credit Banks, the Federal
National Mortgage Association, and the U.S. Postal Service. These
U.S. Government Obligations are either: (i) backed by the full faith and
credit of the U.S. Government (e.g., U.S. Treasury Bills); (ii) guaranteed by
the U.S. Treasury (e.g., Government National Mortgage Association mortgage-
backed securities); (iii) supported by the issuing agency's or
instrumentality's right to borrow from the U.S. Treasury (e.g., Federal
National Mortgage Association Discount Notes); or (iv) supported only by the
issuing agency's or instrumentality's own credit (e.g., each of the Federal
Home Loan Banks).
The Portfolio may also invest up to 15% of its total assets in corporate
debt securities which are rated A or BBB by Standard & Poor's or A and Baa by
Moody's or other NRSROs or, if not rated, are of comparable quality to
obligations so rated in the judgment of the Sub-Investment Manager. Securities
rated BBB or Baa by Standard & Poor's or Moody's are considered investment-
grade obligations and are regarded as having adequate capacity to pay interest
and repay principal, although adverse economic conditions or changing
circumstances are more likely to lead to a weakening of such capacity than for
higher grade bonds. Such securities may be considered to have speculative
characteristics. See "DESCRIPTION OF CERTAIN INVESTMENTS" in the Statement of
Additional Information for a more complete description of investment ratings.
In the event that the ratings of securities held by the Portfolio fall below
investment grade, the Portfolio will not be obligated to dispose of such
securities and may continue to hold such securities if, in the opinion of the
Sub-Investment Manager, such investment is considered appropriate under the
circumstances.
The Portfolio will not purchase preferred or common stocks but may acquire
and retain up to 10% of its total assets in preferred or common stocks either
by conversion of fixed income securities or by the exercise of related
warrants.
The Portfolio may enter into agreements with banks or broker-dealers to
purchase some securities on a "forward commitment," "when issued" or on a
"delayed delivery" basis. Such agreements involve a commitment to purchase
securities at a price, which is fixed at the time of commitment, for delivery
at a future date, which may be up to three months in the future. The Portfolio
will not pay for the securities or begin earning interest on them until the
securities are paid for and received. The securities so purchased are subject
to market fluctuations so that at the time of delivery, the value of such
securities may be more or less than the purchase price.
It is the policy of the Bond Portfolio not to engage in trading for short-
term profits. The Portfolio will engage in trading if it believes a
transaction net of costs (including custodian's fees) will contribute to the
achievement of its investment objective.
It is anticipated that the Portfolio's average portfolio maturity will not
exceed 15 years, with the precise term to maturity dependent upon general
market and economic conditions.
Risk Factors. If the Bond Portfolio disposes of an obligation prior to
maturity, it may realize a loss or a gain. An increase in interest rates will
generally reduce the value of portfolio investments, and a decline in interest
rates will generally increase the value of portfolio investments. As a result,
the level of income under such circumstances may vary. In addition, portfolio
investments (other than U.S. Government Obligations) are dependent upon the
ability of the issuer to make scheduled payments of principal and income.
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High Yield Bond Portfolio
Investment Objectives. The High Yield Bond Portfolio seeks a high level of
current income. The Portfolio will seek to achieve its objective by investing
primarily in corporate obligations with emphasis on higher-yielding, higher
risk, lower-rated or unrated securities.
Under normal conditions, Massachusetts Financial Services Company ("MFS"),
the sub-adviser, expects that the Portfolio's assets will primarily consist of
a diversified portfolio of high-yielding bonds, convertible securities and
preferred stock of both domestic and foreign issuers. The Portfolio may
purchase securities on a when-issued basis and on a forward commitment basis.
The debt securities in which the High Yield Bond Portfolio may invest
include bonds, debentures, notes, equipment lease certificates, equipment
trust certificates (including interests in trusts or other entities
representing such obligations), conditional sales contracts, commercial paper
and U.S. Government Securities, mortgage-backed securities including CMOs,
stripped mortgage-backed securities, asset-backed bonds, collateralized bond
or loan obligations, bonds on which interest is payable in kind, deferred
interest bonds and zero coupon bonds. The Fund may also invest in parallel pay
CMOs and PAC Bonds. The High Yield Bond Portfolio also may invest in common
stocks, warrants, loan participation, assignments, securities sold through
private placements and ADRs, EDRs and GDRs. See "Depository Receipts" below.
The sub-adviser believes that these investments will increase the Fund's
diversification and enhance return, but also involve certain risks, described
below. These investments and techniques and their attendant risks are
described in "Investment Methods and Risks."
The High Yield Bond Portfolio may also invest in other instruments or
utilize investment techniques that involve special risks. These include:
emerging market securities, brady bonds, interest rate swaps, currency swaps,
other types of available swap agreements, mortgage dollar roll transactions,
options on securities and securities indices, forward foreign currency
exchange contracts, options on foreign currency, futures contracts and options
thereon, repurchase agreements, borrowing from a bank and lending portfolio
securities. The Portfolio may invest up to 15% of its assets in illiquid
securities. The Portfolio may also invest up to 50% (and MFS expects generally
to invest between 0% and 20%) of its total assets in foreign securities (not
including ADRs). The Portfolio may hold foreign currency received in
connection with investments in foreign securities when, in the judgment of the
sub-advisor, it would be beneficial to convert such currency into U.S. dollars
at a later date, based on anticipated changes in the relevant exchange rate.
The Portfolio may also hold foreign currency in anticipation of purchasing
foreign securities.
The Portfolio may invest in futures contracts for hedging purposes only. The
Portfolio has adopted the additional restriction that it will not enter into a
futures contract if, immediately thereafter, the value of securities and other
obligations underlying all such futures contracts would exceed 50% of the
value of the Portfolio's total assets.
The High Yield Bond Portfolio may sell a security short as a hedge against
portfolio holdings whose credit is deteriorating. The Fund's short sales are
limited to situations where the Portfolio owns a debt security of a company
and sells short a different type of security issued by the same company such
as common or preferred stock or a senior or junior debt security. The total
market value of all securities sold short may not exceed 2% of the Portfolio's
net assets.
During periods of unusual market conditions when the sub-adviser believes
that investing for temporary defensive purposes is appropriate, part or all of
the assets of the Fund may be invested in cash (including foreign currency) or
short-term money market instruments.
When and if available, fixed-income securities may be purchased at a
discount from face value. However, the Portfolio does not intend to hold such
securities to maturity for the purpose of achieving potential capital gains,
unless current yields on these securities remain attractive. From time to time
the Portfolio may purchase securities not paying interest at the time acquired
if, in the opinion of the sub-adviser, such securities have the potential for
future income or capital appreciation.
Securities offering the high current income sought by the High Yield Bond
Portfolio are ordinarily in the lower rating categories of recognized rating
agencies (that is, ratings of Baa or lower by Moody's or BBB by Standard &
Poor's) or are unrated and generally involve greater volatility of price and
risk of principal and income than securities in the higher rating categories.
The Portfolio may invest in securities rated Baa by Moody's or BBB by Standard
& Poor's as well as securities rated Ba or lower by Moody's or BB or lower by
Standard & Poor's. No minimum rating standard is required by the Portfolio. A
detailed discussion of the risks associated with lower rated corporate debt
obligations is found in "High Yield Securities" below. See the SAI for a
description of corporate bond ratings assigned by Standard & Poor's and
Moody's.
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While the sub-adviser may refer to ratings issued by established credit
rating agencies, it is not the Portfolio's policy to rely exclusively on
ratings issued by these rating agencies, but rather to supplement such ratings
with MFS's own independent ongoing review of the credit quality. The
Portfolio's achievement of its investment objective may be more dependent on
the sub-adviser's own credit analysis than in the case of an investment
company primarily investing in higher quality fixed-income securities. Since
shares of the Portfolio represent an investment in securities with fluctuating
market prices, the value of shares of the Portfolio will vary as the aggregate
value of the portfolio securities of the Portfolio increases or decreases.
However, changes in the value of securities subsequent to their acquisition
will not affect cash income or yield to maturity to the Portfolio.
The Portfolio seeks to maximize the return on its portfolio by taking
advantage of market developments, yield disparities and variations in the
creditworthiness of issuers. This may result in increases or decreases in the
holding by the Fund of debt securities which sell at moderate to substantial
premiums or discounts from face value. Moreover, if the sub-adviser's
expectations of changes in interest rates or its evaluation of the normal
yield relationship between two securities proves to be incorrect, the income,
net asset value and potential capital gain of the Portfolio may be decreased
or its potential capital loss may be increased. The Portfolio will be
diversified as defined under the Investment Company Act of 1940.
Domestic Growth Stock Portfolio
Investment Objectives. The investment objective of the Domestic Growth Stock
Portfolio is to achieve reasonable income and growth of capital by investing
primarily in a diversified portfolio of equity securities issued by companies
organized in the U.S. and considered to be undervalued in light of the
company's earning power and growth potential.
Investment Policies. The mix of assets of the Portfolio will vary with
prevailing economic and market conditions. Generally, at least 80% of the
Portfolio's assets are invested in common stocks and other equity related
securities such as preferred stocks and securities convertible into common
stock. The Portfolio may also invest up to 20% of its assets in both U.S.
Government Obligations and corporate debt securities, which will be rated
within the top four rating categories of Standard & Poor's or Moody's or other
NRSROs or, if unrated, are considered by the Portfolio's Sub-Investment
Manager to be of comparable quality and cash equivalent investments, such as
certificates of deposit, bankers' acceptances, and commercial paper, having
ratings of A-1 or Prime-1 by Standard & Poor's or Moody's or other NRSROs or,
if unrated, are considered by the Portfolio's Sub-Investment Manager to be of
comparable quality. Securities rated BBB or Baa by Standard & Poor's or
Moody's are considered investment-grade obligations and are regarded as having
adequate capacity to pay interest and repay principal, although adverse
economic conditions or changing circumstances are more likely to lead to a
weakening of such capacity than for higher grade bonds. Such securities may be
considered to have speculative characteristics. In the event that the ratings
of securities held by the Portfolio fall below investment grade, the Portfolio
will not be obligated to dispose of such securities and may continue to hold
such securities if, in the opinion of the Sub-Investment Manager, such
investment is considered appropriate under the circumstances. Generally, at
least 60% of the Portfolio's assets will be invested in securities which have
paid dividends or interest within the preceding 12 months, but non-income
producing securities will be held for anticipated increases in value. The
Portfolio may also invest in warrants, which are rights to buy certain
securities at set prices during specified time periods. See "Warrants" below.
This Portfolio invests primarily in stocks listed on the New York Stock
Exchange and on other national securities exchanges and, to a lesser extent,
in stocks that are traded over-the-counter. Securities are selected
principally for their potential appreciation and anticipated income. Assets of
the Portfolio will be substantially fully invested at all times.
Risk Factors. The prices of the types of securities usually purchased for
the Domestic Growth Stock Portfolio will tend to fluctuate more than the
prices of the securities usually purchased for the Bond Portfolio or the Money
Market Portfolio. As a result, the net asset value of the Domestic Growth
Stock Portfolio may experience greater short-term and long-term variations
than Portfolios that invest primarily in fixed income securities.
Growth Portfolio
Investment Objectives. The Growth Portfolio seeks capital growth. The
Portfolio invests primarily in equity securities that Strong Capital
Management, Inc. ("Strong"), the Growth Portfolio's sub-adviser, believes have
above-average growth prospects. Under normal market conditions, the Portfolio
will invest at least 65% of its total assets in equity securities, including
common stocks, preferred stocks and securities that are convertible into
common or preferred stocks, such as warrants and convertible bonds. While the
emphasis of the Growth Portfolio is clearly on equity securities, the Growth
Portfolio may invest a limited portion of its assets in debt obligations when
the Portfolio's sub-adviser perceives that they
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are more attractive than stocks on a long-term basis. When the sub-adviser
determines that market conditions warrant a temporary defensive position, the
Growth Portfolio may invest without limitation in cash and short-term fixed-
income securities.
Strong will generally invest Portfolio assets in companies whose earnings
are believed to be in a relatively strong growth trend, and, to a lesser
extent, in companies in which significant further growth is not anticipated
but whose market value is thought to be undervalued. In identifying companies
with favorable growth prospects, the sub-adviser ordinarily looks to certain
other characteristics, such as the following: (1) prospects for above-average
sales and earnings growth; (2) high return on invested capital; (3) overall
financial strength, including sound financial and accounting policies and a
strong balance sheet; (4) competitive advantages, including innovative
products and service; (5) effective research, product development, and
marketing; and (6) stable, capable management.
The Growth Portfolio may invest up to 35% of its total assets in debt
obligations that are considered investment grade or, if not rated, of
equivalent investment quality as determined by Strong, including intermediate
to long-term corporate, U.S. Government or agency debt securities, bank
obligations or commercial paper. When Strong determines that market conditions
warrant a temporary defensive position, the Growth Portfolio may invest
without limitations in cash and short-term fixed income securities. Although
the debt obligations in which it invests will be primarily investment grade,
the Fund may invest up to 5% of its net assets in non-investment grade debt
obligations (debt securities rated Ba or lower by Moody's or BB or lower by
Standard & Poor's). A detailed discussion of the risks associated with lower
rated debt obligations is found in "High Yield Securities" and in the SAI. See
the SAI for a description of the bond ratings assigned by Standard & Poor's
and Moody's.
The Growth Portfolio may invest up to 25% of its net assets directly in
foreign securities, including both direct investments and investments made
through depositary receipts. See "Foreign Securities" and "Depositary
Receipts" for the special risks associated with foreign investments.
The Portfolio may purchase obligations on a when-issued or forward
commitment basis, enter into repurchase, reverse repurchase and mortgage
dollar roll agreements, swap agreements, foreign currency transactions, loan
its portfolio securities, purchase restricted securities, forward foreign
currency contracts, options and futures contracts and borrow from banks. The
Portfolio may purchase zero coupon bonds, mortgage and other asset backed
securities, bonds with interests payable in kind, foreign government
securities and the securities of unsecured issuers. The Portfolio may also
purchase the securities of other investment companies and small capitalization
companies. The Growth Portfolio may make short sales "against the box," and
invest up to 15% of its assets in illiquid securities. These investments and
techniques and their attendant risks are more fully described in "Investment
Methods and Risks." The Portfolio will be a diversified investment company.,
Growth and Income Portfolio
Investment Objectives. The objective of the Growth and Income Portfolio is
to seek long-term growth of capital by investing primarily in a wide range of
equity issues that may offer capital appreciation and, secondarily, to seek a
reasonable level of current income.
Investment Policies. The Growth and Income Portfolio invests at least 80% of
its assets in common stocks and other equity securities such as preferred
stocks and securities convertible into common stock that are either listed on
the New York Stock Exchange, traded over-the-counter or, to a lesser extent,
listed on other national securities exchanges. Securities are selected
principally for potential capital appreciation, based upon such criteria as
relatively low price to earnings ratio and relatively low price to book value
ratio, as compared to such ratios for the market in general and, secondarily,
for current income and increasing future dividends. While the Growth and
Income Portfolio intends to invest at least 60% of its assets in securities
which have paid dividends or interest within the preceding 12 months, the
Portfolio may invest in securities not currently paying dividends where
Warburg the Sub-Investment Manager anticipates that they will increase in
value.
The Growth and Income Portfolio may also invest for temporary or defensive
purposes in high-grade debt securities and money market securities, including
U.S. Government Obligations, commercial paper and bank obligations, and
repurchase agreements.
The Growth and Income Portfolio will invest primarily in U.S. companies, but
may, when deemed appropriate by Warburg, invest in and hold up to 20% of the
Portfolio's total assets in foreign securities which are traded in the U.S. or
in Depository Receipts. The Growth and Income Portfolio may also purchase the
securities of foreign issuers directly in foreign
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markets. The Portfolio's investments in foreign securities will primarily be
in equity securities of companies organized outside the U.S., but may also
include debt obligations of foreign companies and governments. See "Foreign
Securities" and "Depository Receipts" in the Prospectus and "DESCRIPTION OF
CERTAIN INVESTMENTS--Depository Receipts" in the Statement of Additional
Information.
The Growth and Income Portfolio may write covered call options or purchase
put and call options with respect to certain of its portfolio securities or
purchase stock index options for hedging purposes or to enhance income. The
Growth and Income Portfolio may also purchase or write futures contracts,
including stock index futures contracts. The Portfolio may also enter into
closing transactions with respect to such options and futures contracts. See
"Securities and Index Options" and "Futures Contracts" in this Prospectus.
Risk Factors. The prices of the securities purchased for the Growth and
Income Portfolio will tend to fluctuate more than the prices of securities
purchased for the Bond Portfolio or the Money Market Portfolio. As a result,
the net asset value of the Growth and Income Portfolio may experience greater
short-term and long-term variations than Portfolios that invest primarily in
fixed income securities.
Capital Growth Portfolio
Investment Objectives. The investment objective of the Capital Growth
Portfolio is to seek capital growth. Realization of income is not a
significant investment consideration and any income realized will be
incidental.
Investment Policies. The Capital Growth Portfolio will invest primarily in
common stocks when Janus, the Sub-Investment Manager believes that the market
environment favors investment in those securities. Common stock investments
are selected in industries and companies that Janus believes are experiencing
favorable demand for their products and services and that operate in a
favorable environment from a competitive and regulatory standpoint.
It is the policy of the Capital Growth Portfolio to purchase and hold
securities for capital growth. If the Sub-Investment Manager is satisfied with
the performance of a security and anticipates continued appreciation, the
Portfolio will generally retain such security. However, changes in the
Portfolio will generally be made whenever the Sub-Investment Manager believes
they are advisable, either as a result of securities having reached a price
objective, or by reason of developments not foreseen at the time of the
investment decision. Since investment changes usually will be made without
reference to the length of time a security has been held, a significant number
of short-term transactions may result. To a limited extent, the Portfolio may
also purchase individual securities in anticipation of relatively short-term
price gains, and the rate of portfolio turnover will not be a determining
factor in the sale of such securities. However, certain tax rules may restrict
the Portfolio's ability to sell securities held for less than 90 days.
Although the Portfolio expects that under normal conditions its assets will
be primarily invested in common stocks, to the extent that it is not so
invested, the Capital Growth Portfolio may also invest in other securities,
including: U.S. Government Obligations, corporate bonds and debentures, high
grade commercial paper, preferred stocks, convertible securities, warrants or
other securities of U.S. issuers when the Sub-Investment Manager perceives an
opportunity for capital growth from such securities or so that the Portfolio
may receive a return on its idle cash. The Portfolio's cash position may
increase when the Sub-Investment Manager is unable to locate investment
opportunities that it believes have desirable risk/reward characteristics.
Investments in debt securities will be limited to securities of U.S.
companies, the U.S. Government and foreign governments and foreign
governmental entities. Foreign governmental entities include supranational
organizations, such as the European Economic Community and the World Bank,
that are chartered to promote economic development and are supported by
various governments and governmental entities. All debt securities in which
the Portfolio invests, except as noted below, will have credit ratings in the
four highest rating categories of Standard & Poor's or Moody's or other NRSROs
or, if not rated, will be of comparable quality to obligations so rated in the
judgment of the Sub-Investment Manager. The Capital Growth Portfolio may
invest up to 5% of its assets in high-yield/high-risk bonds. Such securities
include debt securities that are below investment grade (securities rated Ba
or lower by Moody's or BB or lower by Standard & Poor's) and unrated
securities of comparable quality as determined by the Sub-Investment Manager.
Investments may also be made in foreign equity securities and in Depository
Receipts. The Portfolio will not invest more than 25% of its assets in foreign
securities denominated in foreign currencies and not publicly traded in the
U.S. See "Foreign Securities" and "Depository Receipts" in the Prospectus.
Additionally, in order to manage exchange rate risks, the Portfolio may enter
into foreign currency exchange contracts (agreements to exchange one currency
for another at a future date). See "Forward Foreign Currency Exchange
Contracts" in the Prospectus.
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The Portfolio may purchase and sell futures contracts as more fully
described under "Futures Contracts" in this Prospectus and may write covered
call options and purchase call and put options as described under "Securities
and Index Options" in this Prospectus.
The Portfolio may invest in "special situations" from time to time. A
special situation arises when, in the Sub-Investment Manager's opinion, the
securities of a particular company will be recognized and appreciate in value
due to a specific development, such as a technological breakthrough or a new
product, at that company.
The Portfolio expects that its securities will primarily be traded on U.S.
and foreign securities exchanges and established over-the-counter markets.
Risk Factors. The foreign securities and ADRs, EDRs and GDRs in which the
Portfolio may invest involve special considerations and risks. See "Foreign
Securities" and "Depository Receipts" in this Prospectus. Investing in foreign
currency exchange contracts involves certain risks since shifting the
Portfolio's currency exposure from one currency to another removes the
Portfolio's opportunity to profit from increases in the value of the original
currency and involves a risk of increased losses if the Sub-Investment
Manager's projection of future exchange rates is inaccurate. Investment in
special situations may carry an additional risk of loss in the event that the
anticipated development does not occur or does not attract the expected
attention. The price of the securities purchased by the Capital Growth
Portfolio will tend to fluctuate more than the prices of securities purchased
by the Bond Portfolio and the Money Market Portfolio.
Balanced Portfolio
Investment Objectives. The investment objective of the Balanced Portfolio is
to seek reasonable current income and long-term capital growth, consistent
with conservation of capital, by investing primarily in common stocks and
fixed income securities.
Investment Policies. The Balanced Portfolio intends to invest based on
combined considerations of risk, income, capital enhancement and protection of
capital value. The Balanced Portfolio may invest in any type or class of
security. Normally, the Balanced Portfolio will invest in common stocks and
fixed income securities; however, it may also invest in warrants and in
securities convertible into common stocks. At least 25% of the value of its
assets will be invested in high-grade fixed income senior securities which are
rated in the three highest rating categories by any NRSRO or, if unrated, are
considered by Morgan, the Portfolio's Sub-Investment Manager, to be of
comparable quality. The Portfolio may purchase and sell futures contracts as
more fully described under "Futures Contracts" in this Prospectus and may
write covered call options and purchase call and put options as described
under "Securities and Index Options" in this Prospectus. The Portfolio may
also invest in zero coupon debt obligations. In order to provide additional
diversification the Portfolio may invest in equity and debt securities of
foreign issuers limited to 15% of the Portfolio's total assets and in
Depository Receipts. See "Foreign Securities" and "Depository Receipts" in
this Prospectus.
In implementing the investment objectives of the Balanced Portfolio, Morgan
will select securities believed to have potential for the production of
current income, with emphasis on securities that also have potential for
capital enhancement. In an effort to protect its assets against major market
declines, or for other temporary defensive purposes, the Balanced Portfolio
may actively pursue a policy of retaining cash or investing part or all of its
assets in cash equivalents, such as U.S. Government Obligations, high grade
commercial paper and U.S. dollar obligations of foreign branches of U.S.
banks.
Risk Factors. The prices of equity securities in which the Balanced
Portfolio invests will fluctuate day to day and, as a result, the value of an
investment in the Balanced Portfolio will vary based upon such market
conditions. The value of the Balanced Portfolio's investment in fixed income
securities will vary depending on various factors including prevailing
interest rates. Fixed income securities are also subject to the ability of the
issuer to make payments of principal and interest when due. Although the
Balanced Portfolio seeks to reduce both financial and market risks associated
with any one investment medium, performance of the Balanced Portfolio will
depend on such additional factors as timing the mix of investments and the
ability of Morgan to predict and react to changing market conditions.
Investment in foreign securities and ADRs involve special considerations and
risks. See "Foreign Securities" and "Depository Receipts" in this Prospectus.
Emerging Growth Portfolio
Investment Objective. The Emerging Growth Portfolio seeks to provide long-
term growth of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the Portfolio's investment objective of
long term growth of capital.
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Investment Policies. The Portfolio's policy is to invest primarily (i.e., at
least 80% of its assets under normal circumstances) in common stocks of small
and medium-sized companies that are early in their life cycle but which have
the potential to become major enterprises (emerging growth companies). Such
companies generally would be expected to show earnings growth over time that
is well above the growth rate of the overall economy and the rate of
inflation, and would have the products, technologies, management and market
and other opportunities which are usually necessary to become more widely
recognized as growth companies. Emerging growth companies can be of any size
and the Portfolio may also invest in larger or more established companies
whose rates of earnings growth are expected to accelerate because of special
factors, such as rejuvenated management, new products, changes in consumer
demand, or basic changes in the economic environment.
While the Portfolio will invest primarily in common stocks, the Portfolio
may, to a limited extent, seek appreciation in other types of securities such
as foreign or convertible securities and warrants when relative values make
such purchases appear attractive either as individual issues or as types of
securities in certain economic environments (see "Risk Factors" and "Foreign
Securities" below). The Portfolio may also enter into forward foreign currency
exchange contracts for the purchase or sale of foreign currency for hedging
purposes and non-hedging purposes, including transactions entered into for the
purpose of profiting from anticipated changes in foreign currency exchange
rates, as well as options on foreign currencies. The Portfolio may also hold
foreign currency (see "Risk Factors" below). The Portfolio may invest up to
25% (and generally expects to invest between 0% and 10%) of its total assets
in foreign securities (not including American Depository Receipts ("ADRs")
(see "American Depository Receipts" below)), which may be traded on foreign
exchanges. The Portfolio may hold cash equivalents or other forms of debt
securities as a reserve for future purchases of common stock or to meet
liquidity needs. The Portfolio may also invest in emerging market securities.
The Portfolio may invest in corporate asset-backed securities (see
"Corporate Asset-Backed Securities" below). The Portfolio may write covered
call and put options and purchase call and put options on securities and stock
indices in an effort to increase current income and for hedging purposes. The
Portfolio may also purchase and sell stock index futures contracts and may
write and purchase options thereon for hedging purposes and for non-hedging
purposes, subject to applicable law (see "Futures Contracts" below and the
Statement of Additional Information). In addition, the Portfolio may purchase
portfolio securities on a "when-issued" or on a "forward delivery" basis (See
"When-Issued Securities" below). The Portfolio may also invest a portion of
its assets in "loan participations" (see "Loan Participations and Other Direct
Indebtedness" below and in the Statement of Additional Information).
While it is not generally the Portfolio's policy to invest or trade for
short-term profits, the Portfolio may dispose of a portfolio security whenever
MFS, the Sub-Investment Manager, is of the opinion that such security no
longer has an appropriate appreciation potential or when another security
appears to offer relatively greater appreciation potential. Subject to tax
requirements, portfolio changes are made without regard to the length of time
a security has been held, or whether a sale would result in a profit or loss.
During periods of unusual market conditions when MFS, believes that
investing for temporary defensive purposes is appropriate, or in order to meet
anticipated redemption requests, a large portion or all of the assets of the
Portfolio may be invested in cash or cash equivalents including, but not
limited to, obligations of banks (including certificates of deposit, bankers'
acceptances and repurchases agreements) with assets of $1 billion or more,
commercial paper, short-term notes, obligations issued or guaranteed by the
U.S. Government or any of its agencies, authorities or instrumentalities and
related repurchase agreements. U.S. Government securities also include
interests in trust or other entities representing interests in obligations
that are issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities.
Risk Factors. The nature of investing in emerging growth companies involves
greater risk than is customarily associated with investments in more
established companies. Emerging growth companies often have limited product
lines, markets or financial resources, and they may be dependent on one-person
management. In addition, there may be less research available on many
promising small and medium sized emerging growth companies. The securities of
emerging growth companies may have limited marketability and may be subject to
more abrupt or erratic market movements than securities of larger, more
established growth companies or the market averages in general. Shares of the
Portfolio, therefore, are subject to greater fluctuation in value than shares
of a conservative equity Portfolio or of a growth Portfolio which invests
entirely in proven growth stocks.
The Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities. Investments in lower rated income
securities, while offering generally high current income and generally
providing greater
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income and opportunity for gain than investments in higher rated securities,
usually entail greater risk of principal and income (including the possibility
of default or bankruptcy of the issuers of such securities), and involve
greater volatility of price (especially during periods of economic uncertainty
or change) than investments in higher rated securities and because yields may
vary over time, no specified level of income can ever be assured. In
particular, securities rated lower than Baa by Moody's Investors Service, Inc.
("Moody's") or BBB by Standard & Poor's Rating Service or comparable unrated
securities (commonly known as "junk bonds") are considered speculative. These
lower rated high yielding fixed income securities generally tend to reflect
economic changes (and the outlook for economic growth), short-term corporate
and industry developments and the market's perception of their credit quality
(especially during times of adverse publicity) to a greater extent than higher
rated securities which react primarily to fluctuations in the general level of
interest rates (although these lower rated fixed income securities are also
affected by changes in interest rates). In the past, economic downturns or an
increase in interest rates have under certain circumstances caused a higher
incidence of default by the issuers of these securities and may do so in the
future, especially in the case of highly leveraged issuers. During certain
periods, the higher yields on the Portfolio's lower rated high yielding fixed
income securities are paid primarily because of the increased risk of loss of
principal and income, arising from such factors as the heightened possibility
of default or bankruptcy of the issuers of such securities. Due to the fixed
income payments of these securities, the Portfolio may continue to earn the
same level of interest income while its net asset value declines due to
portfolio losses, which could result in an increase in the Portfolio's yield
despite the actual loss of principal. The prices for these securities may be
affected by legislative and regulatory developments. An effect of such rules
may be to depress the prices of outstanding lower rated high yielding fixed
income securities. Changes in the value of securities subsequent to their
acquisition will not affect cash income or yield to maturity to the Portfolio
but will be reflected in the net asset value of shares of the Portfolio. The
market for these lower rated fixed income securities may be less liquid than
the market for investment grade fixed income securities. Furthermore, the
liquidity of these lower rated securities may be affected by the market's
perception of their credit quality. Therefore, the Sub-Investment Manager's
judgment may at times play a greater role in valuing these securities than in
the case of investment grade fixed income securities, and it also may be more
difficult during times of certain adverse market conditions to sell these
lower rated securities at their fair value to meet redemption requests or to
respond to changes in the market. No minimum rating standard is required by
the Portfolio. To the extent the Portfolio invests in these lower rated fixed
income securities, the achievement of its investment objective may be more
dependent on the Sub-Investment Manager's own credit analysis than in the case
of a Portfolio investing in higher quality bonds. While the Sub-Investment
Manager may refer to ratings issued by established credit rating agencies, it
is not a policy of the Portfolio to rely exclusively on ratings issued by
these agencies, but rather to supplement such ratings with the Sub-Investment
Manager's own independent and ongoing review of credit quality.
The Portfolio may also invest in fixed income securities rated Baa by
Moody's or BBB by S&P and comparable unrated securities. These securities,
while normally exhibiting adequate protection parameters, may have speculative
characteristics and changes in economic conditions and other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher rated securities.
Additional Risk Factors
The net asset value of the shares of an open-end investment company which
may invest to a limited extent in fixed income securities changes as the
general levels of interest rates fluctuate. When interest rates decline, the
value of a fixed income portfolio can be expected to rise. Conversely, when
interest rates rise, the value of a fixed income portfolio can be expected to
decline.
Although changes in the value of securities subsequent to their acquisition
are reflected in the net asset value of shares of the Portfolio, such changes
will not affect the income received by the Portfolios from such securities.
However, the dividends paid by the Portfolios, if any, will increase or
decrease in relation to the income received by the Portfolio from its
investments, which would in any case be reduced by the Portfolio's expenses
before it is distributed to shareholders.
In addition, the use of options, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies may result in
the loss of principal, particularly where such instruments are traded for
other than hedging purposes (e.g., to enhance current yield).
The Emerging Growth Portfolio is aggressively managed and, therefore, the
value of its shares is subject to greater fluctuation and investments in its
shares involve the assumption of a higher degree of risk than would be the
case with an investment in a conservative equity portfolio or a growth
portfolio investing entirely in proven growth equities.
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See the Statement of Additional Information for further discussion of
foreign securities and the holding of foreign currency as well as the
associated risks.
Given the above average investment risk inherent to the Emerging Growth
Portfolio, investment in shares of the Emerging Growth Portfolio should not be
considered a complete investment program and may not be appropriate for all
investors.
Convertible Securities
All Funds except the Money Market Portfolio may invest in convertible
securities, Convertible securities may include corporate notes or preferred
stock but are ordinarily a long-term debt obligation of the issuer convertible
at a stated price or at a stated exchange rate into common stock of the
issuer. As with all debt securities, the market value of convertible
securities tends to decline as interest rates increase and, conversely, to
increase as interest rates decline. Convertible securities generally offer
lower interest or dividend yields than non-convertible securities of similar
quality. However, when the market price of the common stock underlying a
convertible security exceeds the conversion price, the price of the
convertible security tends to reflect the value of the underlying common
stock. As the market price of the underlying common stock declines, the
convertible security tends to trade increasingly on a yield basis, and thus
may not depreciate to the same extent as the underlying common stock.
Convertible securities generally rank senior to common stocks in an issuer's
capital structure and are consequently of higher quality and entail less risk
of declines in market value than the issuer's common stock. However, the
extent to which such risk is reduced depends in large measure upon the degree
to which the convertible security sells above its value as a fixed-income
security. The convertible debt securities in which a Fund may invest are
subject to the same rating criteria as that Fund's investment in non-
convertible debt securities.
Foreign Securities
The World Growth Stock Portfolio, the International Equity Portfolio, the
High Yield Portfolio, the Growth Portfolio, the Capital Growth Portfolio, the
Gold Stock Portfolio and the Emerging Growth Portfolio intend to purchase
securities that are listed on stock exchanges in foreign countries. They may
also, to a limited extent, purchase unlisted foreign securities. The Growth
and Income Portfolio, the Capital Growth Portfolio and the Balanced Portfolio
may also invest in listed and unlisted foreign securities. Foreign investments
may involve greater risks than are present in domestic investments. Compared
to domestic companies, there is generally less publicly available information
about foreign companies, less comprehensive accounting, reporting and
disclosure requirements, and there may be less governmental regulation and
supervision of foreign stock exchanges, brokers and listed companies.
Investments in foreign securities also involve the risk of expropriation or
confiscatory taxation that could affect investments, currency blockages which
would prevent cash from being brought back into the United States, generally
higher brokerage and custodial costs than those of domestic securities and
settlement of transactions with respect to such securities may sometimes be
delayed beyond periods customary in the United States. The Sub-Investment
Managers, under the supervision of Chubb Investment Advisory, consider
possible political and financial instability abroad, as well as the liquidity
and volatility of foreign investments.
Investing in foreign securities or on foreign exchanges may present a
greater degree of risk than investing in domestic issuers. These risks include
changes in currency rates, exchange control regulations, governmental
administration, economic or monetary policy (in this country or abroad), war
or expropriation. In particular, the dollar value of portfolio securities of
non-U.S. issuers fluctuates with changes in market and economic conditions
abroad and with changes in relative currency values (when the value of the
dollar increases as compared to a foreign currency, the dollar value of a
foreign-denominated security decreases, and vice versa). Costs may be incurred
in connection with conversions between various currencies. Special
considerations may also include more limited information about foreign
issuers, higher brokerage costs, different accounting standards and thinner
trading markets. Foreign securities markets may also be less liquid, more
volatile and less subject to government supervision than in the United States.
Investments in foreign countries could be affected by other factors including
confiscatory taxation and potential difficulties in enforcing contractual
obligations and could be subject to extended settlement periods. Therefore, an
investment in shares of a Portfolio may be subject to a greater degree of risk
than investments in other investment companies which invest exclusively in
domestic securities.
Foreign Currencies
As a result of its investments in foreign securities, the Portfolios may
receive interest or dividend payments, or the proceeds of the sale or
redemption of such securities, in the foreign currencies in which such
securities are denominated. In that event, a Portfolio may promptly convert
such currencies into dollars at the then current exchange rate. Under certain
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circumstances, however, such as where the Sub-Investment Manager believes that
the applicable exchange rate is unfavorable at the time the currencies are
received or the Sub-Investment Manager anticipates, for any other reason, that
the exchange rate will improve, a Portfolio may hold such currencies for an
indefinite period of time.
In addition, a Portfolio may be required to receive delivery of the foreign
currency underlying forward currency contracts it has entered into. This could
occur, for example, if an option written by the Portfolio is exercised or is
unable to close out a forward contract it has entered into. A Portfolio may
also hold foreign currency in anticipation of purchasing foreign securities. A
Portfolio may also elect to take delivery of the currencies underlying options
or forward contracts if, in the judgment of the Sub-Investment Manager, it is
in the best interest of the Portfolio to do so. In such instances as well, a
Portfolio may promptly convert the foreign currencies to dollars at the then
current exchange rate, or may hold such currencies for an indefinite period of
time.
While the holding of currencies will permit a Portfolio to take advantage of
favorable movements in the applicable exchange rate, it also exposes a
Portfolio to risk of loss if such rates move in a direction adverse to the
Portfolio's position. Such losses could reduce any profits or increase any
losses sustained by the Portfolio from the sale or redemption of securities,
and could reduce the dollar value of interest or dividend payments received.
In addition, the holding of currencies could adversely affect the Portfolio's
profit or loss on currency options or forward contracts, as well as its
hedging strategies.
Prior to investing in foreign securities, a Portfolio may hold funds
temporarily in foreign currencies. The value of the assets of that Portfolio
may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations. The Portfolio may also incur
costs in connection with conversions between various currencies. The
Portfolios will, therefore, consider foreign exchange rates in making
investment decisions, but, other than the Capital Growth Portfolio and the
Emerging Growth Portfolio, will not actively hedge foreign currency
fluctuations by entering into contracts to purchase or sell foreign currencies
at a future date or options or futures contracts on foreign currencies. See
"RISK CONSIDERATIONS--Foreign Securities" in the Statement of Additional
Information.
Brady Bonds
Certain of the Portfolios consistent with their objectives and policies may
invest in Brady Bonds, which are securities created through exchange of
existing commercial bank loans to public and private entities in certain
emerging markets for new bonds in connection with debt restructuring under a
debt restructuring plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady (the "Brady Plan"). Brady Plan debt restructuring have been
implemented to date in Argentina, Brazil, Bulgaria, Costa Rica, Dominican
Republic, Ecuador, Jordan, Mexico, Nigeria, Panama, the Philippines, Poland,
Uruguay and Venezuela. Brady Bonds may be collateralized or uncollateralized,
are issued in various currencies (but primarily the U.S. Dollar) and are
actively traded in the over-the-counter markets. U.S. dollar denominated,
collateralized Brady Bonds, which may be fixed-rate bonds, or floating rate
bonds, are generally collateralized in full as to principal by U.S. Treasury
zero coupon bonds having the same maturity as the bonds. Brady Bonds are often
viewed as having four valuation components: the collateralized repayment of
principal at final maturity; the collateralized interest payments; the
uncollateralized interest payments; and any uncollateralized repayments of
principal at maturity (these uncollateralized amounts constituting the
"residual risk"). In light of the residual risk of Brady Bonds and the history
of defaults of countries issuing Brady Bonds with respect to the commercial
bank loans by public and private entities, investments in Brady Bonds may be
viewed as speculative.
Non-Diversified Status
Since the International Equity Portfolio is not "diversified" as defined by
the Investment Company Act of 1940, as amended ("ICA") it may invest a greater
percentage of its assets in any single issuer than otherwise permissible for a
diversified investment company, and it will be more susceptible to adverse
developments affecting any single issuer. Nonetheless, this "non-diversified"
Portfolio is still subject to the diversification requirements that arise
under the federal tax laws.
Emerging Market Securities
Consistent with the Portfolios' objectives and policies the Portfolios may
invest in securities of issuers whose principal activities are located in
emerging market countries. Emerging market countries include any country
determined by the Sub-Investment Manager to have an emerging market economy,
taking into account a number of factors including whether the country has a
low to middle economy according to the International Bank for Reconstruction
and Development, the country's
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foreign currency debt rating, its political and economic stability and the
development of its financial and capital markets. The Sub-Investment Manager
determines whether an issuer's principal activities are located in an emerging
market country by considering such factors as country of organization, the
principal trading market for its securities and the source of its revenues and
assets. The issuer's principal activities generally are deemed to be located
in a particular country if: (a) the security is issued or guaranteed by the
government of the country or any of its agencies, authorities, or
instrumentalities; (b) the issuer is organized under the laws of, and
maintains a principal office in that country; (c) the issuer has its principal
securities trading market in that country; (d) the issuer derives 50% or more
of its total revenue from goods sold or services performed in that country; or
(e) the issuer has 50% or more of its assets in that country.
Depository Receipts
The World Growth Portfolio, the International Equity Portfolio, the Gold
Stock Portfolio, the Growth Portfolio, the Growth and Income Portfolios, the
Capital Growth Portfolio, the Balanced Portfolio, the High Yield Bond
Portfolio and the Emerging Growth Portfolio may also invest in Depository
Receipts, (ADRs, GDRs and EDRs.) ADRs are certificates issued by a United
States bank representing the right to receive securities of a foreign issuer
deposited in a foreign branch of a United States bank and traded on a United
States exchange or over-the-counter. European Depository Receipts ("EDRs") and
Global Depository Receipts ("GDRs") are typically issued by foreign banks or
trust companies, although they may be by US banks or trust companies, and also
evidence ownership of underlying securities issued by a foreign or U.S.
securities market. Generally, Depository Receipts in registered form are
designed for use in the U.S. securities market and Depository Receipts in
bearer form are designed for use in securities markets outside the United
States. Depository Receipts may not necessarily be denominated in the same
currency as the underlying securities in to which they may be converted.
Depository Receipts may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities traded in the form of Depository Receipts. In unsponsored programs
the issuer may not be directly involved in the creation of the program. In
some cases it may be easier to obtain financial information from an issuer
that has participated in the creation of the sponsored program. Accordingly,
there may be less information available regarding issuers of securities
underlying unsponsored programs and there may not be a correlation between
such information and the market value of the Securities. Brokerage commissions
will be incurred if ADRs are purchased through brokers on the U.S. stock
exchanges.
Depository Receipts also involve the risks of other investment in foreign
securities, for purposes of each Fund's investment policies, a Fund's
investment in Depository Receipts will be deemed to be investments in the
underlying securities.
Forward Foreign Currency Exchange Contracts
The Portfolios (except the Money Market Portfolio) may utilize forward
foreign currency exchange contracts ("forward currency contracts"). A forward
currency contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the forward currency contract agreed upon by the parties, at a price set at
the time of the contract. These forward currency contracts are principally
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Portfolios will
enter into forward currency contracts only under two circumstances. First,
when a Portfolio has entered into a contract to purchase or sell a security
denominated in a foreign currency, the Portfolio may be able to protect itself
against a possible loss, between trade date and settlement date for such
security, resulting from an adverse change in the relationship between the
U.S. dollar and the foreign currency in which such security is denominated, by
entering into a forward currency contract in U.S. dollars for the purchase or
sale of the amount of the foreign currency involved in the underlying security
transaction. However, this tends to limit potential gains which might result
from a positive change in such currency relationships. Second, when management
of a Portfolio believes that the currency of a particular foreign country may
suffer or enjoy a substantial movement against the U.S. dollar (or another
currency), the Portfolio may enter into a forward currency contract to sell or
buy an amount of foreign currency approximating the value of some or all of
the Portfolio's securities denominated in such foreign currency, or a proxy
currency whose performance is expected to correlate to the currency. The
forecasting of short-term currency market movement is extremely difficult and
whether such a short-term hedging strategy will be successful is highly
uncertain.
Repurchase Agreements
All of the Portfolios may enter into repurchase agreements, whereby the
Portfolio purchases securities (referred to as "underlying securities") from
well-established securities dealers or banks, subject to agreement by the
seller to repurchase
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the securities at a stated price on a specified date. Repurchase agreements
involve certain risks not associated with direct investment in securities,
including the risk that the original seller will default on its obligations to
repurchase, as a result of bankruptcy or otherwise. To minimize this risk, a
Portfolio will enter into repurchase agreements only if the repurchase
agreement is structured in a manner reasonably designed to collateralize fully
the value of a Portfolio's investment during the entire term of the agreement
and in accordance with guidelines regarding the creditworthiness of the seller
determined by the Board of Directors of the Fund. As a general matter, if the
seller of the repurchase agreement is a bank it must have assets of at least
$1,000,000,000; if the seller is a broker-dealer it must have a net worth of
at least $25,000,000. The underlying securities, held as collateral, will be
marked to market on a daily basis, and must be high-quality short-term
securities. In addition, the securities underlying repurchase agreements must
be either U.S. Government Obligations or securities that, at the time the
repurchase agreement is made, are rated in the highest rating category by the
Requisite NRSROs. Nevertheless, in the event that the other party to the
agreement fails to repurchase the securities subject to the agreement, a
Portfolio could suffer a loss to the extent proceeds from the sale of the
underlying securities held as collateral were less than the price specified in
the repurchase agreement.
High Yield Securities
The corporate debt obligations in which the High Yield Bond Portfolio and
other Portfolios, may invest may be rated below investment grade by Standard &
Poor's or by Moody's (i.e., bonds rated BB or below by Standard & Poor's or Ba
or below by Moody's) or be unrated. The High Yield Bond Portfolio may invest
100% of its net assets in lower rated corporate debt obligations. Bonds rated
BB or below by Standard & Poor's or Ba or below by Moody's (or comparable
unrated securities), commonly known as "high yield, high risk," are
considered, on balance, speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation and will
generally involve more credit risk than securities in the higher rating
categories. As a result, investment in such bonds will entail greater
speculative risks than those associated with investment-grade bonds (i.e.,
bonds rated BBB or higher by Standard & Poor's or Baa or higher by Moody's).
The Securities and Exchange Commission takes the position that bonds rated BB
or below by Standard and Poor's or Ba or below by Moody's (or comparable
unrated securities) may be classified as "junk bonds." No minimum rating
standard is required for a purchase of bonds by the High Yield Bond or Growth
Portfolios. See SAI for a description of the ratings issued by investment
rating services.
An economic downturn could severly affect the ability of highly leveraged
issuers to service their debt obligations or to repay their obligations upon
maturity. Factors having an adverse impact on the market value of lower rated
securities will have an adverse effect on a Portfolio's net asset value to the
extent it invests in such securities. In addition, a Portfolio may incur
additional expenses to the extent it is required to seek recovery upon a
default in payment of principal or interest on its portfolio holdings
The secondary market for high yield, high risk bond securities, which is
concentrated in relatively few market makers, may not be as liquid as the
secondary market for more highly rated securities, a factor which may have an
adverse effect on a Portfolio's ability to dispose of a particular security
when necessary to meet its liquidity needs. Under adverse market or economic
conditions, the secondary market for high yield, high risk bond securities
could contract further, independent of any specified adverse changes in the
condition of a particular issuer. As a result, a Portfolio could find it more
difficult to sell these securities or may be able to sell the securities only
at prices lower than if such securities were widely traded. Prices realized
upon the sale of such lower rated or unrated securities, under these
circumstances, may be less than the prices used in calculating a Portfolio's
net asset value.
Since investors generally perceive that there are greater risks associated
with lower-rated debt securities, the yields and prices of such securities may
tend to fluctuate more than those for higher-rated securities. In the lower
quality segments of the fixed-income securities market, changes in perceptions
of issuers' creditworthiness tend to occur more frequently and in a more
pronounced manner than do changes in higher quality segments of the fixed-
income securities market resulting in greater yield and price volatility.
Another factor which causes fluctuations in the prices of fixed-income
securities is the supply and demand for similarly rated securities. In
addition, the prices of fixed-income securities fluctuate in response to the
general level of interest rates. Fluctuations in the prices of portfolio
securities subsequent to their acquisitions will not affect cash income from
such securities but will be reflected in a Portfolio's net asset value.
Lower-rated (and comparable non-rated) securities tend to offer higher
yields than higher-rated securities with the same maturities because the
historical financial condition of the issuers of such securities may not have
been as strong as that of
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<PAGE>
other issuers. In addition to the risk of default, there are the related costs
of recovery on defaulted issues. The sub-advisers will attempt to reduce these
risks through diversification of these Portfolio's portfolios and by analysis
of each issuer and its ability to make timely payments of income and
principal, as well as broad economic trends in corporate developments.
Zero Coupon Bonds
The Portfolios may invest in zero coupon bonds which are debt obligations
that do not make any interest payments for a specified period of time prior to
maturity or until maturity. The value of these obligations fluctuates more in
response to interest rate changes than does the value of debt obligations that
make current interest payments.
Securities and Index Options
The Growth, Growth and Income Portfolio, High Yield Portfolio, Growth
Portfolio, the Capital Growth Portfolio, the Balanced Portfolio and the
Emerging Growth Portfolio may write covered call options and purchase call and
put options on securities and stock indices. The Growth Portfolio, High Yield
Bond Portfolio, International Equity Portfolio, Capital Growth Portfolio and
the Emerging Growth Portfolio may also utilize options on foreign currencies.
See the Statement of Additional Information for a more detailed description of
these options.
Writing (Selling) Call Options. In order to earn additional income or to
protect partially against declines in the value of its securities, the
Portfolios noted above may write (sell) covered call options. A Portfolio may
also purchase call options to the extent necessary to close out call option
positions previously written by the Portfolio. A call option gives the holder
(purchaser) the right to buy and obligates the writer (seller) to sell, in
return for a premium paid to the writer, the underlying security at the
exercise price at any time during the option period. A call option on a
securities index is similar to a call option on an individual security, except
that the value of the option depends on the weighted value of the group of
securities comprising the index and all settlements are made in cash rather
than by delivery of a particular security.
The writing of call options on securities and securities indices involves
the following risks: (1) during the option period the writer of a call option
gives up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but retains the
risk of loss should the price of the underlying security or index decline and
(ii) the inability to close out options previously written, which would
require the Portfolio to retain the option and the securities covering the
option until its exercise or expiration.
Purchasing Put and Call Options
In order to hedge against changes in the market value of their portfolio
securities, the Growth Portfolio, the High Yield Bond Portfolio, the
International Equity Portfolio, the Growth and Income Portfolio, the Capital
Growth Portfolio, the Balanced Portfolio and the Emerging Growth Portfolio may
also purchase put and call options with respect to equity securities, bonds,
and stock and bond indices which correlate with their portfolio securities,
provided that the premiums paid for such options are limited in each case to
no more than 5% of the Portfolio's total assets. A put option on a security
gives the purchaser of the option, in return for the premium paid to the
writer (seller), the right to sell the underlying security at the exercise
price at any time during the option period. Upon exercise by the purchaser,
the writer of a put option has the obligation to purchase the underlying
security at the exercise price. A put option on a securities index is similar
to a put option on an individual security, except that the value of the option
depends on the weighted value of the group of securities comprising the index
and all settlements are made in cash, rather than by delivery of a particular
security.
Purchasing a put or call option on securities and securities indices
involves the risk that the Portfolio may lose the premium it paid plus
transaction costs.
Futures Contracts
The Growth and Income Portfolio, the Growth Portfolio, the High Yield Bond
Portfolio, the International Equity Portfolio, the Capital Growth Portfolio,
the Balanced Portfolio and the Emerging Growth Portfolio may purchase and sell
futures contracts on debt securities and indexes of debt securities (i.e.,
interest rate futures contracts) as a hedge against or to minimize adverse
principal fluctuations resulting from anticipated interest rate changes. They
may also, where appropriate, enter into stock index futures contracts to
provide a hedge for a portion of a Portfolio's equity holdings. Stock index
futures contracts may be used as a way to implement either an increase or
decrease in portfolio exposure to the equity markets in response to changing
market conditions. The Capital Growth, and Emerging Growth Portfolios may also
enter into currency futures contracts to hedge the currency fluctuations of
its foreign securities. A Portfolio may also write covered call
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<PAGE>
options and purchase put or call options on futures contracts of the type
which that Portfolio is permitted to purchase or sell. The Portfolios will not
enter into futures contracts for speculation and will only enter into futures
contracts that are traded on national futures exchanges. No Portfolio will
enter into futures contracts or options thereon if immediately thereafter the
sum of the amounts of initial margin deposits on the Portfolio's existing
futures contracts and premiums paid for options on unexpired futures contracts
would exceed 5% of the value of the Portfolio's total assets.
The use of futures contracts by the Growth Portfolio, High Yield Bond
Portfolio and International Equity Portfolio, Growth and Income Portfolio and
Capital Growth Portfolio, Balanced Portfolio and Emerging Growth Portfolio
entails certain risks, including but not limited to the following: no
assurance that futures contracts transactions can be offset in closing
transactions at favorable prices or at all unless a liquid secondary market
exists; possible reduction of the Portfolio's income due to the use of
hedging; possible reduction in value of both the securities hedged and the
hedging instrument; possible lack of liquidity due to daily limits on price
fluctuation; imperfect correlation between the contract and the securities
being hedged; and potential losses well in excess of the amount invested in
futures contracts themselves. If a Sub-Investment Manager's forecasts
regarding movements in securities prices or interest rates are incorrect, the
Portfolio's investment results may have been better without the hedge. Futures
contracts and their associated risks are described in more detail in the
Statement of Additional Information.
Lending of Securities
The Emerging Growth Portfolio, Growth Portfolio, High Yield Bond Portfolio
and International Equity Portfolio may make loans of its portfolio securities.
Such loans will usually be made to member banks of the Federal Reserve System
and member firms (and subsidiaries thereof) of the New York Stock Exchange and
would be required to be secured continuously by collateral in cash, U.S.
Government securities or an irrevocable letter of credit maintained on a
current basis at an amount at least equal to the market value of the
securities loaned. The Portfolio would continue to collect the equivalent of
the interest on the securities loaned and would receive either interest
(through investment of cash collateral) or a fee (if the collateral is U.S.
Government securities or a letter of credit).
When-Issued Securities
In order to help ensure the availability of suitable securities the Growth
Portfolio, High Yield Bond Portfolio and International Equity Portfolio Bond,
Balanced, Capital Growth, World Growth Stock and Emerging Growth Portfolios
may purchase securities on a "when-issued" or on a "forward delivery" basis,
which means that the obligations will be delivered to the Portfolios at a
future date usually beyond customary settlement time. It is expected that,
under normal circumstances, the Portfolios will take delivery of such
securities. In general, the Portfolios do not pay for the securities until
received and does not start earning interest on the obligations until the
contractual settlement date. While awaiting delivery of the obligations
purchased on such bases, the Portfolios will establish a segregated account
consisting of cash, short-term money market instruments or other liquid assets
equal to the amount of the commitments to purchase "when-issued" securities.
See the Statement of Additional Information.
Mortgage Backed and Corporate Asset-Backed Securities
The Growth Portfolio, High Yield Bond Portfolio and International Equity
Portfolio Bond and the Emerging Growth Portfolios may invest in corporate
asset-backed securities. These securities, issued by trusts and special
purpose corporations, are backed by a pool of assets, such as credit card or
automobile loan receivables, representing the obligations of a number of
different parties. Corporate asset-backed securities present certain risks.
For instance, in the case of credit card receivables, these securities may not
have the benefit of any security interest in the related collateral. See the
Statement of Additional Information for further information on these
securities.
The Bond, International Equity, High Yield, Growth, Growth and Income and
Emerging Growth Portfolios may invest in mortgage-backed securities, which
represent direct or indirect participation in, or are collateralized by and
payable from mortgage loans secured by real property.
Mortgage backed securities are often subject to more rapid repayment than
their stated maturity date would indicate as a result of the pass-through of
prepayments of principal on the underlying loans. This can occur when interest
rates decline significantly. A Portfolio's ability to maintain positions in
such securities will be affected by reductions in the principal amount of such
securities resulting from prepayments and its ability to reinvest the returns
or principal at comparable yields is subject to generally prevailing interest
rates at that time. To the extent that a Portfolio invests in mortgage-backed
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<PAGE>
securities, the values of its securities will vary with changes in market
interest rates generally and the differentials in yields among various U.S.
Government Securities and other mortgage-backed securities.
Stripped Mortgage-Backed Securities
Certain of the Portfolios may invest a portion of their assets in stripped
mortgage-backed securities which are derivative multi-class mortgage
securities issued by agencies and instrumentalities of the United States
Government or by private originators of or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks and
investment banks. Stripped mortgage-backed securities are usually structured
with two classes that receive different proportions of interest and principal
distributions from a pool of mortgage assets. A common type of stripped
mortgage-backed securities 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) and the other class will receive all of the principal (the
principal only of "PO" Class). The yield to maturity on an IO is extremely
sensitive to the rate of principal payments (including prepayments on the
related underlying mortgage assets) and a rapid rate of principal payments may
have a material adverse effect on such securities' yield to maturity. If the
underlying mortgage assets experience greater than anticipated prepayment of
principal, the Portfolios may fail to fully recoup their initial investment in
these securities. The market value of the class consisting primarily or
entirely of principal payments generally is unusually volatile in response to
changes in interest rates. Because stripped mortgage-backed securities were
only recently introduced, established trading markets for these securities
have not yet fully developed, although the securities are traded among
institutional investors and investment banking firms.
Borrowing
Certain of the Portfolios may borrow money but only from banks and only for
temporary or short-term purposes. The Portfolios will not borrow for
leveraging purposes and will maintain continuous asset coverage of at least
300% (as defined in the Investment Company Act of 1940) with respect to all of
its borrowings, the Portfolio may be required to sell its assets within three
days to reduce debt and restore 300% asset coverage. Borrowing involves
interest costs.
Warrants
All of the Portfolios except the Money Market Portfolio, may invest in
warrants, which are rights to buy certain securities at set prices during
specified time periods. If, prior to the expiration date, the Portfolio is not
able to exercise a warrant at a cost lower than underlying securities, the
Portfolio will suffer a loss of its entire investment in the warrant.
Restricted and Illiquid Securities
All of the Portfolios may to some extent purchase certain restricted
securities (those that are not registered under the Securities Act of 1933
("33 Act") but can be offered and sold to "qualified institutional buyers
under Rule 144A of the 33 Act) and limited amounts of illiquid securities
including illiquid restricted securities. Limitations on illiquid securities
and other illiquid investments for each Portfolio are described in the
Portfolio's investment restrictions in the Statement of Additional Information
incorporated herein by reference.
Illiquid investments include many restricted securities, repurchase
agreements that mature in more than seven days or that have a notice or demand
feature more than seven days, certain over-the-counter option contracts,
participation interests in loans, securities not readily marketable and
certain restricted securities.
Certain repurchase agreements which provide for settlement in more than
seven days, however, can be liquidated before nominal fixed term on seven day
or less notice. The Portfolios will consider such repurchase agreements as
liquid. Likewise, restricted securities (including commercial paper issued
pursuant to 4 (2) of the 33 Act) that the Board of Directors or the Sub-
Investment Managers have determined to be liquid will be treated as such.
Dollar Roll Transactions
All Portfolios except the Money Market Portfolio and the International
Equity Portfolio may enter into mortgage "dollar roll" transactions with
selected banks and broker-dealers pursuant to which a Portfolio 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. A Portfolio
will only enter into covered rolls. A covered roll is a
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<PAGE>
specific type of dollar roll for which there is an offsetting cash position or
a cash equivalent security position which matures on or before the forward
settlement date of the dollar roll transaction. In the event that the party
with whom the Portfolio contracts to replace substantially similar securities
on a future date fails to deliver such securities, the Portfolio may not be
able to obtain such securities at the prices specified in such contract and
thus may not benefit from the price differential between the current sales
price and the repurchase price.
Swap Transactions
The High Yield Bond Portfolio and the Growth Portfolio may, to the extent
permitted by the SEC, enter into privately negotiated "swap" transactions with
other financial institutions in order to take advantage of investment
opportunities generally not available in public markets. In general, these
transactions involve "swapping" a return based on certain securities,
instruments, or financial indexes with another party, such as a commercial bank
in exchange for a return based on different securities, instruments, or
financial indexes.
By entering into swap transactions, a Portfolio may be able to protect the
value of a portion of its securities against declines in market values. A
Portfolio may also enter into swap transactions to facilitate implementation of
allocation strategies between different market segments or to take advantage of
market opportunities which may arise from time to time. A Portfolio may be able
to enhance its overall performance if the return offered by the other party to
the swap transaction exceeds the return swapped by the Portfolio. However,
there can be no assurance that the return a Portfolio receives from the
counterparty to the swap transaction will exceed the return it swaps to that
party.
While a Portfolio will only enter into swap transactions with counterparties
it considers creditworthy (and will monitor creditworthiness of parties with
which it enters into swap transactions), a risk inherent in swap transactions
is that the other party to the transaction may default on its obligations under
the swap agreement. If the other party to the swap transaction defaults on its
obligations, a Portfolio would be limited to contractual remedies under the
swap agreement. There can be no assurance that a Portfolio will succeed when
pursuing its contractual remedies. To minimize a Portfolio's exposure in the
event of a default, the Portfolio will usually enter into swap transactions on
a net basis (i.e., the parties to the transaction will net the payments payable
to each other before such payments are made). When a Portfolio enters into swap
transactions on a net basis, the net amount of the excess, if any, of the
Portfolio's obligations over its entitlements with respect to each such swap
agreement will be accrued on a daily basis and an amount of liquid assets
having an aggregate market value at least equal to the accrued excess will be
segregated by the Portfolio's custodian. To the extent a Portfolio enters into
swap transactions other than on a net basis, the amount segregated will be the
full amount of the Portfolio's obligations, if any, with respect to each such
swap agreement, accrued on a daily basis.
Swap agreements are considered to be illiquid by the SEC staff and will be
subject to the limitations on illiquid investments. A detailed discussion of
the limitations on illiquid investments is found in "Restricted and Illiquid
Securities" in the SAI.
Interest Rate Swaps. The High Yield Bond Portfolio and the Growth Portfolio
may enter into interest rate swaps for hedging purposes and non-hedging
purposes. Since swaps are entered into for good faith hedging purposes or are
offset by a segregated account, the sub-advisors believe that swaps do not
constitute senior securities as defined in the 1940 Act and, accordingly, will
not treat than as being subjected to each Portfolio's borrowing restrictions.
The net amount of the excess, if any, of a Portfolio's obligations over its
"entitlement" with respect to each interest rate swap will be accrued on a
daily basis and an amount of cash or liquid high grade debt securities (i.e.,
securities rated in one of the top three rating categories by Moody's or
Standard & Poor's, or, if unrated, deemed by the sub-adviser to be of
comparable credit quality) having an aggregate net asset value at least equal
to such accrued excess will be maintained in a segregated account by the
custodian. A Portfolio will not enter into any interest rate swap unless the
credit quality of the unsecured senior debt or the claims-paying ability of the
other party thereto is considered to be investment grade by the sub-adviser. If
there is a default by the other party to such a transaction, a Portfolio will
have contractual remedies pursuant to the agreement. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid
in comparison with the markets for other similar instruments which are traded
in the interbank market.
The SEC, however, considers interest rate swaps to be illiquid and therefore
subject to the limitations on illiquid investments. A detailed discussion of
the limitations on illiquid investments is found in "Restricted and Illiquid
Securities" in the SAI.
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Loan Participations and Other Direct Indebtedness
The Growth Portfolio, High Yield Bond Portfolio and International Equity
Portfolio Bond and the Emerging Growth Portfolios may invest a portion of
their assets in "Loan Participations" and other direct indebtedness. By
purchasing a loan participation, the Portfolios acquire some or all of the
interest of a bank or other lending institution in a loan to a corporate
borrower. Many such loans are secured, and impose restrictive covenants which
must be met by the borrower. These loans are made generally to finance
internal growth, mergers, acquisitions, stock repurchases, leveraged buy-outs
and other corporate activities. Such loans may be in default at the time of
purchase. The Portfolios may also purchase other direct indebtedness such as
trade or other claims against companies, which generally represent money owed
by the company to a supplier of goods and services. These claims may also be
purchased at a time when the company is in default. Certain of the loan
participations and other direct indebtedness acquired by the Portfolios may
involve revolving credit facilities or other standby financing commitments
which obligate the Portfolios to pay additional cash on a certain date or on
demand.
The highly leveraged nature of many such loans and other direct indebtedness
may make such loans especially vulnerable to adverse changes in economic or
market conditions. Loan participations and other direct indebtedness may not
be in the form of securities or may be subject to restrictions on transfer,
and only limited opportunities may exist to resell such instruments. As a
result, the Portfolios may be unable to sell such investments at an opportune
time or may have to resell them at less than fair market value. For a further
discussion of loan participations, other direct indebtedness and the risks
related to transactions therein, see the Statement of Additional Information.
INVESTMENT RESTRICTIONS
Investments of the Portfolios are further restricted by certain policies
that may not be changed without a vote of stockholders. See "INVESTMENT
RESTRICTIONS" in the Statement of Additional Information.
Portfolio Turnover
Portfolio turnover may vary and from year to year or within a year depending
upon economic, market and business conditions. The annual portfolio turnover
rates for the Portfolios in 1996 and 1995 were as follows: 27.50% and 18.09%
for the World Growth Stock Portfolio; 64.78% and 23.98% for the Gold Stock
Portfolio; 49.75% and 64.17% for the Domestic Growth Stock Portfolio; 23.25%
and 127.74% for the Bond Portfolio; 35.69% and 32.30%, for the Growth and
Income Portfolio; 147.82% and 170.32% for the Capital Growth Portfolio; and
222.35% and 164.70% for the Balanced Portfolio. In addition, the portfolio
turnover rate for the Balanced Portfolio for such periods can be broken down
into rates of 233.29% and 219.50%, respectively, for the common stock portion
of the Portfolio and 202.08% and 92.85%, respectively, for the fixed income
portion. The Portfolio turnover rate for Emerging Growth Portfolio for 1996
and for the period from May 1, 1995 (commencement of operations) to December
31, 1995 was 94.58% and 30.31%, respectively. Portfolios having higher
turnover rates may realize larger amounts of gains and losses relative to a
portfolio having a lower turnover rate and will generally incur
correspondingly greater brokerage commissions. Excessive short-term trading
may result in excessive "short-short" income under the Internal Revenue Code
("IRC") which, in turn, could affect the status of such Portfolios as
regulated investment companies and the tax status of the contracts invested in
the Portfolio. See "TAXES AND DIVIDENDS" in this Prospectus and "PORTFOLIO
TRANSACTIONS AND BROKERAGE ALLOCATIONS" in the Statement of Additional
Information.
MANAGEMENT OF THE FUND
The Board of Directors of the Fund is responsible for the administration of
the affairs of the Fund.
The Fund's investment manager is Chubb Investment Advisory, a registered
investment adviser, a wholly-owned subsidiary of Chubb Life which, in turn, is
a wholly-owned Subsidiary of Jefferson Pilot Corporation. Its address is One
Granite Place, Concord, NH 03301. It provides supervisory investment advice,
and provides certain administrative services for all of the Fund's Portfolios.
Its investment advisory responsibilities include, among other things,
recommending, evaluating, monitoring and overseeing the activities of the Sub-
Investment Managers and reviewing the practices of broker-dealers selected by
the Sub-Investment Managers. Chubb Investment Advisory also provides office
space and related utilities, including telephones, necessary for the Fund's
operations; recommends auditors, counsel and custodians; maintains records not
otherwise maintained by other parties; and provides personnel, data processing
services, and supplies to the Fund. The
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<PAGE>
cost of such facilities, supplies and services is included in the investment
management fee described below. Chubb Investment Advisory also acts as
transfer agent and dividend disbursing agent for the fund and serves as
investment administrator to Chubb Investment Funds, Inc., an open-end
management investment companies organized in 1987.
Investment management fees are paid to Chubb Investment Advisory monthly at
an annual rate based on a percentage of the average daily net asset value of
each Portfolio as shown below:
<TABLE>
<CAPTION>
WORLD GROWTH STOCK,
GOLD STOCK,
DOMESTIC GROWTH STOCK, HIGH YIELD
MONEY MARKET GROWTH AND INCOME, CAPITAL EMERGING BOND AND INTERNATIONAL
AVERAGE DAILY NET ASSETS AND BOND AND BALANCED GROWTH GROWTH GROWTH EQUITY
- ------------------------ ------------ ---------------------- ------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
First $200 Million...... .50% .75% 1.00% .80% .75% 1.00%
Next $1.1 Billion....... .45% .70% .95% .75% .75% 1.00%
Over $1.3 Billion....... .40% .65% .90% .70% .75% 1.00%
</TABLE>
The Sub-Investment Managers for the Portfolios are Templeton Global Advisors
Limited, Lyford Cay, Nassau, Bahamas for the World Growth Stock Portfolio;
Lombard Odier International Portfolio Management Limited ("Lombard Odier")
Chubb Asset Managers, Inc., 15 Mountain View Road, Warren, New Jersey 07061
for the Bond Portfolio; Van Eck Associates Corporation, 99 Park Avenue, New
York, New York 10016 for the Gold Stock Portfolio; Pioneering Management
Corporation, 60 State Street, Boston, Massachusetts 02109 for the Domestic
Growth Stock Portfolio; Janus Capital Corporation, 100 Fillmore Street, Suite
300, Denver, Colorado 80206 for the Capital Growth Portfolio; J.P. Morgan
Investment Management, Inc. ("Morgan") 522 Fifth Avenue, New York, New York
10036 for the Balanced Portfolio; Warburg Pincus Counsellors, Inc. 466
Lexington Avenue, New York, New York 10017-3147 for the Growth and Income
Portfolio; Massachusetts Financial Services Company, 500 Boylston Street,
Boston, Massachusetts 02116 for the Money Market High Yield Bond, and Emerging
Growth Portfolios; and Strong Capital Management, Inc. ("Strong") P.O. Box
2936, Milwaukee, Wisconsin 53201 for the Growth Portfolio.
Templeton, Sub-Adviser to the World Growth Stock Portfolio, is a registered
investment adviser, organized under the laws of the Bahamas. Templeton is an
indirect wholly owned subsidiary of Franklin Resources, Inc. ("Franklin"), a
Delaware corporation. Franklin is a publicly traded company whose ordinary
shares of common stock are listed on the New York Stock Exchange. Templeton
serves as an investment adviser or sub-adviser to various investment companies
registered under the Investment Company Act of 1940, subject to the
supervision and direction of each company's Board of Directors and, where
appropriate, the company's investment adviser, as well as to investment
companies registered in foreign jurisdictions. In this capacity, Templeton is
responsible on a daily basis for managing the companies' investments, making
investment decisions on behalf of the companies and supplying research
services. Templeton may also provide investment research and advice to certain
common trust vehicles. Templeton is also an adviser or sub-adviser to several
private accounts. Templeton and its affiliates currently serve as investment
manager to 175 U.S. registered investment companies. Mr. Jeffrey Everett, Mr.
Sean Farrington and Mr. Mark Holowesko are primarily responsible for the day
to day management of the World Growth Stock Portfolio. Mr. Everett, Executive
Vice President of Templeton, has been a portfolio manager at Templeton since
1989. Mr Farrington, Vice President of Templeton, has been portfolio manager
since 1995, and joined Templeton as a portfolio manager in 1991. Mr.
Holowesko, President of Templeton, has been with Templeton as a portfolio
manger since 1987.
Chubb Asset, Sub-Adviser to the Bond Portfolio, is a registered investment
adviser, is a Delaware corporation and a wholly-owned subsidiary of The Chubb
Corporation. It is in no way affiliated with Chubb Investment Advisory or
Chubb Life. Since 1987, Chubb Asset has been the investment manager for Chubb
Investment Funds, Inc., which currently consists of the Chubb Money Market
Fund, the Chubb Government Securities Fund, the Chubb Tax-Exempt Fund, the
Chubb Total Return Fund, the Chubb Growth and Income Fund, the Capital
Appreciation Fund and the Global Income Fund. Persons employed by Chubb Asset,
who are also investment personnel of Chubb & Son, Inc., a wholly-owned
subsidiary of The Chubb Corporation, currently provide investment advice to
and supervise and monitor investment portfolios for The Chubb Corporation and
its affiliates, including general accounts of insurance affiliates of The
Chubb Corporation. In addition, certain investment personnel employed by Chubb
Asset currently provide advice to other investment portfolios of entities not
affiliated with The Chubb Corporation or its affiliates in their capacity as
officers or directors of certain registered investment advisers not related to
Chubb Asset. Ned Gerstman and Paul Geyer have been primarily responsible for
the day-to-day management of the Bond Portfolio since 1988 and 1991,
respectively. Mr. Gerstman is Senior Vice President of Chubb Asset and Vice
President and Portfolio Manager of The Chubb Corporation. He has been employed
by Chubb Asset since 1988 and has been Portfolio Manager for The Chubb
Corporation since 1987. Mr. Geyer, Assistant Vice President and
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<PAGE>
Assistant Portfolio Manager of Chubb Asset, has been affiliated with Chubb
Asset since 1991 and with The Chubb Corporation since 1990. He was previously
affiliated with Merrill Lynch in New York.
Van Eck Associates, a registered investment adviser and a Delaware
corporation is Sub-adviser to the Gold Portfolios. It acts as an adviser to
three other registered investment companies, Van Eck Funds, Van Eck Investment
Trust and International Growth Trust and as a sub-adviser to two other
registered investment companies, Thomson Fund Group--Thomson Precious Metals
and Natural Resources Fund and GCG Trust--Natural Resources Fund, and manages
or advises managers of portfolios of pension plans and other accounts. Mr. John
C. van Eck owns 25.6% of the outstanding voting securities of Van Eck
Associates and his wife and two sons, are each the beneficial owners of 24.8%
of such securities. Mr. John C. van Eck has retained the right to direct the
voting and disposition of the shares of Van Eck Associates held by his wife.
Since October 1996, Henry J. Bingham has been primarily responsible for the
day-to-day management of the Gold Stock Portfolio. He has been associated with
Van Eck Associates as a portfolio manager since 1984 and is currently Executive
Managing Director of Van Eck.
Pioneer, the sub-adviser of the Domestic Growth Stock Portfolio, is a
registered investment adviser, is a Delaware corporation. It is a wholly-owned
subsidiary of The Pioneer Group, Inc., a Delaware corporation. Pioneer
currently acts as a manager and investment adviser of twenty-two other
registered investment companies. Robert W. Benson, Senior Vice President of
Pioneer, has been primarily responsible for the day-to-day management of the
Domestic Growth Stock Portfolio since 1986. Mr. Benson has been employed as a
portfolio manager by Pioneer since 1974.
Janus, a registered investment adviser, is a Colorado corporation. It serves
as investment adviser or sub-adviser to Janus Growth and Income Fund, Janus
Worldwide Fund, Janus Fund, Janus Twenty Fund, Janus Venture Fund, Janus
Flexible Income Fund and Janus Intermediate Government Securities Fund, as well
as several other mutual funds and individual, corporate and pension and profit-
sharing accounts. Kansas City Southern Industries, Inc. ("KCSI") owns
approximately 83% of the outstanding voting stock of Janus, most of which it
acquired in 1984. KCSI is a publicly-traded holding company whose primary
subsidiaries are engaged in transportation, financial services and real estate.
Mr. Marc Pinto is primarily responsible for the day-to-day management of the
Capital Growth Fund. Mr. Pinto has been a portfolio manager since 1994,
previously he was employed by a family firm and as an Associate in the
Investment Banking Division of Goldman Sachs.
Warburg, Pincus, Counsellors, Inc. ("Warburg"), Sub-adviser to the Growth and
Income Portfolio, is a wholly owned subsidiary of Warburg Pincus Counsellors
G.P. ("Warburg G.P."), a New York General Partnership which is in itself
controlled by Warburg, Pincus & Co. ("W.P. & Co."), also a New York
partnership. Lionel I. Pincus, the Managing Director of W.P. & Co. may be
deemed to control both W.P. & Co. and Warburg. Warburg G.P. has no business
other than being a holding company of Warburg and its subsidiaries. Warburg,
organized in 1970, is a professional investment counselling firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations, and other institutions and individuals. As of May 31, 1997
Warburg managed nearly $18.8 billion in assets. Brian Posner, a managing
Director of Warburg, has been with Warburg since January 1997 and since May 1,
1997 has been chief investment officer. Prior to joining Warburg, Mr. Posner
had been a portfolio manager with Fidelity Investments since 1987, most
recently the Vice President and portfolio manager of Fidelity Equity-Income II
Fund.
J.P. Morgan Investment Management Inc. ("Morgan") is the sub-adviser to the
Balanced Portfolio. Morgan is a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated, a bank holding company organized in Delaware. Morgan offers a
wide range of investment management services and acts as investment adviser to
corporate and institutional clients. As of March 31, 1997 Morgan had assets
under management of $180 Billion. Michael J. Kelley, Vice President, (employed
by Morgan since 1985) and Harriet T. Huber, Vice President (employed by Morgan
since 1989) are primarily responsible for the day to day management of and
implementation of Morgan's investment process for the Balanced Portfolio.
Massachusetts Financial Services Company ("MFS") is Sub-adviser to the Money
Market and High Yield Bond Portfolio. AFS 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 in the
United States, Massachusetts Investors Trust. Net assets under the management
of the MFS organization were approximately $52.8 billion on behalf of
approximately 2.3 million investor accounts as of May 31, 1997. As of such
date, the MFS organization manages approximately $34.19 billion of assets
invested in equity securities and approximately $19.93 billion of assets
invested in fixed income securities. Approximately $4.0 billion of the assets
managed by MFS are invested in securities of foreign issuers and non-U.S.
dollar denominated securities of U.S. issuers. MFS is a subsidiary of Sun Life
Assurance Company of Canada (U.S.), a subsidiary of Sun Life of Canada (U.S.)
Holdings Inc., which in turn is a wholly owned subsidiary of Sun Life Assurance
Company of Canada.
40
<PAGE>
MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS(R) Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS
Intermediate Income Trust, MFS Charter Income Trust, MFS Special Value Trust,
MFS Variable Insurance Trust, MFS Institutional Trust, MFS Union Standard
Trust, MFS/Sun Life Series Trust, Sun Growth Variable Annuity Fund, Inc. and
twelve variable accounts, each of which is a registered investment company
established by Sun Life Assurance Company of Canada (U.S.) in connection with
the sale of various combination fixed/variable annuity contracts. MFS and its
wholly owned subsidiary, MFS Asset Management, Inc., provide investment advice
to substantial private clients. John W. Ballen, a Senior Vice President of
MFS, is the Emerging Growth Portfolio's portfolio manager. Mr. Ballen has been
employed as a portfolio manager by MFS since 1984.
Joan S. Batchelder, Senior Vice President will be primarily responsible for
the day-to-day management of the High Yield Portfolio. Ms. Batchelder has been
employed as a portfolio manager by MFS since 1984.
Strong Capital Management, Inc. ("Strong") is the sub-adviser to the Growth
Portfolio, was organized in 1974. Since then, Strong's principal business has
been providing investment supervision for individuals and institutional
accounts, such as pension funds and profit sharing plans. The sub-adviser also
acts as sub-adviser for its own proprietary mutual funds. As of February 28,
1997, Strong managed over $24.2 billion is assets.
Subject to the supervision of the Board of Directors and the Adviser, Strong
manages the Growth Portfolio in accordance with its stated investment
objective and policies, makes investment decisions for the Portfolio, places
order to purchase and sell securities on its behalf. The portfolio manager for
the Growth Portfolio is Mr. Ronald Ognar. Mr. Ognar, a Charter Financial
Analyst with more than 25 years of investment experience joined Strong in
April 1993, after two years as a principal of and portfolio manager with RCM
Capital Management. For approximately three years prior to that he was a
portfolio manager at Kemper Financial Services in Chicago. In addition to his
duties as portfolio manager of the Growth Portfolio he also co-manages the
Strong Total Return Fund, the Strong Growth Fund II and the Asset Allocation
Fund.
Lombard Odier, the sub-adviser to the International Equity Portfolio,
provides investment advisory services with respect to the Portfolio's
investment in foreign securities, including recommending optimal geographic
and equity allocation. Lombard Odier is wholly-owned by Lombard, Odier & Cie
("LOC"), one of the largest and oldest private banks in Switzerland,
established in 1798. Mr. Jean Bonna, a Managing Partner of LOC is Chairman of
Lombard Odier. Lombard Odier presently serves as investment sub-adviser to one
open-end investment company and one closed-end investment company.
The Portfolio retains Lombard Odier to manage the investments of its assets
and to place orders for the purchase and sale of portfolio securities. Lombard
Odier will be primarily responsible for recommending the allocation of
investments among various international markets and currencies, recommendation
and selection of particular securities in the international markets and
placement of portfolio transactions in the foreign equity markets. Although,
over-all strategy is set by the Lombard Odier Strategy Committee, Mr. Ronald
Armist (15 years of investment experience) and Mr. Omid Kamshad (20 years of
investment experience) will primarily be responsible for the day-to-day
management of the International Equity Portfolio.
The compensation of the Sub-Investment Managers is paid directly from the
investment management fees of Chubb Investment Advisory and is set forth in
the table below as an annual percentage of the average daily net asset value
of the Portfolio managed:
<TABLE>
<CAPTION>
SUB-INVESTMENT MANAGER
-------------------------------------------------------
AVERAGE DAILY NET ASSETS JANUS TEMPLETON CHUBB ASSET VAN ECK PIONEER
- ------------------------ ------- --------------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C>
First $200 Million...... .75% .50% .35% .50% .50%
Next $1.1 Billion....... .70% .45% .30% .45% .45%
Over $1.3 Billion....... .65% .40% .25% .40% .40%
<CAPTION>
MFS MFS MFS
NET ASSETS WARBURG EMERGING GROWTH MONEY MARKET HIGH YIELD MORGAN
- ---------- ------- --------------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C>
First $100 Million...... .50% .40% .30% .40% .45%
Next $100 Million....... .50% .40% .30% .40% .40%
Next $200 Million....... .50% .40% .25% .40% .35%
Over $400 Million....... .50% .40% .25% .40% .30%
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
NET ASSETS STRONG LOMBARD ODIER
- ---------- ------ -------------
<S> <C> <C> <C> <C> <C>
First $25 Million........................... .60% .50%
Next $75 Million............................ .50% .50%
Next $50 Million............................ .40% .50%
Over $150 Million........................... .30% .50%
</TABLE>
As noted above, under the Investment Management Agreement Chubb Investment
Advisory acts as transfer agent and dividend paying agent for the Fund and
assumes a number of administrative functions in addition to its investment
management services. For example, Chubb Investment Advisory prepares and
distributes proxy statements, prospectuses, Statements of Additional
Information, reports and other communications with stockholders; schedules,
plans the agenda for, and conducts the meetings of the Fund's directors and
stockholders; and prepares and files tax returns and reports which federal,
state, local or foreign laws may require. The cost of preparing, printing and
distributing all materials and holding such meetings is borne by the Fund. The
Fund also pays certain other expenses which are described under the heading
"INVESTMENT ADVISORY AND OTHER SERVICES--Payment of Expenses" in the Statement
of Additional Information.
For the year ended December 31, 1996, all investment management fees paid to
Chubb Investment Advisory totalled: .75%, .50%, .75%, .75%, .50%, .75%, 1.00%,
.75% and .80%, respectively, of the average daily net assets of the World
Growth Stock Portfolio, Money Market Portfolio, Gold Stock Portfolio, Domestic
Growth Stock Portfolio, Bond Portfolio, Growth and Income Portfolio, Capital
Growth Portfolio, Balanced Portfolio and Emerging Growth Portfolio. For the
year ended December 31, 1996 the ratio of operating expenses to average net
assets was 0.88%, 0.62%, 1.04%, 0.85%, 0.60%, 0.88%, 1.13%, 0.97% and 1.16%
respectively, for the World Growth Stock Portfolio, the Money Market Portfolio,
the Gold Stock Portfolio, the Domestic Growth Stock Portfolio, the Bond
Portfolio, the Growth and Income Portfolio, the Capital Growth Portfolio, the
Balanced Portfolio and Emerging Growth Portfolio. Chubb Investment advisory
paid each of its current sub advisors a sub advisory fee equal to the fee
levels above for the first $200 million of assets.
CAPITAL STOCK
The Fund issues a separate series of capital stock for each Portfolio. Each
share of capital stock issued with respect to a Portfolio has a pro rata
interest in the assets of that Portfolio. Each share of capital stock is
entitled to one vote on all matters submitted to a vote of all stockholders of
the Fund, and fractional shares are entitled to a corresponding fractional
vote. Shares of a Portfolio will be voted separately from shares of other
Portfolios on matters affecting only that Portfolio, including approval of the
investment management agreement, a sub-investment management agreement, and
changes in fundamental investment policies of that Portfolio. The assets of
each Portfolio are charged with the liabilities of that Portfolio and a
proportionate share of the general liabilities of the Fund. All shares may be
redeemed at any time.
As a Maryland corporate entity, the Fund is not required to hold regular
annual shareholder meetings and, in the normal course, does not expect to hold
such meetings. The Fund is, however, required to hold shareholder meetings for
such purposes as, for example: (i) approving certain agreements as required by
the 1940 Act; (ii) changing fundamental investment objectives and restrictions
of the Portfolios; and (iii) filling vacancies on the Board of Directors in the
event that less than a majority of the directors were elected by shareholders.
The Fund expects that there will be no meetings of shareholders for the purpose
of electing directors unless and until such time as less than a majority of the
directors holding office have been elected by shareholders. At such time, the
directors then in office will call a shareholder meeting for the election of
directors. In addition, holders of record of not less than two-thirds of the
outstanding shares of the Fund may remove a director from office by a vote cast
in person or by proxy at a shareholder meeting called for that purpose at the
request of holders of 10% or more of the outstanding shares of the Fund. The
Fund has the obligation to assist in such shareholder communications. Except as
set forth above, directors will continue in office and may appoint successor
directors.
Chubb Life initially purchased 100,000 shares of the capital stock of each
Portfolio, other than the Balanced Portfolio and the Emerging Growth Portfolio,
for its general account. Chubb Life initially purchased 500,000 shares of the
capital stock of the Balanced Portfolio and 300,000 shares of capital stock of
the Emerging Growth Portfolio for its general account. The purchase price of
each share was $10.00. All other shares are offered only to corresponding
divisions of separate accounts established by Chubb Life or its affiliated
insurance companies. As of March 26, 1997, Chubb Life owned shares of capital
stock of the Capital Growth, the Growth and Income Portfolio and the Balanced
Portfolio, representing .14%, .57% and .75%, respectively, of total shares
outstanding. The shares held in a separate account which are attributable to
42
<PAGE>
Policies will be voted by Chubb Life or its affiliated insurance companies in
accordance with instructions received from the owners of Policies. The shares
held by Chubb Life or its affiliated insurance companies, including shares for
which no voting instructions have been received, shares held in the separate
account representing charges imposed by Chubb Life or its affiliated insurance
companies against the separate account and shares held by Chubb Life or its
affiliated insurance companies that are not otherwise attributable to Policies,
will also be voted by Chubb Life or its affiliated insurance companies in
proportion to instructions received from the owners of Policies. Chubb Life and
its affiliated insurance companies reserve the right to vote any or all such
shares at their discretion to the extent consistent with then current
interpretations of the Investment Company Act of 1940 and rules thereunder.
TAXES AND DIVIDENDS
Each Portfolio intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code ("Code"). It is the Fund's policy to
comply with the provisions of the Code regarding distribution of investment
income. Under those provisions, a Portfolio will not be subject to federal
income tax on that portion of its ordinary income and net capital gains
distributed to shareholders.
The Fund expects that each Portfolio will declare and distribute by the end
of each calendar year all or substantially all ordinary income and net capital
gains. Failure to distribute substantially all ordinary and net capital gains,
as described, may subject the Fund to an excise tax.
Dividends from ordinary income will be declared and distributed with respect
to each Portfolio at least once each year. Ordinary income of each Portfolio is
the investment company taxable income as defined in Section 852(b) of the Code.
All dividends and distributions will be automatically reinvested in additional
shares of the Portfolio with respect to which dividends have been declared, at
net asset value, as of the ex-dividend date of such dividends.
Section 817(h) of the Code and regulations thereunder set standards for
diversification of the investments underlying variable life insurance policies
in order for such policies to be treated as life insurance. These requirements,
which are in addition to diversification requirements applicable to the
Portfolios under Subchapter M and the Investment Company Act of 1940, may
affect the composition of a Portfolio's investments. Since the shares of the
Fund are currently sold to segregated asset accounts underlying such variable
life insurance policies, the Fund intends to comply with the diversification
requirements as set forth in the regulations.
The Secretary of the Treasury may in the future issue additional regulations
or revenue rulings that will prescribe the circumstances in which a
policyowner's control of the investments of a separate account may cause the
policyowner, rather than the insurance company, to be treated as the owner of
the assets of the separate account. Failure to comply with Section 817(h) of
the Code or any regulations thereunder, or with any regulations or revenue
rulings on policyowner control, if promulgated, would cause earnings on a
policyowner's interest in the separate account to be includible in the
policyowner's gross income in the year earned.
OFFERING AND REDEMPTION OF SHARES
Shares of capital stock of each Portfolio of the Fund are offered only to the
corresponding division of a separate account to which premiums have been
allocated by the owner of a Policy. Shares are sold and redeemed at their net
asset value as next determined following receipt by the separate account of
premium payments, surrender requests under Policies, loan payments, transfer
requests, and similar or related transactions through the separate account. The
Fund's principal underwriter and distributor is Chubb Securities Corporation,
One Granite Place, Concord, New Hampshire 03301. Chubb Securities Corporation
is an affiliate of Chubb Investment Advisory and a wholly-owned subsidiary of
Chubb Life and Jefferson Pilot Corporation. No selling commission or redemption
charge is made with respect to the purchase or sale of Fund shares.
Net asset value is normally determined as of the close of regular trading on
the New York Stock Exchange (presently 4:00 p.m. New York Time) on each day
during which the New York Stock Exchange is open for trading. The net asset
value of each Portfolio will not be calculated on the Friday following
Thanksgiving, the Friday following Christmas if Christmas falls on a Thursday
and Monday before Christmas if Christmas falls on a Tuesday.
43
<PAGE>
An equity security listed on a stock exchange is valued at the closing sale
price on the exchange on which such security is principally traded. If no sale
took place, the mean of the bid and asked prices at the close of trading is
used. A security not listed on a stock exchange is valued at the closing sale
price as reported on a readily available market quotation system, or, if no
sales took place, the mean of the bid and asked prices at the close of trading
in the over-the-counter market. Quotations of foreign securities in foreign
currencies are converted to United States dollar equivalents using
appropriately translated foreign market prices.
Trading in securities on exchanges in European and Far Eastern countries, and
in over-the-counter markets in such other nations, is normally completed well
before the close of trading on the New York Stock Exchange. Trading of European
and Far Eastern securities, either generally or in a particular country or
countries, may not take place on every day on which the New York Stock Exchange
is open. Furthermore, trading takes place in Japanese markets on certain
Saturdays, and in various foreign markets on days which are not business days
in New York and on which the Fund's net asset value is not normally calculated.
The calculation of the net asset value of those Portfolios which do such
trading, therefore, may not take place contemporaneously with the determination
of the prices of many of the securities of each such Portfolio which are used
in making the calculation of net asset value. Occasionally, events affecting
the values of such securities may occur between the times at which they are
determined and the close of the New York Stock Exchange, which events may not
be reflected in the computation of a Portfolio's net asset value. If, during
such periods, events occur which materially affect the value of the securities
of a Portfolio, and during such periods either shares are tendered for
redemption or a purchase or sale order is received by the Fund, such securities
will be valued at fair value as determined in good faith by the Board of
Directors of the Fund.
Short-term debt securities having remaining maturities of 60 days or less are
valued on an amortized cost basis unless the Board determines that such method
does not represent fair value. This procedure values a purchased instrument at
cost on the date of purchase plus assumes a constant rate of amortization of
any discount or premium, regardless of any intervening change in general
interest rates or the market value of the instrument.
Options and convertible preferred stocks listed on a national securities
exchange are valued as of their last sale price or, if there is no sale, at the
current bid price. Futures Contracts are valued as of their last sale price or,
if there is no sale, at the mean of the bid and asked price.
All other securities and assets are valued at their fair value as determined
in good faith by the Board of Directors of the Fund.
With the approval of the Board, the Fund may utilize a pricing service, a
bank, or a broker-dealer experienced in such matters to perform any of the
above-described valuation functions.
Further discussion of asset valuation methods is included in the Statement of
Additional Information under the heading "DETERMINATION OF NET ASSET VALUE."
OTHER INFORMATION
Shares of the Portfolios are presently offered to separate accounts of Chubb
Life, Hamilton and Jefferson Pilot, affiliates of Chubb Life, Hamilton and
Jefferson Pilot and may be offered in the future to other non-affiliated
insurance companies in order to fund additional variable life insurance
policies or variable annuity contracts.
A potential for certain conflicts of interest exists between the interests of
variable life insurance policyowners and variable annuity contract owners. In
the event that shares of the Portfolios are offered to separate accounts
funding variable annuity contracts, the Board of Directors of the Fund intends
to monitor events for the existence of any material conflict between the
interests of variable life insurance policyowners and variable annuity contract
owners and to determine what action, if any, should be taken in response
thereto.
44
<PAGE>
CHUBB AMERICA FUND, INC
One Granite Place
Concord, New Hampshire 03301
(603) 226-5000
A Series Fund
with a
World Growth Stock Portfolio Investing Primarily in Stocks
International Equity Portfolio Invests In Securities Whose Primary Trading
Markets Are Putside The United States.
Money Market Portfolio Investing Primarily
in Money Market Instruments
Gold Stock Portfolio Investing Primarily in Gold Mining Shares
Bond Portfolio Investing Primarily in Debt Securities
High Yield Bond Portfolio Invests Primarily In Corporate Obligations With
Emphasis On Higher Yielding, Higher Risk, Lower-Rated Or Unrated
Securities.
Domestic Growth Stock Portfolio Investing Primarily in Stocks
Growth Portfolio Invests In Equity Securities That Have Above-Average
Growth Prospects.
Growth and Income Portfolio Investing Primarily in Stocks
Capital Growth Portfolio Investing Primarily in Stocks
Balanced Portfolio Investing Primarily in
Stocks and Fixed Income Securities
Emerging Growth Portfolio Investing Primarily in Common Stocks
of Small and Medium-Sized Companies
- --------------------------------------------------------------------------------
This Statement of Additional Information is not a prospectus but supplements and
should be read in conjunction with the Prospectus for the Fund. It is
incorporated by reference into the Prospectus. A copy of the Prospectus may be
obtained by writing or calling the Fund at the address or telephone number
above.
- --------------------------------------------------------------------------------
The date of the Prospectus to which this Statement of Additional Information
relates is November 15, 1997.
The date of this Statement of Additional Information is November 15, 1997.
S-1
<PAGE>
TABLE OF CONTENTS
Page
----
Business History
Investment Restrictions
Description of Certain Investments
Bank Obligations
Repurchase Agreements
Commercial Paper
Loan Participation and other Direct Indebtedness
Corporate Asset Backed Securities
Lending of Securities
Forward Commitments
Warrants
Forward Foreign Currency Exchange Contracts
American Depository Receipts
Securities and Index Options
Futures Contracts and Related Options
High Yield Bonds
Description of Investment Ratings
Risk Considerations
U.S. Dollar Obligations of Foreign
Branches of U.S. Banks
Repurchase Obligations
Foreign Securities
Forward Foreign Currency Exchange Contracts
Gold Mining Shares
Options
Futures Contracts and Related Options
Federal Tax Matters
Investment Advisory and Other Services
Investment Management Agreements
and Sub-Investment Management Agreements
Independent Auditors
Custodians
Payment of Expenses
Portfolio Transactions and Brokerage Allocations
Management of the Fund
Capital Stock
Offering and Redemption of Shares
Determination of Net Asset Value
Taxes
S-2
<PAGE>
Page
----
Performance and Yield Information
Additional Information
Reports
Name and Service Mark
S-3
<PAGE>
BUSINESS HISTORY
Chubb America Fund, Inc. (the "Fund") is an open-end diversified management
investment company established by Chubb Life Insurance Company of America
("Chubb Life") to provide for the investment of assets of separate accounts
established by Chubb Life, Jefferson Pilot Life ("Jefferson Pilot") and
Alexander Hamilton Life ("Alexander Hamilton") or their affiliated insurance
companies. Chubb Life was purchased by Jefferson-Pilot Corporation, a North
Carolina corporation, as of April 30, 1997. Such assets are acquired by the
separate accounts pursuant to the sale of flexible premium variable life
insurance policies and variable annuities (the "Policies"). The Fund has no
business history prior to being incorporated in Maryland on October 19, 1984. In
the future, the Fund may sell its shares to other separate accounts funding
variable annuities and variable life insurance policies established by Chubb
Life, its successors or assigns, or by other insurance companies with which
Chubb Life is affiliated or unaffiliated, and may add or delete Portfolios.
INVESTMENT RESTRICTIONS
Each of the following investment restrictions are fundamental policies of the
World Growth Stock, Money Market, Gold Stock, Bond and Domestic Growth Stock
Portfolios and may not be changed for any such Portfolio without approval of a
majority of the outstanding shares of each affected Portfolio. Investment
restrictions 2, 3, 5, 6, 8-10 are fundamental policies for the Growth Portfolio.
Investment restrictions 2, 3, 5, 6, 8-12 and 17 are fundamental policies for the
Growth, Growth and Income, Capital Growth, Emerging Growth and Balanced
Portfolios and investment restrictions 2, 3, 5 and 8, 10, 12 are fundamental
restrictions of the International Equity Portfolio and investment restrictions
2, 3, 5, 6, 8, 9, 10, 11 and 12 are fundamental restrictions of the High Yield
Bond Portfolio and may not be changed for any such Portfolio without approval of
a majority of the outstanding shares of the affected Portfolio. Each
restriction, whether or not fundamental, applies to each Portfolio of the Fund,
unless otherwise indicated. A change in policy affecting only one Portfolio may
be effected with the approval of a majority of the outstanding shares of that
Portfolio only. (As used in the Prospectus and this Statement of Additional
Information, the term "majority of the outstanding voting shares" means the
lesser of (1) 67% of the shares represented at a meeting at which more than 50%
of the outstanding shares are represented or (2) more than 50% of the
outstanding shares.) A Portfolio will not:
1. Invest more than 10%, or in the case of Emerging Growth Portfolio, High
Yield Portfolio, and the Growth Portfolio 15%, of the value of the total
assets of the Portfolio in securities, or 5%, except with respect to
Emerging Growth Portfolio, International Equity Portfolio, and the Growth
Portfolio of the value of the total assets of the Portfolio in equity
securities, which are not readily marketable, such as repurchase agreements
having a maturity of more than seven days, restricted securities, and
securities that are secured by interests in real estate.
2. Invest in real estate, although it may buy securities of companies which
deal in real estate and securities which are secured by interests in real
estate, including interests in real estate investment trusts.
3. Invest in commodities or commodity contracts, except that the Growth and
Income Portfolio, International Equity Portfolio, High Yield Portfolio, the
Growth Portfolio, the Capital Growth Portfolio, the Balanced Portfolio and
the Emerging Growth Portfolio may each enter into financial futures
contracts and options thereon that are listed on a national securities or
commodities exchange if, immediately thereafter for that Portfolio: (a) the
total of the initial margin deposits required with respect to all open
futures positions at the time such positions were established plus the sum
of the premiums paid for all unexpired options on futures contracts would
not exceed 5% of the value of a Portfolio's total assets and (b) a
segregated account consisting of cash or liquid high-grade debt securities
in an amount equal to the total market value of any futures contracts
purchased by a Portfolio, less the amount of any initial margin, is
established by that Portfolio. In the case of an option that is "in-the-
money" at the time of purchase, the "in-the-money" amount, as defined under
Commodity Futures Trading Commission
S-4
<PAGE>
regulations, may be excluded in computing the 5% limit. Except the Growth
Portfolio may engage in futures or options transactions which are
permissible pursuant to Rule 4.5 under the Commodity Exchange Act,
provided, however, that the Portfolio may use futures and options on
futures (within the meaning of the Commodity Exchange Act), provided that
the initial margin and premiums required to establish such positions, less
the amount by which such options positions are in the money (within the
meaning of the Commodity Exchange Act), do not exceed 5% of the Portfolio's
net assets. In addition, (i) the aggregate value of securities underlying
call options on securities written by the Growth Portfolio or obligations
underlying put options on securities written by the Portfolio determined
as of the date the options are written will not exceed 50% of the
Portfolio's net assets; (ii) the aggregate premiums paid on all options
purchased by the Portfolio and which are being held will not exceed 20% of
the Portfolio's net assets; (iii) the Portfolio will not purchase put or
call options, other than hedging positions, if, as a result thereof, more
than 5% of its total assets would be so invested; and (iv) the aggregate
margin deposits required on all futures and options on futures transactions
being held will not exceed 5% of the Portfolio's total assets.
4. Invest in securities of other investment companies, except by purchases in
the open market involving only customary broker's commissions or as part of
a merger, consolidation, or acquisition, subject to limitations in the
Investment Company Act of 1940 (the "1940 Act") and rules thereunder.
Provided, however, that notwithstanding any other fundamental policy or
restriction, the Growth Portfolio may invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
restrictions as the Growth Portfolio.
5. Make loans, except by the purchase of bonds or other debt obligations
customarily distributed privately to institutional investors and except
that the Fund may buy repurchase agreements and provided that the Emerging
Growth Fund may lend its portfolio securities representing not in excess of
30% of its total assets (taken at market value and further provided the
International Equity Portfolio and the High Yield Portfolio may make loans
if as a result less than 33 1/3% of the Portfolio's assets would be lent to
other persons).
6. Except with respect to the International Equity Portfolio, make an
investment unless, when considering all its other investments, 75% of the
value of the Portfolio's assets would consist of cash, cash items, U.S.
Government securities, securities of other investment companies, and other
securities. For this restriction, "other securities" are limited, for each
issuer, to not more than 5% of the value of the Portfolio's assets and to
not more than 10% of the issuer's outstanding voting securities.
As a matter of operating policy, the Fund except the International Equity
Portfolio considers bank obligations as "other securities" and will invest no
more than 5% of a Portfolio's total assets in the obligations of any one issuer
and will own no more than 10% of the outstanding voting securities of such
issuer. Pursuant to this operating policy, the Fund will not consider repurchase
agreements to be subject to this 5% limitation if the collateral underlying the
repurchase agreements are exclusively U.S. Government Obligations.
7. Except with respect to the International Equity Portfolio and High Yield
Portfolio invest more than 5% of the value of the total assets of the
Portfolio in securities of companies having a record of less than three
years' continuous operations, including predecessors and unconditional
guarantors.
8. Act as an underwriter of securities of other issuers, except to the extent
that it may be deemed to be an underwriter in reselling securities, such as
restricted securities, acquired in private transactions and subsequently
registered under the Securities Act of 1933.
9. Except with respect to the Emerging Growth Portfolio, borrow money, except
that, as a temporary measure for extraordinary or emergency purposes and
not for investment purposes, any Portfolio may borrow from banks up to 5%
of its assets taken at cost, provided in each case that the total
borrowings have an asset coverage, based on value, of at least 300%. The
Emerging Growth Portfolio, High Yield Bond Portfolio and Growth Portfolio
may not borrow money in an amount in excess of 33 1/3% of its total assets,
and then only as a temporary measure for extraordinary or emergence
purposes. This restriction will not prevent the Growth Portfolio,
International Equity Portfolio, High Yield Portfolio, Growth and Income
Portfolio, the Capital Growth Portfolio, the Balanced Portfolio or Emerging
Growth Portfolio from entering into futures contracts as set forth above in
restriction 3.
10. Issue securities senior to its common stock except to the extent set out in
paragraph 9 above. For purposes hereof, writing covered call options, and
as regards Emerging Growth Portfolio, put options, and entering into
futures contracts, to the extent permitted by restrictions 3 and 13, shall
not involve the issuance of senior securities.
11. Sell securities short, except the International Equity Portfolio, Growth
Portfolio, Growth and Income Portfolio, Capital Growth Portfolio, the
Balanced Portfolio and Emerging Growth Portfolio may make short sales
against the box.
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12. Buy securities on margin, except that (1) it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities, and (2) the Growth and Income Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio, Growth Portfolio and the Emerging Growth
Portfolio may make margin deposits in connection with futures contracts and
options transactions to the extent permitted by restrictions 3 and 13.
13. Except for the Growth Portfolio invest in or write puts, calls, straddles,
or spreads. However, this restriction shall not prohibit the Portfolios
(other than the Money Market Portfolio) from writing or selling covered
call options or purchasing call options in order to close transactions. Nor
shall this restriction prohibit the Emerging Growth or Capital Growth
Portfolio from writing or selling covered call and put options or
purchasing call or put options. This restriction shall not prohibit the
Growth and Income Portfolio, High Yield Bond Portfolio, International
Equity Portfolio, the Capital Growth Portfolio, the Balanced Portfolio and
the Emerging Growth Portfolio from investing more than 5% of the value of
the total assets of the Portfolio in securities of companies having a
record of less than three years' continuous operations, including
predecessors and unconditional guarantors. (In addition, as a matter of
operating policy, no Portfolio may write covered call options if, as a
result, a Portfolio's securities covering all call options written or
subject to put or call options would exceed 25% of the value of the
Portfolio's total assets.) Provided that the International Equity Portfolio
and the High Yield Portfolio may write covered calls or put options with
respect to 25% of their assets at any time and may invest more that 25% of
the value of their net assets at any time in purchased puts, calls, spreads
or straddles, or any combination thereof other than protective put options.
The aggregate value or premiums paid on all options held by either the
International Equity Portfolio or the High Yield Portfolio may not exceed
20% of the Portfolio's total net assets.
14. Except for the Growth and Income Portfolio, the International Equity
Portfolio, the High Yield Portfolio and the Growth Portfolio enter into a
repurchase agreement with Chubb Life Insurance Company of America ("Chubb
Life"); The Chubb Corporation; or a subsidiary of either of such
corporations.
15. Except for the Emerging Growth Portfolio, the International Equity
Portfolio, the High Yield Portfolio and the Growth Portfolio participate
on a joint or joint and several basis in any trading account in securities.
Transactions for the Portfolios and any other accounts under common
management may be combined or allocated between the Portfolios and such
other accounts.
16. Except for the Growth and Income Portfolio, the International Equity
Portfolio, the High Yield Portfolio and the Growth Portfolio invest in
companies for the purpose of exercising control of management.
17. Invest more than 25% of the value of the total assets of the Portfolio
(other than the International Equity Portfolio, Gold Stock Portfolio and
High Yield Portfolio) in securities of any one industry. Banks are not
considered a single industry for purposes of this restriction. (As a matter
of operating policy, only the Money Market Portfolio may utilize this
exception.) Nor shall this restriction apply to securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
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18. Invest in interests, other than debentures or equity stock interests, in
oil and gas or other mineral exploration or development programs.
19. Invest more than 5% of the total value of the assets of the Portfolio in
warrants, whether or not the warrants are listed on the New York or
American Stock Exchanges, or more than 2% of the value of the assets of the
Portfolio in warrants which are not listed on those exchanges. Warrants
acquired in units or attached to securities are not included in this
restriction.
20. Invest more than 15% of the value of the assets of the Portfolios (except
the Emerging Growth Portfolio and the International Equity Portfolio,
Growth Portfolio, and High Yield Bond Portfolio) in securities of foreign
issuers that are not listed on a recognized U.S. or foreign securities
exchange, or quoted on an inter-dealer quotation system. Provided, however
that the International Equity Portfolio may not invest in foreign issuers
unless, after such investment, issuers in at least the following number of
different countries are represented in the Portfolio's holding: if up to
40% of the Portfolio's total assets are invested in foreign issuers, two
foreign countries; if between 40% and 60% of the Portfolio's total assets
are invested in foreign issuers, three foreign countries; if between 60%
and 80% of the Portfolio's total assets are invested in foreign issuers,
four foreign countries if over 80% of the Portfolio's total assets are
invested in foreign issuers, five foreign countries.
DESCRIPTION OF CERTAIN INVESTMENTS
The following is a description of certain types of investments which may be made
by the Portfolios and which may involve certain specific risks, discussed under
"RISK CONSIDERATIONS" below:
Bank Obligations
All of the Portfolios may acquire obligations of banks. These include
certificates of deposit, which are normally limited to $100,000 per issuing
bank, bankers' acceptances and time deposits. Certificates of deposit are
generally short-term, interest-bearing negotiable certificates issued by
commercial banks or savings and loan associations against funds deposited in the
issuing institution. Bankers' acceptances are time drafts drawn on a commercial
bank by a borrower, usually in connection with an international commercial
transaction (to finance the import, export, transfer or storage of goods). With
a bankers' acceptance, the borrower is liable for payment as is the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most bankers' acceptances have maturities of six months or less and are
traded in secondary markets prior to maturity. Time deposits are generally
short-term, interest-bearing negotiable obligations issued by commercial banks
against funds deposited in the issuing institution. None of the Portfolios will
invest in time deposits maturing in more than seven days.
The Money Market Portfolio will not invest in any security issued by a
commercial bank unless the bank is organized and operating in the U.S. and is a
member of the Federal Deposit Insurance Corporation. However, this limitation
shall not prohibit investments in foreign branches of U.S. banks which otherwise
meet the foregoing requirements.
Repurchase Agreements
All of the Portfolios, except the Bond Portfolio and the Domestic Growth Stock
Portfolio, may invest in repurchase agreements.
A repurchase agreement customarily obligates the seller, at the time it sells
securities to the Portfolio, to repurchase the securities at a mutually agreed
upon time and price. The total amount received on repurchase would be calculated
to exceed the price paid by the Portfolio, reflecting an agreed upon market rate
of interest for the period from the time of the repurchase agreement to the
settlement date, and would not necessarily be related to the interest rate on
the underlying securities. The differences between the total amount to be
received upon repurchase
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of the securities and the price which was paid by the Portfolio upon their
acquisition is accrued as interest and is included in the Portfolio's net income
declared as dividends. The underlying securities will consist of high-quality
securities. With respect to the Money Market Portfolio, the underlying security
must be either a U.S. Government Obligation or a security rated in the highest
rating category by the Requisite NRSROs (as defined in the Prospectus) and must
be determined to present minimal credit risk. The Fund has the right to sell
securities subject to repurchase agreements but would be required to deliver
identical securities upon maturity of the repurchase agreements unless the
seller fails to pay the repurchase price. It is each Portfolio's intention not
to sell securities subject to repurchase agreements prior to the agreement's
maturity.
Commercial Paper
All of the Portfolios may invest in commercial paper. Commercial paper involves
an unsecured promissory note issued by a corporation. It is usually sold on a
discount basis and has a maturity at the time of issuance of nine months or
less. In connection with the World Growth Stock Portfolio, the Gold Stock
Portfolio, the Bond Portfolio and the Domestic Growth Stock Portfolio, on the
date of investment, such paper must be rated A-1 by Standard & Poor's
Corporation ("Standard & Poor's") or Prime-1 by Moody's Investor's Service, Inc.
("Moody's"), the highest commercial paper ratings, or the highest commercial
paper ratings by other Nationally Recognized Securities Rating Organization
(NRSROs), or, if not rated, must have been issued by a corporation with an
outstanding debt issue rated AAA or AA by Standard & Poor's or AAA or Aa by
Moody's as described below, and be of equivalent investment quality in the
judgment of the Portfolio's Investment Manager or Sub-Investment Manager, as
appropriate. On the date of investment, with respect to the Money Market
Portfolio, such paper or its issuer must be rated in one of the two highest
commercial paper rating categories by at least two NRSROs which have issued a
rating with respect to such commercial paper or its issuer or by one NRSRO if
that paper or its issuer has been rated by only one NRSRO or, if not rated, must
be of comparable quality. In connection with the Growth and Income Portfolio,
the Capital Growth Portfolio and the Balanced Portfolio, on the date of
investment, such paper must be rated within the three highest categories by
Moody's, Standard & Poor's or other NRSROs or, if not rated, must be of
equivalent investment quality in the judgment of the Portfolio's Investment
Manager or Sub-Investment Manager, as appropriate.
Loan Participations and Other Direct Indebtedness
As described in the Prospectus, the Portfolios may purchase loan participations
and other direct indebtedness. In purchasing a loan participation, a Portfolio
acquires some or all of the of the interest of a bank or other lending
institution in a loan to a corporate borrower. Many such loans are secured,
although some may be unsecured. Such loans may be in default at the time of
purchase. Loans and other direct indebtedness that are fully secured offer a
Portfolio more protection than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation collateral from a secured loan or other direct indebtedness would
satisfy the corporate borrower's obligation, or that the collateral can be
liquidated.
These loans and other direct indebtedness are made generally to finance internal
growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other
corporate activities. Such loans and other direct indebtedness loans are
typically made by a syndicate of lending institutions represented by an agent
lending institution which has negotiated and structured the loan and is
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responsible for collecting interest, principal and other amounts due on its own
behalf and on behalf of the others in the syndicate, and for enforcing its and
their other rights against the borrower. Alternatively, such loans and other
direct indebtedness may be structured as a novation, pursuant to which the
Portfolio would assume all of the rights of the lending institution in a loan,
or as an assignment, pursuant to which the Portfolio would purchase an
assignment of a portion of a lender's interest in a loan or other direct
indebtedness either directly from the lender or through an intermediary. A
Portfolio may also purchase trade or other claims against companies, which
generally represent money owed by the company to a supplier of goods or
services. These claims may also be purchased at a time when the company is in
default.
Certain of the loan participations and other direct indebtedness acquired by a
Portfolio may involve revolving credit facilities or other standby financing
commitments which obligates a Portfolio to pay additional cash on a certain date
or on demand. These commitments may have the effect of requiring a Portfolio to
increase its investment in a company at a time when the Emerging Growth
Portfolio might not otherwise decide to do so (including at a time when the
company's financial condition makes it unlikely that such amounts will be
repaid). To the extent that a Portfolio is committed to advance additional
funds, it will at all times hold and maintain in a segregated account cash or
other high grade debt obligations in an amount sufficient to meet such
commitments.
The Portfolio's ability to receive payment of principal, interest and other
amounts due in connection with these investments will depend primarily on the
financial condition of the borrower. In selecting the loan participations and
other direct indebtedness which the Portfolio will purchase, The Sub-Investment
Manager will rely upon its own (and not the original lending institution's)
credit analysis of the borrower. As the Portfolio may be required to rely upon
another lending institution to collect and pass on to the Portfolio amounts
payable with respect to the loan and to enforce the Portfolio's rights under the
loan and other direct indebtedness, an insolvency, bankruptcy or reorganization
of the lending institution may delay or prevent the Portfolio from receiving
such amounts. In such cases, the Portfolio will evaluate as well the
creditworthiness of the lending institution and will treat both the borrower and
the lending institution as an "issuer" of the loan participation for the
purposes of certain investment restrictions pertaining to the diversification of
the Portfolio's investments. The highly leveraged nature of many such loans and
other direct indebtedness may make such loans and other direct indebtedness
especially vulnerable to adverse changes in economic or market conditions.
Investments in such loans and other direct indebtedness may involve additional
risk to the Portfolio. For example, if a loan or other direct indebtedness is
foreclosed, the Portfolio could become part owner of any collateral, and would
bear the costs and liabilities associated with owning and disposing of
collateral. In addition, it is conceivable that under emerging legal theories of
lender liability, the Portfolio could be held liable as co-lender. It is unclear
whether loans and other forms of direct indebtedness offer securities law
protections against fraud and misrepresentation. In the absence of definitive
regulatory guidance, the Portfolio relies on the Sub-Investment Manager's
research in an attempt to avoid situations where fraud and misrepresentation
could adversely affect the Portfolio. In addition, loan participations and other
direct investments may not be in the form of securities or may be subject to
restrictions on transfer, and only limited opportunities may exist to resell
such instruments. As a result, the Portfolio may be unable to sell such
investments at an opportune time or may have to resell them at less than fair
market value. To the extent that the Sub-Investment Manager determines that any
such
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investments are illiquid, the Portfolio will include them in the investment
limitations described below.
Corporate Asset-Backed Securities
As described in the Prospectus, the Fund may invest in corporate asset-backed
securities. These securities, issued by trusts and special purposes
corporations, are backed by a pool of assets, such as credit card and automobile
loan receivables, representing the obligations of a number of different parties.
Corporate asset-backed securities present certain risks. For instance, in the
case of credit card receivables, these securities may not have the benefit of
any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in
a typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities. The underlying
assets (e.g., loans) are also subject to prepayments which shorten the
securities' weighted average life and may lower their return.
Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors and underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letter of credit obtained by the issuer or sponsor from third parties. The Fund
will not pay any additional or separate fees for credit support. The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated or failure of the
credit support could adversely affect the return on an investment in such a
security.
Lending of Securities
Subject to their investment limitations the Portfolios may seek to increase
their income by lending portfolio securities. Such loans will usually be made to
member banks of the Federal Reserve System and to its member firms (and
subsidiaries thereof) of the New York Stock Exchange and would be required to be
secured continuously by collateral in cash, cash equivalents, or U.S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Portfolios would have the right to
call a loan and obtain the securities loaned at any time on customary industry
settlement notice (which will usually not exceed five days). During the
existence of a loan, the Portfolio would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities
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loaned and would also receive compensation based on investment of the
collateral. The Emerging Growth Portfolio would not, however, have the right to
vote any securities having voting rights during the existence of the loan, but
would call the loan in anticipation of an important vote to be taken among
holders of the securities or of the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower fail financially. However, the loans would be made only to
firms deemed by The Sub-Investment Manager to be of good standing, and when, in
the judgment of The Sub-Investment Manager, the consideration which could be
earned currently from securities loans of this type justifies the attendant
risk. If The Sub-Investment Manager determines to make securities loans, it is
not intended that the value of the securities loaned would exceed 30% of the
value of the Emerging Growth Portfolio's total assets.
Forward Commitments
The Portfolios may, from time to time, purchase securities on a forward
commitment, when issued, or delayed delivery basis. The price of such forward
commitment securities, which may be expressed in yield terms, is fixed at the
time the commitment to purchase is made. Delivery and payment will take place at
a later date. Normally, the settlement date may take up to three months. During
the period between purchase and settlement, no payments are made by the
Portfolio to the issuer and no interest accrues to the Portfolio. Forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date. While forward commitment securities may
be sold prior to the settlement date, each Portfolio intends to purchase such
securities with the purpose of actually acquiring them, unless a sale appears
desirable for investment reasons. At the time a Portfolio makes the commitment
to purchase a security on a forward commitment basis, the Portfolio will record
the transaction and reflect the value of the security in determining its net
asset value. [The Investment Managers do not believe that the net asset value or
income of the Portfolios will be adversely affected by the purchase of
securities on a forward commitment basis.] Each Portfolio using forward
commitments will maintain with it's custodian, in a segregated account, cash or
securities equal in value to its total commitments for forward commitment
securities.
Warrants
All of the Portfolios, except the Money Market Portfolio, may invest in
warrants, which are rights to buy certain securities at set prices during
specified time periods. If, prior to the expiration date, the Portfolio is not
able to exercise a warrant at a cost lower than the underlying securities, the
Portfolio will suffer a loss of its entire investment in the warrant.
Forward Foreign Currency Exchange Contracts
Certain of the Portfolios may use forward foreign currency exchange contracts
("forward currency contracts") to hedge against the decline of a currency in
which the Portfolio's securities are denominated. A forward currency contract
involves an obligation to purchase or sell a specific currency at a future date,
which may be any fixed number of days from the date of the contract as agreed by
the parties, at a price set at the time of the contracts.
The Portfolios may enter into forward currency contracts or maintain a net
exposure on such contracts only if (i) the consummation of
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the contracts would not obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolio's securities or other assets
denominated in the currency and (ii) the Portfolios maintain with their
custodian cash, U.S. government securities, or liquid, high-grade debt
securities in a segregated account in an amount not less than the value of the
Portfolio's total assets committed to the consummation of the contracts or
otherwise cover the forward currency contract in accordance with the current
SEC's regulations.
Depository Receipts
Certain of the Portfolios may invest in American Depository Receipts ("ADR's"),
Global Depository Receipts ("GDR's"), and European Depository Receipts
("EDR's"). ADR's are certificates issued by a U.S. bank representing the right
to receive securities of a foreign issuer deposited in that bank or a
correspondent bank. There are no fees imposed on the purchase or sale of ADR's
when purchased from the issuing bank in the initial underwriting, although the
issuing bank may impose charges for the collection of dividends and the
conversion of ADR's into the underlying ordinary shares. Brokerage commissions
will be incurred if ADR's are purchased through brokers on U.S. stock exchanges.
Investments in ADR's often have advantages over direct investments in the
underlying foreign securities, including the following: they are more liquid
investments, they can be sold for U.S. dollars, they may be transferred easily,
market quotations are readily available in the U.S. and more uniform financial
information is available for the issuers of such securities. GDRs and EDRs are
similar to ADRs except that they are not necessarily issued by a US Bank in that
they represent evidence of ownership of underlying securities issued in the US
or foreign securities market. Generally, Depository Receipts in bearer form are
designed for care in securities market outside the United States. Depository
Receipts may not necesarily be denominated in the same currency as the
underlying securities into which they may be converted. Depository Receipts may
be in sponsored or unsponsored programs. The issuer may not be involved and less
issuer information may be available. The Fund believes that the risk associated
with ownership of depository receipts are no greater than the risks associated
with the direct ownership of foreign shares.
Restricted and Illiquid Securities
All of the Portfolios may to some extent purchase certain restricted securities
(those that are not registered under the Securities Act of 1933 ("33 Act") but
can be offered and sold to "qualified institutional buyers" under Rule 144A of
the 33 Act) and limited amounts of illiquid investments, including illiquid
restricted securities. Limitations on illiquid securities and other illiquid
investments for each Portfolio are described in the Portfolio's investment
restriction above.
Illiquid investments include many restricted securities, repurchase agreements
that mature in more than seven days, currency and interest rate swaps, time
deposits that mature in more than seven days or that have a notice or demand
period more than seven days, certain over-the-counter option contracts,
participation interests in loans, securities not readily marketable and certain
restricted securities.
Certain repurchase agreements which provide for settlement in more than seven
days, however, can be liquidated before the nominal fixed term on seven days or
less notice. The Portfolios will consider such repurchase agreements as liquid.
Likewise, restricted securities (including commercial paper issued pursuant to
4(2) of the 33 Act) that the Board of Directors or the sub-advisers have
determined to be liquid will be treated as such.
Securities and Index Options
All of the Portfolios, except the Money Market Portfolio Portfolio may write
(sell) covered call options and purchase call options in order to close
transactions. In addition, the Growth and Income Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio, the International Equity Portfolio; the
Growth Portfolio, the High Yield Bond Portfolio and the Emerging Growth
Portfolio may purchase put and call options to enhance investment performance or
for hedging purposes. The options activities of a Portfolio may increase its
portfolio turnover rate and the amount of brokerage commissions paid. These
commissions may be higher than those which would apply to purchases and sales of
securities directly.
Writing Covered Call Options. A call option is a contract that gives the holder
(buyer) of the option the right to buy (in return for a premium paid), and the
writer of the option (in return for a premium received) the obligation to sell,
the underlying security at a specified price (the exercise price) at any time
before the option expires. A covered call option is a call in which the writer
of the option, for example, owns the underlying security throughout the option
period. In such cases, the security covering the call will be maintained in a
segregated account with the Fund's custodian. The exercise price of a call
option written by a Portfolio may be below, equal to or above the current market
value of the underlying security at the time the option is written. A Portfolio
will write covered call options to reduce the risks associated with certain of
its investments or to increase total investment return through the receipt of
premiums.
A Portfolio may attempt to protect itself from loss due to a decline in value of
the underlying security or from the loss of appreciation due to its rise in
value by buying an identical option, in which case the purchase cost of such
option may offset the premium received for the option previously written. In
order to do this, the Portfolio makes a "closing purchase transaction" by the
purchase of a call option on the same security with the same exercise price and
expiration date as the covered call option which it has previously written. The
Portfolio will realize a gain or loss from a closing purchase transaction if the
amount paid to purchase a call option is less
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or more than the amount received from the sale of the corresponding call option.
Also, because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the exercise or closing out of a call option is likely to be
offset in whole or in part by unrealized appreciation of the underlying security
owned by the Portfolio.
Purchasing Put and Call Options. A Portfolio may purchase put options on
securities to protect its holdings in an underlying or related security against
an anticipated decline in market value. Such hedge protection is provided only
during the life of the option. Securities are considered related if their price
movements generally correlate with one another. The purchase of put options on
securities held by a Portfolio or related to such securities will enable a
Portfolio to preserve, at least partially, unrealized gains in an appreciated
security in its portfolio without actually selling the security. In addition, a
Portfolio will continue to receive interest or dividend income on the security.
A Portfolio may purchase call options on individual securities or stock indices
in order to take advantage of anticipated increases in the price of those
securities by purchasing the right to acquire the securities underlying the
option or, with respect to options on indices, to receive income equal to the
value of such index over the strike price. As the holder of a call option with
respect to individual securities, a Portfolio obtains the right to purchase the
underlying securities at the exercise price at any time during the option
period. As the holder of a call option on a stock index, a Portfolio obtains the
right to receive, upon exercise of the option, a cash payment equal to the
multiple of any excess of the value of the index on the exercise date over the
strike price specified in the option.
Options on Indexes. A Portfolio may write covered call options and purchase put
and call options on appropriate securities indexes for the purpose of hedging
against the risk of unfavorable price movements adversely affecting the value of
a Portfolio's securities or to enhance income. Unlike a stock option which gives
the holder the right to purchase or sell a specified stock at a specified price,
an option on a securities index gives the holder the right to receive a cash
settlement amount based upon price movements in the stock market generally (or
in a particular industry or segment of the market represented by the index)
rather than the price movements in individual stocks.
A securities index fluctuates with changes in the market values of the
securities so included. For example, some securities index options are based on
a broad market index such as the S&P 500 or the NYSE Composite Index, or a
narrower market index such as the S&P 100. Indexes may also be based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. Options on stock indexes are currently traded on
the following exchanges, among others: The Chicago Board Options Exchange, New
York Stock Exchange and American Stock Exchange. Options on other types of
securities indexes, which do not currently exist, including indexes on certain
debt securities, may be introduced and traded on exchanges in the future.
Futures Contracts and Related Options
The Growth and Income Portfolio, Growth Portfolio, High Yield Bond Portfolio,
International Equity Portfolio, the Capital Growth Portfolio, the Balanced
Portfolio and the Emerging Growth Portfolio may purchase or sell futures
contracts and related options.
Futures Transactions. A futures contract is an agreement to buy or sell a
security (or deliver a final cash settlement price in the case of a contract
relating to an index or otherwise not calling
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for physical delivery at the end of trading in the contracts) for a set price in
the future. Futures exchanges and trading in futures is regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC").
Futures contracts trade on certain regulated contracts markets.
Positions taken in the futures markets are not normally held until delivery or
cash settlement is required, but are instead liquidated through offsetting
transactions which may result in a gain or a loss. While futures positions taken
by a Portfolio will usually be liquidated in this manner, the Portfolio may
instead make or take delivery of underlying securities whenever it appears
economically advantageous to the Portfolio to do so. A clearing organization
associated with the exchange on which futures are traded assumes responsibility
for closing-out transactions and guarantees that, as between the clearing
members of an exchange, the sale and purchase obligations will be performed with
regard to all positions that remain open at the termination of the contract.
Upon entering into a futures contract, a Portfolio will be required to deposit
with a futures commission merchant a certain percentage (usually 1% to 5%) of
the futures contracts market value as initial margin. A Portfolio may not commit
in the aggregate more than 5% of the market value of its total assets to initial
margin deposits on the Portfolio's existing futures contracts and premium paid
for options on unexpired futures contracts used for non hedging purposes.
Initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned upon termination of the futures contract if all
contractual obligations have been satisfied. The initial margin in most cases
will consist of cash or U.S. Government securities. Subsequent payments, called
variation margin, may be made with the futures commission merchant as a result
of marking the contracts to market on a daily basis as the contract value
fluctuates.
Futures on Debt Securities. A futures contract on a debt security is a binding
contractual commitment which, if held to maturity, will result in an obligation
to make or accept delivery, during a particular future month, of securities
having a standardized face value and rate of return. By purchasing futures on
debt securities [assuming a "long" position] a Portfolio will legally obligate
itself to accept the future delivery of the underlying security and pay the
agreed price. By selling futures on debt securities [assuming a "short"
position] it will legally obligate itself to make the future delivery of the
security against payment of the agreed price. Open future positions on debt
securities will be valued at the most recent settlement price, unless such price
does not appear to the Sub-Investment Manager to reflect the fair value of the
contract, in which case the positions will be valued by, or under the direction
of, the Board of Directors.
The Portfolios by hedging through the use of futures on debt securities seek to
establish more certainty with respect to the effective rate of return on their
portfolio securities. A Portfolio may, for example, take a "short" position in
the futures market by selling contracts for the future delivery of debt
securities held by the Portfolio (or securities having characteristics similar
to those held by the Portfolio) in order to hedge against an anticipated rise in
interest rates that would adversely affect the value of the Portfolio's
portfolio securities. When hedging of this character is successful, any
depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position.
On other occasions, a Portfolio may take a "long" position by purchasing futures
on debt securities. This would be done, for example, when the Portfolio intends
to purchase particular debt securities, but expects the rate of return available
in the bond market at that time to be less favorable than rates currently
available in the futures markets. If the anticipated rise in the price of the
debt securities should occur (with its concomitant reduction in yield), the
increased cost to the Portfolio of purchasing the debt securities will be
offset, at least to some extent, by the
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rise in the value of the futures position in debt securities taken in
anticipation of the subsequent purchase of such debt securities.
The Portfolio could accomplish similar results by selling debt securities with
long maturities and investing in debt securities with short maturities when
interest rates are expected to increase or by buying debt securities with long
maturities and selling debt securities with short maturities when interest rates
are expected to decline. However, by using futures contracts as a risk
management technique (to reduce a Portfolio's exposure to interest rate
fluctuations), given the greater liquidity in the futures market than in the
bond market, it might be possible to accomplish the same result more effectively
and perhaps at a lower cost. See Limitations on Purchase and Sale of Futures
Contracts and Options on Futures Contracts below.
Stock Index Futures. A stock index futures contract does not require the
physical delivery of securities, but merely provides for profits and losses
resulting from changes in the market value of the contract to be credited or
debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date, a final cash
settlement occurs and the futures positions are simply closed out. Changes in
the market value of a particular stock index futures contract reflect changes in
the specified index of equity securities on which the future is based.
Stock index futures may be used to hedge the equity portion of a Portfolio's
securities portfolio with regard to market risk (involving the market's
assessment of over-all economic prospects), as distinguished from stock-specific
risk (involving the market's evaluation of the merits of the issuer of a
particular security). By establishing an appropriate "short" position in stock
index futures, a Portfolio may seek to protect the value of its portfolio
against an overall decline in the market for equity securities. Alternatively,
in anticipation of a generally rising market, a Portfolio can seek to avoid
losing the benefit of apparently low current prices by establishing a "long"
position in stock index futures and later liquidating that position as
particular equity securities are in fact acquired. To the extent that these
hedging strategies are successful, a Portfolio will be affected to a lesser
degree by adverse overall market price movements, unrelated to the merits of
specific portfolio equity securities, than would otherwise be the case. See
Limitations on Purchase and Sale of Futures Contracts and Options on Futures
Contracts below.
Options on Futures. The Growth Portfolio, International Equity Portfolio, High
Yield Bond Portfolio, Growth and Income Portfolio, the Capital Growth Portfolio,
the Emerging Growth Portfolio and the Balanced Portfolio may purchase put and
call options and write call options on futures contracts. These options are
traded on exchanges that are licensed and regulated by the CFTC for the purpose
of options trading. A call option on a futures contract gives the purchaser the
right, in return for the premium paid, to purchase a futures contract (assume a
"long" position) at a specified exercise price at any time before the option
expires. A put option gives the purchaser the right, in return for the premium
paid, to sell a futures contract (assume a "short" position) at a specified
exercise price at any time before the option expires. Upon the exercise of a
call, the writer of the option is obligated to sell the futures contract (to
deliver a "long" position to the option holder) at the option exercise price,
which presumably will be lower than the current market price of the contract in
the futures market. Upon exercise of a put, the writer of the option is
obligated to purchase the futures contract (to deliver a "short" position to the
option holder) at the option exercise price which presumably will be higher than
the current market price of the contract in the futures market.
When a Portfolio, as a purchaser of an option on a futures contract, exercises
such option and assumes a long futures position, in the case of a call, or a
short futures position, in the case of
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a put, its gain will be credited to its futures variation margin account. Any
loss suffered by the writer of the option of a futures contract will be debited
to its futures variation margin account. However, as with the trading of
futures, most participants in the options markets do not seek to realize their
gains or losses by exercise of their option rights. Instead, the holder of an
option usually will realize a gain or loss by buying or selling an offsetting
option at a market price that will reflect an increase or a decrease from the
premium originally paid as purchaser or required as a writer.
Options on futures contracts can be used by a Portfolio to hedge the same risks
as might be addressed by the direct purchase or sale of the underlying futures
contracts themselves. Depending on the pricing of the option, compared to either
the futures contract upon which it is based or upon the price of the underlying
securities themselves, it may or may not be less risky than direct ownership of
the futures contract or the underlying securities.
In contrast to a futures transaction, in which only transaction costs are
involved, benefits received by a Portfolio as a purchaser in an option
transaction will be reduced by the amount of the premium paid as well as by
transaction costs. In the event of an adverse market movement, however, a
Portfolio which purchased an option will not be subject to a risk of loss on the
option transaction beyond the price of the premium it paid plus its transaction
costs, and may consequently benefit from a favorable movement in the value of
its portfolio securities that would have been more completely offset if the
hedge had been effected through the use of futures.
If a Portfolio writes call options on futures contracts, the Portfolio will
receive a premium but will assume a risk of adverse movement in the price of the
underlying futures contract comparable to that involved in holding a futures
position. If the option is not exercised, the Portfolio will realize a gain in
the amount of the premium, which may partially offset unfavorable changes in the
value of securities held by, or to be acquired for, the Portfolio. If the option
is exercised, the Portfolio will incur a loss in the option transaction, which
will be reduced by the amount of the premium it has received, but which may be
partially offset by favorable changes in the value of its portfolio securities.
While the purchaser or writer of an option on a futures contract may normally
terminate its position by selling or purchasing an offsetting option of the same
series, a Portfolio's ability to establish and close out options positions at
fairly established prices will be subject to the existence of a liquid market.
The Portfolios will not purchase or write options on futures contracts unless,
in the Sub-Investment Manager's opinion, the market for such options has
sufficient liquidity that the risks associated with such options transactions
are not at unacceptable levels.
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Options on Foreign Currencies
As noted in the Prospectus, the Capital Growth and Emerging Growth Portfolios
may purchase and write options on foreign currencies for hedging purposes in a
manner similar to that in which Forward Contracts will be utilized. For
example, a decline in the dollar value of a foreign currency in which portfolio
securities are denominated will reduce the dollar value of such securities, even
if their value in the foreign currency remains constant.
In order to protect against such diminutions in the value of portfolio
securities, the Portfolios may purchase put options on the foreign currency. If
the value of the currency does decline, the Portfolios will have the right to
sell such currency for a fixed amount in dollars and will thereby offset, in
whole or in part, the adverse effect on its investments which otherwise would
have resulted.
Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of such
securities, the Capital Growth and the Emerging Growth Portfolios may purchase
call options thereon. The purchase of such options could offset, at least
partially, the effects of the adverse movements in exchange rates. As in the
case of other types of options, however, the benefit to Portfolios deriving from
purchases of foreign options will be reduced by the amount of the premium and
related transactions costs. In addition, where currency exchange rates do not
move in the direction or to the extent anticipated, Portfolios could sustain
losses on transactions in foreign currency options which would require it to
forgo a portion or all of the benefits of advantageous changes in such rates.
The Capital Growth, Growth, International Equity, High Yield Bond, and Emerging
Growth Portfolios may write options on foreign currencies for the same types of
hedging purposes. For example, where the Capital Growth or Emerging Growth
Portfolios anticipate a decline in the dollar value of foreign-dominated
securities due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant currency. If the
expected decline occurs, the options will most likely not be exercised, and the
diminution in value of portfolio securities will be offset by the amount of
premium received.
Similarly, instead of purchasing a call option to hedge against anticipated
increase in the dollar cost of securities to be acquired, a Portfolio could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow a Portfolio to hedge such increased
costs up to the amount of the premium. Foreign currency options written by a
Portfolio will generally be covered in a manner similar to the covering of other
types of options. As in the case of other types of options, however, the writing
of a foreign currency option will constitute only a partial hedge up to the
amount of the premium, and only if rates move in the expected direction. If this
does not occur, the option may be exercised and the Portfolio would be required
to purchase or sell the underlying currency at a loss which may not be offset by
the amount of the premium. Through the writing of options on foreign currencies,
a Portfolio also may be required to forgo all or a portion of the benefits which
might otherwise have been obtained from favorable movements in exchange rates.
Limitations on Purchase and Sale of Futures Contracts
and Options on Futures Contracts.
The Portfolios will engage in transactions in futures contracts and related
options for bona fide hedging purposes and not for speculation. The Portfolios
may not purchase or sell futures contracts or related options if immediately
thereafter the sum of the amounts of initial margin
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deposits on a Portfolio's existing futures contracts and premiums paid for
unexpired options on futures contracts would exceed 5% of the value of the
Portfolio's total assets; provided, however, that in the case of an option that
is "in-the-money" at the time of purchase, the "in-the-money" amount may be
excluded in calculating the 5% limitation. In instances involving the purchase
or sale of futures contracts or the writing of covered call options thereon by a
Portfolio, such positions will always be "covered", as appropriate, by either
(i) an amount of cash and cash equivalents, equal to the market value of the
futures contracts purchased or sold and options written thereon (less any
related margin deposits), deposited in a segregated account with its custodian
or (ii) by owning the instruments underlying the futures contract sold (i.e.,
short futures positions) or option written thereon or by holding a separate
option permitting the Portfolio to purchase or sell the same futures contract or
option at the same strike price or better.
High Yield Bonds
The medium and lower quality debt securities in which the Growth, Capital
Growth, High Yield Bond and Emerging Growth Portfolios may invest are regarded
as predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Medium and lower quality bonds may be more
susceptible to real or perceived adverse economic and individual corporate
developments than would investment grade bonds. For example, a projected
economic downturn or the possibility of an increase in interest rates could
cause a decline in high yield bond prices because such an event might lessen the
ability of highly leveraged high yield issuers to meet their principal and
interest payment obligations, meet projected business goals or obtain additional
financing. In addition, the secondary trading market for medium and lower
quality bonds may be less liquid than the market for investment grade bonds.
This potential lack of liquidity may make it more difficult for the Sub-
Investment Manager to accurately value certain portfolio securities. Further,
there is the risk that certain high yield bonds containing redemption or call
provisions may be called by the issuers of such bonds in a declining interest
rate market and the Portfolio might then have to replace such called bonds with
lower yielding bonds, thereby decreasing the net investment income to the
Portfolio.
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Description of Investment Ratings
Moody's - Bond Ratings
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt-
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa-Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as high-
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of protective
elements may be of greater amplitude, or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A-Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa-Bonds which are rated Baa are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Ba-Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca-Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
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Moody's Commercial Paper Ratings
Moody's Commercial Paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative capacity of rated issuers:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations.
Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
Standard & Poor's - Bond Ratings
AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA-Bonds rated AA also qualify as quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A-Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
BBB-Bonds rated BBB are regarded as having an adequate capacity to pay principal
and interest. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.
BB, B, CCC, CC-Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree. While such bonds
will likely have some equality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
C-Bonds rated C are typically subordinated to senior debt which is assigned an
actual or implied CCC rating.
D-Bonds rated D are in payment default or may be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.
Standard & Poor's Commercial Paper Ratings
A Standard & Poor's Commercial Paper Rating is a current assessment of the
likelihood of
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timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. Ratings are applicable to both
taxable and tax-exempt commercial paper. The four categories are as follows:
A-Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety.
A-1-This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2-Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1".
A-3-Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
The Commercial Paper Rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information.
SP-1-A very strong, or strong, capacity to pay principal and interest. Issues
that possess overwhelming safety characteristics will be given a "+"
designation.
SP-2-A satisfactory capacity to pay principal and interest.
SP-3-A speculative capacity to pay principal and interest.
Standard & Poor's may continue to rate note issues with a maturity greater than
three years in accordance with the same rating scale currently employed for
municipal bond ratings.
RISK CONSIDERATIONS
U.S. Dollar Obligations of Foreign Branches of U.S. Banks
The Money Market Portfolio and the Balanced Portfolio may regularly invest in
U.S. dollar denominated obligations of foreign branches of FDIC-member U.S.
banks. These instruments represent the loan of funds actually on deposit in the
U.S. The Fund believes that the U.S. bank would be liable in the event that the
foreign branch failed to pay on its U.S. dollar obligations. Nevertheless, the
assets supporting the liability could be expropriated or otherwise restricted if
located outside the U.S. Exchange controls, taxes, or political and economic
developments could affect liquidity or repayment. Because of possibly
conflicting laws or regulations, the issuing bank could maintain and prevail
that the liability is solely that of the branch, thus exposing the Portfolio to
a possible loss. Such U.S. dollar obligations of foreign branches of FDIC-member
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U.S. banks are not covered by the usual $100,000 of FDIC insurance if they are
payable only at an office of such a bank located outside the U.S., the District
of Columbia, Puerto Rico, Guam, American Samoa, and the Virgin Islands.
Repurchase Agreements
During the holding period of a repurchase agreement, the seller marks to market
the collateral on a daily basis and must provide additional collateral if the
market value of the obligation falls below the repurchase price. If a Portfolio
acquires a repurchase agreement and then the seller defaults at a time when the
value of the underlying securities is less than the obligation of the seller,
the Fund could incur a loss. If the seller defaults or becomes insolvent, a
Portfolio could realize delays, costs or a loss in asserting its rights to the
collateral in satisfaction of the seller's repurchase agreement. The Portfolios
will enter into repurchase agreements only with sellers who are believed to
present minimal credit risks and whose creditworthiness has been evaluated by
the Board of Directors of the Fund. As a general matter, if the seller of the
repurchase agreement is a bank it must have assets of at least $1,000,000,000;
if the seller is a broker-dealer it must have a net worth of at least
$25,000,000.
Foreign Securities
The investment in securities of foreign issuers by certain of the Portfolios may
involve special considerations associated with fluctuating exchange rates, the
fact that foreign securities and the markets therefore are not as liquid as
their domestic counterparts, the imposition of exchange control restrictions,
and economic or political instability. In addition, issuers of foreign
securities are subject to different, and in some cases less comprehensive,
accounting, reporting and disclosure requirements than domestic issuers. As a
result, the selection of investments in foreign issuers may be more difficult
and subject to greater risks than investments in domestic issuers.
These Portfolios make investments in businesses located in foreign nations.
Thus, there is the possibility of expropriation or confiscatory taxation,
political or social instability or diplomatic developments which could affect
investments in those nations. Further, foreign brokerage commissions and
custodian fees are generally higher than in the U.S. In addition, government
restrictions in certain countries and other limitations or investment may affect
the maximum percentage of equity ownership in any one company by the Portfolios.
Moreover, in some countries, only special classes of securities may be purchased
by external investors and the price, liquidity, and rights with respect to such
securities may differ from those relating to shares owned by nationals. In
addition, there may also be the absence of developed legal structures governing
private or foreign investment or allowing for judicial redress for injury to
private property. As a result, the selection of securities of non-U.S. issuers
may be more difficult and subject to greater risks than investment in domestic
issuers.
A Portfolio may be affected, either unfavorably or favorably, by fluctuations in
the relative rates of exchange between the currencies of different nations and
the exchange control regulations and by their indigenous economic and political
developments. The Sub-Investment Managers for these Portfolios will consider
these and other factors before investing in particular foreign securities, and
will not make such investments unless, in its opinion, such investments will
meet the policies and objectives of its respective Portfolio. In addition, the
Board of Directors will monitor all foreign custody arrangements to ensure
compliance with the 1940 Act and the rules thereunder, and will review and
approve, at least annually, the continuance of such arrangements as consistent
with the best interests of the Fund and the stockholders.
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Forward Foreign Currency Exchange Contracts
The Portfolios' use of forward foreign currency exchange contracts involves the
special risks described below. The precise matching of the amounts of foreign
currency contracts and the value of the portfolio securities being hedged will
not generally be possible, because the future value of such securities in
foreign currencies will change as a consequence of movements in the market value
of those securities between the dates the forward currency contracts are entered
into and the dates they mature.
In addition, since it is impossible to forecast with precision the market value
of portfolio securities at the expiration or maturity of a forward currency
contract, it may be necessary for the Portfolio to purchase additional foreign
currency on the spot (i.e., cash) market (and bear the expense of such purchase)
if the market value of the securities being hedged is less than the amount of
foreign currency the Portfolio would be obligated to deliver upon the sale of
such securities. Conversely, it may be necessary for the Portfolio to sell some
of the foreign currency received upon the sale of portfolio securities on the
spot market if the market value of such securities exceeds the amount of foreign
currency the Portfolio is obligated to deliver.
Further, the Portfolios may not always be able to enter into a forward currency
contract when the Sub-Investment Manager deems it advantageous to do so, for
instance, if the Portfolio is unable to find a counterparty to the transaction
at an attractive price. Moreover, the Portfolio may not be able to purchase
forward currency contracts with respect to all of the foreign currencies in
which its portfolio securities may be denominated. In those circumstances, and
in other circumstances in which the Portfolio enters into a cross-hedging
forward currency contract, the correlation between the movements in the exchange
rates of the subject currency and the currency in which the portfolio security
is denominated may not be precise. Finally, the cost of purchasing forward
currency contracts in a particular currency will reflect, in part, the rate of
return available on instruments denominated in that currency. The cost of
purchasing forward contracts to hedge portfolio securities that are denominated
in currencies that, in general, yield high rates of return may, therefore, tend
to reduce the rate of return.
Gold Mining Shares
The four largest producers of gold currently are the Republic of South Africa,
the U.S., Australia and Canada. Economic and political conditions and objectives
prevailing in these countries may have direct effects on the production and
marketing of newly produced gold and sales of central bank gold holdings.
Political and social conditions in South Africa, due to the history of apartheid
and the volatility of the political conditions in the new South African
government and unsettled political conditions which could recur in South Africa
as well as in neighboring countries, may pose certain risks to investments in
South Africa if aggravated by local or international developments, such risks
could have an adverse effect on investments in South Africa including the Fund's
investments and, under certain conditions, on the liquidity of the Funds
portfolio and its ability to meet shareholder redemption requests. The ability
of the Fund to invest or hold investments in South African companies may be
further affected by changes in the United States or South African laws or
regulations. In the past legislation has been proposed in Congress which would
require U.S. investors, including the Fund, to sell their investment in South
Africa. If such legislation were to be enacted it could have a materially
adverse effect on the value of the Fund's investments in South Africa.
Notwithstanding these considerations, the recent liberalization of South
Africa's political system could reduce the risks described above in the future.
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Options
During the option period, the writer of a call option has, in return for the
premium received on the option, given up the opportunity for capital
appreciation above the exercise price should the market price of the underlying
security increase, but has retained the risk of loss should the price of the
underlying security decline. The writer has no control over the time when it may
be required to fulfill its obligation as a writer of the option. The premium is
intended to offset that loss in whole or in part. Unlike the situation in which
the Portfolio owns securities not subject to a call option, the Portfolio in
writing call options must assume that the call may be exercised at any time
prior to the expiration of its obligation as a seller, and that in such
circumstances the net proceeds realized from the sale of the underlying
securities pursuant to the call may be substantially below the prevailing market
price, although it must be at the previously agreed to exercise price.
The risk of purchasing a call option or a put option is that the Portfolio may
lose the premium it paid plus transaction costs. If a Portfolio does not
exercise the option and is unable to close out the position prior to expiration
of the option, it will lose its entire investment. An option position may be
closed out only on an exchange that provides a secondary market for an option of
the same series. Although a Portfolio will write and purchase options only when
the Sub-Investment Manager believes that a liquid secondary market will exist
for options of the same series, there can be no assurance that a liquid
secondary market will exist for a particular option at a particular time and
that a Portfolio, if it so desires, can close out its position by effecting a
closing transaction. If the writer of a covered call option is unable to effect
a closing purchase transaction, it cannot sell the underlying security until the
option expires or the option is exercised. Accordingly, a covered call writer
may not be able to sell the underlying security at a time when it might
otherwise be advantageous to do so.
The effectiveness of hedging through the purchase of securities index options
will depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the selected
securities index. Perfect correlation is not possible because the securities
held or to be acquired by a Portfolio will not exactly match the composition of
the securities indexes on which options are written. The principal risk in
purchasing securities index options is that the premium and transaction costs
paid by a Portfolio will be lost as a result of unanticipated movements in the
price of the securities comprising the securities index for which the option has
been purchased. In writing securities index options, the principal risks are the
inability to effect closing transactions at favorable prices and the inability
to participate in the appreciation of the underlying securities.
Futures Contracts and Related Options
Positions in futures contracts and related options may be closed out only on an
exchange that provides a secondary market for such contracts or options. A
Portfolio will enter into an option or futures contract only if there appears to
be a liquid secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular option or futures contract at any
specific time. Thus, it may not be possible to close out a futures contract or
related option position. In the case of a futures contract, in the event of
adverse price movements a Portfolio would continue to be required to make daily
margin payments. In this situation, if a Portfolio has insufficient cash to meet
daily margin requirements it may have to sell portfolio securities at a time
when it may be disadvantageous to do so. In addition, a Portfolio may be
required to take or make delivery of the securities underlying the futures
contracts it holds. The inability to close out futures contracts also could have
an adverse impact on a Portfolio's ability to hedge its portfolio effectively.
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There are several risks in connection with the use of futures contracts as a
hedging device. While hedging can provide protection against an adverse movement
in market prices, it can also preclude a hedger's opportunity to benefit from a
favorable market movement. In addition, investing in futures contracts and
options on futures contracts will cause a Portfolio to incur additional
brokerage commissions and may cause an increase in a Portfolio's turnover rate.
The successful use of futures contracts and related options also depends on the
ability of the Sub-Investment Manager to forecast correctly the direction and
extent of market movements within a given time frame. To the extent market
prices remain stable during the period a futures contract or option is held by a
Portfolio or such prices move in a direction opposite to that anticipated, a
Portfolio may realize a loss on the hedging transaction that will not be offset
by an increase in the value of its portfolio securities. As a result, a
Portfolio's return for the period may be less than if it had not engaged in the
hedging transaction.
Utilization of futures contracts by a Portfolio involves the risk of imperfect
correlation in movements in the price of futures contracts and movements in the
price of the securities which are being hedged. If the price of the futures
contract moves more or less than the price of the securities being hedged, a
Portfolio will experience a gain or loss which will not be completely offset by
movements in the price of the securities.
Compared to the purchase or sale of futures contracts, the purchase of put or
call options on futures contracts involves less potential risk for a Portfolio
because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to a Portfolio while the
purchase or sale of the futures contract would not have resulted in a loss, such
as when there is no movement in the price of the underlying securities.
Federal Tax Matters
A policyowner's interest in earnings on assets held in a separate account and
invested in the Fund are not includible in the policyowner's gross income
because the Policies presently qualify as life insurance contracts for Federal
income tax purposes.
The Fund intends that each Portfolio will comply with Section 817(h) of the Code
and the regulations thereunder. Pursuant to that Section, the only shareholders
of the Fund and its Portfolios will be separate accounts funding variable
annuities and variable life insurance policies established by Chubb Life, its
successors and assigns or by other insurance companies with which Chubb Life is
affiliated and Chubb Life's general account which provided the initial capital
for the Portfolios.
In addition, Section 817(h) of the Code and the regulations thereunder impose
diversification requirements on the separate accounts and on the Portfolios.
These diversification requirements are in addition to the diversification
requirements imposed by the Code for the Portfolios to be treated as regulated
investment companies. Failure to meet the requirements of Section 817(h) could
result in taxation to Chubb Life or its affiliated insurance companies and
immediate taxation of the owners of the policies funded by the Fund.
The Secretary of the Treasury may in the future issue regulations or one or more
revenue rulings which would prescribe the circumstances in which a policyowner's
control of the investments of a segregated asset account may cause the
policyowner, rather than an insurance company, to be treated as the owner of the
assets of the account. The regulations could impose requirements that are not
reflected in the Policy, relating, for example, to such elements of policyowner
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control as premium allocation, transfer privileges and investment in a division
focusing on a particular investment sector such as the Gold Stock Portfolio.
Failure to comply with any such regulations presumably would cause earnings on a
policyowner's interest in the separate account to be includible in the
policyowner's gross income in the year earned.
The Fund may, therefore, find it necessary to take action to assure that the
Policy continues to qualify as a life insurance policy under Federal tax laws.
The Fund, for example, may be required to alter the investment objectives of any
Portfolios or substitute the shares of one Portfolio for those of another. No
such change of investment objectives or substitution of securities will take
place without notice to affected policyholders and the approval of a majority of
such policyholders or without prior approval of the Securities and Exchange
Commission, to the extent legally required. See "TAXES" below.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Management Agreements and Sub-Investment Management Agreements.
The Fund has entered into Investment Management Agreements with Chubb Investment
Advisory Corporation ("Chubb Investment Advisory") with respect to all
Portfolios. The Fund and Chubb Investment Advisory have also executed Sub-
Investment Management Agreements with Templeton Global Advisors, Inc.
("Templeton"), Chubb Asset Managers, Inc. ("Chubb Asset"), Van Eck Associates
Corporation ("Van Eck Associates"), Pioneering Management Corporation
("Pioneer"), Janus Capital Corporation ("Janus"), J.P. Morgan Investment
Management, Inc. ("Morgan"), Warburg, Pincus Counsellors, Inc. ("Warburg")
Strong Capital Management Inc. ("Strong"), Lombard Odier International Portfolio
Management Limited ("Lombard Odier") Massachusetts Financial Services Company
("MFS") (collectively the "Sub-Investment Managers") with regard to the World
Growth Stock; Bond; Gold Stock; Domestic Growth Stock; Capital Growth; Balanced,
Growth and Income, Growth; International Equity; Money Market High Yield Bond
and Emerging Growth Portfolios, respectively.
The Investment Management Agreements provide that Chubb Investment Advisory,
subject to control and review by the Fund's Board of Directors, is responsible
for the overall management and supervision of each Portfolio and for providing
certain administrative services to the Fund. See "MANAGEMENT OF THE FUND" in the
Prospectus. The Sub-Investment Management Agreements provide that the Sub-
Investment Managers, subject to review by the Fund's Board of Directors and by
Chubb Investment Advisory, have the day-to-day responsibility for making
decisions to buy, sell or hold any particular security for the Portfolio which
they advise.
Chubb Investment Advisory, each Sub-Investment Manager and their affiliates may
provide investment advice to other clients, including, but not limited to,
mutual funds, individuals, pension funds and institutional investors. Some of
the advisory accounts of Chubb Investment Advisory, each Sub-Investment Manager,
and their affiliates may have investment objectives and investment programs
similar to those of the Portfolios. Accordingly, occasions may arise when
securities that are held by other advisory accounts, or that are currently being
purchased or sold for other advisory accounts, are also being selected for
purchase or sale for a Portfolio. It is the practice of Chubb Investment
Advisory, each Sub-Investment Manager and their affiliates to allocate such
purchases or sales insofar as feasible among their several clients in a manner
they deem equitable, to all accounts involved. Under normal circumstances such
transactions will be (1) done on a pro-rata basis substantially in proportion to
the amounts ordered by each account, (2) entered into only if the
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trade is likely to produce a benefit for the Portfolios, and (3) at the same
average price for each client. While it is conceivable that in certain instances
this procedure could adversely affect the price or number of shares involved in
the Fund's transaction, it is believed that the procedure generally contributes
to better overall execution of the Fund's portfolio transactions. It is also the
policy of Chubb Investment Advisory, each Sub-Investment Manager, and each of
their affiliates not to favor any one account over the other.
For providing investment advisory and management services to the Fund, Chubb
Investment Advisory receives monthly compensation from the Fund and has sole
responsibility to provide each Sub-Investment Manager, other than Janus, with
quarterly compensation and Janus with monthly compensation, at annual rates
computed as described under "MANAGEMENT OF THE FUND" in the Prospectus. For the
year ended December 31, 1994, the Fund paid $377,344, $39,051, $60,959, $38,648,
$221,681, $32,319, $214,041, and $100,956 to Chubb Investment Advisory for the
World Growth Stock Portfolio, the Money Market Portfolio, the Gold Stock
Portfolio, the Bond Portfolio Domestic Growth Stock Portfolio, the Growth &
Income Portfolio, the Capital Growth Portfolio and the Balance Portfolio
respectively. For the year ended December 31, 1995, the Fund paid $511,260,
$40,941, $59,640, $50,107, $317,840, $65,332, $387,176 and $106,430 and $33,463
to Chubb Investment Advisory for the World Growth Stock Portfolio, the Money
Market Portfolio, the Gold Stock Portfolio, the Bond Portfolio, the Domestic
Growth Stock Portfolio, the Growth and Income Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio, and the Emerging Growth Portfolio,
respectively. For the year ended December 31, 1996 the Fund paid and $656,061,
$42,558, $62,705, $53,464 $480,015, $135,739, $703,701, $134,709, and $173,563
to Chubb Investment Advisory for the World Growth Stock Portfolio, the Money
Market Portfolio, the Gold Stock Portfolio, the Bond Portfolio, the Domestic
Growth Stock Portfolio, the Growth and Income Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio and the Emerging Growth Portfolio. All such
fees were paid pursuant to the terms of the Investment Management Agreements and
the Sub-Investment Management Agreements. The Emerging Growth Portfolio was
added to the Fund on May 1, 1995 and therefore no investment advisory fees were
paid by it during 1994.
For providing sub-investment advisory services to the Portfolios, as described
under "MANAGEMENT OF THE FUND" Chubb Investment Advisory for the years 1996,
1995 and 1994 respectively paid: $437,374, $340,840 and $251,563 to Templeton
for the World Growth Portfolio; $29,791, $28,659 and $27,336 to Chubb Asset
Managers, Inc. for the Money Market Portfolio for the years 1996, 1995 and 1994
respectively; $41,803, $37,760, and $40,639 to Van Eck Associates for the Gold
Portfolio; $320,010, $211,893 and $147,547 to Pioneering Management for the
Domestic Growth Portfolio $37,425, $35,075 and $27,054 to Chubb Asset Managers,
Inc. for the Bond Portfolio; $90,493, $43,555 and $21,546 to Chubb Asset
Managers, Inc. for the Growth and Income Portfolio; $527,776, $290,382 and
$160,531 to Janus for the Capital Growth Portfolio; and $89,806, $70,953 and
$67,304 to Phoenix for the Balanced Portfolio; and Chubb Investment Advisory
paid $108,477 for 1996 and $20,914 for 1995, to MFS for the Emerging Growth
Portfolio.
The Investment Management Agreements also obligate Chubb Investment Advisory to
perform certain administrative services which are described more completely in
the Prospectus. Certain of these functions have been delegated to the Sub-
Investment Managers.
The continuance of the Investment Management Agreements and the Sub-Investment
Management Agreements were approved by the Fund's Board of Directors on January
30, 1997. As a result of the sale by the Chubb Corporation of Chubb Life to
Jefferson-Pilot on April 30, 1997 (the "Transaction") and the resulting change
in control of Chubb Investment Advisory, the Investment Management Agreements
and each of the Sub-Investment Management Agreements terminated by operation of
law on that date. On April 30, 1997 the Fund and Chubb Investment Advisory
received an exemptive order from the Securities and Exchange Commission that
permitted Chubb Investment Advisory to continue to provide investment management
services to the Fund and each of its series during an interim period of not more
than 120 days from the date of the Transaction and continuing through the date a
new investment management agreement and new sub-investment management agreements
were approved by Shareholders. On August 15, 1997 Investment Management
Agreement with Chubb Investment Advisory Corporation and with each of the Sub-
Investment Advisory Agreements with each of the Sub-Investment Advisors,
including the new arrangements with Warburg, Morgan and MFS were approved at a
Special Meeting of Shareholders held on August 15, 1997. See "CAPITAL STOCK" in
this Statement of Additional Information.
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<PAGE>
Independent Auditors
Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116, has been
selected as the independent auditors of the Fund.
The financial statements of the Fund incorporated by reference in this Statement
of Additional Information and the related financial highlights included in the
Prospectus for the periods indicated therein have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated by
reference herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
Custodians
Citibank, N.A., 111 Wall Street, New York, New York 10043, acts as custodian of
the Fund's assets. The Fund has also appointed, with the approval of the Fund's
Board of Directors, from time to time, sub-custodians, qualified under Rule 17f-
5 of the 1940 Act, with respect to certain foreign securities. The Fund may
authorize Citibank to enter into an agreement with any U.S. banking institution
or trust company to act as a sub-custodian pursuant to a resolution of the
Fund's Board of Directors. Securities owned by the Fund subject to repurchase
agreements may be held in the custody of other U.S. banks.
Payment of Expenses
Chubb Investment Advisory is obligated to assume the cost of certain
administrative expenses for the Fund, as described in the Prospectus under the
heading "MANAGEMENT OF THE FUND." The Fund pays the following expenses:
brokerage commissions and transfer taxes; other state, federal and local taxes
and filing fees; fees and expenses of qualification of the Fund and its shares
under federal and state securities laws subsequent to the effective date of this
Prospectus; compensation of directors who are not interested persons of the Fund
("disinterested directors"); travel expenses of disinterested directors;
interest and other borrowing costs; extraordinary or nonrecurring expenses such
as litigation; costs of printing and distributing communications to current
policyowners; insurance premiums; charges and expenses of the custodian,
independent auditors, and counsel; industry association dues; and other expenses
not expressly assumed by Chubb Investment Advisory. Certain other expenses are
assumed by Chubb Securities Corporation ("Chubb Securities") pursuant to a
distribution agreement with the Fund. See "OFFERING AND REDEMPTION OF SHARES"
below.
PORTFOLIO TRANSACTIONS AND BROKERAGE
ALLOCATIONS
Under the Investment Management Agreements, Chubb Investment Advisory has
ultimate authority to select broker-dealers through which securities are to be
purchased and sold, subject to the general control of the Board of Directors.
Under the Sub-Investment Management Agreements, the Sub-Investment Managers have
day-to-day responsibility for selecting broker-dealers through which securities
are to be purchased and sold, subject to Chubb Investment Advisory's overall
monitoring and supervision. The Sub-Investment Managers each provide the trading
desk for their respective Portfolio transactions. Chubb Investment Advisory will
perform daily valuation of the assets of each Portfolio.
The Money Market Portfolio's investments usually will be purchased on a
principal basis directly from issuers, underwriters or dealers. Accordingly,
minimal brokerage charges are expected to be paid on such transactions.
Purchases from an underwriter generally include a commission or concession paid
by the issuer, and transactions with a dealer usually include the dealer's
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mark-up.
The amount of brokerage commissions paid by the Fund for all Portfolios, for the
year 1996 were $532,729, and for all portfolios for 1995 were $402,052 and
Portfolios for 1994 was $201,435.
Insofar as known to management, no director or officer of the Fund, Chubb
Investment Advisory, any Sub-Investment Manager or any person affiliated with
any of them has any material direct or indirect interest in any broker-dealer
employed by or on behalf of the Fund.
In selecting broker-dealers to execute transactions for the Fund, the Sub-
Investment Managers are obligated to use their best efforts to obtain for each
Portfolio the most favorable overall price and execution available, considering
all the circumstances. Such circumstances include the price of the security, the
size of the broker-dealer's "spread" or commission, the willingness of the
broker-dealer to position the trade, the reliability, financial strength and
stability and operational capabilities of the broker-dealer, the ability to
effect the transaction at all where a large block is involved, the availability
of the broker-dealer to stand ready to execute possibly difficult transactions
in the future, and past experience as to qualified broker-dealers, including
broker-dealers who specialize in any Canadian or foreign securities held by the
Portfolios. Such considerations are judgmental and are weighed by the Sub-
Investment Managers in seeking the most favorable overall economic result for
the Fund.
Notwithstanding the foregoing, however, and subject to appropriate policies and
procedures as then approved by the Board of Directors of the Fund, Chubb
Investment Advisory and the Sub-Investment Managers are authorized to allocate
portfolio transactions to broker-dealers who have provided brokerage and
research services, as such services are defined in Section 28(e) of the
Securities and Exchange Act of 1934, for the Portfolios or other advisory
accounts as to which Chubb Investment Advisory or any Sub-Investment Manager has
investment discretion. In addition, Chubb Investment Advisory and the Sub-
Investment Managers may cause the Portfolios to pay a broker-dealer a commission
for effecting a securities transaction in excess of the amount another broker-
dealer would have charged for effecting the same transaction, if Chubb
Investment Advisory or the Sub-Investment Manager determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services, as defined above, provided by such broker-
dealer viewed in terms of either that particular transaction or the overall
responsibilities of Chubb Investment Advisory or the Sub-Investment Managers
with respect to the Portfolios or their other advisory accounts. Such brokerage
and research services may include, among other things, analyses and reports
concerning issuers, industries, securities, economic factors and trends, and,
portfolio strategy. Such brokerage and research services may be used by Chubb
Investment Advisory or a Sub-Investment Manager in connection with any other
advisory accounts managed by it. Conversely, research services for any other
advisory accounts may be used by the Sub-Investment Manager or Chubb Investment
Advisory in managing the investments of a Portfolio. Chubb Investment Advisory
or a Sub-Investment Manager may also receive from such broker-dealers quotations
for Portfolio valuation purposes, provided that this results in no additional
cost to the Fund.
Research services may be provided to Templeton, at no additional cost to the
Fund, by various wholly owned subsidiaries, including Templeton Investment
Counsel, Inc., a corporation registered under the Investment Advisers Act of
1940, Templeton Investment Management (Hong Kong) Ltd., and Templeton Management
Limited, a Canadian company. The research services include information,
analytical reports, computer screening studies, statistical data, and factual
resumes pertaining to securities in the U.S. and in various foreign nations
which
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Templeton considers as having relatively stable and friendly governments.
Such supplemental research, when utilized, is subjected to analysis by Templeton
before being incorporated into the investment advisory process. Templeton pays
these subsidiaries compensation and reimbursement of expenses as mutually agreed
on, without cost to the Fund. These subsidiaries and Templeton are independent
contractors and in no sense is any of them an agent for the other. Any of them
is free to discontinue such research services at any time on 30 days' notice
without cost or penalty.
In 1996, $37,663 of commissions were paid to brokers because of research
services provided to either Chubb Investment Advisory or the Sub-Investment
Managers.
The Sub-Investment Managers will use their best efforts to recapture all
available tender offer solicitation fees and similar payments in connection with
tenders of the securities of the Fund and to advise the Fund of any fees or
payments of whatever type which it may be possible to obtain for the Fund's
benefit in connection with the purchase or sale of Fund securities.
Any of the Sub-Investment Managers and Chubb Investment Advisory may combine
transactions for the Fund with transactions for other accounts managed by them
or their affiliates, including other investment companies registered under the
1940 Act, as previously described above. Transactions will be combined only when
the transaction meets the Fund's requirements as to selection of brokers or
dealers and negotiation of prices and commissions which the Sub-Investment
Managers would otherwise apply.
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<PAGE>
MANAGEMENT OF THE FUND
The directors and officers of the Fund, their addresses, their positions with
the Fund, and their principal occupations for the past five years are set forth
below:
Positions
with Principal Occupations for
Name and Address the Fund the Past Five Years
- ---------------- --------- -------------------
Ronald Angarella* President Senior Vice President, Chubb Life,
One Granite Place and Director President and Director, Chubb
Concord, N.H. 03301 Investment Advisory, Chubb
Securities and Hampshire Funding,
Inc.; Senior Vice President and
Director, Chubb Investment Funds,
Inc.
Charles C. Cornelio Vice Executive Vice President,
One Granite Place President Chubb Life and Jefferson Pilot
Concord, N.H. 03301 and Corporation, Vice President, and
General Counsel Secretary, Chubb Securities
Corporation.
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<PAGE>
Positions
with Principal Occupations
Name and Address the Fund for the Past Five Years
- ---------------- -------- -----------------------
Shari J. Lease Secretary Assistant Vice President and
One Granite Place Associate Counsel, Chubb Life;
Concord, N.H. 03301 Secretary, Chubb Investment Funds,
Inc.; Assistant Secretary, Chubb
Investment Advisory, previously
Assistant Counsel and Assistant Vice
President, State Bond and Mortgage
Company and affiliated companies.
John A. Weston Treasurer Assistant Vice President of
One Granite Place ChubbLife; Treasurer of Chubb
Concord, N.H. 03301 Securities Corporation, Chubb
Investment Advisory and Hampshire
Funding, Inc.; formerly, Mutual Fund
Accounting Officer for the Fund,
Chubb Investment Funds, Inc. and
Chubb Investment Advisory
Corporation and Assistant Treasurer
for Chubb Securities Corporation and
Hampshire Funding, Inc.
Thomas H. Elwood Assistant Assistant Counsel, Chubb Life
One Granite Place Secretary Assistant Secretary, Chubb
Concord, N.H. 03301 Investment Funds, Inc. and Chubb
Investment Advisory; formerly,
Associate Counsel, New York Life
Insurance Company; Secretary New York
Life Institutional Funds, Inc.,
Assistant Secretary, Mainstay Funds,
Chubb Series Trust and MFA Funds.
Mark D. Landry Assistant Mutual Fund Accounting and
One Granite Place Treasurer Operations Officer for ChubbLife
Concord, N.H. 03301 Concord, N.H. 03301 and Chubb
Investment Advisory; Assistant
Treasurer of Chubb Investment Funds,
Inc.; formerly Mutual Fund Accounting
and Operations Manager for the Fund,
Chubb Investment Funds, Inc. and
Chubb Investment Advisory.
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<PAGE>
Position
with Principal Occupations
Name and Address the Fund for the Past Five Years
- ---------------- ------------ -----------------------
James J. Weisbart Director Retired, previously President of
301 Smithfield Road Bird Bath Laundromats and President
Contoocook, N.H. 03329 of Solomon's Inc. (retail clothing
company)
Michael D. Coughlin Director President of Concord Litho
106 School Street Company, Inc. (printing company)
Concord, N.H. 03301
Elizabeth S. Hager Director State Representative, New
5 Auburn Street Hampshire; Executive Director,
Concord, N.H. 03301 United Ways; Consultant, Fund
Development; previously, City
Councilor, City of Concord, N.H. and
Mayor, City of Concord, N.H.
Asterisks indicate those directors who are "interested persons" within the
meaning of Section 2(a)(19) of the 1940 Act. Messrs. Weisbart and Coughlin and
Ms. Hager are members of the audit committee and Mr. Angarella and Ms. Hager and
members of the valuation committee.
CAPITAL STOCK
The authorized capital stock of the Fund consists of 12,000,000,000 shares of
common stock which are divided into twelve series: World Growth Stock Portfolio
common stock, International Equity Portfolio, Money Market Portfolio common
stock, Gold Stock Portfolio common stock, Bond Portfolio common stock, High
Yield Bond Portfolio common stock, Domestic Growth Stock Portfolio common stock,
Growth and Income Portfolio common stock, Capital Growth Portfolio common stock,
Growth Portfolio common stock, Balanced Portfolio common stock and Emerging
Growth Portfolio common stock. Each series currently consists of 1,000,000,000
shares. The Fund has the right to issue additional shares without the consent of
stockholders and may reallocate shares to new series or to one or more of the
existing series.
The assets received by the Fund for the issuance or sale of shares of each
Portfolio and all income, earnings, profits and proceeds thereof are
specifically allocated to each Portfolio. They constitute the underlying assets
of each Portfolio, are required to be segregated on the books of account and are
to be charged with the expenses of such Portfolio. Any assets which are not
clearly allocable to a particular Portfolio or Portfolios are allocated in a
manner determined by the Board of Directors. Accrued liabilities which are not
clearly allocable to one or more Portfolios would generally be allocated among
the Portfolios in proportion to their relative net assets before adjustment for
such unallocated liabilities. Each issued and outstanding share in a Portfolio
is entitled to participate equally in dividends and distributions declared with
respect to such Portfolio and in the net assets of such Portfolio upon
liquidation or dissolution remaining after satisfaction of outstanding
liabilities.
The shares of each Portfolio, when issued, will be fully paid and non-
assessable, will have no preference, preemptive, conversion, exchange or similar
rights, and will be freely transferable. Shares do not have cumulative voting
rights.
Chubb Life provided the initial capital for the Fund by purchasing $1,000,000
worth of shares of the World Growth Stock Portfolio, the Money Market Portfolio
and the Gold Stock Portfolio
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for its general account. Subsequently, upon formation of the Bond Portfolio and
Domestic Growth Stock Portfolio, Chubb Life purchased $1,000,000 worth of shares
of the two additional Portfolios for its general account. Most recently, Chubb
Life purchased $1,000,000 worth of shares of the Growth and Income Portfolio and
the Capital Growth Portfolio,$5,000,000 worth of shares of the Balanced
Portfolio and $3,000,000 worth of shares of Emerging Growth Portfolio for its
general account and will purchase shares in the three new portfolios in the
future. Chubb Life intends to withdraw such investment from time to time.
As of February 28, 1997, Chubb Life owned of record and beneficially the
following percentages of shares of the Fund's Portfolios in its general account:
1.35% of the Growth and Income Portfolio, .36% of the Capital Growth, Portfolio,
1.23% of the Balanced Portfolio. Chubb Separate Account A, a separate account
established by Chubb Life, owned of record as of February 28, 1997, 100.00% of
the World Growth Stock Portfolio, the Money Market Portfolio, the Gold Stock
Portfolio, the Bond Portfolio, the Domestic Growth Stock Portfolio and the
Emerging Growth Portfolio, 98.65% of the Growth and Income Portfolio, 99.64% of
the Capital Growth Portfolio, 98.77% of the Balanced Portfolio.The shares held
by Chubb Life or its affiliated insurance companies, including shares for which
no voting instructions have been received, shares held in a separate account
representing charges imposed by Chubb Life or its affiliates and shares held by
Chubb Life that are not otherwise attributable to Policies, will be voted by
Chubb Life or its affiliated insurance companies in proportion to instructions
received from the owners of Policies. Chubb Life and its affiliated insurance
companies reserve the right to vote any or all such shares at their discretion
to the extent consistent with then current interpretations of the 1940 Act and
rules thereunder.
The officers and directors of the Fund cannot directly own shares of the Fund
without purchasing a Policy. As a result, the amount of shares owned by the
directors and officers of the Fund as a group is less than 1% of each Portfolio.
OFFERING AND REDEMPTION OF SHARES
The Fund offers shares of each Portfolio only for purchase by the corresponding
division of separate accounts established by Chubb Life or its affiliated
insurance companies. It thus will serve as an investment medium for the Policies
offered by Chubb Life and its affiliated insurance companies. The offering is
without a sales charge and is made at each Portfolio's net asset value per
share, which is determined in the manner set forth below under "DETERMINATION OF
NET ASSET VALUE." In the future, the shares of the Fund may be offered to
additional separate accounts of Chubb Life, its successor or assigns, or of its
affiliated insurance companies.
Chubb Securities is the principal underwriter and distributor of the Fund's
shares. It is also the principal underwriter and distributor of the Policies.
Under the terms of the Fund Distribution Agreement entered into by Chubb
Securities and the Fund, Chubb Securities is not obligated to sell any specific
number of shares of the Fund. Chubb Securities also pays any distribution
expenses and costs (that is, those arising from any activity
S-34
<PAGE>
which is primarily intended to result in the sale of shares issued by the Fund)
including expenses and costs attributable to the Fund which are related to the
printing and distributing of prospectuses and periodic reports to new or
prospective owners of Policies. Such expenses are reimbursed by Chubb Life or
its affiliated insurance companies, their successors or assigns, pursuant to the
terms of separate agreements with Chubb Securities relating to the sale of
Policies.
The Fund redeems all full and fractional shares of the Fund at the net asset
value per share applicable to each Portfolio. See "DETERMINATION OF NET ASSET
VALUE" below.
Redemptions are normally made in cash, but the Fund has authority, at its
discretion, to make full or partial payment by assignment to the separate
account of portfolio securities at their value used in determining the
redemption price. The Fund, nevertheless, pursuant to Rule 18f-1 under the 1940
Act, has filed a notification of election on Form N-18f-1, by which the Fund has
committed itself to pay to the separate account in cash, all such separate
account's requests for redemption made during any 90-day period, up to the
lesser of $250,000 or 1% of the applicable Portfolio's net asset value at the
beginning of such period. The securities, if any, to be paid in-kind to the
separate account will be selected in such manner as the Board of Directors deems
fair and equitable. In such cases, the separate account would incur brokerage
costs should it wish to liquidate these portfolio securities.
The right to redeem shares or to receive payment with respect to any redemption
of shares of any Portfolio may only be suspended (1) for any period during which
trading on the New York Stock Exchange is restricted or such Exchange is closed,
other than customary weekend and holiday closings, (2) for any period during
which an emergency exists as a result of which disposal of securities or
determination of the net asset value of that Portfolio is not reasonably
practicable, or (3) for such other periods as the Securities and Exchange
Commission may by order permit for the protection of stockholders of the
Portfolio.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Portfolio of the Fund is determined
immediately after the declaration by the Fund of dividends, if any, as of the
close of regular trading on the New York Stock Exchange (presently 4:00 P.M. New
York Time), on each day during which the New York Stock Exchange is open for
trading except on days where both (i) the degree of trading in the Portfolio's
securities would not materially affect the net asset value of the Portfolio's
shares and (ii) no shares of the Portfolio were tendered for redemption or no
purchase order was received. The New York Stock Exchange is open from Monday
through Friday except on the following national holidays: New Years Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. In the event that any of the above holidays
falls on a Sunday, it is regularly observed on the following Monday.
The net asset value per share of each Portfolio is computed by dividing the sum
of the value of the securities held by that Portfolio, plus any cash or other
assets and minus all liabilities, by the total number of outstanding shares of
that Portfolio at such time. Any expenses borne by the Fund, including the
investment management fee payable to Chubb Investment Advisory, are accrued
daily except for extraordinary or non-recurring expenses. See "INVESTMENT
ADVISORY AND OTHER SERVICES-Payment of Expenses" above.
Portfolio securities which are traded on national stock exchanges are valued at
the last sale price as of the close of business of the New York Stock Exchange
on the day the securities are being valued, or, lacking any sales, at the mean
between the closing bid and asked prices.
S-35
<PAGE>
Securities traded in the over-the-counter market are valued at the closing sales
price as reported on a readily available market quotation system, or, if no sale
took place, the mean between the bid and asked prices. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Directors of the Fund.
Quotations of foreign securities in foreign currencies are converted to U.S.
dollar equivalents using appropriately translated foreign market closing prices.
Long-Term U.S. Treasury securities and other obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities are valued at
representative quoted prices from bond pricing services.
Long-term publicly traded corporate bonds are valued at prices obtained from a
bond pricing service when such prices are available or, when appropriate, from
broker-dealers who make a market in that security.
Debt instruments with a remaining maturity of 60 days or less are valued on an
amortized cost basis. Under this method of valuation, the security is valued
at cost on the date of purchase plus a constant rate of amortization of any
discount or premium until maturity, regardless of any intervening change in
general interest rates or the market value of the instrument. The amortized cost
value of the security may be either more or less than the market value at any
given time. If for any reason the fair value of any security is not fairly
reflected through the amortized cost method of valuation, such security will be
valued by market quotations, if available, otherwise as determined in good faith
by the Board of Directors.
TAXES
In order for each Portfolio of the Fund to qualify for Federal income tax
treatment as a regulated investment company, two of the tests they must meet are
(i) that at least 90% of its gross income for a taxable year must be derived
from qualifying income, i.e., dividends, interest, income derived from loans of
securities, and gains from the sale of securities and (ii) for fiscal years
beginning on or before August 6, 1997 gains realized on the sale or other
disposition of securities held for less than three months must be limited to
less than 30% of each Portfolio's annual gross income. It is the Fund's policy
to comply with the provisions of the Internal Revenue Code of 1986 regarding
distribution of investment income and capital gains so that each Portfolio will
not be subject to Federal income tax on amounts distributed and undistributed or
an excise tax on certain undistributed income or capital gains. For these
purposes, if a regulated investment company declares a dividend in December to
stockholders of record in December and pays such dividends before the end of
January they will be treated as paid in the preceding calendar year and to have
been received by such stockholder in December.
PERFORMANCE AND YIELD INFORMATION
Money Market Portfolio
For the seven days ended December 31, 1996, the yield of the Money Market
Portfolio expressed as a simple annualized yield was 4.28%; the yield of the
Money Market Portfolio expressed as a compounded effective yield was 4.37%.
S-36
<PAGE>
The Money Market Portfolio's yield is its investment income, less expenses,
expressed as a percentage of assets on an annualized basis for a seven-day
period. The yield is expressed as a simple annualized yield and as a compounded
effective yield. The yield does not reflect the fees and charges imposed on the
assets of Separate Account A.
The simple annualized yield is computed by determining the net change (exclusive
of realized gains and losses from the sale of securities and unrealized
appreciation and depreciation) in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the seven-day period,
dividing the net change in account value by the value of the account at the
beginning of the period, and annualizing the resulting quotient (base period
return) on a 365-day basis. The net change in account value reflects the value
of additional shares purchased with dividends from the original shares in the
account during the seven-day period, dividends declared on such additional
shares during the period, and expenses accrued during the period.
The compounded effective yield is computed by determining the unannualized base
period return, adding one to the base period return, raising the sum to a power
equal to 365 divided by seven, and subtracting one from the result.
Non-Money Market Portfolios
The yield for the 30-day period ended December 31, 1996 for the Bond Portfolio
was 6.25%.
This yield figure represents the net annualized yield based on a specified 30-
day (or one month) period assuming a reinvestment semiannual compounding of
income. Yield is calculated by dividing the average daily net investment income
per share earned during the specified period by the maximum offering price,
which is net asset value per share on the last day of the period, and
annualizing the result according to the following formula:
Yield = 2(((A-B + 1) 6) -1)
---
CD
Where A equals dividends and interest earned during the period, B equals
expenses accrued for the period (net of reimbursements), C equals the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and D equals the maximum offering price per share on the last
day of the period.
The average annual total return quotations for the World Growth Stock Portfolio,
the Money Market Portfolio, the Gold Stock Portfolio, the Bond Portfolio, the
Domestic Growth Stock Portfolio, the Growth and Income Portfolio, the Capital
Growth Portfolio, the Balanced Portfolio and Emerging Growth Portfolio for the
year ended December 31, 1996 are 19.22%, 4.65%, 2.57%, 2.47%, 16.46%, 22.88%,
19.25%, 10.56% and 18.30%, respectively. The average annual total return
quotations for these Portfolios, other than the Growth and Income Portfolio, the
Capital Growth Portfolio, the Balanced Portfolio and the Emerging Growth
Portfolio, for the 5 years ended December 31, 1996 are 13.79%, 3.63%, 7.64%,
6.42% and 18.98%, respectively. The average annual total return quotations for
these Portfolios since each Portfolio's inception are 12.34%, 5.01%, 5.17%,
7.20%, 13.96%, 15.43%, 22.65%, 10.32% and 31.10%, respectively.
The average annual total return figures represent the average annual compounded
rate of return of the stated period. Average annual total return quotations
reflect the percentage change between the beginning value of a static account in
the Portfolio and the ending value of that account measured by the then current
net asset value of that Portfolio assuming that all dividends
S-37
<PAGE>
and capital gains distributions during the stated period were reinvested in
shares of the Portfolio when paid. Total return is calculated by finding the
average annual compounded rates of return of a hypothetical investment that
would compare the initial amount to the ending redeemable value of such
investment according to the following formula:
T = (ERV/P)/1/n/-1
where T equals average annual total return, where ERV, the ending redeemable
value, is the value, at the end of the applicable period, of a hypothetical
$10,000 payment made at the beginning of the applicable period, where P equals a
hypothetical initial payment of $1,000, and where N equals the number of years.
From time to time, in reports and sales literature: (1) each Portfolio's
performance or P/E ratio may be compared to: (i) the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index") and Dow Jones Industrial Average
so that you may compare that Portfolio's results with those of a group of
unmanaged securities widely regarded by investors as representative of the U.S.
stock market in general; (ii) other groups of mutual funds traced by: (A) Lipper
Analytical Services, a widely-used independent research firm which ranks mutual
funds by overall performance, investment objectives, and asset size; (B) Forbes
Magazine's Annual Mutual Funds Survey and Mutual Fund Honor Roll; or (C) other
financial or business publications, such as the Wall Street Journal, Business
Week, Money Magazine, and Barron's, which provide similar information; (iii)
indices of stocks comparable to those in which the particular Portfolio invests;
(2) the Consumer Price Index (measure of inflation) may be used to assess the
real rate of return from an investment in each Portfolio; (3) other U.S.
government statistics such as GNP, and net import and export figures derived
from governmental publications, e.g., The Survey of Current Business, may be
used to illustrate investment attributes of each Portfolio or the general
economic, business, investment, or financial environment in which each Portfolio
operates; and (4) the effect of tax-deferred compounding on the particular
Portfolio's investment returns, or on returns in general, may be illustrated by
graphs, charts, etc. where such graphs or charts would compare, at various
points in time, the return from an investment in the particular Portfolio (or
returns in general) on a tax-deferred basis (assuming reinvestment of capital
gains and dividends and assuming one or more tax rates) with the return on a
taxable basis. Each Portfolio's performance may also be compared to the
performance of other mutual funds by Morningstar, Inc. which ranks mutual funds
on the basis of historical risk and total return. Morningstar rankings are
calculated using the mutual fund's performance relative to three-month Treasury
bill monthly returns. Morningstar's rankings range from five stars (highest) to
one star (lowest) and represent Morningstar's assessment of the historical risk
level and total return of a mutual fund as a weighted average for 3, 5, and 10-
year periods. In each category, Morningstar limits its five star rankings to 10%
of the funds it follows and its four star rankings to 22.5% of the funds it
follows. Rankings are not absolute or necessarily predictive of future
performance.
The performance of the Portfolios may be compared, for example, to the record of
the S&P 500 Index, NASDAQ Composite Index, and the Europe, Australia, Far
Eastern ("EAFE") Index. The S&P 500 Index is a well known measure of the price
performance of 500 leading larger domestic stocks which represent approximately
80% of the market capitalization of the U.S. equity market. The NASDAQ Composite
Index is comprised of all stocks on NASDAQ's National Market Systems, as well as
other NASDAQ domestic equity securities. The NASDAQ Composite Index has
typically included smaller, less mature companies representing 10% to 15% of the
capitalization of the entire domestic equity market. The EAFE Index is comprised
of more than 900 companies in Europe, Australia and the Far East. All of these
indices are unmanaged and capitalization weighted. In general, the securities
comprising the NASDAQ Composite Index are more growth oriented and have a
somewhat higher beta and P/E ratio than those in the S&P
S-38
<PAGE>
500 Index.
The total returns of all of these indices will show the changes in prices for
the stocks in each index. However, only the performance data for the S&P 500
Index assumes reinvestment of all capital gains distributions and dividends paid
by the stocks in each data base. Tax consequences will not be included in such
illustration, nor will brokerage or other fees or expenses of investing be
reflected in the NASDAQ Composite, S&P 500, EAFE Index.
ADDITIONAL INFORMATION
Reports
Annual and semi-annual reports containing financial statements of the Fund, as
well as voting instruction soliciting material for the Fund, have been sent to
Policyowners.
Name and Service Mark
The Chubb Corporation in conjunction with its sale of Chubb Life to Jefferson-
Pilot Corporation has granted a limited right to use the "Chubb" name and
service mark
FINANCIAL STATEMENTS
The financial statements contained in the Fund's December 31, 1996 Annual Report
to Shareholders are incorporated herein by reference.
S-39
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
The financial statements contained in the Fund's December 31, 1996
Annual Report to Shareholders filed on March 3, 1997 are
incorporated by reference in the Fund's Statement of Additional
Information.
(b) Exhibits
1. a. Amended and Restated Articles of Incorporation,
b. Articles Supplementary to the Articles of
Incorporation,
2. By-Laws, incorporated by reference to earlier
filing on February 21, 1991, SEC File No. 2-94479, Exhibit
2 of Form N-1A Registration Statement.
3. Not applicable.
4. Not applicable.
C-1
<PAGE>
by reference to earlier filing on April 11, 1990, SEC File No. 2-
94479, Exhibit 4(b) of N-1A Registration Statement.
c. Specimen of Certificate of Stock of the Gold Stock Portfolio,
incorporated by reference to earlier filing on April 11, 1990, SEC
File No. 2-94479, Exhibit 4(c) of N-1A Registration Statement.
d. Specimen of Certificate of Stock of the Bond Portfolio,
incorporated by reference to earlier filing on April 11, 1990, SEC
File No. 2-94479, Exhibit 4(d) of N-1A Registration Statement.
e. Specimen of Certificate of Stock of the Domestic Growth Stock
Portfolio, incorporated by reference to earlier filing on April 11,
1990, SEC File No. 2-94479, Exhibit 4(e) of N-1A Registration
Statement.
f. Specimen of Certificate of Stock of the Growth and Income
Portfolio, incorporated by reference to earlier filing on February 28,
1992, SEC File No. 2-94479, Exhibit 4(f) of N-1A Registration
Statement.
g. Specimen of Certificate of Stock of the Capital Growth Portfolio,
incorporated by reference to earlier filing on February 28, 1992, SEC
File No. 2-94479, Exhibit 4(g) of N-1A Registration Statement.
C-2
<PAGE>
5. a. Investment Management Agreement between Chubb America Fund, Inc.
and Chubb Investment Advisory Corporation.
b. Investment Subadvisory Agreement among Chubb America Fund,
Inc., Chubb Investment Advisory Corporation and Templeton Global
Advisers Limited.
c. Investment Subadvisory Agreement among Chubb America Fund,
Inc., Chubb Investment Advisory Corporation and Van Eck Associates
Corporation.
d. Sub-Investment Subadvisory Agreement among Chubb America Fund,
Inc., Chubb Investment Advisory Corporation and Pioneering Management
Corporation.
C-3
<PAGE>
e. Investment Sub Advisory Agreement between Chubb America Fund,
Inc., Chubb Investment Advisory Corporation and Warburg, Pincus
Counselors, Inc. for the Growth and Income Portfolio.
f. Investment Sub Advisory Agreement between Chubb America Fund,
Inc., Chubb Investment Advisory Corporation and Janus Capital
Corporation for the Capital Growth Portfolio.
g. Investment Sub Advisory Agreement between Chubb America Fund,
Inc., Chubb Investment Advisory Corporation and J.P. Morgan Investment
Management Inc. for the Balanced Portfolio.
C-4
<PAGE>
h. Investment Sub-Advisory Agreement among Chubb America Fund,
Inc., Chubb Investment Advisory Corporation, and Massachusetts
Financial Services Company with respect to the Emerging Growth
Portfolio and Money Market Portfolios.
i. Investment Sub-Advisory Agreement among Chubb America Fund,
Inc., Chubb Investment Advisory Corporation and Chubb Asset Managers,
Inc.
j. Form of Investment Sub-Advisory Agreement among Chubb America
Fund, Inc., Chubb Investment Advisory Corporation and Londard Odeir
and Strong Capital Management.
k. Form of Investment Sub-Advisory Agreement among Chubb America
Fund, Inc., Chubb Investment Advisory Corporation and Massachusetts
Financial Services Corporation.
6. Fund Distribution Agreement Between Chubb America Fund, Inc. and Chubb
Securities Corporation.
C-5
<PAGE>
7. Not applicable.
8. a. Custodian Agreement between Chubb America Fund, Inc. and Citibank,
N.A., incorporated by reference to earlier filing on February 21,
1991, SEC File No. 2-94479, Exhibit 8 of N-1A Registration Statement.
b. Amendment to the Custodial Services Agreement between Chubb
America Fund, Inc. and Citibank, N.A., incorporated by reference to
earlier filing on April 14, 1993, SEC File No. 2-94479, Exhibit 8(b)
of N-1A Registration Statement.
c. Amendment No.2 to Custodial Services Agreement between Chubb
America Fund, Inc. and Citibank, N.A., incorporated by reference to
earlier filing on April 14, 1993, SEC File No. 2-94479, Exhibit 8(c)
of N-1A Registration Statement.
9. Not applicable.
10. a. Opinion and Consent of Counsel as to the legality of the
securities being registered.
11. Not applicable.
12. Not applicable.
C-6
<PAGE>
13. a. Stock Subscription Agreement between Chubb America Fund, Inc. and
The Volunteer State Life Insurance Company, incorporated by reference
to earlier filing on April 11, 1990, SEC File No. 2-94479, Exhibit
13(a) of N-1A Registration Statement.
b. Stock Subscription Agreement between Chubb America Fund, Inc. and
The Volunteer State Life Insurance Company, incorporated by reference
to earlier filing on April 11, 1990, SEC File No. 2-94479, Exhibit
13(b) of N-1A Registration Statement.
c. Stock Subscription Agreement between Chubb America Fund, Inc. and
Chubb Life Insurance Company of America, incorporated by reference to
earlier filing on February 28, 1992, SEC File No. 2-94479, Exhibit
13(c) of N-1A Registration Statement.
d. Stock Subscription Agreement between Chubb America Fund, Inc.,
and Chubb Life Insurance Company of America.
14. Not applicable.
20. Consent of Freedman, Levy, Kroll & Simonds, incorporated by reference
to earlier filing on April 11, 1990, SEC File No. 2-94479, Exhibit 20
of N-1A Registration Statement.
27.1 FINANCIAL DATA SCHEDULES No. 2-94479
99.1 Consent of Ernst & Young LLP
99.2 Schedule of Computation of Performance Quotation Incorporated by
reference to earlier filing on April 7, 1997 SEC File 2-94479 EXHIBIT
99.2 of NIA Registration Statement SEC File No. 2-94479
99.3 Diagram of Subsidiaries of the Jefferson-Pilot Corporation
Incorporated by reference to earlier filing on April 7, 1997 SEC File
No. 2-94479 Exhibit 99.3 of NIA Registration Statement SEC File No.
2-94479
99.4 Price Make-up Sheet Incorporated by reference to earlier filing on
April 7, 1997 SEC. File No. 2-94479 Exhibit 99.4 of NIA Registration
Statement SEC File No. 2-94479
C-7
<PAGE>
Item 25. Persons Controlled by or under Common Control with Registrant
Initially, shares of the Registrant were offered and sold only to The Volunteer
State Life Insurance Company ("Volunteer"), a stock life insurance company
organized under the laws of Tennessee. Effective July 1, 1991, Volunteer
changed its name to Chubb Life Insurance Company of America ("Chubb Life") and
re-domesticated to New Hampshire. The purchasers of variable life insurance
contracts issued in connection with separate accounts established by Chubb Life
or its affiliated insurance companies will have the right to instruct Chubb Life
or its affiliated insurance companies with respect to the voting of the
Registrant's shares held by such separate accounts on behalf of policyowners.
The shares held by Chubb Life or its affiliated insurance companies, including
shares for which no voting instructions have been received, shares held in the
separate accounts representing charges imposed by Chubb Life or its affiliated
insurance companies against the separate account and shares held by Chubb life
or its affiliated insurance companies that are not otherwise attributable to
Policies, will also be voted by Chubb Life or its affiliated insurance companies
in proportion to instructions received from owners of Policies. Chubb Life or
its affiliated insurance companies reserve the right to vote any or all such
shares at their discretion to the extent consistent with then current
interpretations of the Investment Company Act of 1940 and rules thereunder.
Subject to such voting instruction rights, Chubb Life or its affiliated
insurance companies will directly control the Registrant.
Subsequently, shares of the Registrant may be offered and sold to other separate
accounts formed by Chubb Life, its successors or assigns, and by other insurance
companies which, along with Chubb Life, are subsidiaries of The Jefferson Pilot
Corporation, a North Carolina corporation, or subsidiaries of such subsidiaries.
In addition, shares of the Fund may be also offered and sold to other separate
accounts of non-affiliated insurance companies. A diagram of the subsidiaries of
The Jefferson Pilot Corporation has been incorporated by reference to earlier
filing on April 7, 1997, as Exhibit 99.3 of N1A Registration Statement SEC File
No. 2-94479.
C-8
<PAGE>
Item 26. Number of Holders of Securities
As of the effective date of this Registration Statement:
<TABLE>
<CAPTION>
(2)
(1) Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
World Growth Stock Portfolio Capital Stock; $.01 par value.... Two
International Equity Portfolio Capital Stock; $.01 par value.. One
Money Market Portfolio Capital Stock; $.01 par value.......... Two
Gold Stock Portfolio Capital Stock; $.01 par value............ Two
Bond Portfolio Capital Stock; $.01 par value.................. Two
High Yield Bond Portfolio Capital Stock; $.01 par value....... One
Growth Portfolio Capital Stock; $.01 par value................ One
Domestic Growth Stock Portfolio Capital Stock; $.01 par value. Two
Growth and Income Portfolio Capital Stock; $.01 par value..... Two
Capital Growth Portfolio Capital Stock; $.01 par value........ Two
Balanced Portfolio Capital Stock; $.01 par value.............. Two
Emerging Growth Portfolio Capital Stock; $.01 par value....... Two
</TABLE>
Chubb Life has purchased 300,000 shares of capital stock of the the Emerging
Growth Portfolio. Chubb Separate Account A has purchased shares of each
Portfolio in the amounts allocated to each Portfolio by purchasers of Policies.
Item 27. Indemnification
Reference is made to Article VIII, Section 10 of the Registrant's Amended and
Restated Articles of Incorporation filed on April 11, 1990 as Exhibit 1 to the
Form N-1A Registration Statement and to Article V of the Registrant's By-Laws
filed herein as Exhibit 2 to this Registration Statement. The Amended and
Restated Articles of Incorporation provide that neither an officer nor director
of the Registrant will be liable to the Registrant or its stockholders for
monetary damages for breach of fiduciary duty as an officer or director, except
to the extent such limitation of liability is not otherwise permitted by law.
The By-Laws provide that the Registrant will indemnify its directors and
officers to the extent permitted or required by Maryland law. A resolution of
the Board of Directors specifically approving payment or advancement of expenses
to an officer is required by the By-Laws. Indemnification may not be made if
the director or officer has incurred liability by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of duties in the conduct of
his/her office ("Disabling Conduct"). The means of determining whether
indemnification shall be made are (1) a final decision by a court or other body
before whom the proceeding is brought that the director or officer was not
liable by reason of Disabling Conduct, or (2) in the absence of such a decision,
a reasonable determination, based on a review of the facts, that the director or
officer was not
C-9
<PAGE>
liable by reason of Disabling Conduct. Such latter determination may be made
either by (a) vote of a majority of directors who are neither interested persons
(as defined in the Investment Company Act of 1940) nor parties to the proceeding
or (b) independent legal counsel in a written opinion. The advancement of legal
expenses may not occur unless the director or officer agrees to repay the
advance (if it is determined that the director or officer is not entitled to the
indemnification) and one of three other conditions is satisfied: (1) the
director or officer provides security for his/her agreement to repay, (2) the
Registrant is insured against loss by reason of lawful advances, or (3) the
directors who are not interested persons and are not parties to the proceedings,
or independent counsel in a written opinion, determine that there is reason to
believe that the director or officer will be found entitled to indemnification.
The directors and officers are currently covered for liabilities incurred in
their capacities as such directors and officers under the terms of a joint
liability insurance policy. This policy also covers the directors and officers
of Chubb Investment Advisory, Chubb Asset, and Chubb Investment Funds, Inc. The
policy also insures the Registrant, Chubb Investment Advisory, Chubb Asset and
Chubb Investment Funds, Inc. for errors and omissions liabilities.
Insofar as indemnification for liability arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, 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 director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, 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 28. Business and Other Connections of Investment Adviser
Chubb Investment Advisory was formed in 1984 and had not been previously
engaged in any other business. The other businesses, professions, vocations and
employment of a substantial nature of its directors and officers during the past
two years are as follows:
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<PAGE>
<TABLE>
<CAPTION>
Other Business,
Name of Director Positions with Chubb Profession, Vocation or
or Officer of Chubb Investment Employment During
Investment Advisory Advisory Past Two Years
- -------------------- -------- --------------
<S> <C> <C>
Ronald Angarella President and Director Senior Vice President,
Chubb Life; President and
Director, Chubb
Securities, Hampshire
Funding, Inc. and Chubb
America Fund, Inc.;
Senior Vice President and
Director, Chubb
Investment Funds, Inc.
Ronald H. Emery Senior Vice President Senior Vice President and
and Director Controller, Chubb Life
Shari J. Lease Secretary Assistant Vice President
and Counsel, Chubb Life;
Secretary Chubb
Investment Funds, Inc.
and Chubb Series Trust
</TABLE>
C-11
<PAGE>
<TABLE>
<CAPTION>
Name of Director Positions with Chubb Other Business,
or Officer of Chubb Investment Profession, Vocation or
Investment Advisory Advisory Employment During
- ------------------- -------- Past Two Years
--------------
<S> <C> <C>
John A. Weston Treasurer Assistant Vice President,
Mutual Fund Accounting
Officer, Chubb Life;
Treasurer, Chubb
Securities Corporation,
Chubb Investment Funds
Inc. and Chubb Series
Trust and Hampshire
Funding, Inc.; previously
Financial Reporting
Officer, Chubb Life
</TABLE>
C-12
<PAGE>
<TABLE>
<CAPTION>
Name of Director Positions with Chubb Other Business,
or Officer of Chubb Investment Profession, Vocation or
Investment Advisory Advisory Employment During
- ------------------- -------- Past Two Years
--------------
<S> <C> <C>
Carol R. Hardiman Assistant Vice Vice President of Chubb
President Securities and Hampshire
Funding Inc.
Thomas H. Elwood Assistant Secretary Assistant Counsel, Chubb
Life; Assistant Secretary,
Chubb Investment Funds,
Inc.; formerly, Associate
Counsel New York Life
Insurance Company;
Secretary New York Life
Institutional Funds, Inc.,
Assistant Secretary Chubb
Series Trust, Main Stay
Funds, and MFA Funds.
</TABLE>
The directors, officers, employees and partners of the Sub-Investment Managers
have rendered investment advice and management during the past two years and
have not engaged in any other business of a substantial nature.
Item 29. Principal Underwriters
The names, principal business addresses, positions and offices with Chubb
Securities Corporation, and positions and offices with the Fund, of each
director or officer of Chubb Securities Corporation who is a director or officer
of the Fund are:
<TABLE>
<CAPTION>
Positions and
Officers Positions and
Name and Principal with Chubb Officers
Business Address Securities with the Fund
---------------- ---------- -------------
<S> <C> <C>
Ronald Angarella President and Chairman President and Director
One Granite Place
Concord,
New Hampshire 03301
Charles C. Cornelio Vice President, Director Vice President, Counsel
One Granite Place and Secretary and Assistant Secretary
Concord,
New Hampshire 03301
John A. Weston Treasurer Treasurer
One Granite Place
Concord,
New Hampshire 03301
Shari J. Lease Assistant Secretary Assistant Vice President
and Counsel, Chubb Life;
Secretary Chubb
Investment Funds, Inc.
and Chubb Series Trust
</TABLE>
Item 30. Location of Accounts and Records
The following entities prepare, maintain and preserve the records required by
Section 31(a) of the 1940 Act for the Registrant. These services are provided
to the Registrant through written agreements between the parties to the effect
that such services will be provided to the Registrant
C-13
<PAGE>
for such periods prescribed by the Rules and Regulations of the Securities and
Exchange Commission under the 1940 Act and such records will be surrendered
promptly on request:
Citibank, N.A., 111 Wall Street, New York, New York 10043; Chubb Asset
Managers, Inc., 15 Mountain View Road, Warren, New Jersey 07061; Van Eck
Associates Corporation, 99 Park Avenue, New York, New York 10016; Chubb
Investment Advisory, One Granite Place, Concord, New Hampshire 03301; Pioneering
Management Corporation, 60 State Street, Boston, Massachusetts; Templeton,
Global Advisors, Inc., Lyford Cay, Nassau, Bahamas; Janus Capital Corporation,
100 Fillmore Street, Suite 300, Denver, Colorado 80206; Phoenix Investment
Counsel, Inc., One American Row, Hartford Connecticut 06115; Massachusetts
Financial Services Company, 500 Boylston Street, Boston, Massachusetts 02116;
and Chubb Securities Corporation, One Granite Place, Concord, New Hampshire
03301.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
Not applicable.
C-14
<PAGE>
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 Amended Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amended
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Concord, and State of New Hampshire, on the 28th
day of September 1997.
CHUBB AMERICA FUND, INC.
By: /s/ RONALD ANGARELLA
---------------------
Ronald Angarella
President
Each of the undersigned Officers and Directors of Chubb America Fund, Inc. (the
"Fund") whose signatures appear below hereby makes, constitutes and appoints
Ronald Angarella, Shari J. Lease and Thomas H. Elwood, and each of them acting
individually, his/her true and lawful attorneys with power to act without any
other and with full power of substitution, to execute, deliver and file in each
of the undersigned Officers and Directors' capacity or capacities as shown
below, this Registration Statement and any and all documents in support of this
Registration Statement or supplement thereto, and any and all amendments,
including any and all post-effective amendments to the foregoing; and said
Officers and Directors hereby grant to said attorneys, and to any one or more of
them, full power and authority to do and perform each and every act and thing
whatsoever as said attorney or attorneys may deem necessary or advisable to
carry out fully the intent of this Power of Attorney to the same extent and with
the same effect as each of said Officers and Directors might or could do
personally in his/her capacity or capacities as aforesaid, and each of said
Officers and Directors ratifies, confirms and approves all acts and things which
said attorney or attorneys might do or cause to be done by virtue of this Power
of Attorney and his/her signature as the same as may be signed by said attorney
or attorneys, or any one or more of them to this Registration Statement and any
and all amendments thereto, including any and all post-effective amendments to
the foregoing.
C-15
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this Amended
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/RONALD ANGARELLA President, September 2, 1997
------------------- Principal
RONALD ANGARELLA Executive
Officer, and
Director
/s/JOHN A. WESTON Treasurer, Principal August 28, 1997
----------------- Financial Officer, and
JOHN A. WESTON, Principal Accounting
Officer
* Director September 2, 1997
----------------------
* Director September 2, 1997
---------------------
* Director September 2, 1997
--------------------
</TABLE>
* By Ronald Angarella
-------------------
Attorney in fact
C-16
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
1.a. Amended and Restated Articles of Incorporation
1.b. Articles Supplementary to the Articles of Incorporation
5.a. Investment Management Agreement between Chubb America Fund Inc. and
Chubb Investment Advisory Corporation
b. Investment Sub Advisory Agreement among Chubb America Fund Inc., Chubb
Investment Advisory Corporation and Templeton Global Advisors Limited
for the World Growth Stock Portfolio
c. Investment Sub Advisory Agreement among Chubb America Fund Inc., Chubb
Investment Advisory Corporation and Van Eck Associates Corporation for
the Gold Stock Portfolio
d. Investment Sub Advisory Agreement among Chubb America Fund Inc., Chubb
Investment Advisory Corporation and Promising Management Corporation for
the Domestic Growth Stock Portfolio
e. Investment Sub Advisory Agreement among Chubb America Fund, Inc., Chubb
Investment Advisory Corporation and Working, Pincus Counselors Inc.
for the Growth and Income Portfolio
f. Investment Sub Advisory Agreement among Chubb America Fund, Inc., Chubb
Investment Advisory Corporation, and James Capital Corporation for the
Capital Growth Portfolio
g. Investment Sub Advisory Agreement among Chubb America Fund Inc., Chubb
Investment Advisory Corporation and J.P. Morgan Investment Advisory
Corporation for the Balanced Portfolio
h. Investment Sub Advisory Agreement among Chubb America Fund Inc., Chubb
Investment Advisory Corporation and Massachusetts Financial Services
Company for the Emerging Growth and Money Market Portfolios
i. Investment Sub Advisory Agreement among Chubb America Fund Investment,
Chubb Investment Advisory Corporation and Chubb Asset Managers for the
Bond Portfolio
j. Form of Investment Sub Advisory Agreement among Chubb America Fund
Inc., Chubb Investment Advisory Corporation and Strong Capital
Management for the Investment Equity and Growth Portfolios
k. Form of Investment Sub Advisory Agreement among Chubb America Fund Inc.,
Chubb Investment Advisory Corporation and Massachusetts Financial
Services Company for the High Yield Bond Portfolio
6. Fund Distribution Agreement between Chubb America Fund, Inc. and Chubb
Securities Corporation
10. Opinion and Consent of Counsel as to the legality of the securities
being registered
27.1 Financial Data Schedules
99.1 Consent of Ernst & Young LLP
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> WORLD GROWTH STOCK PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7,765,094
<INVESTMENTS-AT-VALUE> 9,713,036
<RECEIVABLES> 2,459,549
<ASSETS-OTHER> 1,237,333
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 100,835,918
<PAYABLE-FOR-SECURITIES> 1,653,028
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,187,256
<TOTAL-LIABILITIES> 8,840,284
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,067,714
<SHARES-COMMON-STOCK> 3,947,054
<SHARES-COMMON-PRIOR> 3,475,276
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 490,907
<ACCUMULATED-NET-GAINS> 2,046,667
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19,372,160
<NET-ASSETS> 91,995,634
<DIVIDEND-INCOME> 2,149,311
<INTEREST-INCOME> 551,779
<OTHER-INCOME> 0
<EXPENSES-NET> 772,846
<NET-INVESTMENT-INCOME> 1,928,244
<REALIZED-GAINS-CURRENT> 7,188,290
<APPREC-INCREASE-CURRENT> 6,444,435
<NET-CHANGE-FROM-OPS> 15,560,969
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,896,674
<DISTRIBUTIONS-OF-GAINS> 5,766,822
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 480,289
<NUMBER-OF-SHARES-REDEEMED> 182,468
<SHARES-REINVESTED> 173,957
<NET-CHANGE-IN-ASSETS> 18,303,277
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 556,740
<OVERDISTRIB-NII-PRIOR> 454,018
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 65,061
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 772,846
<AVERAGE-NET-ASSETS> 86,733,775
<PER-SHARE-NAV-BEGIN> 21.20
<PER-SHARE-NII> .49
<PER-SHARE-GAIN-APPREC> 3.56
<PER-SHARE-DIVIDEND> .48
<PER-SHARE-DISTRIBUTIONS> 1.46
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 23.31
<EXPENSE-RATIO> .88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> MONEY MARKET PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7,740,635
<INVESTMENTS-AT-VALUE> 7,739,400
<RECEIVABLES> 634
<ASSETS-OTHER> 549,360
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8,289,394
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 393,137
<TOTAL-LIABILITIES> 393,137
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,898,600
<SHARES-COMMON-STOCK> 770,648
<SHARES-COMMON-PRIOR> 809,271
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,108)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,235)
<NET-ASSETS> 7,896,257
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 440,661
<OTHER-INCOME> 0
<EXPENSES-NET> 52,737
<NET-INVESTMENT-INCOME> 387,924
<REALIZED-GAINS-CURRENT> (163)
<APPREC-INCREASE-CURRENT> (2,551)
<NET-CHANGE-FROM-OPS> 385,210
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 387,924
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,371,889
<NUMBER-OF-SHARES-REDEEMED> 1,449,618
<SHARES-REINVESTED> 39,106
<NET-CHANGE-IN-ASSETS> (416,419)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (945)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 42,558
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 52,737
<AVERAGE-NET-ASSETS> 8,470,557
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> .50
<PER-SHARE-GAIN-APPREC> (.02)
<PER-SHARE-DIVIDEND> .50
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.25
<EXPENSE-RATIO> .62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> GOLD STOCK PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7,594,071
<INVESTMENTS-AT-VALUE> 7,803,139
<RECEIVABLES> 424,418
<ASSETS-OTHER> 10,597
<OTHER-ITEMS-ASSETS> 5,400
<TOTAL-ASSETS> 8,243,554
<PAYABLE-FOR-SECURITIES> 485,692
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 203,435
<TOTAL-LIABILITIES> 689,127
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,377,161
<SHARES-COMMON-STOCK> 454,995
<SHARES-COMMON-PRIOR> 413,432
<ACCUMULATED-NII-CURRENT> 105,318
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (135,784)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 207,732
<NET-ASSETS> 7,554,427
<DIVIDEND-INCOME> 61,079
<INTEREST-INCOME> 16,930
<OTHER-INCOME> 0
<EXPENSES-NET> 87,402
<NET-INVESTMENT-INCOME> (9,393)
<REALIZED-GAINS-CURRENT> 579,813
<APPREC-INCREASE-CURRENT> (474,478)
<NET-CHANGE-FROM-OPS> 95,942
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 196,148
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 119,333
<NUMBER-OF-SHARES-REDEEMED> 80,029
<SHARES-REINVESTED> 2,259
<NET-CHANGE-IN-ASSETS> 686,782
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 71,804
<OVERDIST-NET-GAINS-PRIOR> 332,934
<GROSS-ADVISORY-FEES> 62,705
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 87,402
<AVERAGE-NET-ASSETS> 8,314,989
<PER-SHARE-NAV-BEGIN> 16.61
<PER-SHARE-NII> (.03)
<PER-SHARE-GAIN-APPREC> .45
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .43
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.60
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> DOMESTIC GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 57,127,636
<INVESTMENTS-AT-VALUE> 66,193,249
<RECEIVABLES> 352,945
<ASSETS-OTHER> 3,305,136
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 69,851,330
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,684,964
<TOTAL-LIABILITIES> 7,684,964
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,741,370
<SHARES-COMMON-STOCK> 3,418,546
<SHARES-COMMON-PRIOR> 2,715,671
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 359,383
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,065,613
<NET-ASSETS> 62,166,366
<DIVIDEND-INCOME> 665,000
<INTEREST-INCOME> 83,777
<OTHER-INCOME> 0
<EXPENSES-NET> 546,784
<NET-INVESTMENT-INCOME> 201,993
<REALIZED-GAINS-CURRENT> 7,787,402
<APPREC-INCREASE-CURRENT> 1,251,740
<NET-CHANGE-FROM-OPS> 9,241,135
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 201,993
<DISTRIBUTIONS-OF-GAINS> 8,608,136
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 674,482
<NUMBER-OF-SHARES-REDEEMED> 372,862
<SHARES-REINVESTED> 401,256
<NET-CHANGE-IN-ASSETS> 13,648,480
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 480,015
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 546,784
<AVERAGE-NET-ASSETS> 63,632,545
<PER-SHARE-NAV-BEGIN> 17.87
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 2.85
<PER-SHARE-DIVIDEND> .06
<PER-SHARE-DISTRIBUTIONS> 2.53
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.19
<EXPENSE-RATIO> .85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> BOND PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 12,152,607
<INVESTMENTS-AT-VALUE> 12,196,539
<RECEIVABLES> 168,563
<ASSETS-OTHER> 73,016
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12,438,118
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 720,425
<TOTAL-LIABILITIES> 720,425
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11,672,624
<SHARES-COMMON-STOCK> 1,141,490
<SHARES-COMMON-PRIOR> 871,579
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,137
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 43,932
<NET-ASSETS> 11,717,693
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 699,701
<OTHER-INCOME> 0
<EXPENSES-NET> 64,383
<NET-INVESTMENT-INCOME> 635,318
<REALIZED-GAINS-CURRENT> 70,071
<APPREC-INCREASE-CURRENT> (363,167)
<NET-CHANGE-FROM-OPS> 342,222
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 635,318
<DISTRIBUTIONS-OF-GAINS> 34,269
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 526,422
<NUMBER-OF-SHARES-REDEEMED> 317,408
<SHARES-REINVESTED> 60,897
<NET-CHANGE-IN-ASSETS> 2,487,603
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (34,665)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 53,464
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 64,383
<AVERAGE-NET-ASSETS> 10,634,614
<PER-SHARE-NAV-BEGIN> 10.59
<PER-SHARE-NII> .56
<PER-SHARE-GAIN-APPREC> (.29)
<PER-SHARE-DIVIDEND> .56
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.27
<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> GROWTH AND INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 19,449,541
<INVESTMENTS-AT-VALUE> 23,632,810
<RECEIVABLES> 46,077
<ASSETS-OTHER> 1,189,653
<OTHER-ITEMS-ASSETS> 175
<TOTAL-ASSETS> 24,868,715
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,157,019
<TOTAL-LIABILITIES> 1,157,019
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,104,196
<SHARES-COMMON-STOCK> 1,402,464
<SHARES-COMMON-PRIOR> 910,807
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 424,234
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,183,269
<NET-ASSETS> 23,711,696
<DIVIDEND-INCOME> 373,172
<INTEREST-INCOME> 35,826
<OTHER-INCOME> 0
<EXPENSES-NET> 158,754
<NET-INVESTMENT-INCOME> 250,244
<REALIZED-GAINS-CURRENT> 1,429,599
<APPREC-INCREASE-CURRENT> 2,322,094
<NET-CHANGE-FROM-OPS> 4,001,937
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 250,227
<DISTRIBUTIONS-OF-GAINS> 873,208
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 638,373
<NUMBER-OF-SHARES-REDEEMED> 183,357
<SHARES-REINVESTED> 36,642
<NET-CHANGE-IN-ASSETS> 10,585,673
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 132,174
<GROSS-ADVISORY-FEES> 135,739
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 158,754
<AVERAGE-NET-ASSETS> 17,885,364
<PER-SHARE-NAV-BEGIN> 14.41
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> 3.12
<PER-SHARE-DIVIDEND> .18
<PER-SHARE-DISTRIBUTIONS> .62
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.91
<EXPENSE-RATIO> .88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 7
<NAME> CAPITAL GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 73,631,704
<INVESTMENTS-AT-VALUE> 80,082,904
<RECEIVABLES> 1,095,969
<ASSETS-OTHER> 1,771,723
<OTHER-ITEMS-ASSETS> 180
<TOTAL-ASSETS> 82,950,776
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 12,118,614
<TOTAL-LIABILITIES> 12,118,614
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,852,475
<SHARES-COMMON-STOCK> 4,103,167
<SHARES-COMMON-PRIOR> 2,869,198
<ACCUMULATED-NII-CURRENT> 1,873
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,526,661
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,451,153
<NET-ASSETS> 70,832,162
<DIVIDEND-INCOME> 464,170
<INTEREST-INCOME> 542,852
<OTHER-INCOME> 0
<EXPENSES-NET> 797,903
<NET-INVESTMENT-INCOME> 209,119
<REALIZED-GAINS-CURRENT> 13,355,059
<APPREC-INCREASE-CURRENT> (2,436,125)
<NET-CHANGE-FROM-OPS> 11,128,053
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 206,677
<DISTRIBUTIONS-OF-GAINS> 13,430,158
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,090,550
<NUMBER-OF-SHARES-REDEEMED> 205,098
<SHARES-REINVESTED> 348,517
<NET-CHANGE-IN-ASSETS> 20,979,133
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 1,602,334
<OVERDISTRIB-NII-PRIOR> 1,143
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 703,701
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 797,903
<AVERAGE-NET-ASSETS> 69,766,608
<PER-SHARE-NAV-BEGIN> 17.38
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> 3.24
<PER-SHARE-DIVIDEND> .05
<PER-SHARE-DISTRIBUTIONS> 3.36
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.26
<EXPENSE-RATIO> 1.13
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 8
<NAME> BALANCED PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 18,701,560
<INVESTMENTS-AT-VALUE> 19,627,605
<RECEIVABLES> 1,088,377
<ASSETS-OTHER> 41,357
<OTHER-ITEMS-ASSETS> 176
<TOTAL-ASSETS> 20,757,515
<PAYABLE-FOR-SECURITIES> 1,007,150
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,493,935
<TOTAL-LIABILITIES> 2,501,085
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,700,368
<SHARES-COMMON-STOCK> 1,513,162
<SHARES-COMMON-PRIOR> 1,220,439
<ACCUMULATED-NII-CURRENT> 169
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 629,848
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 926,045
<NET-ASSETS> 18,256,430
<DIVIDEND-INCOME> 101,457
<INTEREST-INCOME> 469,158
<OTHER-INCOME> 0
<EXPENSES-NET> 174,909
<NET-INVESTMENT-INCOME> 395,706
<REALIZED-GAINS-CURRENT> 1,710,585
<APPREC-INCREASE-CURRENT> (325,936)
<NET-CHANGE-FROM-OPS> 1,780,355
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 395,535
<DISTRIBUTIONS-OF-GAINS> 1,248,566
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 444,592
<NUMBER-OF-SHARES-REDEEMED> 270,460
<SHARES-REINVESTED> 118,592
<NET-CHANGE-IN-ASSETS> 3,724,162
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 134,709
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 174,909
<AVERAGE-NET-ASSETS> 17,812,036
<PER-SHARE-NAV-BEGIN> 11.91
<PER-SHARE-NII> .26
<PER-SHARE-GAIN-APPREC> .99
<PER-SHARE-DIVIDEND> .26
<PER-SHARE-DISTRIBUTIONS> .83
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.07
<EXPENSE-RATIO> .97
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 9
<NAME> EMERGING GROWTH PORTFOLIO
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 27,681,152
<INVESTMENTS-AT-VALUE> 31,343,640
<RECEIVABLES> 19,552
<ASSETS-OTHER> 391,571
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,754,763
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 960,733
<TOTAL-LIABILITIES> 960,733
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 27,298,182
<SHARES-COMMON-STOCK> 2,021,917
<SHARES-COMMON-PRIOR> 860,878
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,495,848
<NET-ASSETS> 30,794,030
<DIVIDEND-INCOME> 26,867
<INTEREST-INCOME> 119,739
<OTHER-INCOME> 0
<EXPENSES-NET> 250,544
<NET-INVESTMENT-INCOME> (103,938)
<REALIZED-GAINS-CURRENT> 867,902
<APPREC-INCREASE-CURRENT> 2,223,109
<NET-CHANGE-FROM-OPS> 2,987,073
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 964,086
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,255,676
<NUMBER-OF-SHARES-REDEEMED> 96,996
<SHARES-REINVESTED> 2,359
<NET-CHANGE-IN-ASSETS> 19,354,506
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 173,563
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 250,544
<AVERAGE-NET-ASSETS> 21,508,669
<PER-SHARE-NAV-BEGIN> 13.29
<PER-SHARE-NII> (.05)
<PER-SHARE-GAIN-APPREC> 2.48
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .49
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.23
<EXPENSE-RATIO> 1.16
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit 99.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectus and "Independent Auditors" in the Statement of
Additional Information and to the use of our report dated February 14, 1997,
incorporated by reference in Post-Effective Amendment Number 20 to the
Registration Statement (Form N-1A No. 2-94479) of Chubb America Fund, Inc.
ERNST & YOUNG LLP
Boston, Massachusetts
September 2, 1997
<PAGE>
Exhibit 1.a
AMENDMENT AND RESTATEMENT OF ARTICLES OF INCORPORATION
OF
CHUBB AMERICA FUND, INC.
CHUBB AMERICA FUND, INC., a Maryland Corporation duly incorporated and
existing under the laws of the State of Maryland, having its principal office in
the State of Maryland in Baltimore, Maryland, hereby amends and restates its
Articles of Incorporation, which amendment was approved by the Board of
Directors of the Corporation on January 24, 1989, and which amendment and
restatement was approved by the affirmative vote of the holders of two-thirds of
all the shares entitled to be cast on the matter on April 27, 1989.
FIRST: The Articles of Incorporation of the Corporation are amended and
restated to read as follows:
ARTICLE I
---------
INCORPORATOR
------------
I, the undersigned, whose post office address is 832 Georgia Avenue,
Chattanooga, Tennessee 37402, being at least eighteen years of age, do hereby
act as incorporator with the intention of forming a corporation under and by
virtue of the General Corporation Law of the State of Maryland.
ARTICLE II
----------
NAME
----
The name of the Corporation is CHUBB AMERICA FUND, INC.
ARTICLE III
-----------
PURPOSES AND POWERS
-------------------
Section 1. Purposes. The purpose or purposes for which the Corporation is
---------
formed are as follows: (a) to conduct and carry on the business of an
investment company of the management type, (b) to hold, invest and reinvest the
property and assets of the Corporation in securities, including, without
limitation, commercial paper, certificates of deposit, bankers' acceptances,
bonds, notes, debentures, stocks, certificates of interest or participation, in
repurchase agreements, and in other property without limitation or restriction,
and, in connection therewith, to hold all or part of its assets in cash, (c) to
issue redeemable securities, and (d) to engage in other lawful activity within
the purposes for which corporations may be organized under the General
Corporation Law of the State of Maryland.
Section 2. Powers. The corporation shall be authorized to exercise and
-------
enjoy all of the powers, rights and privileges granted to, or conferred upon
corporations of a similar character by the General Corporation Law of the State
of Maryland, as now or hereafter in force.
<PAGE>
ARTICLE IV
ADDRESS AND REGISTERED AGENT
The post office address of the principal office of the Corporation in the
State of Maryland is 32 South Street, Baltimore, Maryland 21202. The name and
post office address of the resident agent of the Corporation in the State of
Maryland are The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. The resident agent is a Maryland corporation.
ARTICLE V
---------
CAPITAL STOCK
-------------
Section 1. Authorized Shares. The total number of shares of capital stock
------------------
which the corporation shall have authority to issue is one billion
(1,000,000,000) shares of the par value of One Cent ($.0l) per share and of the
aggregate par value of Ten Million Dollars ($10,000,000).
Section 2. Classes of Stock. Three hundred million (300,000,000) shares
-----------------
shall be issued and divided into the following classes of capital stock (the
"Funds"), each class comprising the number of shares and having the designation
indicated, subject, however, to the authority to change the designations of any
class and to increase or decrease the number of shares of any class hereinafter
granted to the Board of Directors.
Class Number of Shares
----- ----------------
World Growth Stock Portfolio 100,000,000
Money Market Portfolio 100,000,000
Gold Stock Portfolio 100,000,000
The balance of seven hundred million (700,000,000) shares of such stock,
and all other unissued shares, may be issued in such classes, or in any new
class or classes, each comprising such number of shares and having such
designations, such powers, preferences and rights and such qualifications,
limitations and restrictions as shall be fixed and determined from time to time
by resolution or resolutions providing for the issuance of such stock adopted by
the Board of Directors, to whom authority so to fix and determine the same,
without the vote or consent of the stockholders of the Corporation, is hereby
expressly granted. The Board of Directors is hereby expressly granted
authority, subject to applicable laws, to change the designation of any class
and to increase or decrease the number of shares of any class, but the number of
shares of any class shall not be decreased by the Board of Directors below the
number of shares thereof then outstanding. At any time when there are no shares
outstanding or subscribed for a particular class of stock previously established
in these Articles of Incorporation or by the Board of Directors, the class may
be liquidated by similar means. Each share of a class shall have equal rights
with each other share of that class with respect to the assets of the
Corporation pertaining to that class.
-2-
<PAGE>
Section 3. Voting Rights. The holder of each share of stock of the
--------------
Corporation shall be entitled to one vote for each full share, and a fractional
vote for each fractional share of stock, irrespective of class, then standing in
such holder's name on the books of the Corporation. On any matter submitted to
a vote of stockholders, all shares of the Corporation then issued and
outstanding and entitled to vote shall be voted in the aggregate and not by
class except that: (A) when otherwise expressly required by the Maryland General
Corporation Law or the Investment Company Act of 1940, as amended, shares shall
be voted by individual class; and (B) only shares of a particular class shall be
entitled to vote on matters which, in the judgment of the Board of Directors,
concern only that class.
Section 4. Fractional Shares. The Corporation may issue shares of stock
------------------
in fractional denominations to the same extent as its whole shares, and shares
in fractional denominations shall be shares of stock having proportionately, to
the respective fractions represented thereby, all the rights of whole shares,
including without limitation the right to vote, the right to receive dividends
and distributions and the right to participate upon liquidation of the
Corporation, but excluding the right to receive a stock certificate representing
fractional shares.
Section 5. Special Rights and Limitations. Except as the Board of
-------------------------------
Directors may provide in classifying or reclassifying any unissued shares of
stock, each class of stock of the Corporation shall have the following powers,
preferences or other special rights, and the qualifications, restrictions, and
limitations thereof shall be as follows:
(A) Nonassessable and Transferable Shares. The shares of each class,
--------------------------------------
when issued, will be fully paid and nonassessable; shall have no preference,
preemptive, conversion, exchange, or similar rights, except as set forth in this
Section, in Section 6 of this Article, and Section 2 of Article VII; and will be
freely transferable.
(B) Assets Belonging to Classes. All consideration received by the
----------------------------
Corporation for the issue or sale of shares of stock of a particular class,
together with all assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in whatever form, shall
constitute assets of that class, as opposed to other classes of the Corporation,
subject only to the rights of creditors. Such assets are described in these
Articles of Incorporation as "belonging to" that class. Any assets, income,
earnings, profits, and proceeds thereof, and any funds or payments which are not
readily identifiable as belonging to a particular class shall be allocated by or
under the supervision of the Board of Directors among any one or more of the
classes established and designated from time to time, in such manner and on such
basis as the Board of Directors, in its sole discretion, deems fair and
equitable.
(C) Dividends and Distributions. The Board of Directors may from time to
----------------------------
time declare and pay dividends or distributions, in stock or in cash, on any or
all classes of stock, the amount of such dividends and distributions and the
payment of them being wholly in the discretion of the Board of Directors.
Dividends or distributions on shares of any class of stock shall be paid only
out of earned surplus or other
-3-
<PAGE>
lawfully available assets belonging to such class. Because the Corporation
intends to qualify as a "regulated investment company" under the Internal
Revenue Code of 1954, as amended, or any successor or comparable statute
thereto, and the regulations promulgated thereunder, and because the computation
of net income and gains for federal income tax purposes may vary from the
computation thereof on the books of the Corporation, the Board of Directors
shall have the power, within its discretion, to distribute in any fiscal years
as dividends, including dividends designated in whole or in part as capital
gains distributions, amounts sufficient, in the opinion of the Board of
Directors, to enable the Corporation to qualify as a regulated investment
company and to avoid liability for the Corporation for federal income tax in
respect of that year. In furtherance and not in limitation of the foregoing, in
the event that a class of shares has a net capital loss for a fiscal year, and
to the extent that a net capital loss for a fiscal year offsets net capital
gains from one or more of the other classes, the amount to be deemed available
for distribution to the class or classes with the net capital gain may be
reduced by the amount offset.
(D) Liabilities Belonging to Classes. The assets belonging to any class
---------------------------------
of stock shall be charged with the liabilities in respect to such class, and
shall also be charged with their share of the general liabilities of the
Corporation in proportion to the net asset value of the respective classes
before allocation of the general liabilities. The determination of the Board of
Directors shall be conclusive as the amount of general liabilities or the amount
of any general assets of the Corporation, as to whether such liabilities or
assets are allocable to one or more classes, and as to the allocation of such
liabilities or assets to a given class or among several classes.
(E) Liquidation of Portfolio or Transfer of Assets Among Portfolios. The
----------------------------------------------------------------
Board of Directors may liquidate any Portfolio or transfer the assets of any
Portfolio to any other Portfolio. Such liquidation or transfer shall require
the approval of a majority of the stockholders of the affected class or each of
the affected classes of capital stock or shall be accomplished in such other
manner as may be permitted by the General Corporation Law and the Investment
Company Act of 1940, as amended. Upon any such transfer, the Corporation shall
issue shares of capital stock representing interests in the Fund to which the
assets were transferred. Such shares shall be exchanged at their respective net
asset values.
Section 6. Liquidation of Corporation. In the event of the liquidation of
---------------------------
the Corporation the stockholders of each class that has been established and
designated shall be entitled to receive, as a class, the excess of the assets
belonging to that class over the liabilities belonging to that class. The
assets so distributable to the stockholders of any particular class shall be
distributed among such stockholders in proportion to the number of shares of
that class held by them and recorded on the books of the Corporation. Any
assets not readily identifiable as belonging to any particular class shall be
allocated by or under the supervision of the Board of Directors to and among any
one or more of the classes established and designated, as provided herein. Any
such allocation by the Board of Directors shall be conclusive and binding for
all purposes.
Section 7. Redemption. All shares of stock of the Corporation shall have
-----------
the redemption rights provided in Section 2 of Article VII.
-4-
<PAGE>
Section 8. Binding Nature of Articles of Incorporation. The
--------------------------------------------
Corporation's shares of stock are issued and sold, and all persons who shall
acquire stock of the Corporation shall acquire the same, subject to the
condition and understanding that the provisions of the Corporation's Articles of
Incorporation, as from time to time amended, shall be binding upon them.
ARTICLE VI
----------
NUMBER OF DIRECTORS
-------------------
The number of directors of the Corporation shall be three (3), which number
may be increased or decreased pursuant to the By-Laws of the Corporation, but
shall never be less than three, and the names of the directors who shall act
until the first annual meeting or until their successors are duly chosen and
qualified are Howard I. Levine, Whitney Durand, and W. Scott McGinness.
ARTICLE VII
-----------
PROVISIONS DEFINING, LIMITING AND REGULATING POWERS
---------------------------------------------------
The business and affairs of the Corporation shall be managed under the
direction of the Board of Directors which shall have and may exercise all powers
of the Corporation except those powers which are by law, by these Articles of
Incorporation or by the By-Laws conferred upon or reserved to the stockholders.
The following provisions are hereby adopted for the purpose of defining,
limiting and regulating the powers of the Corporation and of the directors and
stockholders.
Section 1. No Preemptive Rights. No holder of shares of stock of any
---------------------
class shall be entitled as a matter of right to subscribe for or purchase or
receive any part of any treasury shares held by the Corporation, or of any new
or additional issue of shares of stock of any class, or of securities
convertible into shares of stock of any class of the Corporation, whether now or
hereafter authorized or whether issued for money, for a consideration other than
money, or by way of dividend, other than such right, if any, as the Board of
Directors, at its discretion, may determine.
Section 2. Redemption of Shares. Each holder of shares of capital stock
---------------------
of the Corporation shall be entitled to require the Corporation to redeem all or
any part of the shares of capital stock of the Corporation standing in the name
of the holder on the books of the Corporation. The Corporation shall redeem all
shares of such capital stock tendered to it for redemption at the redemption
price of such shares as in effect from time to time as may be determined by the
Board of Directors of the Corporation in accordance with the provisions hereof,
subject to the right of the Board of Directors of the Corporation to suspend the
right of redemption of shares of capital stock of the corporation or postpone
the date of payment of such redemption price in accordance with provisions of
applicable law. The redemption price of shares of capital stock of the
Corporation shall be the net asset value thereof as determined by the Board of
Directors of the Corporation from time to time in accordance with the provisions
of applicable law,
-5-
<PAGE>
less such redemption fee or other charge, if any, as may be fixed by resolution
of the Board of Directors of the Corporation. Redemption shall be conditioned on
the Corporation having funds legally available therefor. Payment of the
redemption price shall be made in cash by the Corporation at such time and in
such manner as may be determined from time to time by the Board of Directors of
the Corporation, except that capital stock of any class may be redeemed with the
assets, other than cash, of the Portfolio to which the class relates if the
Board of Directors deems such action desirable.
Section 3. Net Asset Value. If the Board of Directors determines that the
----------------
net asset value per share of any class or classes of the Corporation's stock
should remain constant, the Corporation may declare, pay and credit as dividends
daily the net income (which may include or give effect to realized and
unrealized gains and losses, as determined in accordance with the Corporation's
accounting and valuation policies) of the Corporation allocated to that class.
If the amount so determined for any day is negative, the Corporation may,
without the payment of monetary compensation but in consideration of the
interest of the Corporation and its stockholders in maintaining a constant net
asset value per share of the class, redeem pro rata from all the stockholders of
record of shares of the class or classes at the time of such redemption (in
proportion to their respective holdings thereof) such number of outstanding
shares of the class, or fractions thereof, as shall be required to permit the
net asset value per share of the class to remain constant.
Section 4. Custody of Assets and Management of Business. Assets of the
---------------------------------------------
Corporation may be held by or deposited with, a bank or trust company or any
other organization as custodian in accordance with applicable law and
regulations. Subject to the provisions of the Investment Company Act of 1940,
as amended, the Corporation may employ any agency or instrumentality,
incorporated or unincorporated, to render management services of any nature with
respect to the conduct of the business of the Corporation, and to manage and
direct the business and activities of the Corporation to such extent as the
Board of Directors may determine from time to time, whether or not the procedure
involves delegation of functions usually or customarily performed by the Board
of Directors or officers of a corporation.
Section 5. By-Laws. The original By-Laws of the Corporation shall be
--------
adopted by the initial directors named herein. Thereafter, the Board of
Directors shall have the power to make, alter or repeal by-laws subject,
however, to the power vested in and reserved to the stockholders to modify or
rescind any such action by affirmative vote of the holders of a majority of the
outstanding stock of the Corporation.
Section 6. Reserves. The Board of Directors shall have the power from
---------
time to time to set apart out of any assets of the Corporation otherwise
available for dividends a reserve or reserves for working capital or for any
other proper purpose or purposes, and to reduce, abolish or add to any such
reserve or reserves from time to time as said Board of Directors may deem to be
in the best interests of the Corporation. The Board of Directors shall also
have the authority to determine in its discretion what part of the assets of the
Corporation available for dividends in excess of such reserve or reserves shall
be declared in dividends and paid to the stockholders of the Corporation.
-6-
<PAGE>
Section 7. Majority Voting. Notwithstanding any provision of the
----------------
General Corporation Law requiring a greater proportion than a majority of the
vote of all classes or of any class of the Corporation's stock entitled to be
cast in order to take or authorize any action, any such action may be taken or
authorized upon the concurrence of a majority of the aggregate number of votes
entitled to be cast thereon subject to applicable laws and regulations as from
time to time in effect, or rules or orders of the Securities and Exchange
Commission or any successor thereto.
Section 8. Conclusive Effect of Certain Determinations. Any determination
--------------------------------------------
made in good faith and, as far as accounting matters are involved, in accordance
with generally accepted accounting principles, by or pursuant to the direction
of the Board of Directors, shall be final and conclusive as to the following
matters; the amount of the assets, debts, obligations, or liabilities of the
Corporation; the amount of new reserves or charges set up and the propriety
thereof; the time of or purpose for creating such reserves or charges; the use,
alteration or cancellation of any reserves or charges, whether or not any debt,
obligation or liability for which such reserves or charges shall have been
created shall have been paid or discharged or shall be then or thereafter
required to be paid or discharged; the establishment or designation of
procedures or methods to be employed for valuing any asset of the Corporation
and as to the value of any asset; the allocation of any asset of the Corporation
to a particular class or classes of the Corporation's stock; the funds available
for the declaration of dividends; the declaration of dividends; the charging of
any liability of the Corporation to a particular class or classes of the
Corporation's outstanding stock; the estimated expense to the Corporation in
connection with purchases or redemptions of its shares; the ability to liquidate
investments in orderly fashion; any other matters relating to the issue, sale,
purchase or redemption or other acquisition or disposition of investments or
shares of the Corporation; or the determination of the net asset value per share
of shares of any class of the Corporation's stock.
Section 9. Amendments. The Corporation reserves the right from time to
-----------
time to make any amendment of these Articles of Incorporation, whether such
amendment is now or hereafter authorized by law, including any amendment which
alters the contractual rights of any outstanding stock.
Section 10. Liability of Directors and Officers. A director or officer of
------------------------------------
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director or officer, except
to the extent such exemption from liability or limitation thereof is not
permitted by law (including the Investment Company Act of 1940) as currently in
effect or as the same may hereafter be amended.
No amendment to or repeal of this Article VIII, Section 10 and no
modifications to its provisions, shall apply to, or have any effect upon the
liability or alleged liability of any director or officer with respect to any
acts or omissions of such director or officer prior to such amendment, repeal or
modification.
-7-
<PAGE>
ARTICLE VIII
------------
PERPETUAL EXISTENCE
-------------------
The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I leave signed these Articles of Incorporation on
October 15, 1984.
/s/ George A Henning
--------------------
George A. Henning, Incorporator
STATE OF TENNESSEE
COUNTY OF HAMILTON
I hereby certify that on October 15, 1984, before me, the subscriber, a
notary public of the State of Tennessee in and for the County of Hamilton,
personally appeared George A. Henning and acknowledged the foregoing Articles of
Incorporation to be his act.
WITNESS my hand and seal, the day and year last above written.
/s/ Whitney Durand
------------------
Notary Public
My commission expires: April 25, 1988
SECOND: The foregoing amendment and restatement does not increase the
authorized stock of the Corporation.
THIRD: The foregoing amendment and restatement of the charter of the
Corporation have been approved by the Board of Directors of the Corporation and
by the affirmative vote of majority of all the votes entitled to be cast on the
matter.
IN WITNESS WHEREOF, Chubb America Fund has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on April 28, 1989.
WITNESS: CHUBB AMERICA FUND, INC.
Amy R. Goldstein Bruce R. Stefany
- ------------------------- -------------------------
Secretary President
THE UNDERSIGNED, President of Chubb America Fund, Inc., who executed on
behalf of the Corporation the foregoing Amendment and Restatement of Articles of
Incorporation, of which this certificates made a part, hereby acknowledges in
the name and on behalf of said Corporation the foregoing Amendment and
Restatement of Articles of Incorporation to be the corporate act of said
Corporation and hereby certifies that to the best of his knowledge, information,
and belief the matters and facts set forth therein with respect to the
authorization and approval thereof are true in all material respects under the
penalties of perjury.
Bruce R. Stefany
-------------------------
President
-8-
<PAGE>
Exhibit 1.b
ARTICLES SUPPLEMENTARY
TO THE
ARTICLES OF INCORPORATION
OF
CHUBB AMERICA FUND, INC.
CHUBB AMERICA FUND, INC., a Maryland corporation having its principal office in
Baltimore, Maryland (hereinafter called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland that:
FIRST: The Articles of Incorporation of the Corporation are supplemented by
adding three new class of stock designated as High Yield Bond Portfolio; the
Growth Portfolio; and the International Equity Portfolio to Section 2,
Article V so that the first sentence of Section 1, Article V reads as follows:
"The total number of shares of capital stock which the corporation shall have
authority to issue is TWELVE BILLION (12,000,000,000) shares of the par value
of one Cent ($.01) per share and of the aggregate value of ONE HUNDRED TWENTY
MILLION Dollars ($120,000,000).
Article V so that the first sentence of Section 2, Article V reads as follows:
"Section 2. Classes of Stock. Twelve Billion (12,000,000,000) shares shall be
issued and divided into the following classes of capital stock (the "Funds"),
each class comprising the number of shares and having the designation indicated,
subject, however, to the authority to change the designations of any class and
to increase or decrease the number of shares of any class hereinafter granted to
the Board of Directors.
<PAGE>
<TABLE>
<CAPTION>
Class Number of Shares
<S> <C>
World Growth Stock Portfolio 1,000,000,000
Money Market Portfolio 1,000,000,000
Gold Stock Portfolio 1,000,000,000
Bond Portfolio 1,000,000,000
Domestic Growth Stock Portfolio 1,000,000,000
Growth and Income Portfolio 1,000,000,000
Capital Growth Portfolio 1,000,000,000
Balanced Portfolio 1,000,000,000
Emerging Growth Portfolio 1,000,000,000
High Yield Bond Portfolio 1,000,000,000
Growth Portfolio 1,000,000,000
International Equity Portfolio 1,000,000,000
</TABLE>
SECOND: The High Yield Bond Portfolio; the Growth Portfolio; and the
International Equity Portfolio shares shall have the same rights and limitations
afforded the original classes of stock, including, but not limited to, the
voting rights set forth in Section 3 of Article V, the rights of fractional
shares set forth in Section 4 of Article V, the special rights and limitations
set forth in Section 5 of Article V, the rights upon liquidation of the
Corporation set forth in Section 6 of Article V and the redemption rights set
forth in Section 7 of Article V.
<PAGE>
THIRD: The High Yield Bond Portfolio; the Growth Portfolio; and the
International Equity Portfolio shares, have been classified by the Board of
Directors of the Corporation under the authority contained in Section 2, Article
V of the Articles of Incorporation.
IN WITNESS WHEREOF, Chubb America Fund, Inc. has caused these presents to be
signed in its name and on its behalf by its President and witnessed by its
Secretary on August 5, 1997.
WITNESS: CHUBB AMERICA FUND, INC.
By: /s/ Ronald Angarella
Shari Lease Ronald Angarella
Secretary Chairman and President
THE UNDERSIGNED, President of Chubb America Fund, Inc., who executed on behalf
of said Corporation, the foregoing Articles Supplementary, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Articles Supplementary to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information and belief, the matters and facts set forth therein with respect to
the approval thereof are true in all material respects, under the penalties of
perjury.
/s/ Ronald Angarella
Ronald Angarella
Chairman and President
<PAGE>
Exhibit 5a
INVESTMENT MANAGEMENT AGREEMENT
CHUBB AMERICA FUND, INC.
THIS AGREEMENT made this 28th day of August 1997, between CHUBB AMERICA
FUND, INC., a Maryland corporation with offices at One Granite Place, Concord,
New Hampshire (the "Fund), and CHUBB INVESTMENT ADVISORY CORPORATION, a
Tennessee corporation with offices at One Granite Place, Concord, New Hampshire
("Chubb Investment");
WITNESSETH
WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company of
1940 (the "Investment Company Act");
WHEREAS, the Fund is authorized to issue shares of common stock, $.01 par
value, ("Stock") in separate classes or series with each such class or series
representing an interest in a separate portfolio of securities and other assets,
and each with its own investment objectives, investment policies and
restrictions (individually, a "Portfolio", collectively, the "Portfolios");
WHEREAS, Chubb Investment is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940;
WHEREAS, the Board of Directors of the Fund desires to retain Chubb
Investment to render investment management and corporate administrative services
to the Fund's Portfolios set forth in Schedule A hereto, as such may be revised
from time to time, in the manner and on the terms set forth herein; and
WHEREAS, the Board of Directors of the Fund believes that Chubb
Investment's expertise and business contacts are and will be of material benefit
to the Fund in employing and supervising any investment subadviser
("Subadviser"), as further described below;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Fund and Chubb Investment hereby agree as follows:
1. Appointment of Manager. The Fund hereby appoints Chubb Investment as
the investment manager ("Investment Manager" or "Manager") for each of the
Portfolios of the Fund specified in Appendix A to this Agreement, as such
Appendix A may be amended by the Manager and the Fund from time to time, subject
to the supervision of the Directors of the Fund and in the manner under the
terms and conditions set forth in this Agreement.
1
<PAGE>
2. (a) Duties of Chubb Investment. Chubb Investment hereby agrees,
subject to the supervision of the Board of Directors of the Fund (i) to act as
the investment manager of the Portfolios, and, in that connection, (ii) to
select and contract, at its own expense, with investment subadvisers
("Subadvisers") to manage the investment operations and composition of each and
every Portfolio of the Fund, including the purchase, retention, and disposition
of the investments, securities and cash contained in each Portfolio.
In taking any action hereunder, Chubb Investment shall always be subject to, and
shall follow at all times (i) any restrictions of the Fund's Articles of
Incorporation and By-Laws, as amended from time to time, (ii) the applicable
provisions of the Investment Company Act, and any rules and regulations adopted
thereunder, (iii) the statements relating to the Portfolios' investment
objectives, policies and restrictions as the same are set forth in the
prospectus of the Fund and Statement of Additional Information then currently
effective under the Securities Act of 1933 (the "Prospectus"), and (iv) any
other provisions of state and federal law applicable to it in connection with
its duties hereunder, including any applicable provisions imposed by state
insurance regulations and under the Internal Revenue Code of 1986, as amended,
and regulations thereunder (the "Code").
(b) Interim Arrangements. Notwithstanding the provisions of subsection
(a) of this paragraph, the Manager may, in the event of a Subadviser becomes
unable to provide portfolio management services to a Portfolio, itself provide
to the Portfolio those services normally provided by the Subadviser under the
Subadviser's agreement with the Manager, until such time as the Manager selects
and contracts with a replacement Subadviser.
(c) Administrative Services. Subject to the direction and control of the
Board of Directors of the Fund, Chubb Investment shall perform administrative
services in connection with the management of the Portfolios and will supervise
all aspects of the Portfolios' operations. In this connection, Chubb Investment
agrees to perform the following administrative functions:
(1) Determine the value of each Portfolio's assets and liabilities,
compute the daily income and net asset value of each Portfolio and compute the
yield and/or total return of each Portfolio as may be required, in accordance
with applicable law;
(2) Schedule, plan agendas for and conduct directors and shareholders
meetings;
(3) Recommend auditors, counsel, Custodian and others;
(4) Coordinate, supervise and direct any Subadviser, the Fund's
Custodian and the Fund's Distributor, auditors and counsel on a day-to-day
basis;
(5) Prepare and distribute all required proxy statements, reports,
and other communications with shareholders;
2
<PAGE>
(6) Prepare and file tax returns, reports due and other required
filings with the Securities and Exchange Commission ("SEC"), the National
Association of Securities Dealers, Inc., state blue sky authorities, and
generally monitor compliance with all federal and state securities laws and the
Code;
(7) Supply clerical, secretarial, accounting and bookkeeping
services, data processing services, office supplies and stationery;
(8) Provide persons to perform such professional, administrative and
clerical functions as are necessary in connection with shareholder relations,
reports, redemption requests and account adjustments, including the receipt,
handling and coordination of shareholder complaints;
(9) Provide adequate office space and related services (including
telephone and other utility service) necessary for the Fund's operations;
(10) Maintain corporate records not otherwise maintained by the Fund's
Custodian, Distributor, or any Subadviser; and
(11) Assist, generally, in all aspects of the Fund's operations with
respect to the Portfolios.
The Manager may enter into arrangements with its parent or other persons
affiliated or unaffiliated with the Manager for the provisions of certain
personnel and facilities to the Manager to enable the Manager to fulfill its
duties and obligations under this Agreement. Nothing herein will be construed
to restrict the Fund's right, at its own expense, to contract for services to be
performed by third parties.
(d) Arrangements with Subadvisers. Notwithstanding any other provision
hereof, Chubb Investment, with the approval of the Board of Directors of the
Fund, may contract with one or more Subadvisers to perform any of the investment
management services required by the Fund, and may contract with one or more
Subadvisers or other parties to perform any of the administrative services
required of Chubb Investment hereunder; provided, however, that the compensation
of such other parties will be the sole responsibility of Chubb Investment and
the duties and responsibilities of such other Subadviser or other parties shall
be as set forth in an agreement or agreements between Chubb Investment and such
other parties.
3
<PAGE>
Chubb Investment shall exercise reasonable care in recommending,
monitoring, and supervising the performance of Subadviser and others serving
pursuant to the foregoing paragraph, but Chubb Investment shall not otherwise be
liable or legally responsible for the conduct of any Subadviser. In this
connection, it shall be a particular responsibility of Chubb Investment to
evaluate the investment performance of Subadviser and that of potential
Subadviser, and Chubb Investment shall supply the Board of Directors of the Fund
with such statistical and research data bearing on each Portfolio's performance
and that of Subadviser and potential Subadviser as they and Chubb Investment
deem necessary. It shall also be a particular responsibility of Chubb Investment
to supervise and monitor the practices of Subadviser in placing orders and
selecting brokers and dealers to effect Portfolio transactions and in
negotiating commission rates with them, and the services provided by such
brokers and dealers.
It also is understood that Chubb Investment, at its expense, will enter
into an agreement with Chubb America Service Corporation, a New Hampshire
corporation, pursuant to which Chubb Investment will obtain from said
corporation most staff, facilities and services necessary to meet its
obligations hereunder. Entering into said agreement shall in no way diminish any
obligation or liability of Chubb Investment hereunder.
3. (a) Purchase and Sale of Assets. Nothing in this Investment
Management Agreement shall preclude the combining of orders for the sale or
purchase of securities or other investments with other accounts managed by Chubb
Investment, provided that Chubb Investment does not favor any account over any
other account and provided further that any purchase or sale orders executed
contemporaneously shall be allocated in a manner that Chubb Investment deems to
be equitable to all accounts involved and, under normal circumstances, such
transactions will be (1) done on a pro rata basis substantially in proportion to
the amounts ordered by each account, (2) entered into only if, in Chubb
Investment's opinion, the trade is likely to produce a benefit for the
Portfolio, and (3) is at a price which is approximately the same for all parties
involved. Neither Chubb Investment, nor any of its directors, officers, or
employees, nor any person, firm, or corporation controlling, controlled by or
under common control with it shall act as a principal or receive any commission
as agent in connection with the purchase or sale of assets for the Portfolios.
(b) Brokerage Fees. In placing orders for the purchase or sale of
investments for the Portfolios, in the name of the Portfolio or their nominees,
Chubb Investment shall use its best efforts to obtain for the Portfolios the
most favorable price and best execution available, considering all of the
circumstances, and shall maintain records adequate to demonstrate compliance
with this requirement. Notwithstanding the foregoing, however, and subject to
appropriate policies and procedures as then approved by the Board of Directors
of the Fund, Chubb Investment may, to the extent authorized by Section 28(e) of
the Securities Exchange Act of 1934, cause the Fund to pay a broker or dealer
that provides research or other brokerage services to Chubb Investment and the
Fund with respect to the Portfolio an amount of commission for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Chubb Investment
determines in good faith that such amount of commission is reasonable in
relationship to the value of such services, viewed in terms of that particular
transaction or Chubb Investment's
4
<PAGE>
overall responsibilities to the Portfolios or its other advisory clients. To the
extent authorized by said Section 28(e) and the Fund's Board of Directors, Chubb
Investment shall not be deemed to have acted unlawfully or to have breached any
duty created by this Investment Management Agreement or otherwise solely by
reason of such action.
4. Compensation of Chubb Investment. Except as hereinafter provided, for
the services rendered and expenses assumed by Chubb Investment, while this
Investment Management Agreement is in effect, the Fund shall pay to Chubb
Investment fees at an annual rate set forth in Schedule A attached hereto. Fees
will accrue daily and will be payable as agreed by the Fund and Chubb
Investment, but not more frequently than monthly. The average asset value of the
Portfolios shall be determined and computed in accordance with the description
of the method of determining net asset value contained in the Prospectus.
The fees payable to Chubb Investment by the Fund hereunder shall be reduced
by any tender solicitation fees or similar payments received by Chubb
Investment, or any affiliated person of Chubb Investment, in connection with the
tender of investments of any Portfolio (less any direct expenses incurred by
Chubb Investment, or any affiliated person of Chubb Investment, in connection
with obtaining such fees or payments). Chubb Investment shall use its best
efforts to recapture all available tender offer solicitation fees and similar
payments in connection with tenders of the securities of any Portfolio,
provided, however, that Chubb Investment shall not be required to register as a
broker-dealer for this purpose. Chubb Investment shall advise the Board of
Directors of any fees or payments of whatever type which it may be possible for
Chubb Investment to receive in connection with the purchase or sale of
investment securities for any Portfolio.
5. Non-Exclusivity. The Fund agrees that the services of Chubb
Investment are not to be deemed exclusive and Chubb Investment is free to act as
investment manager to various investment companies and as fiduciary for other
managed accounts. Chubb Investment shall, for all purposes herein, be deemed to
be an independent contractor and shall, unless otherwise provided or authorized,
have no authority to act for or represent the Fund with respect to the
Portfolios in any way or otherwise be deemed an agent of the Fund with respect
to the Portfolios other than in furtherance of its duties and responsibilities
as set forth in this Investment Management Agreement. It is understood and
agreed that the directors, officers and employees of Chubb Investment are not
prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers, directors,
trustees, or employees of any other firm or corporation, including other
investment companies.
5
<PAGE>
6. Books and Records. Chubb Investment will maintain all books and
records required for the Fund with respect to the Portfolios, to the extent not
maintained by the Custodian or any Subadviser. Chubb Investment agrees that all
books and records which it maintains for the Fund are the Fund's property, and,
in the event of termination of this Investment Management Agreement for any
reason, Chubb Investment agrees promptly to return to the Fund, free from any
claim or retention of rights by Chubb Investment, all records relating to the
Fund. Chubb Investment also agrees, upon request of the Fund, promptly to
surrender such books and records to the Fund or, at the Fund's expense, to make
copies thereof available to the Fund or to make such books and records available
for inspection by representatives of regulatory authorities or other persons
reasonably designated by the Fund. Chubb Investment further agrees to maintain,
prepare and preserve such books and records in accordance with the Investment
Company Act and rules thereunder, including but not limited to, Rules 31a-1 and
31a-2.
Chubb Investment will use records or information obtained under this
Investment Management Agreement only for the purposes contemplated hereby, and
will not disclose such records or information in any manner other than as
expressly authorized by the Board of Directors or officers of the Fund, or
unless disclosure is expressly required by applicable federal or state
regulatory authorities or by this Investment Management Agreement. Chubb
Investment shall supply all information requested by any insurance regulatory
authorities to determine whether all insurance laws and regulations are being
complied with.
The records maintained for the Fund hereunder by Chubb Investment shall
include records showing, for each shareholder's account, the following: (a)
name, address and tax identifying number; (b) number and class of shares held;
(c) historical information regarding the account of each shareholder, including
dividends paid and the date, class of Stock and price for all transactions; (d)
any stop or restraining order placed against the account; (e) any dividend
reinvestment order, dividend address and correspondence relating to the current
maintenance of the account; (f) certificate numbers and denominations for any
Stock certificates; (g) any other information required in order for Chubb
Investment to perform the calculations contemplated or required by this
Investment Management Agreement; and (h) such other records as the Fund may from
time to time reasonably request.
7. Liability. Chubb Investment will not be liable for any loss suffered
by the Portfolios in connection with any investment policy established by the
Fund for the purchase, sale or redemption of any securities at the direction of
the Board of Directors of the Fund. Nothing herein contained shall be construed
to protect Chubb Investment against any liability resulting from the willful
misfeasance, bad faith or negligence of Chubb Investment in the performance of
its duties or from reckless disregard of its obligations and duties under this
Investment Management Agreement or by virtue of violation of any applicable law.
6
<PAGE>
8. (a) Initial Documents. The Fund's management shall file with Chubb
Investment the following documents: (i) certified copies of the Articles of
Incorporation of the Fund and all amendments thereto, made from time to time;
(ii) a certified copy of the By-Laws of the Fund as amended, from time to time;
(iii) a copy of the resolution of the Board of Directors of the Fund authorizing
this Investment Management Agreement; (iv) specimens of all forms of outstanding
and new stock certificates, if any, with respect to Portfolio Stock in the form
approved by the Board of Directors of the Fund accompanied by Board of
Directors' resolutions approving such forms, and with a certificate of the
Secretary of the Fund as to such approval; (v) an opinion of counsel for the
Fund with respect to the validity of the Portfolio Stock, the number of shares
authorized, the number of Shares allocated to the Portfolio's class of Shares,
the status of redeemed or repurchased Shares and the number of Shares with
respect to which a registration statement under the Securities Act of 1933 has
been filed and is in effect; and (vi) a listing of the insurance companies with
which Chubb Life through its general account or Separate Account A or any
additional separate accounts established by Chubb Life, its successors or
assigns, is affiliated.
(b) Further Documentation. The Fund's management will also furnish to
Chubb Investment from time to time the following documents: (i) each resolution
of the Board of Directors of the Fund authorizing the original issue of the
Portfolio's Shares; (ii) each registration statement filed with the SEC under
the Securities Act of 1933 or under the Investment Company Act and amendments
thereof, orders relating thereto and the Prospectus in effect with respect to
the sale of shares of the Fund; (iii) certified copies of each resolution of the
Board of Directors authorizing officers to give instructions to Chubb
Investment.
(c) Information. The Fund, its officers or agent will provide timely
information to Chubb Investment regarding such matters as purchases and
redemptions of shares in the Portfolios, cash requirements, and cash available
for investment in the Portfolios, and all other information as may be reasonably
necessary, or appropriate, in order for Chubb Investment to perform its
responsibilities hereunder.
(d) Reliance on Documents and Information. Chubb Investment will be
entitled to rely on all documentation and information furnished to it by the
Fund's management.
9. Authorized Shares. The Fund certifies to Chubb Investment, that as of
the close of business on the date of this Investment Management Agreement, it
has authorized one billion shares of its Stock, and further certifies that, by
virtue of its Articles of Incorporation and the provisions of the law of the
state of its incorporation, shares of its Stock which are redeemed or
repurchased by the Fund from its shareholder are restored to the status of
authorized and unissued shares.
10. (a) Expenses of the Fund. As between the Fund and Chubb Investment,
the following expenses shall be borne exclusively by the Fund;
(i) Brokerage commissions and transfer taxes in connection with
portfolio transactions and similar fees and charges for the acquisition,
disposition, lending or borrowing of portfolio investments;
7
<PAGE>
(ii) All other state, federal, local or foreign governmental fees
and taxes (including any insurance, transfer, franchise or income taxes) payable
by the Fund and all corporate or filing fees payable by the Fund to any
governmental entity or agency;
(iii) All expenses, incidental and otherwise, associated with
preparing and filing with appropriate state, federal, local or foreign
governments or agencies all tax returns, including the expenses associated with
any mailings to the policy owners with respect to such returns.
(iv) Fees and expenses incurred in the registration or qualification
(and maintaining said registration or qualification) of the Fund and its shares
under federal or state securities laws, if deemed applicable, subsequent to the
effective date of the registration statement including all fees and expenses
incurred in connection with the preparation, setting in type, printing and
mailing of the registration statement and any amendments or supplements that may
be made from time to time;
(v) Compensation paid to directors who are not "interested persons"
of the Fund within the meaning of the Investment Company Act and travel expenses
paid to all directors;
(vi) Interest and any other cost related to borrowings by the Fund;
(vii) Any extraordinary or non-recurring expenses (such as legal
claims and liabilities, and litigation costs and any indemnification related
thereto);
(viii) Costs of printing and distributing to current policy owners,
shareholder reports, proxy statements, Prospectuses and any stickers and
supplements thereto, and otherwise communicating with the shareholders;
(ix) Costs and all incidental expenses associated with conducting
shareholder meetings;
(x) The cost of the fidelity bond required by Investment Company
Act Rule 17g-1 and any errors and omissions insurance or other liability
insurance covering the Fund and/or its officers, directors and employees;
(xi) The cost of obtaining quotes necessary for valuing the assets
and related liabilities for the Portfolios;
(xii) The charges and expenses of the Custodian, independent
accountants and independent legal counsel retained by the Fund, the charges and
expenses of any independent proxy solicitation firm retained by the Fund to
solicit voting instructions from policy owners with respect to Portfolio Shares,
and the charges and expenses of any trade association fees; and
8
<PAGE>
(xiii) All other expenses not specifically assumed hereunder by Chubb
Investment.
(b) Expenses of Chubb Investment. As between the Fund and Chubb
Investment, the costs and expenses of providing the necessary facilities,
personnel, office equipment and supplies, office space, telephone service, and
other utility service necessary to carry out its obligations hereunder shall be
borne exclusively by Chubb Investment, except as otherwise herein expressly
provided. In addition, Chubb Investment shall pay and assume all expenses
specifically assumed by Chubb Investment as set forth in Paragraphs 2(c)(1),
(3), (4), (7), (8), (9), (10) and (11); and 2(d) of this Investment Management
Agreement.
11. Duration and Termination of the Agreement. This Investment Management
Agreement shall become effective as of the date first written above provided
that it has been approved by the majority of the outstanding shares of each of
the Portfolios. Thereafter, it shall continue in effect with respect to each of
the Portfolios from year to year, but only so long as such continuance is
specifically approved at least annually by the Board of Directors in conformity
with the requirements of the Investment Company Act. This Investment Management
Agreement may be terminated, with respect to each Portfolio, without the payment
of any penalty, by the Board of Directors of the Fund or by vote of a majority
of the outstanding shares of Portfolio on sixty days' written notice to Chubb
Investment, or by Chubb Investment on sixty days' written notice to the Fund.
This Investment Management Agreement shall automatically terminate in the event
of its assignment.
12. Amendment of the Agreement. This Investment Management Agreement may
be amended with respect to any Portfolio only if, to the extent required by law,
such amendment is specifically approved by (a) the vote of a majority of the
outstanding shares of the Portfolio, and (b) by the vote of the Board of
Directors of the Fund, including a majority of those directors of the Fund who
are not parties to nor interested persons of any party to this Investment
Management Agreement cast in person at a meeting called for the purpose of
voting on such approval.
13. Definitions. The terms "assignment," "interested person," and
"majority of the outstanding shares," when used in this Investment Management
Agreement, shall have the respective meanings specified under the Investment
Company Act and rules thereunder.
14. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
15. Name. This Investment Management Agreement is entered into in
recognition of an agreement, dated February 15, 1985, between the Fund and The
Chubb Corporation granting the Fund a license to use the word "Chubb" in its
corporate name and to use such words in connection with its business.
9
<PAGE>
16. Provisions of Certain Information by Manager. The Manager will
promptly notify the Fund in writing of the occurrence of any of the following
events:
a. the Manager fails to be registered as a investment adviser under the
Advisers Act or under the laws of any jurisdiction in which the Manager is
required to be registered as an investment adviser in order to perform its
obligations under this Agreement,
b. the Manager is served or otherwise receives notice of any action,
suit, proceeding, inquiry or investigation, at law or in the equity, before or
by any court, public board or body, involving the affairs of the Fund, and/or
c. the chief executive officer or controlling stockholder of the
Manager or the portfolio manager of any Portfolio changes or there is otherwise
an actual change in control or management of the Manager.
17. Entire Agreement. This Agreement contains the entire understanding
and agreement of the Parties.
18. Headings. The headings in the sections of this Agreement are inserted
for convenience of reference only and shall not constitute a part hereof.
19. Notices. All notices required to be given pursuant to this Agreement
shall be delivered or mailed to the last known business address of the Fund or
Manager in person or by registered mail or a private mail or delivery service
providing the sender with notice of receipt. Notice shall be deemed given on
the date delivered or mailed in accordance with this section.
20. Force Majeure. The Manager shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including, but not
limited to, acts of civil or military authority, national emergencies, work
stoppages, fire, flood catastrophe, acts of nature, insurrection, war, riot,
failure of communication or power supply. In the event of equipment breakdowns
beyond its control, the Manager shall take reasonable steps to minimize service
interruptions but shall have no liability with respect to such undertakings.
21. Severability. Should any portion of this Agreement for any reason be
held to be void in law or in equity, the Agreement shall be construed, insofar
as is possible, as if such portion had never been contained in the Agreement.
10
<PAGE>
22. Governing Law. The provisions of this Investment Management Agreement
shall be construed and interpreted in accordance with the laws of the State of
New Hampshire, as at the time in effect, and the applicable provisions of the
Investment Company Act and rules thereunder or other federal laws and
regulations which may be applicable. To the extent that the applicable law of
the State of New Hampshire, or any of the provisions herein, conflict with the
applicable provisions of the Investment Company Act and rules thereunder or
other federal laws and regulations which may be applicable the latter shall
control.
CHUBB AMERICA FUND, INC.
Attest: /s/ Thomas Elwood By: /s/ Ronald R. Angarella
-------------------------- ---------------------------
Title: Assistant Secretary Title: President
CHUBB INVESTMENT ADVISORY
CORPORATION
Attest: /s/ Mark Landry By: /s/ Carol R. Hardiman
-------------------------- ---------------------------
Title: Assistant Treasurer Title: Assistant Vice President
11
<PAGE>
SCHEDULE A
CHUBB AMERICA FUND, INC.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- --------------------------------------------------------------------------------
<S> <C> <C>
World Growth Stock Portfolio .75% of first $200 Million
.70% of next $1.1 Billion
.65% over $1.3 Billion
- --------------------------------------------------------------------------------
International Equity Portfolio 1.00% of first $200 Million
1.00% of next $1.1 Billion
1.00% over $1.3 Billion
- --------------------------------------------------------------------------------
Money Market Portfolio .50% of first $200 Million
.45% of next $1.1 Billion
.40% over $1.3 Billion
- --------------------------------------------------------------------------------
Gold Stock Portfolio .75% of first $200 Million
.70% of next $1.1 Billion
.65% over $1.3 Billion
- --------------------------------------------------------------------------------
High Yield Bond Portfolio .75% of first $200 Million
.75% of next $1.1 Billion
.75% over $1.3 Billion
- --------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
Bond Portfolio .50% of first $200 Million
.45% of next $1.1 Billion
.40% over $1.3 Billion
- --------------------------------------------------------------------------------
Growth Portfolio .75% of first $200 Million
.75% of next $1.1 Billion
.75% over $1.3 Billion
- --------------------------------------------------------------------------------
Domestic Growth Stock Portfolio .75% of first $200 Million
.70% of next $1.1 Billion
.65% over $1.3 Billion
- --------------------------------------------------------------------------------
Growth and Income Portfolio .75% of first $200 Million
.70% of next $1.1 Billion
.65% over $1.3 Billion
- --------------------------------------------------------------------------------
Capital Growth Portfolio 1.00% of first $200 Million
.95% of next $1.1 Billion
.90% over $1.3 Billion
- --------------------------------------------------------------------------------
Balanced Portfolio .75 of first $200 Million
.70% of next $1.1 Billion
.65% over $1.3 Billion
- --------------------------------------------------------------------------------
Emerging Growth Portfolio .80 of first $200 Million
.75% of next $1.1 Billion
.70% over $1.3 Billion
- --------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
13
<PAGE>
Exhibit 5b
INVESTMENT SUBADVISORY AGREEMENT
WORLD GROWTH STOCK PORTFOLIO
THIS AGREEMENT, made this 28th day of August, 1997 is between CHUBB INVESTMENT
ADVISORY CORPORATION, a Tennessee corporation with offices at One Granite Place,
Concord, New Hampshire, 03301 (the "Investment Manager" or "Manager") and
Templeton Global Advisers Limited, (the "Subadviser") a Bahamian corporation
with offices at Nassau, Bahamas.
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business as
a diversified open-end management investment company and is registered as such
under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of
which represents a separate portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as
investment manager of the Portfolio, as set forth in an Investment Management
Agreement between the Fund and the Investment Manager dated August 28, 1997 (the
"Investment Management Agreement") pursuant to which it was agreed that the
Investment Manager may contract with the Subadviser, or other parties for
certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940;
WHEREAS, the Investment Manager desires to retain the Subadviser to
render investment management services to the Fund's World Growth Stock Portfolio
(the "Portfolio") in the manner and on the terms hereinafter set forth;
1
<PAGE>
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree as
follows:
1. Duties of the Subadviser. The Subadviser hereby agrees, subject to
the instructions and supervision of the Investment Manager: (1) to act as the
Subadviser of the Portfolio, (2) to manage the investment and reinvestment of
the assets of the Portfolio for the period and on the terms and conditions set
forth in this Agreement, and (3) during the term hereof, to render the services
and to assume the obligations herein set forth in return for the compensation
provided for herein and to bear all expenses of its performance of such services
and obligations. It is understood that all acts of the Subadviser in performing
this Agreement are to be performed by it outside the United States.
2. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment of
the assets of the Portfolio and determine the composition of the assets of the
Portfolio, subject to the instructions and supervision of the Manager and
consistent with the provisions of the Fund's registration statement, as amended
from time to time. In fulfilling its obligations to manage the investment and
reinvestment of the assets of the Portfolio, the Subadviser will:
(i) formulate and implement a continuous investment program
for the Portfolio (a) consistent with the investment objectives, policies, and
restrictions of the Portfolio as stated in the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
Statement of Additional Information ("SAI") as amended from time to time, and
(b) in compliance with the requirements communicated in writing by the
Investment Manager to the Subadviser and applicable to regulated investment
companies and segregated asset accounts under Subchapters M and L of the
Internal Revenue Code of 1986, as amended, and applicable to registered
investment companies under applicable laws;
(ii) implement the investment program for the Portfolio by the
purchase and sale of securities and other investments authorized under the
Fund's Agreement and Articles of Incorporation, Bylaws, and such Portfolio's
currently effective Prospectus and SAI, including the placing of orders for such
purchases and sales;
(iii) regularly report to the Directors of the Fund and the
Manager with respect to the implementation of the investment program and, in
addition, provide such statistical information and special reports concerning
the Portfolio and/or important developments materially affecting the
2
<PAGE>
investments held, or contemplated to be purchased, by the Portfolio, as may
reasonably be requested by the Manager or the Directors of the Fund;
(iv) provide determinations of the fair value of certain portfolio
securities when market quotations are not readily available for the purpose of
calculating the Portfolio's net asset value in accordance with procedures and
methods established by the Directors of the Fund; and
(v) the Subadviser is not required to furnish any personnel, overhead
items or facilities for the Investment Manager or the Fund, including trading
desk facilities or daily pricing of the Fund's portfolio.
B. To enable the Subadviser's fulfillment of its obligations under this
Agreement, the Manager will undertake the following:
(i) the Manager agrees promptly to provide the Subadviser with all
amendments or supplements to the Registration Statement, the Fund's Agreement
and Articles of Incorporation, and Bylaws;
(ii) the Manager agrees, on an ongoing basis, to notify the
Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolio;
(iii) the Manager agrees to provide or cause to be provided to the
Subadviser with such assistance as may be reasonably requested by the Subadviser
in connection with its activities pertaining to the Portfolio under this
Agreement, including, without limitation, information concerning the Portfolio,
its available funds, or funds that may reasonably become available for
investment, and information as to the general condition of the Portfolio's
affairs;
(iv) the Manager agrees to provide or cause to be provided to the
Subadviser on an ongoing basis, such information as is reasonably requested by
the Subadviser for performance by the Subadviser of its obligations under this
Agreement, and the Subadviser shall not be in breach of any term of this
Agreement or be deemed to have acted negligently if the Manager fails to provide
or cause to be provided such requested information and the Subadviser relies on
the information most recently furnished to the Subadviser; and
(v) the Manager will promptly provide the Subadviser with any
guidelines and procedures applicable to the Subadviser or the Portfolio adopted
from time to time by the Board of Directors of the Fund and agrees to promptly
provide the Subadviser copies of all amendments thereto.
3
<PAGE>
C. The Subadviser, at its expense, will furnish all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement.
D. The Subadviser shall be responsible for selecting members of
securities exchanges, brokers and dealers (such members, brokers and dealers
being hereinafter referred to as "brokers") for the execution of the Fund's
portfolio transactions consistent with the Fund's brokerage policies and, when
applicable, the negotiation of commissions in connection therewith.
All decisions and placements shall be made in accordance with the
following principles:
(i) Purchase and sale orders will usually be placed with brokers
which are selected by the Subadviser as able to achieve "best execution" of such
orders. "Best execution" shall mean prompt and reliable execution at the most
favorable security price, taking into account the other provisions hereinafter
set forth. The determination of what may constitute best execution and price in
the execution of a securities transaction by a broker involves a number of
considerations, including, without limitation, the overall direct net economic
result to the Fund (involving both price paid or received and any commissions
and other costs paid), the efficiency with which the transaction is effected,
the ability to effect the transaction at all where a large block is involved,
availability of the broker to stand ready to execute possibly difficult
transactions in the future, and the financial strength and stability of the
broker. Such considerations are judgmental and are weighed by the Subadviser in
determining the overall reasonableness of brokerage commissions.
(ii) In selecting brokers for portfolio transactions, the
Subadviser shall take into account its past experience as to brokers qualified
to achieve "best execution," including brokers who specialize in any foreign
securities held by the Fund.
(iii) The Subadviser is authorized to allocate brokerage business
to brokers who have provided brokerage and research services, as such services
are defined in Section 28(e) of the Securities Exchange Act of 1934 (the "1934
Act"), for the Fund and/or other accounts, if any, for which the Subadviser
exercises investment discretion (as defined in Section 3(a)(35) of the 1934 Act)
and, as to transactions for which fixed minimum commission rates are not
applicable, to cause the Fund to pay a commission for effecting a securities
transaction in excess of the amount another broker would have charged for
effecting that transaction, if the Subadviser determines in good faith that such
amount of commission is reasonable in relation to the value of the brokerage and
4
<PAGE>
research services provided by such broker, viewed in terms of either that
particular transaction or the Subadviser's overall responsibilities with respect
to the Fund and the other accounts, if any, as to which it exercises investment
discretion. In reaching such determination, the Subadviser will not be required
to place or attempt to place a specific dollar value on the research or
execution services of a broker or on the portion of any commission reflecting
either of said services. In demonstrating that such determinations were made in
good faith, the Subadviser shall be prepared to show that all commissions were
allocated and paid for purposes contemplated by the Fund's brokerage policy;
that the research services provide lawful and appropriate assistance to the
Subadviser in the performance of its investment decision-making
responsibilities; and that the commissions paid were within a reasonable range.
Any evaluation as to whether commissions were within a reasonable range shall be
based on any available information as to the level of commission known to be
charged by other brokers on comparable transactions, but shall also take into
consideration that (i) obtaining a low commission is deemed secondary to
obtaining a favorable securities price, since it is recognized that usually it
is more beneficial to the Fund to obtain a favorable price than to pay the
lowest commission; and (ii) the quality, comprehensiveness and frequency of
research studies that are provided for the Subadviser are useful to the
Subadviser in performing its advisory services under this Agreement. Research
services provided by brokers to the Subadviser are considered to be in addition
to, and not in lieu of, services required to be performed by the Subadviser
under this Agreement. Research furnished by brokers through which the Fund
effects securities transactions may be used by the Subadviser for any of its
accounts, and not all research may be used by the Subadviser for the Fund. When
execution of portfolio transactions is allocated to brokers trading on exchanges
with fixed brokerage commission rates, account may be taken of various services
provided by the broker.
(iv) Purchases and sales of portfolio securities within the
United States other than on a securities exchange shall be executed with primary
market makers acting as principal, except where, in the judgment of the
Subadviser, better prices and execution may be obtained on a commission basis or
from other sources.
(v) Sales of the Fund's shares by a broker are one factor among
others to be taken into account in deciding to allocate portfolio transactions
(including agency transactions, principal transactions, purchases in
underwritings or tenders in response to tender offers) for the account of the
Fund to that broker, provided that the broker shall furnish "best execution," as
defined in subparagraph (i) above, and that such allocation shall be within the
scope of the Fund's policies as stated above; provided further, that in every
allocation made to a broker in which the sale of Fund shares is taken into
account, there shall be no increase in the amount of the commissions or other
5
<PAGE>
compensation paid to such broker beyond a reasonable commission or other
compensation determined, as set forth in subparagraph (iii) above, on the basis
of best execution alone or best execution plus research services, without taking
account of or placing any value upon such sale of the Fund's shares.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients of
the Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
F. The Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
3. Compensation of the Subadviser. The Investment Manager will pay
the Subadviser, with respect to the Portfolio, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolio's assets and accrued on a daily basis.
4. Non-Exclusivity. It is understood that the services of the
Subadviser are not deemed to be exclusive, and nothing in this Agreement shall
prevent the Subadviser, or any affiliate thereof, from providing similar
services to other investment companies and other clients, including clients
which may invest in the same types of securities as the Fund, or, in providing
such services, from using information furnished by others. The Subadviser
shall, for all purposes herein, be deemed to be an independent contractor and
shall, unless otherwise provided or authorized, have no authority to act for or
represent the Fund or the Investment Manager in any way or otherwise be deemed
an agent of the Fund or Investment Manager other than in furtherance of its
duties and responsibilities as set forth in this Subadvisory Agreement.
6
<PAGE>
5. Books and Records. The Subadviser agrees that all books and
records which it maintains concerning the Fund are the Fund's property, and, in
the event of termination of this Agreement for any reason, the Subadviser agrees
promptly to return to the Fund, free from any claim or retention of rights by
the Subadviser, except the right to make and retain copies, all records relating
to the Portfolio. The Subadviser also agrees upon request of the Investment
Manager or the Fund, promptly to surrender the books and records to either party
or make the books and records available for inspection by representatives of
regulatory authorities. The Subadviser will furnish any information or reports
requested by any state insurance commissioner. The Investment Manager shall
reimburse the Subadviser for its costs and expenses in complying with any such
request.
Each party will use records or information obtained under this Agreement
only for the purposes contemplated hereby, and will not disclose such records or
information (except information which is a matter of public record) in any
manner other than expressly authorized by the other party, or if disclosure is
expressly required by applicable federal or state regulatory authorities or by
this Agreement.
6. Liability. Except as may otherwise be provided by the 1940 Act,
neither the Subadviser nor its officers, directors, employees or agents shall be
subject to any liability for any error of judgment, mistake of law, or any loss
arising out of any investment or other act or omission in the performance by the
Subadviser of its duties under this Agreement or for any loss or damage
resulting from the imposition by any government of exchange control restrictions
which might affect the liquidity of the Fund's assets, or from acts or omissions
of custodians, or securities depositories, or from any war or political act of
any foreign government to which such assets might be exposed, or for failure, on
the part of the custodian or otherwise, timely to collect payments, except for
any liability, loss or damage resulting from willful misfeasance, bad faith or
gross negligence on the Subadviser's part or by reason of reckless disregard of
the Subadviser's duties under this Agreement. It is hereby understood and
acknowledged by the Investment Manager that the value of the investments made
for the Fund may increase as well as decrease and are not guaranteed by the
Subadviser. It is further understood and acknowledged by the Investment Manager
that investment decisions made on behalf of the Fund by the Subadviser are
subject to a variety of factors which may affect the values and income generated
by the Fund's portfolio securities, including general economic conditions,
market factors and currency exchange rates, and that investment decisions made
by the Subadviser will not always be profitable or prove to have been correct.
7
<PAGE>
7. Reliance on Documents. The Investment Manager shall assure that
the Fund or its officers or agent will provide timely information to the
Subadviser regarding such matters as purchases and redemptions of shares in the
Portfolio, the cash requirements, and cash available for investment in the
Portfolio, and all other information as may be reasonably necessary or
appropriate in order for the Subadviser to perform its responsibilities
hereunder.
Neither the Fund or the Investment Manager, nor their respective
designees or agents, shall use any material describing or identifying the
Subadviser or its affiliates without the prior consent of the Subadviser. Any
material utilized by the Fund, the Investment Manager or their respective
designees or agents which contains information as to the Subadviser and/or its
affiliates shall be submitted to the Subadviser for approval prior to use, not
less than ten (10) business days before such approval is requested.
The Investment Manager has herewith furnished the Subadviser copies of
the Investment Management Agreement and the Fund's Prospectus, Articles of
Incorporation and By-Laws as currently in effect and agrees during the
continuance of the Agreement to furnish the Subadviser copies of any amendments
or supplements thereto before or at the time the amendments or supplements
become effective. The Investment Manager also agrees to notify the Subadviser
of any federal or state law or regulation, including tax laws or regulations,
which restrict the activities of the Subadviser hereunder. The Subadviser will
be entitled to rely on all such documents or other information furnished to it
by the Investment Manager or the Fund.
8. Duration and Termination of the Agreement. This Subadvisory
Agreement shall become effective as of the date first written above and remain
in force until August 28, 1999. Thereafter, it shall continue in effect from
year to year, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (b) a
majority of those directors who are not parties to this Subadvisory Agreement,
not interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated, without the payment of any penalty, by the Board of
Directors of the Fund, by a vote of a majority of the outstanding shares of the
Portfolio, or by the Investment Manager on sixty days' written notice to the
Subadviser, or by the Subadviser on sixty days' written notice to the Fund or
the Investment Manager. Termination by the Board of Directors or by the
Investment Manager shall be subject to shareholder approval to the extent
legally required. This Agreement shall automatically terminate in the event of
its assignment or in the event of termination of the Investment Management
Agreement.
8
<PAGE>
9. Amendments of the Agreement. Except to the extent permitted by the
Investment Company Act or the rules or regulations thereunder or pursuant to any
exemptive relief granted by the Securities and Exchange Commission ("SEC"), this
Agreement may be amended by the parties only if such amendment, if material, is
specifically approved by the vote of a majority of the outstanding voting
securities of the Portfolio (unless such approval is not required by Section 15
of the Investment Company Act as interpreted by the SEC or its staff) and by the
vote of a majority of the Independent Directors cast in person at a meeting
called for the purpose of voting on such approval. The required shareholder
approval shall be effective with respect to the Portfolio if a majority of the
outstanding voting securities of the Portfolio vote to approve the amendment,
notwithstanding that amendment may not have been approved by a majority of the
outstanding voting securities of any other portfolio affected by the amendment
or all the portfolios of the Fund.
10. Definitions. The terms "assignment", "interested person", and
"majority of the outstanding voting securities", when used in this Agreement,
shall have the respective meaning specified under the Investment Company Act and
the rules thereunder.
11. Notices. Any notice that is required to be given by the parties to
each other under the terms of this Agreement shall be given in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Karen L. Skidmore
Senior Corporate Counsel
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94404
with a copy to:
Secretary
Templeton Global Advisors, Limited
Box N-7759
Nassau, Bahamas
9
<PAGE>
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
12. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New
Hampshire as at the time in effect and the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable. To the extent that the applicable law of the State of New Hampshire
or any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable, the latter shall control.
13. Use of Subadviser's Name. In the event this Agreement is
terminated and the Subadviser no longer acts as Subadviser to the Fund, the
Subadviser reserves the right to withdraw from the Investment Manager and the
Fund the use of names "Franklin," "Templeton" or any name misleadingly implying
a continuing relationship between the Investment Manager or the Fund and the
Subadviser or any of its affiliates.
14. Entire Agreement. This Agreement contains the entire understanding
and agreement of the parties with respect to the Portfolio.
15. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
10
<PAGE>
16. Severability. Should any portion of this Agreement for any reason
be held to be void in law or in equity, this Agreement shall be construed,
insofar as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT
ADVISORY CORPORATION
ATTEST: /s/ THOMAS ELWOOD BY: /s/ RONALD R. ANGARELLA
------------------------- ----------------------------
TITLE: ASSISTANT SECRETARY TITLE: PRESIDENT
-------------------------- -------------------------
TEMPLETON GLOBAL ADVISORS
LIMITED
ATTEST: /s/ EMEBET CHESLEY BY: /s/ MARTIN FLANAGAN
------------------------- ----------------------------
TITLE: PROJECT COORDINATOR TITLE: EXECUTIVE VICE PRESIDENT
-------------------------- -------------------------
11
<PAGE>
SCHEDULE A
INVESTMENT SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio .30% of first $200 Million
Massachusetts Financial Services .25% over $200 Million
- ------------------------------------------------------------------------------
Growth and Income Portfolio .50%
Warburg Pincus
- ------------------------------------------------------------------------------
World Growth Stock Portfolio .50% of first $200 Million
Templeton Global Advisors Limited .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Balanced Portfolio .45% of first $100 Million
J.P. Morgan Investment Management .40% of next $100 Million
.35% over $200 Million
.30% over $400 Million
- ------------------------------------------------------------------------------
Emerging Growth Portfolio .40%
Massachusetts Financial Services
- ------------------------------------------------------------------------------
Bond Portfolio .35% of first $200 Million
Chubb Asset Managers, Inc. .30% of next $1.1 Billion
.25% over $1.3 Billion
- ------------------------------------------------------------------------------
Gold Stock Portfolio .50% of first $200 Million
Van Eck Associates Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Domestic Growth Portfolio .50% of first $200 Million
Pioneering Management Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Capital Growth Portfolio .75% of first $200 Million
Janus Capital Corporation .70% of next $1.1 Billion
.65% over $1.3 Billion
- ------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
<PAGE>
Exhibit 5c
INVESTMENT SUBADVISORY AGREEMENT
GOLD STOCK PORTFOLIO
THIS AGREEMENT, made this 28th day of August, 1997 is between CHUBB INVESTMENT
ADVISORY CORPORATION, a Tennessee corporation with offices at One Granite Place,
Concord, New Hampshire, 03301 (the "Investment Manager" or "Manager") and Van
Eck Associates Corporation, (the "Subadviser") a Delaware corporation with
offices at 99 Park Avenue, New York, New York 100016.
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business
as a diversified open-end management investment company and is registered as
such under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of
which represents a separate portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as
investment manager of the Portfolio, as set forth in an Investment Management
Agreement between the Fund and the Investment Manager dated August 28, 1997,
(the "Investment Management Agreement") pursuant to which it was agreed that the
Investment Manager may contract with the Subadviser, or other parties for
certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act");
WHEREAS, the Investment Manager desires to retain the Subadviser to
render investment management services to the Fund's Gold Stock Portfolio (the
"Portfolio") in the manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree as
follows:
1. Appointment of the Subadviser. The Manager hereby appoints the
Subadviser to act as an investment subadviser for the Portfolio and to manage
the investment and reinvestment of the assets of the Portfolio, subject to the
supervision of the Directors of the Fund and the terms and conditions of this
Agreement. The Subadviser will be an independent
1
<PAGE>
contractor and will have no authority to act for or represent the Fund or
Manager in any way or otherwise be deemed an agent of the Fund or Manager except
as expressly authorized in this Agreement or another writing by the Fund,
Manager and the Subadviser. Notwithstanding the foregoing, the Subadviser may
execute account documentation, agreements, contracts and other documents as the
Subadviser may be requested by brokers, dealers, counterparts and other persons
in connection with the Subadviser's management of the assets of the Portfolio,
provided that the Subadviser receives the express agreement and consent of the
Manager and/or the Fund's Board of Directors to execute such documentation,
agreements, contracts and other documents. In such respect, and only for this
limited purpose, the Subadviser shall act at the Manager and/or the Fund's agent
and attorney-in-fact.
2. Duties of the Subadviser. The Subadviser hereby agrees, subject to
the supervision of the Investment Manager and the Board of Directors of the
Fund, (1) to act as the Subadviser of the Portfolio, (2) to manage the
investment and reinvestment of the assets of the Portfolio for the period and on
the terms and conditions set forth in this Agreement, and (3) during the term
hereof, to render the services and to assume the obligations herein set forth in
return for the compensation provided for herein and to bear all expenses of its
performance of such services and obligations.
3. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment of
the assets of the Portfolio and determine the composition of the assets of the
Portfolio, subject always to the direction and control of the Directors of the
Fund and the Manager and in accordance with the provisions of the Fund's
registration statement, as amended from time to time. In fulfilling its
obligations to manage the investment and reinvestment of the assets of the
Portfolio, the Subadviser will:
(i) obtain and evaluate pertinent economic, statistical,
financial, and other information affecting the economy generally and individual
companies or industries, the securities of which are included in the Portfolio
or are under consideration for inclusion in the Portfolio;
(ii) formulate and implement a continuous investment program
for the Portfolio (a) consistent with the investment objectives, policies, and
restrictions of the Portfolio as stated in the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
Statement of Additional Information ("SAI") as amended from time to time, and
(b) in compliance with the requirements applicable to both regulated investment
companies and segregated asset accounts under Subchapters M and L of the
Internal Revenue Code of 1986, as amended, and requirements applicable to
registered investment companies under applicable laws;
(iii) take whatever steps are necessary to implement the
investment program for the Portfolio by the purchase and sale of securities and
other investments authorized under the Fund's Agreement and Articles of
Incorporation, Bylaws, and such
2
<PAGE>
Portfolio's currently effective Prospectus and SAI, including the placing of
orders for such purchases and sales;
(iv) regularly report to the Directors of the Fund and the
Manager with respect to the implementation of the investment program and, in
addition, provide such statistical information and special reports concerning
the Portfolio and/or important developments materially affecting the investments
held, or contemplated to be purchased, by the Portfolio, as may reasonably be
requested by the Manager or the Directors of the Fund, including attendance at
Board of Directors Meetings, as reasonably requested, to present such
information and reports to the Board;
(v) provide determinations of the fair value of certain
portfolio securities when market quotations are not readily available for the
purpose of calculating the Portfolio's net asset value in accordance with
procedures and methods established by the Directors of the Fund;
(vi) provide any and all information, records and supporting
documentation about accounts the Subadviser manages that have investment
objectives, policies, and strategies substantially similar to those employed by
the Subadviser in managing the Portfolio which may be reasonably necessary,
under applicable laws, to allow the Portfolio or its agent to present
information concerning the Subadviser's prior performance in the Prospectus and
the SAI of the Portfolio and any permissible reports and materials prepared by
the Portfolio or its agent; and
(vii) establish appropriate interfaces with the Fund's
Manager in order to provide such Manager with all necessary information
requested by the Manager.
B. To facilitate the Subadviser's fulfillment of its obligations
under this Agreement, the Manager will undertake the following:
(i) the Manager agrees promptly to provide the Subadviser
with all amendments or supplements to the Registration Statement, the Fund's
Agreement and Articles of Incorporation, and Bylaws;
(ii) the Manager agrees, on an ongoing basis, to notify the
Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolio;
(iii) the Manager agrees to provide or cause to be provided
to the Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolio under
this Agreement, including, without limitation, information concerning the
Portfolio, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolio's
affairs;
3
<PAGE>
(iv) the Manager agrees to provide or cause to be provided
to the Subadviser on an ongoing basis, such information as is reasonably
requested by the Subadviser for performance by the Subadviser of its obligations
under this Agreement, and the Subadviser shall not be in breach of any term of
this Agreement or be deemed to have acted negligently if the Manager fails to
provide or cause to be provided such requested information and the Subadviser
relies on the information most recently furnished to the Subadviser; and
(v) the Manager will promptly provide the Subadviser with
any guidelines and procedures applicable to the Subadviser or the Portfolio
adopted from time to time by the Board of Directors of the Fund and agrees to
promptly provide the Subadviser copies of all amendments thereto.
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolio (excluding that
necessary for the determination of net asset value and shareholder accounting
services). The Subadviser shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Subadviser pursuant to this
Section 3.
D. The Subadviser will select brokers and dealers to effect all
portfolio transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolio in accordance with such policies or practices as may be established by
the Board of Directors and described in the Fund's currently effective
Prospectus and SAI, as amended from time to time. In placing orders for the
purchase or sale of investments for the Portfolio, in the name of the Portfolio
or its nominees, the Subadviser shall use its best efforts to obtain for the
Portfolio the most favorable price and best execution available, considering all
of the circumstances, and shall maintain records adequate to demonstrate
compliance with this requirement.
Subject to the appropriate policies and procedures approved by the
Board of Directors, the Subadviser may, to the extent authorized by Section
28(e) of the Securities and Exchange Act of 1934, cause the Portfolio to pay a
broker or dealer that provides brokerage or research services to the Manager,
the Subadviser, or the Portfolio an amount of commissions for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided
viewed in terms of that particular transaction or the Subadviser's overall
responsibilities to the Portfolio or its other advisory clients. To the extent
authorized by said Section 28(e) and the Fund's Board of Directors, the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the most favorable
4
<PAGE>
price and best execution available, the Subadviser may also consider sales of
shares of the Fund as a factor in the selection of brokers and dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients of
the Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
F. The Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
4. Compensation of the Subadviser. The Investment Manager will pay
the Subadviser, with respect to the Portfolio, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolio's assets and accrued on a daily basis.
5. Non-Exclusivity. The Investment Manager agrees that the services
of the Subadviser are not to be deemed exclusive and the Subadviser is free to
act as investment manager to various investment companies and as fiduciary for
other managed accounts. The Subadviser shall, for all purposes herein, be
deemed to be an independent contractor and shall, unless otherwise provided or
authorized, have no authority to act for or represent the Fund or the Investment
Manager in any way or otherwise be deemed an agent of the Fund or Investment
Manager other than in furtherance of its duties and responsibilities as set
forth in this Subadvisory Agreement.
6. Books and Records. The Subadviser agrees that all books and
records which it maintains for the Fund are the Fund's property, and, in the
event of termination of this Agreement for any reason, the Subadviser agrees
promptly to return to the Fund, free from any claim or retention of rights by
the Subadviser, all records relating to the Portfolio. The Subadviser also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to either party or make the book and records available for
inspection by representatives of regulatory authorities. In connection with its
duties hereunder, the Subadviser further agrees to maintain, prepare and
preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
The Subadviser will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose such
records or information in any manner other than expressly authorized by the
Fund, or if disclosure is expressly required by
5
<PAGE>
applicable federal or state regulatory authorities or by this Agreement. The
Subadviser will furnish any informational reports requested by any state
insurance commissioner.
7. Liability. The Subadviser will not be liable for any loss
suffered by the Fund in connection with any investment policy established by the
Fund for the purchase, sale or redemption of any securities at the direction of
the Board of Directors of the Fund or the Investment Manager. Nothing herein
contained shall be construed to protect the Subadviser against any liability
resulting from the willful misfeasance, bad faith or gross negligence of the
Subadviser in the performance of its duties or from reckless disregard of its
obligations and duties under this Subadviser Agreement.
8. Reliance on Documents. The Board of Directors of the Fund or its
officers or agent will provide timely information to the Subadviser regarding
such matters as purchases and redemptions of shares in the Portfolio, the cash
requirements, and cash available for investment in the Portfolio, and all other
information as may be reasonably necessary or appropriate in order for the
Subadviser to perform its responsibilities hereunder.
Neither the Fund or the Investment Manager, nor their respective
designees or agents, shall use any material describing or identifying the
Subadviser or its affiliates without the prior consent of the Subadviser. Any
material utilized by the Fund, the Investment Manager or their respective
designees or agents which contain information as to the Subadviser and/or its
affiliates shall be submitted to the Subadviser for approval prior to use, not
less than five (5) business days before such approval is requested.
The Investment Manager has herewith furnished the Subadviser copies of
the Fund's Prospectus, Articles of Incorporation and By-Laws as currently in
effect and agrees during the continuance of the Agreement to furnish the
Subadviser copies of any amendments or supplements thereto before or at the time
the amendments or supplements become effective. The Subadviser will be entitled
to rely on all such documents furnished to it by the Investment Manager or the
Fund.
9. Duration and Termination of the Agreement. This Subadvisory
Agreement shall become effective as of the date first written above and remain
in force until August 28, 1999. Thereafter, it shall continue in effect from
year to year, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (b) a
majority of those directors who are not parties to this Subadvisory Agreement,
not interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated, without the payment of any penalty, by the Board of
Directors of the Fund, by a vote of a majority of the outstanding shares of the
Portfolio, or by the Investment Manager on sixty days' written notice to the
Subadviser, or by the Subadviser on sixty days' written notice to the Fund or
the Investment Manager. Termination by the Board of Directors or by the
Investment Manager shall be subject to shareholder approval to the extent
legally required. This Agreement shall automatically terminate in the event of
its assignment or in the event of termination of the Investment Management
Agreement.
6
<PAGE>
10. Amendments of the Agreement. Except to the extent permitted by
the Investment Company Act or the rules or regulations thereunder or pursuant to
any exemptive relief granted by the Securities and Exchange Commission ("SEC"),
this Agreement may be amended by the parties only if such amendment, if
material, is specifically approved by the vote of a majority of the outstanding
voting securities of the Portfolio (unless such approval is not required by
Section 15 of the Investment Company Act as interpreted by the SEC or its staff)
and by the vote of a majority of the Independent Directors cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to the Portfolio if a
majority of the outstanding voting securities of the Portfolio vote to approve
the amendment, notwithstanding that amendment may not have been approved by a
majority of the outstanding voting securities of any other portfolio affected by
the amendment or all the portfolios of the Fund.
11. Definitions. The terms "assignment", "interested person", and
"majority of the outstanding voting securities", when used in this Agreement,
shall have the respective meaning specified under the Investment Company Act and
the rules thereunder.
12. Notices. Any notice that is required to be given by the parties
to each other under the terms of this Agreement shall be given in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Van Eck Associates Corporation
99 Park Avenue,
New York, New York 100016
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New
Hampshire as at the time in effect and the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable. To the extent that the applicable law of the State of New Hampshire
or any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable, the latter shall control.
7
<PAGE>
14. Use of Subadviser's Name. Neither the Fund nor the Manager or
any affiliate or agent thereof shall make reference to or use the name, and any
derivative thereof or logo associated with that name, of the Subadviser or any
of its affiliates in any advertising or promotional materials without the prior
approval of the Subadviser, which approval shall not be unreasonably withheld or
delayed. Upon termination of this Agreement, the Manager and the Fund shall
forthwith cease to use such name (or derivative or logo) as soon as reasonably
practicable.
15. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the Portfolio.
16. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
17. Severability. Should any portion of this Agreement for any
reason be held to be void in law or in equity, the Agreement shall be construed,
insofar as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT ADVISORY CORPORATION
ATTEST:/S/Thomas Elwood BY: /S/Ronald Angarella
TITLE:Asst.Secretary TITLE President
VAN ECK ASSOCIATES CORPORATION
ATTEST:/S/Thaddeus Leczynski BY: /S/Phillip Defeo
TITLE Secretary: TITLE President
8
<PAGE>
SCHEDULE A
INVESTMENT SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio .30% of first $200 Million
Massachusetts Financial Services .25% over $200 Million
- ------------------------------------------------------------------------------
Growth and Income Portfolio .50%
Warburg Pincus
- ------------------------------------------------------------------------------
World Growth Stock Portfolio .50% of first $200 Million
Templeton Global Advisors Limited .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Balanced Portfolio .45% of first $100 Million
J.P. Morgan Investment Management .40% of next $100 Million
.35% over $200 Million
.30% over $400 Million
- ------------------------------------------------------------------------------
Emerging Growth Portfolio .40%
Massachusetts Financial Services
- ------------------------------------------------------------------------------
Bond Portfolio .35% of first $200 Million
Chubb Asset Managers, Inc. .30% of next $1.1 Billion
.25% over $1.3 Billion
- ------------------------------------------------------------------------------
Gold Stock Portfolio .50% of first $200 Million
Van Eck Associates Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Domestic Growth Portfolio .50% of first $200 Million
Pioneering Management Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Capital Growth Portfolio .75% of first $200 Million
Janus Capital Corporation .70% of next $1.1 Billion
.65% over $1.3 Billion
- ------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
<PAGE>
Exhibit 5d
INVESTMENT SUBADVISORY AGREEMENT
DOMESTIC GROWTH STOCK PORTFOLIO
THIS AGREEMENT, made this 28th day of August 1997, is between CHUBB INVESTMENT
ADVISORY CORPORATION, a Tennessee corporation with offices at One Granite Place,
Concord, New Hampshire, 03301 (the "Investment Manager" or "Manager") and
Pioneering Management Corporation, (the "Subadviser") a Delaware corporation
with offices at 60 State Street Boston, Massachusetts 02109.
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business as a
diversified open-end management investment company and is registered as such
under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of which
represents a separate portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as investment
manager of the Portfolio, as set forth in an Investment Management Agreement
between the Fund and the Investment Manager dated August 28, 1997, (the
"Investment Management Agreement") pursuant to which it was agreed that the
Investment Manager may contract with the Subadviser, or other parties for
certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940 (the "Advisers Act");
WHEREAS, the Investment Manager desires to retain the Subadviser to render
investment management services to the Fund's Domestic Growth Stock Portfolio
(the "Portfolio") in the manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree as
follows:
1. Appointment of the Subadviser. The Manager hereby appoints the
Subadviser to act as an investment subadviser for the Portfolio and to manage
the investment and reinvestment of the assets of the Portfolio, subject to the
supervision of the Directors of the Fund and the terms and conditions of this
Agreement. The Subadviser will be an independent contractor and will have no
authority to act for or represent the Fund or Manager in any way
1
<PAGE>
or otherwise be deemed an agent of the Fund or Manager except as expressly
authorized in this Agreement or another writing by the Fund, Manager and the
Subadviser. Notwithstanding the foregoing, the Subadviser may execute account
documentation, agreements, contracts and other documents as the Subadviser may
be requested by brokers, dealers, counterparts and other persons in connection
with the Subadviser's management of the assets of the Portfolio, provided that
the Subadviser receives the express agreement and consent of the Manager and/or
the Fund's Board of Directors to execute such documentation, agreements,
contracts and other documents. In such respect, and only for this limited
purpose, the Subadviser shall act at the Manager and/or the Fund's agent and
attorney-in-fact.
2. Duties of the Subadviser. The Subadviser hereby agrees, subject to the
supervision of the Investment Manager and the Board of Directors of the Fund,
(1) to act as the Subadviser of the Portfolio, (2) to manage the investment and
reinvestment of the assets of the Portfolio for the period and on the terms and
conditions set forth in this Agreement, and (3) during the term hereof, to
render the services and to assume the obligations herein set forth in return for
the compensation provided for herein and to bear all expenses of its performance
of such services and obligations.
3. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment of the
assets of the Portfolio and determine the composition of the assets of the
Portfolio, subject always to the direction and control of the Directors of the
Fund and the Manager and in accordance with the provisions of the Fund's
registration statement, as amended from time to time. In fulfilling its
obligations to manage the investment and reinvestment of the assets of the
Portfolio, the Subadviser will:
(i) obtain and evaluate pertinent economic, statistical,
financial, and other information affecting the economy generally and individual
companies or industries, the securities of which are included in the Portfolio
or are under consideration for inclusion in the Portfolio;
(ii) formulate and implement a continuous investment program for
the Portfolio (a) consistent with the investment objectives, policies, and
restrictions of the Portfolio as stated in the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
Statement of Additional Information ("SAI") as amended from time to time, and
(b) in compliance with the requirements applicable to both regulated investment
companies and segregated asset accounts under Subchapters M and L of the
Internal Revenue Code of 1986, as amended, and requirements applicable to
registered investment companies under applicable laws;
(iii) take whatever steps are necessary to implement the
investment program for the Portfolio by the purchase and sale of securities and
other investments authorized under the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
SAI, including the placing of orders for such purchases and sales;
2
<PAGE>
(iv) regularly report to the Directors of the Fund and the
Manager with respect to the implementation of the investment program and, in
addition, provide such statistical information and special reports concerning
the Portfolio and/or important developments materially affecting the investments
held, or contemplated to be purchased, by the Portfolio, as may reasonably be
requested by the Manager or the Directors of the Fund, including attendance at
Board of Directors Meetings, as reasonably requested, to present such
information and reports to the Board;
(v) provide determinations of the fair value of certain
portfolio securities when market quotations are not readily available for the
purpose of calculating the Portfolio's net asset value in accordance with
procedures and methods established by the Directors of the Fund;
(vi) provide any and all information, records and supporting
documentation about accounts the Subadviser manages that have investment
objectives, policies, and strategies substantially similar to those employed by
the Subadviser in managing the Portfolio which may be reasonably necessary,
under applicable laws, to allow the Portfolio or its agent to present
information concerning the Subadviser's prior performance in the Prospectus and
the SAI of the Portfolio and any permissible reports and materials prepared by
the Portfolio or its agent; and
(vii) establish appropriate interfaces with the Fund's Manager in
order to provide such Manager with all necessary information requested by the
Manager.
B. To facilitate the Subadviser's fulfillment of its obligations
under this Agreement, the Manager will undertake the following:
(i) the Manager agrees promptly to provide the Subadviser with
all amendments or supplements to the Registration Statement, the Fund's
Agreement and Articles of Incorporation, and Bylaws;
(ii) the Manager agrees, on an ongoing basis, to notify the
Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolio;
(iii) the Manager agrees to provide or cause to be provided to
the Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolio under
this Agreement, including, without limitation, information concerning the
Portfolio, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolio's
affairs;
3
<PAGE>
(iv) the Manager agrees to provide or cause to be provided to
the Subadviser on an ongoing basis, such information as is reasonably requested
by the Subadviser for performance by the Subadviser of its obligations under
this Agreement, and the Subadviser shall not be in breach of any term of this
Agreement or be deemed to have acted negligently if the Manager fails to provide
or cause to be provided such requested information and the Subadviser relies on
the information most recently furnished to the Subadviser; and
(v) the Manager will promptly provide the Subadviser with any
guidelines and procedures applicable to the Subadviser or the Portfolio adopted
from time to time by the Board of Directors of the Fund and agrees to promptly
provide the Subadviser copies of all amendments thereto.
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolio (excluding that
necessary for the determination of net asset value and shareholder accounting
services). The Subadviser shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Subadviser pursuant to this Section
3.
D. The Subadviser will select brokers and dealers to effect all
portfolio transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolio in accordance with such policies or practices as may be established by
the Board of Directors and described in the Fund's currently effective
Prospectus and SAI, as amended from time to time. In placing orders for the
purchase or sale of investments for the Portfolio, in the name of the Portfolio
or its nominees, the Subadviser shall use its best efforts to obtain for the
Portfolio the most favorable price and best execution available, considering all
of the circumstances, and shall maintain records adequate to demonstrate
compliance with this requirement.
Subject to the appropriate policies and procedures approved by the
Board of Directors, the Subadviser may, to the extent authorized by Section
28(e) of the Securities and Exchange Act of 1934, cause the Portfolio to pay a
broker or dealer that provides brokerage or research services to the Manager,
the Subadviser, or the Portfolio an amount of commissions for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided
viewed in terms of that particular transaction or the Subadviser's overall
responsibilities to the Portfolio or its other advisory clients. To the extent
authorized by said Section 28(e) and the Fund's Board of Directors, the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the most favorable
4
<PAGE>
price and best execution available, the Subadviser may also consider sales of
shares of the Fund as a factor in the selection of brokers and dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients of
the Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
F. The Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
4. Compensation of the Subadviser. The Investment Manager will pay the
Subadviser, with respect to the Portfolio, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolio's assets and accrued on a daily basis.
5. Non-Exclusivity. The Investment Manager agrees that the services of
the Subadviser are not to be deemed exclusive and the Subadviser is free to act
as investment manager to various investment companies and as fiduciary for other
managed accounts. The Subadviser shall, for all purposes herein, be deemed to be
an independent contractor and shall, unless otherwise provided or authorized,
have no authority to act for or represent the Fund or the Investment Manager in
any way or otherwise be deemed an agent of the Fund or Investment Manager other
than in furtherance of its duties and responsibilities as set forth in this
Subadvisory Agreement.
6. Books and Records. The Subadviser agrees that all books and records
which it maintains for the Fund are the Fund's property, and, in the event of
termination of this Agreement for any reason, the Subadviser agrees promptly to
return to the Fund, free from any claim or retention of rights by the
Subadviser, all records relating to the Portfolio. The Subadviser also agrees
upon request of the Investment Manager or the Fund, promptly to surrender the
books and records to either party or make the book and records available for
inspection by representatives of regulatory authorities. In connection with its
duties hereunder, the Subadviser further agrees to maintain, prepare and
preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
The Subadviser will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose such
records or information in any manner other than expressly authorized by the
Fund, or if disclosure is expressly required by
5
<PAGE>
applicable federal or state regulatory authorities or by this Agreement. The
Subadviser will furnish any informational reports requested by any state
insurance commissioner.
7. Liability. The Subadviser will not be liable for any loss suffered by
the Fund in connection with any investment policy established by the Fund for
the purchase, sale or redemption of any securities at the direction of the Board
of Directors of the Fund or the Investment Manager. Nothing herein contained
shall be construed to protect the Subadviser against any liability resulting
from the willful misfeasance, bad faith or gross negligence of the Subadviser in
the performance of its duties or from reckless disregard of its obligations and
duties under this Subadviser Agreement.
8. Reliance on Documents. The Board of Directors of the Fund or its
officers or agent will provide timely information to the Subadviser regarding
such matters as purchases and redemptions of shares in the Portfolio, the cash
requirements, and cash available for investment in the Portfolio, and all other
information as may be reasonably necessary or appropriate in order for the
Subadviser to perform its responsibilities hereunder.
Neither the Fund or the Investment Manager, nor their respective designees
or agents, shall use any material describing or identifying the Subadviser or
its affiliates without the prior consent of the Subadviser. Any material
utilized by the Fund, the Investment Manager or their respective designees or
agents which contain information as to the Subadviser and/or its affiliates
shall be submitted to the Subadviser for approval prior to use, not less than
five (5) business days before such approval is requested.
The Investment Manager has herewith furnished the Subadviser copies of the
Fund's Prospectus, Articles of Incorporation and By-Laws as currently in effect
and agrees during the continuance of the Agreement to furnish the Subadviser
copies of any amendments or supplements thereto before or at the time the
amendments or supplements become effective. The Subadviser will be entitled to
rely on all such documents furnished to it by the Investment Manager or the
Fund.
9. Duration and Termination of the Agreement. This Subadvisory Agreement
shall become effective as of the date first written above and remain in force
until August 28, 1999. Thereafter, it shall continue in effect from year to
year, but only so long as such continuance is specifically approved at least
annually by (a) the Board of Directors of the Fund, or by the vote of a majority
of the outstanding voting securities of the Portfolio, and (b) a majority of
those directors who are not parties to this Subadvisory Agreement, not
interested persons of any party to this Subadvisory Agreement, cast in person at
a meeting called for the purpose of voting on such approval. This Agreement may
be terminated, without the payment of any penalty, by the Board of Directors of
the Fund, by a vote of a majority of the outstanding shares of the Portfolio, or
by the Investment Manager on sixty days' written notice to the Subadviser, or by
the Subadviser on sixty days' written notice to the Fund or the Investment
Manager. Termination by the Board of Directors or by the Investment Manager
shall be subject to shareholder approval to the extent legally required. This
Agreement shall automatically terminate in the event of its assignment or in the
event of termination of the Investment Management Agreement.
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<PAGE>
10. Amendments of the Agreement. Except to the extent permitted by the
Investment Company Act or the rules or regulations thereunder or pursuant to any
exemptive relief granted by the Securities and Exchange Commission ("SEC"), this
Agreement may be amended by the parties only if such amendment, if material, is
specifically approved by the vote of a majority of the outstanding voting
securities of the Portfolio (unless such approval is not required by Section 15
of the Investment Company Act as interpreted by the SEC or its staff) and by the
vote of a majority of the Independent Directors cast in person at a meeting
called for the purpose of voting on such approval. The required shareholder
approval shall be effective with respect to the Portfolio if a majority of the
outstanding voting securities of the Portfolio vote to approve the amendment,
notwithstanding that amendment may not have been approved by a majority of the
outstanding voting securities of any other portfolio affected by the amendment
or all the portfolios of the Fund.
11. Definitions. The terms "assignment", "interested person", and
"majority of the outstanding voting securities", when used in this Agreement,
shall have the respective meaning specified under the Investment Company Act and
the rules thereunder.
12. Notices. Any notice that is required to be given by the parties to
each other under the terms of this Agreement shall be given in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Pioneering Management Corporation
60 State Street
Boston, Massachusetts 02109
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
13. Governing Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of New Hampshire as at
the time in effect and the applicable provisions of the Investment Company Act
or other federal laws and regulations which may be applicable. To the extent
that the applicable law of the State of New Hampshire or any of the provisions
herein, conflict with the applicable provisions of the Investment Company Act or
other federal laws and regulations which may be applicable, the latter shall
control.
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<PAGE>
14. Use of Subadviser's Name. Neither the Fund nor the Manager or any
affiliate or agent thereof shall make reference to or use the name, and any
derivative thereof or logo associated with that name, of the Subadviser or any
of its affiliates in any advertising or promotional materials without the prior
approval of the Subadviser, which approval shall not be unreasonably withheld or
delayed. Upon termination of this Agreement, the Manager and the Fund shall
forthwith cease to use such name (or derivative or logo) as soon as reasonably
practicable.
15. Entire Agreement. This Agreement contains the entire understanding
and agreement of the parties with respect to the Portfolio.
16. Headings. The headings in the sections of this Agreement are inserted
for convenience of reference only and shall not constitute a part hereof.
17. Severability. Should any portion of this Agreement for any reason be
held to be void in law or in equity, the Agreement shall be construed, insofar
as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT ADVISORY
CORPORATION
ATTEST: /s/ Thomas Elwood BY: /s/ Ronald Angarella
--------------------------- ----------------------------
TITLE: Assistant Secretary TITLE: President
---------------------------- -------------------------
PIONEERING MANAGEMENT
CORPORATION
ATTEST: /s/ Lisa G. Melchiorri BY: /s/ David Tripple
--------------------------- ----------------------------
TITLE: Director of Operations TITLE: President
& Administration -------------------------
----------------------------
8
<PAGE>
SCHEDULE A
INVESTMENT SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio .30% of first $200 Million
Massachusetts Financial Services .25% over $200 Million
- ------------------------------------------------------------------------------
Growth and Income Portfolio .50%
Warburg Pincus
- ------------------------------------------------------------------------------
World Growth Stock Portfolio .50% of first $200 Million
Templeton Global Advisors Limited .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Balanced Portfolio .45% of first $100 Million
J.P. Morgan Investment Management .40% of next $100 Million
.35% over $200 Million
.30% over $400 Million
- ------------------------------------------------------------------------------
Emerging Growth Portfolio .40%
Massachusetts Financial Services
- ------------------------------------------------------------------------------
Bond Portfolio .35% of first $200 Million
Chubb Asset Managers, Inc. .30% of next $1.1 Billion
.25% over $1.3 Billion
- ------------------------------------------------------------------------------
Gold Stock Portfolio .50% of first $200 Million
Van Eck Associates Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Domestic Growth Portfolio .50% of first $200 Million
Pioneering Management Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Capital Growth Portfolio .75% of first $200 Million
Janus Capital Corporation .70% of next $1.1 Billion
.65% over $1.3 Billion
- ------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
<PAGE>
Exhibit 5.e
INVESTMENT SUBADVISORY AGREEMENT
GROWTH AND INCOME PORTFOLIO
THIS AGREEMENT, made this 28th day of August, 1997 is between CHUBB
INVESTMENT ADVISORY CORPORATION, a Tennessee corporation with offices at One
Granite Place, Concord, New Hampshire, 03301 (the "Investment Manager" or
"Manager") and Warburg, Pincus Counsellors, Inc., ("Subadviser") a Delaware
corporation with offices at 466 Lexington Avenue, New York, New York 10017.
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business as
a diversified open-end management investment company and is registered as such
under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of
which represents a separate portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as
investment manager of the Portfolio, as set forth in an Investment Management
Agreement between the Fund and the Investment Manager dated August 28, 1997,
(the "Investment Management Agreement") pursuant to which it was agreed that
the Investment Manager may contract with the Subadviser, or other parties for
certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act");
WHEREAS, the Investment Manager desires to retain the Subadviser to
render investment management services to the Fund's Growth and Income
Portfolio (the "Portfolio") in the manner and on the terms hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree
as follows:
1. Appointment of the Subadviser. The Investment Manager hereby
appoints the Subadviser to act as an investment subadviser for the Portfolio
and to manage the investment and reinvestment of the assets of the Portfolio,
subject to the supervision of the Directors of the Fund and the terms and
conditions of this Agreement. The Subadviser will be an independent
contractor and will have no authority to act for or represent the Fund or
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<PAGE>
Investment Manager in any way or otherwise be deemed an agent of the Fund or
Investment Manager except as expressly authorized in this Agreement or another
writing by the Fund, Investment Manager and the Subadviser. Notwithstanding
the foregoing, the Subadviser may execute account documentation, agreements,
contracts and other documents as the Subadviser may be requested by brokers,
dealers, counterparts and other persons in connection with the Subadviser's
management of the assets of the Portfolio, provided that the Subadviser
receives the express agreement and consent of the Investment Manager and/or
the Fund's Board of Directors to execute such documentation, agreements,
contracts and other documents. In such respect, and only for this limited
purpose, the Subadviser shall act as the Investment Manager and/or the Fund's
agent and attorney-in-fact.
2. Duties of the Subadviser. The Subadviser hereby agrees, subject to
the supervision of the Investment Manager and the Board of Directors of the
Fund, (1) to act as the Subadviser of the Portfolio, (2) to manage the
investment and reinvestment of the assets of the Portfolio for the period and
on the terms and conditions set forth in this Agreement, and (3) during the
term hereof, to render the services and to assume the obligations herein set
forth in return for the compensation provided for herein and to bear all
expenses of its performance of such services and obligations.
3. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment of
the assets of the Portfolio and determine the composition of the assets of the
Portfolio, subject always to the direction and control of the Directors of the
Fund and the Investment Manager and in accordance with the provisions of the
Fund's registration statement, as amended from time to time. In fulfilling
its obligations to manage the investment and reinvestment of the assets of the
Portfolio, the Subadviser will:
(i) obtain and evaluate pertinent economic, statistical,
financial, and other information affecting the economy generally and
individual companies or industries, the securities of which are included in
the Portfolio or are under consideration for inclusion in the Portfolio;
(ii) formulate and implement a continuous investment program for
the Portfolio (a) consistent with the investment objectives, policies, and
restrictions of the Portfolio as stated in the Fund's Agreement and Articles
of Incorporation, Bylaws, and such Portfolio's currently effective Prospectus
and Statement of Additional Information ("SAI") as amended from time to time,
and (b) in compliance with the requirements applicable to both regulated
investment companies and segregated asset accounts under Subchapters M and L
of the Internal Revenue Code of 1986, as amended, and requirements applicable
to registered investment companies under applicable laws;
2
<PAGE>
(iii) take whatever steps are necessary to implement the
investment program for the Portfolio by the purchase and sale of securities
and other investments authorized under the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
SAI, including the placing of orders for such purchases and sales;
(iv) regularly report to the Directors of the Fund and the
Investment Manager with respect to the implementation of the investment
program and, in addition, provide such statistical information and special
reports concerning the Portfolio and/or important developments materially
affecting the investments held, or contemplated to be purchased, by the
Portfolio, as may reasonably be requested by the Investment Manager or the
Directors of the Fund, including attendance at Board of Directors Meetings, as
reasonably requested, to present such information and reports to the Board;
(v) assist in the determination of the fair value of certain
portfolio securities when market quotations are not readily available for the
purpose of calculating the Portfolio's net asset value in accordance with
procedures and methods established by the Directors of the Fund;
(vi) establish appropriate interfaces with the Fund's
Investment Manager in order to provide such Investment Manager with all
necessary information requested by the Manager.
B. To facilitate the Subadviser's fulfillment of its obligations
under this Agreement, the Investment Manager will undertake the following:
(i) the Manager agrees promptly to provide the Subadviser
with all amendments or supplements to the Registration Statement, the Fund's
Agreement and Articles of Incorporation, and Bylaws;
(ii) the Manager agrees, on an ongoing basis, to notify the
Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolio;
(iii) the Manager agrees to provide or cause to be provided to
the Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolio under
this Agreement, including, without limitation, information concerning the
Portfolio, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolio's
affairs;
3
<PAGE>
(iv) the Manager agrees to provide or cause to be provided to
the Subadviser on an ongoing basis, such information as is reasonably
requested by the Subadviser for performance by the Subadviser of its
obligations under this Agreement, and the Subadviser shall not be in breach of
any term of this Agreement or be deemed to have acted negligently if the
Manager fails to provide or cause to be provided such requested information
and the Subadviser relies on the information most recently furnished to the
Subadviser; and
(v) the Manager will promptly provide the Subadviser with any
guidelines and procedures applicable to the Subadviser or the Portfolio
adopted from time to time by the Board of Directors of the Fund and agrees to
promptly provide the Subadviser copies of all amendments thereto.
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolio (excluding that
necessary for the determination of net asset value and shareholder accounting
services). The Subadviser shall not be obligated to pay any expenses of or
for the Portfolio not expressly assumed by the Subadviser pursuant to this
Section 3.
D. The Subadviser will select brokers and dealers to effect all
portfolio transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolio in accordance with such policies or practices as may be established
by the Board of Directors and described in the Fund's currently effective
Prospectus and SAI, as amended from time to time. In placing orders for the
purchase or sale of investments for the Portfolio, in the name of the
Portfolio or its nominees, the Subadviser shall use its best efforts to obtain
for the Portfolio the most favorable price and best execution available,
considering all of the circumstances, and shall maintain records adequate to
demonstrate compliance with this requirement.
Subject to the appropriate policies and procedures approved by the Board
of Directors, the Subadviser may, to the extent authorized by Section 28(e) of
the Securities and Exchange Act of 1934, cause the Portfolio to pay a broker
or dealer that provides brokerage or research services to the Manager, the
Subadviser, or the Portfolio an amount of commissions for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided
viewed in terms of that particular transaction or the Subadviser's overall
responsibilities to the Portfolio or its other advisory clients. To the
extent authorized by said Section 28(e) and the Fund's Board of Directors, the
Subadviser shall not be deemed to have acted unlawfully or to have breached
any duty created by this Agreement or otherwise solely by reason of such
action. In addition, subject to seeking the most favorable
4
<PAGE>
price and best execution available, the Subadviser may also consider sales of
shares of the Fund as a factor in the selection of brokers and dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients
of the Subadviser, the Subadviser to the extent permitted by applicable laws
and regulations, may, but shall be under no obligation to, aggregate the
securities to be purchased or sold to attempt to obtain a more favorable price
or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its
fiduciary obligations to the Portfolio and to its other clients over time.
It is recognized that in some cases this practice may adversely affect the
price paid or received by the Portfolio or the size of the position obtainable
for, or disposed of by, the Portfolio.
F. The Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
4. Compensation of the Subadviser. The Investment Manager will pay
the Subadviser, with respect to the Portfolio, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolio's assets and accrued on a daily basis.
5. Non-Exclusivity. The Investment Manager agrees that the services of
the Subadviser are not to be deemed exclusive and the Subadviser is free to
act as investment manager to various investment companies and as fiduciary for
other managed accounts. The Subadviser shall, for all purposes herein, be
deemed to be an independent contractor and shall, unless otherwise provided or
authorized, have no authority to act for or represent the Fund or the
Investment Manager in any way or otherwise be deemed an agent of the Fund or
Investment Manager other than in furtherance of its duties and
responsibilities as set forth in this Subadvisory Agreement.
6. Books and Records. The Subadviser agrees that all books and records
which it maintains for the Fund are the Fund's property, and, in the event of
termination of this Agreement for any reason, the Subadviser agrees promptly
to return to the Fund, free from any claim or retention of rights by the
Subadviser, all records relating to the Portfolio. The Subadviser also agrees
upon request of the Investment Manager or the Fund, promptly to surrender the
books and records to either party or make the book and records available for
inspection by representatives of regulatory authorities. In connection with
its duties hereunder, the Subadviser further agrees to maintain, prepare and
preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
5
<PAGE>
The Subadviser will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose
such records or information in any manner other than expressly authorized by
the Fund, or if disclosure is expressly required by applicable federal or
state regulatory authorities or by this Agreement. The Subadviser will
furnish any informational reports requested by any state insurance
commissioner.
7. Representations and Warranties by the Investment Manager and the
Subadviser. The Investment Manager and the Subadviser each hereby represents
and warrants to the other that:
A. it is registered as an investment adviser under the Advisers Act;
B. it is a corporation duly organized and validly existing under the
laws of its state of incorporation with the power to own and possess its
assets and carry on its business as it is now being conducted;
C. the execution, delivery and performance of this Agreement by such
party are within such party's powers and have been duly authorized by all
necessary action and no action by or in respect of, or filing with, any
governmental body, agency or official is required on the part of such party
for the execution, delivery and performance of this Agreement by such party
and such execution, delivery and performance by such party do not contravene
or constitute a default under (i) any provision of applicable law, rule or
regulation, (ii) such party's governing instruments and (iii) any material
agreement, judgment, injunction, order, decree or other instrument binding
upon such party; and
D. the Form ADV of such party previously provided to the other party is
a true and complete copy of the form filed with the Securities and Exchange
Commissions (the "SEC") and the information contained therein is accurate and
complete in all material respects.
The Investment Manager acknowledges that it received a copy of the
Subadviser's Form ADV more than 48 hours prior to the execution of this
Agreement.
8. Representations and Warranties on Behalf of the Fund and the
Portfolio. The Investment Manager hereby represents and warrants, on behalf
of the Fund and the Portfolio, that:
A. the Fund is registered as an investment company under the Investment
Company Act and the Portfolio's shares are registered under the Securities Act
of 1933, as amended (the "Securities Act");
B. the Fund, on behalf of the Portfolio, has filed a notice of exemption
pursuant to Rule 4.5 under the Commodity Exchange Act with the Commodity
Futures Trading Commission and the National Futures Association; and
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<PAGE>
C. the Fund is a Maryland corporation duly organized and validly
existing under the laws of the State of Maryland with the power to own and
possess its assets and carry on its business as it is now being conducted.
9. Survival of Representations and Warranties; Duty to Update
Information. All representations and warranties made pursuant to Sections 7
and 8 of this Agreement shall survive for the duration of this Agreement and
each party hereto shall promptly notify the other in writing upon becoming
aware that any of the foregoing representations and warranties made by such
party are no longer true.
10. Liability. Neither the Subadviser nor any of its affiliates,
directors, officers, or employees shall be liable to the Investment Manager,
the Fund or any shareholder thereof or any service provider to any Portfolio
of the Fund for any loss suffered by the Investment Manager, the Fund or any
shareholder thereof or any service provider to any portfolio resulting from
its acts or omissions as Subadviser to the Portfolio, except for losses
resulting from willful misconduct, bad faith or gross negligence in the
performance of, or from reckless disregard of, the duties of the Subadviser or
any of its affiliates, directors, officers or employees. The Subadviser, its
affiliates, directors, officers or employees shall not be liable to the
Investment Manager or the Fund for any loss suffered as a consequence of any
action or inaction of other service providers to the Fund, provided such
action or inaction of such other service providers to any Portfolio of the
Fund is not a result of the willful misconduct, bad faith or gross negligence
in the performance of, or from reckless disregard of, the duties of the
Subadviser under this Agreement.
11. Indemnifications.
A. The Investment Manager shall indemnify the Subadviser and its
affiliates, officers, directors, employees, agents, legal representatives and
persons controlled by it (which shall not include the Fund or any portfolio)
(collectively, "Subadviser Related Persons") to the fullest extent permitted
by law against any and all loss, damage, judgments, fines, amounts paid in
settlement and reasonable expenses, including attorneys' fees (collectively
"Losses"), incurred by the Subadviser or Subadviser Related Persons arising
from or in connection with this Agreement or the performance by the Subadviser
or Subadviser Related Persons of its or their duties hereunder so long as such
Losses arise out of the Investment Manager's gross negligence, willful
misconduct or bad faith, in performing its responsibilities hereunder or under
its agreements with the Fund or the gross negligence, willful misconduct or
bad faith of any service provided to any portfolio of the Fund, including
without limitation, such Losses arising under any applicable law or that may
be based upon any untrue statement of a material fact contained in the Fund's
registration statement, or any amendment thereof or any supplement thereto, or
the omission to state therein a material fact known or which should have been
known and was required to be stated therein or necessary to make the statement
therein not misleading, unless such statement or omission was made in reliance
upon written information furnished to the Investment Manager or the Fund by
the Subadviser or any Subadviser Related Person specifically for inclusion in
the registration statement or any amendment or supplement thereto, except to
the extent any such Losses referred to in this paragraph A (i.e., paragraph
A.) result from willful misfeasance, bad faith, gross negligence or reckless
disregard on the part
7
<PAGE>
of the Subadviser or a Subadviser Related Person in the performance of any of
its duties under, or in connection with, this Agreement.
B. The Subadviser shall indemnify the Investment Manager and its
controlling persons, officers, directors, employees, agents, legal
representatives and persons controlled by it (which shall not include the Fund
or any Portfolio) (collectively, "Investment Manager Related Persons") to the
fullest extent permitted by law against any and all Losses incurred by the
Investment Manager or Investment Manager Related Persons arising from or in
connection with this Agreement or the performance by the Investment Manager or
Investment Manager Related Persons of its or their duties hereunder so long as
such Losses arise out of the Subadviser's gross negligence, willful misconduct
or bad faith in performing its responsibilities hereunder, including, without
limitation, such Losses arising under any applicable law or that may be based
upon any untrue statement of a material fact contained in the Fund's
registration statement, or any amendment thereof or any supplement thereto or
the omission to state therein a material fact known or which should have been
known and was required to be stated therein or necessary to make the statement
therein not misleading, provided that such statement or omission was made in
reliance upon written information furnished by the Subadviser or Subadviser
Related Person to the Investment Manager or the Fund, except to the extent any
such Losses referred to in this paragraph B (i.e., paragraph B.) result from
willful misfeasance, bad faith, gross negligence or reckless disregard on the
part of the Investment Manager or a Investment Manager Related Person in the
performance of any of its duties under, or in connection with, this Agreement.
C. The indemnifications provided in this Section shall survive the
termination of this Agreement.
12. Reliance on Documents. The Board of Directors of the Fund or its
officers or agent will provide timely information to the Subadviser regarding
such matters as purchases and redemptions of shares in the Portfolio, the cash
requirements, and cash available for investment in the Portfolio, and all
other information as may be reasonably necessary or appropriate in order for
the Subadviser to perform its responsibilities hereunder.
Neither the Fund or the Investment Manager, nor their respective
designees or agents, shall use any material describing or identifying the
Subadviser or its affiliates without the prior consent of the Subadviser. Any
material utilized by the Fund, the Investment Manager or their respective
designees or agents which contain information as to the Subadviser and/or its
affiliates shall be submitted to the Subadviser for approval prior to use, not
less than five (5) business days before such approval is requested.
The Investment Manager has herewith furnished the Subadviser copies of
the Fund's Prospectus, Articles of Incorporation and By-Laws as currently in
effect and agrees during the continuance of the Agreement to furnish the
Subadviser copies of any amendments or supplements thereto before or at the
time the amendments or supplements become effective. The Subadviser will be
entitled to rely on all such documents furnished to it by the Investment
Manager or the Fund.
8
<PAGE>
13. Duration and Termination of the Agreement. This Subadvisory
Agreement shall become effective as of the date first written above and remain
in force until August 28, 1999. Thereafter, it shall continue in effect from
year to year, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (b) a
majority of those directors who are not parties to this Subadvisory Agreement,
not interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated, without the payment of any penalty, by the Board
of Directors of the Fund, by a vote of a majority of the outstanding shares of
the Portfolio, or by the Investment Manager on sixty days' written notice to
the Subadviser, or by the Subadviser on sixty days' written notice to the Fund
or the Investment Manager. Termination by the Board of Directors or by the
Investment Manager shall be subject to shareholder approval to the extent
legally required. This Agreement shall automatically terminate in the event
of its assignment or in the event of termination of the Investment Management
Agreement.
14. Amendments of the Agreement. Except to the extent permitted by the
Investment Company Act or the rules or regulations thereunder or pursuant to
any exemptive relief granted by the Securities and Exchange Commission
("SEC"), this Agreement may be amended by the parties only if such amendment,
if material, is specifically approved by the vote of a majority of the
outstanding voting securities of the Portfolio (unless such approval is not
required by Section 15 of the Investment Company Act as interpreted by the SEC
or its staff) and by the vote of a majority of the Independent Directors cast
in person at a meeting called for the purpose of voting on such approval.
The required shareholder approval shall be effective with respect to the
Portfolio if a majority of the outstanding voting securities of the Portfolio
vote to approve the amendment, notwithstanding that amendment may not have
been approved by a majority of the outstanding voting securities of any other
portfolio affected by the amendment or all the portfolios of the Fund.
15. Definitions. The terms "assignment", "interested person", and
"majority of the outstanding voting securities", when used in this Agreement,
shall have the respective meaning specified under the Investment Company Act
and the rules thereunder.
16. Notices. Any notice that is required to be given by the parties to
each other under the terms of this Agreement shall be given in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017
Attn: Eugene P. Grace
Facsimile: (212) 878-9351
9
<PAGE>
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
17. Governing Law. The provisions of this Agreement shall be construed
and interpreted in accordance with the laws of the State of New Hampshire as
at the time in effect and the applicable provisions of the Investment Company
Act or other federal laws and regulations which may be applicable. To the
extent that the applicable law of the State of New Hampshire or any of the
provisions herein, conflict with the applicable provisions of the Investment
Company Act or other federal laws and regulations which may be applicable, the
latter shall control.
18. Use of Name. Neither the Fund nor the Investment Manager or any
affiliate, designee or agent thereof shall make reference to or use the name,
and any derivative thereof or logo associated with that name, of the
Subadviser or any of its clients or affiliates or use any material describing
the Subadviser without the prior approval of the Subadviser. Upon termination
of this Agreement, the Investment Manager and the Fund shall forthwith cease
to use such name (or derivative or logo) as soon as reasonably practicable.
19. Entire Agreement. This Agreement contains the entire understanding
and agreement of the parties with respect to the Portfolio and the Fund with
respect to the subject matter contained herein.
20. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
21. Severability. Should any portion of this Agreement for any reason
be held to be void in law or in equity, the Agreement shall be construed,
insofar as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT ADVISORY
CORPORATION
ATTEST: /s/ Thomas Elwood BY: /s/ Ronald Angarella
----------------------- ---------------------------
TITLE: Asst. Secretary TITLE: President
----------------------- ---------------------------
WARBURG, PINCUS COUNSELLORS, INC.,
ATTEST: /s/ Mayan Maglia BY: /s/ Eogene P. Grace
----------------------- ---------------------------
TITLE: TITLE: Senior Vice President
----------------------- ---------------------------
10
<PAGE>
SCHEDULE A
INVESTMENT SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio .30% of first $200 Million
Massachusetts Financial Services .25% over $200 Million
- ------------------------------------------------------------------------------
Growth and Income Portfolio .50%
Warburg Pincus
- ------------------------------------------------------------------------------
World Growth Stock Portfolio .50% of first $200 Million
Templeton Global Advisors Limited .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Balanced Portfolio .45% of first $100 Million
J.P. Morgan Investment Management .40% of next $100 Million
.35% over $200 Million
.30% over $400 Million
- ------------------------------------------------------------------------------
Emerging Growth Portfolio .40%
Massachusetts Financial Services
- ------------------------------------------------------------------------------
Bond Portfolio .35% of first $200 Million
Chubb Asset Managers, Inc. .30% of next $1.1 Billion
.25% over $1.3 Billion
- ------------------------------------------------------------------------------
Gold Stock Portfolio .50% of first $200 Million
Van Eck Associates Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Domestic Growth Portfolio .50% of first $200 Million
Pioneering Management Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Capital Growth Portfolio .75% of first $200 Million
Janus Capital Corporation .70% of next $1.1 Billion
.65% over $1.3 Billion
- ------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
<PAGE>
Exhibit 5f
INVESTMENT SUBADVISORY AGREEMENT
CAPITAL GROWTH PORTFOLIO
THIS AGREEMENT, made this 28th day of August, 1997 is between CHUBB INVESTMENT
ADVISORY CORPORATION, a Tennessee corporation with offices at One Granite Place,
Concord, New Hampshire, 03301 (the "Investment Manager" or "Manager") and Janus
Capital Corporation, (the "Subadviser") a Colorado corporation with offices at
100 Fillmore Street, Suite 300, Denver, Colorado 80206.
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business
as a diversified open-end management investment company and is registered as
such under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of
which represents a separate portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as
investment manager of the Portfolio, as set forth in an Investment Management
Agreement between the Fund and the Investment Manager dated August 28, 1997,
(the "Investment Management Agreement") pursuant to which it was agreed that the
Investment Manager may contract with the Subadviser, or other parties for
certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act");
WHEREAS, the Investment Manager desires to retain the Subadviser to
render investment management services to the Fund's Capital Growth Portfolio
(the "Portfolio") in the manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree as
follows:
1. Appointment of the Subadviser. The Manager hereby appoints the
Subadviser to act as an investment subadviser for the Portfolio and to manage
the investment and reinvestment of the assets of the Portfolio, subject to the
supervision of the Directors of the
1
<PAGE>
Fund and the terms and conditions of this Agreement. The Subadviser will be an
independent contractor and will have no authority to act for or represent the
Fund or Manager in any way or otherwise be deemed an agent of the Fund or
Manager except as expressly authorized in this Agreement or another writing by
the Fund, Manager and the Subadviser. Notwithstanding the foregoing, the
Subadviser may execute account documentation, agreements, contracts and other
documents as the Subadviser may be requested by brokers, dealers, counterparts
and other persons in connection with the Subadviser's management of the assets
of the Portfolio, provided that the Subadviser receives the express agreement
and consent of the Manager and/or the Fund's Board of Directors to execute such
documentation, agreements, contracts and other documents. In such respect, and
only for this limited purpose, the Subadviser shall act at the Manager and/or
the Fund's agent and attorney-in-fact.
2. Duties of the Subadviser. The Subadviser hereby agrees, subject
to the supervision of the Investment Manager and the Board of Directors of the
Fund, (1) to act as the Subadviser of the Portfolio, (2) to manage the
investment and reinvestment of the assets of the Portfolio for the period and on
the terms and conditions set forth in this Agreement, and (3) during the term
hereof, to render the services and to assume the obligations herein set forth in
return for the compensation provided for herein and to bear all expenses of its
performance of such services and obligations.
3. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment
of the assets of the Portfolio and determine the composition of the assets of
the Portfolio, subject always to the direction and control of the Directors of
the Fund and the Manager and in accordance with the provisions of the Fund's
registration statement, as amended from time to time. In fulfilling its
obligations to manage the investment and reinvestment of the assets of the
Portfolio, the Subadviser will:
(i) obtain and evaluate pertinent statistical, financial,
and other information relating to individual companies or industries, the
securities of which are included in the Portfolio or are under consideration for
inclusion in the Portfolio;
(ii) formulate and implement a continuous investment
program for the Portfolio (a) consistent with the investment objectives,
policies, and restrictions of the Portfolio as stated in the Fund's Agreement
and Articles of Incorporation, Bylaws, and such Portfolio's currently effective
Prospectus and Statement of Additional Information ("SAI") as amended from time
to time, and (b) in compliance with the requirements applicable to both
regulated investment companies and segregated asset accounts under Subchapters M
and L of the Internal Revenue Code of 1986, as amended ("IRC"), and requirements
applicable to registered investment companies under applicable laws;
2
<PAGE>
(iii) take whatever steps are necessary to implement the
investment program for the Portfolio by the purchase and sale of securities and
other investments authorized under the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
SAI, including the placing of orders for such purchases and sales;
(iv) regularly report to the Directors of the Fund and the
Manager with respect to the implementation of the investment program and, in
addition, provide such statistical information and special reports concerning
the Portfolio and/or important developments materially affecting the investments
held, or contemplated to be purchased, by the Portfolio, as may reasonably be
requested by the Manager or the Directors of the Fund, including attendance at
Board of Directors Meetings, as reasonably requested, to present such
information and reports to the Board, provided that Subadviser shall not be
responsible for fund accounting;
(v) will assist in suggesting methods for determining
fair value of certain portfolio securities when market quotations are not
readily available for the purpose of calculating the Portfolio's net asset value
in accordance with procedures and methods established by the Directors of the
Fund;
(vi) establish appropriate interfaces with the Fund's
Manager in order to provide such Manager with all necessary information
requested by the Manager and required to be provided by Subadviser hereunder.
B. To facilitate the Subadviser's fulfillment of its
obligations under this Agreement, the Manager will undertake the following:
(i) the Manager agrees to provide the Subadviser with all
amendments or supplements to the Registration Statement, the Fund's Agreement
and Articles of Incorporation, and Bylaws prior to filing with SEC;
(ii) the Manager agrees, on an ongoing basis, to notify
the Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolio prior to the effective date
of such changes;
(iii) the Manager agrees to provide or cause to be provided
to the Subadviser such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolio under
this Agreement, including, without limitation, information concerning the
Portfolio, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolio's
affairs and information to enable Subadviser to monitor the "short-short" test
and 90% source tax of Subchapter M of the IRC;
3
<PAGE>
(iv) the Manager agrees to provide or cause to be provided
to the Subadviser on an ongoing basis, such information as is reasonably
requested by the Subadviser for performance by the Subadviser of its obligations
under this Agreement, and the Subadviser shall not be in breach of any term of
this Agreement or be deemed to have acted negligently if the Manager fails to
provide or cause to be provided such requested information and the Subadviser
relies on the information most recently furnished to the Subadviser; and
(v) the Manager will promptly provide the Subadviser with
any guidelines and procedures applicable to the Subadviser or the Portfolio
adopted from time to time by the Board of Directors of the Fund and agrees to
promptly provide the Subadviser copies of all amendments thereto.
C. The Fund and the Investment Manager shall not, without the
prior written consent of the Subadviser, make representations in any disclosure
document, advertisement, sales literature or other promotional material
regarding the Subadviser or its affiliates. The Investment Manager shall hold
harmless and indemnify the Subadviser against any loss, liability, cost, damage
or expense (including reasonable attorneys fees and costs) arising out of any
use of any disclosure documents, advertisement, sales literature or other
promotional material without prior written consent by the Subadviser.
D. The Subadviser, at its expense, will furnish all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement. The Fund or Investment Manager assumes
and shall pay all expenses incidental to their respective organization,
operation and business not specifically assumed or agreed to be paid by the
Subadviser pursuant hereto, including, but not limited to, investment adviser
fees; any compensation, fees, or reimbursements which the Fund pays to its
Directors; compensation of the Fund's custodian, transfer agent, registrar and
dividend disbursing agent; legal, accounting, audit and printing expenses;
administrative, clerical, record-keeping and bookkeeping expenses; brokerage
commissions and all other expenses in connection with execution of portfolio
transactions (including any appropriate commissions paid to the Subadviser or
its affiliates for effecting exchange listed, over-the-counter or other
securities transactions); interest, all federal, state and local taxes
(including stamp, excise, income and franchise taxes) costs of stock
certificates and expenses of delivering such certificates to the purchaser
thereof; expenses of shareholders' meetings and of preparing, printing and
distributing proxy statements, notices, and reports to shareholders; regulatory
authorities; all expenses incurred in complying with all federal and state laws
and the laws of any foreign country applicable to the issue, offer, or sale of
shares for the Fund, including, but not limited to all costs involved in the
registration or qualification of shares of the Fund for sale in any
jurisdiction, the costs of portfolio pricing services and systems for compliance
with blue sky laws, and all costs involved in preparing, printing and mailing
prospectuses and statements of additional information of the Fund; and all fees,
dues and other expenses incurred by the Fund in connection with the membership
in any trade association or other investment company organization.
4
<PAGE>
E. The Subadviser will select brokers and dealers to effect all
portfolio transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolio in accordance with such policies or practices as may be established by
the Board of Directors and described in the Fund's currently effective
Prospectus and SAI, as amended from time to time. In placing orders for the
purchase or sale of investments for the Portfolio, in the name of the Portfolio
or its nominees, the Subadviser shall use its best efforts to obtain for the
Portfolio the most favorable price and best execution available, considering all
of the circumstances, and shall maintain records adequate to demonstrate
compliance with this requirement.
Subject to the appropriate policies and procedures approved by the
Board of Directors, the Subadviser may, to the extent authorized by Section
28(e) of the Securities and Exchange Act of 1934, cause the Portfolio to pay a
broker or dealer that provides brokerage or research services to the Manager,
the Subadviser, or the Portfolio an amount of commissions for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided
viewed in terms of that particular transaction or the Subadviser's overall
responsibilities to the Portfolio or its other advisory clients. To the extent
authorized by said Section 28(e) and the Fund's Board of Directors, the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the most favorable price and best execution
available, the Subadviser may also consider sales of shares of the Fund as a
factor in the selection of brokers and dealers.
F. On occasions when the Subadviser deems the purchase or sale
of a security to be in the best interest of the Portfolio as well as other
clients of the Subadviser, the Subadviser to the extent permitted by applicable
laws and regulations, may, but shall be under no obligation to, aggregate the
securities to be purchased or sold to attempt to obtain a more favorable price
or lower brokerage commissions and efficient execution. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Subadviser in the manner the
Subadviser considers to be the most equitable and consistent with its fiduciary
obligations to the Portfolio and to its other clients.
The Subadviser may perform its Services through any
employee, officer or agent of the Subadviser and the Investment Manager and the
Fund shall not be entitled to the advice, recommendation or judgment of any
specific person. The Subadviser makes no representation or warranty, express or
implied, that any level of performance or investment results will be achieved by
the Capital Growth Portfolio or that such Portfolio will perform comparably with
any standard or index, including other clients of the Subadviser, whether public
or private.
5
<PAGE>
G. The Subadviser will maintain all accounts, books and records
with respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
4. Compensation of the Subadviser. The Investment Manager will
pay the Subadviser, with respect to the Portfolio, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolio's assets and accrued on a daily basis.
5. Non-Exclusivity. The Investment Manager agrees that the
services of the Subadviser are not to be deemed exclusive and the Subadviser is
free to act as investment manager to various investment companies and as
fiduciary for other managed accounts. The Subadviser shall, for all purposes
herein, be deemed to be an independent contractor and shall, unless otherwise
provided or authorized, have no authority to act for or represent the Fund or
the Investment Manager in any way or otherwise be deemed an agent of the Fund or
Investment Manager other than in furtherance of its duties and responsibilities
as set forth in this Subadvisory Agreement.
6. Books and Records. The Subadviser agrees that all books and
records which it maintains for the Fund are the Fund's property, and, in the
event of termination of this Agreement for any reason, the Subadviser agrees
promptly to return to the Fund, free from any claim or retention of rights by
the Subadviser, all records relating to the Portfolio. The Subadviser also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to either party or make the book and records available for
inspection by representatives of regulatory authorities. In connection with its
duties hereunder, the Subadviser further agrees to maintain, prepare and
preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
The Subadviser will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose such
records or information in any manner other than expressly authorized by the
Fund, or if disclosure is expressly required by applicable federal or state
regulatory authorities or by this Agreement. The Subadviser will furnish any
informational reports requested by any state insurance commissioner.
7. Liability. Except as may otherwise be provided by the
Investment Company Act, neither the Subadviser nor its officers, directors,
employees or agents shall be subject to any liability to Investment Manager, the
Fund or any shareholder of the Fund for any error of judgment, mistake of law or
any loss arising out of any investment or other act or omission in the course
of, connected with or arising out of any service to be rendered hereunder,
except by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties under this Agreement. The Investment Manager shall hold harmless and
indemnify the Subadviser for any loss, liability, cost, damage or expense
(including reasonable attorneys fees and costs) arising from any claim
6
<PAGE>
or demand by the Fund or any past or present shareholder of the fund that is not
arising from Subadviser's willful misfeasance, bad faith or gross negligence.
8. Reliance on Documents. The Board of Directors of the Fund or
its officers or agent will provide timely information to the Subadviser
regarding such matters as purchases and redemptions of shares in the Portfolio,
the cash requirements, and cash available for investment in the Portfolio, and
all other information as may be reasonably necessary or appropriate in order for
the Subadviser to perform its responsibilities hereunder. The Subadviser has
provided the Investment Manager with a copy of its current Form ADV.
Neither the Fund or the Investment Manager, nor their respective
designees or agents, shall use any material describing or identifying the
Subadviser or its affiliates without the prior consent of the Subadviser. Any
material utilized by the Fund, the Investment Manager or their respective
designees or agents which contain information as to the Subadviser and/or its
affiliates shall be submitted to the Subadviser for approval prior to use, not
less than five (5) business days before such approval is requested.
The Investment Manager has herewith furnished the Subadviser
copies of the Fund's Prospectus, Statement of Additional Information, Articles
of Incorporation and By-Laws as currently in effect and agrees during the
continuance of the Agreement to furnish the Subadviser copies of any amendments
or supplements thereto before or at the time the amendments or supplements
become effective. The Subadviser will be entitled to rely on all such documents
furnished to it by the Investment Manager or the Fund.
9. Duration and Termination of the Agreement. This Subadvisory
Agreement shall become effective as of the date first written above and remain
in force until August 28, 1999. Thereafter, it shall continue in effect from
year to year, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (b) a
majority of those directors who are not parties to this Subadvisory Agreement,
not interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated, without the payment of any penalty, by the Board of
Directors of the Fund, by a vote of a majority of the outstanding shares of the
Portfolio, or by the Investment Manager on sixty days' written notice to the
Subadviser, or by the Subadviser on sixty days' written notice to the Fund or
the Investment Manager. Termination by the Board of Directors or by the
Investment Manager shall be subject to shareholder approval to the extent
legally required. This Agreement shall automatically terminate in the event of
its assignment or in the event of termination of the Investment Management
Agreement.
7
<PAGE>
10. Amendments of the Agreement. Except to the extent permitted
by the Investment Company Act or the rules or regulations thereunder or pursuant
to any exemptive relief granted by the Securities and Exchange Commission
("SEC"), this Agreement may be amended by the parties only if such amendment, if
material, is specifically approved by the vote of a majority of the outstanding
voting securities of the Portfolio (unless such approval is not required by
Section 15 of the Investment Company Act as interpreted by the SEC or its staff)
and by the vote of a majority of the Independent Directors cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to the Portfolio if a
majority of the outstanding voting securities of the Portfolio vote to approve
the amendment, notwithstanding that amendment may not have been approved by a
majority of the outstanding voting securities of any other portfolio affected by
the amendment or all the portfolios of the Fund.
11. Definitions. The terms "assignment", "interested person",
and "majority of the outstanding voting securities", when used in this
Agreement, shall have the respective meaning specified under the Investment
Company Act and the rules thereunder.
12. Notices. Any notice that is required to be given by the
parties to each other under the terms of this Agreement shall be given in
writing, delivered, or mailed postpaid to the other party, or transmitted by
facsimile with acknowledgment of receipt, to the parties at the following
addresses or facsimile numbers, which may from time to time be changed by the
parties by notice to the other party:
(a) If to the Subadviser:
Janus Capital Corporation
100 Fillmore Street
Suite 300
Denver, Colorado 80206
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New
Hampshire as at the time in effect and the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable. To the extent that the applicable law of the State of New Hampshire
or any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable, the latter shall control.
8
<PAGE>
14. Use of Subadviser's Name. Neither the Fund nor the Manager
or any affiliate or agent thereof shall make reference to or use the name, and
any derivative thereof or logo associated with that name, of the Subadviser or
any of its affiliates in any advertising or promotional materials without the
prior approval of the Subadviser, which approval shall not be unreasonably
withheld or delayed. Upon termination of this Agreement, the Manager and the
Fund shall forthwith cease to use such name (or derivative or logo) as soon as
reasonably practicable.
15. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the Portfolio.
16. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
17. Severability. Should any portion of this Agreement for any
reason be held to be void in law or in equity, the Agreement shall be construed,
insofar as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT ADVISORY
CORPORATION
ATTEST: /s/ Thomas Elwood BY: /s/ Ronald Angarella
----------------------- ---------------------------------
TITLE: Assistant Secretary TITLE: President
------------------------ ------------------------------
JANUS CAPITAL CORPORATION
ATTEST: /s/ Vera Morris BY: Stephen L. Stieneker
-------------------- ---------------------------------
TITLE: Legal Secretary TITLE: Vice President of Compliance
--------------------- ------------------------------
9
<PAGE>
SCHEDULE A
INVESTMENT SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio .30% of first $200 Million
Massachusetts Financial Services .25% over $200 Million
- ------------------------------------------------------------------------------
Growth and Income Portfolio .50%
Warburg Pincus
- ------------------------------------------------------------------------------
World Growth Stock Portfolio .50% of first $200 Million
Templeton Global Advisors Limited .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Balanced Portfolio .45% of first $100 Million
J.P. Morgan Investment Management .40% of next $100 Million
.35% over $200 Million
.30% over $400 Million
- ------------------------------------------------------------------------------
Emerging Growth Portfolio .40%
Massachusetts Financial Services
- ------------------------------------------------------------------------------
Bond Portfolio .35% of first $200 Million
Chubb Asset Managers, Inc. .30% of next $1.1 Billion
.25% over $1.3 Billion
- ------------------------------------------------------------------------------
Gold Stock Portfolio .50% of first $200 Million
Van Eck Associates Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Domestic Growth Portfolio .50% of first $200 Million
Pioneering Management Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Capital Growth Portfolio .75% of first $200 Million
Janus Capital Corporation .70% of next $1.1 Billion
.65% over $1.3 Billion
- ------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
<PAGE>
Exhibit 5g
INVESTMENT SUBADVISORY AGREEMENT
BALANCED PORTFOLIO
THIS AGREEMENT, made this 28th day of August, 1997 is between CHUBB
INVESTMENT ADVISORY CORPORATION, a Tennessee corporation with offices at One
Granite Place, Concord, New Hampshire, 03301 (the "Investment Manager" or
"Manager") and J.P. Morgan Investment Management Inc. (the "Subadviser"), a New
York corporation with offices at 522 Fifth Avenue, New York, New York 10036.
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business
as a diversified open-end management investment company and is registered as
such under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of
which represents a separate portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as
investment manager of the Fund's Balanced Portfolio (the "Portfolio"), as set
forth in an Investment Management Agreement between the Fund and the Investment
Manager dated August 28, 1997, (the "Investment Management Agreement") pursuant
to which it was agreed that the Investment Manager may contract with the
Subadviser, or other parties for certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act");
WHEREAS, the Investment Manager desires to retain the Subadviser to
render investment management services to the Portfolio in the manner and on the
terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree as
follows:
<PAGE>
1. Appointment of the Subadviser. The Investment Manager hereby
appoints the Subadviser to act as an investment subadviser for the Portfolio and
to manage the investment and reinvestment of the assets of the Portfolio,
subject to the supervision of the Directors of the Fund and the terms and
conditions of this Agreement. The Subadviser will be an independent contractor
and will have no authority to act for or represent the Fund or Investment
Manager in any way or otherwise be deemed an agent of the Fund or Investment
Manager except as expressly authorized in this Agreement or another writing by
the Fund, Investment Manager and the Subadviser. Notwithstanding the foregoing,
the Subadviser may execute account documentation, agreements, contracts and
other documents as the Subadviser may be requested by brokers, dealers,
counterparts and other persons in connection with the Subadviser's management of
the assets of the Portfolio, provided that the Subadviser receives the express
agreement and consent of the Investment Manager and/or the Fund's Board of
Directors to execute such documentation, agreements, contracts and other
documents. In such respect, and only for this limited purpose, the Subadviser
shall act as the Investment Manager and/or the Fund's agent and attorney-in-
fact.
2. Duties of the Subadviser. The Subadviser hereby agrees, subject
to the supervision of the Investment Manager and the Board of Directors of the
Fund, (1) to act as the Subadviser of the Portfolio, (2) to manage the
investment and reinvestment of the assets of the Portfolio for the period and on
the terms and conditions set forth in this Agreement, and (3) during the term
hereof, to render the services and to assume the obligations herein set forth in
return for the compensation provided for herein and to bear all expenses of its
performance of such services and obligations.
3. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment of
the assets of the Portfolio and determine the composition of the assets of the
Portfolio, subject always to the direction and control of the Directors of the
Fund and the Investment Manager and in accordance with the provisions of the
Fund's registration statement, as amended from time to time. In fulfilling its
obligations to manage the investment and reinvestment of the assets of the
Portfolio, the Subadviser will:
(i) obtain and evaluate pertinent economic, statistical,
financial, and other information affecting the economy generally and individual
companies or industries, the securities of which are included in the Portfolio
or are under consideration for inclusion in the Portfolio;
(ii) formulate and implement a continuous investment program
for the Portfolio (a) consistent with the investment objectives, policies, and
restrictions of the Portfolio as stated in the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
Statement of Additional Information ("SAI") as amended from time to time, and
(b) in compliance with the requirements applicable to both regulated investment
companies and segregated asset accounts under Subchapters M and L of
2
<PAGE>
the Internal Revenue Code of 1986, as amended, and requirements applicable to
registered investment companies under applicable laws;
(iii) take whatever steps are necessary to implement the
investment program for the Portfolio by the purchase and sale of securities and
other investments authorized under the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
SAI, including the placing of orders for such purchases and sales;
(iv) regularly report to the Directors of the Fund and the
Investment Manager with respect to the implementation of the investment program
and, in addition, provide such statistical information and special reports
concerning the Portfolio and/or important developments materially affecting the
investments held, or contemplated to be purchased, by the Portfolio, as may
reasonably be requested by the Investment Manager or the Directors of the Fund,
including attendance at Board of Directors Meetings, as reasonably requested, to
present such information and reports to the Board;
(v) assist in determination of the fair value of certain
portfolio securities when market quotations are not readily available for the
purpose of calculating the Portfolio's net asset value in accordance with
procedures and methods established by the Directors of the Fund;
(vi) establish appropriate interfaces with the Fund's
Investment Manager in order to provide such Investment Manager with all
necessary information requested by the Investment Manager.
B. To facilitate the Subadviser's fulfillment of its obligations
under this Agreement, the Investment Manager will undertake the following:
(i) the Manager agrees promptly to provide the Subadviser
with all amendments or supplements to the Registration Statement, the Fund's
Agreement and Articles of Incorporation, and Bylaws;
(ii) the Manager agrees, on an ongoing basis, to notify the
Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolio;
(iii) the Manager agrees to provide or cause to be provided to
the Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolio under
this Agreement, including, without limitation, information concerning the
Portfolio, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolio's
affairs;
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<PAGE>
(iv) the Manager agrees to provide or cause to be provided to
the Subadviser on an ongoing basis, such information as is reasonably requested
by the Subadviser for performance by the Subadviser of its obligations under
this Agreement, and the Subadviser shall not be in breach of any term of this
Agreement or be deemed to have acted negligently if the Manager fails to provide
or cause to be provided such requested information and the Subadviser relies on
the information most recently furnished to the Subadviser; and
(v) the Manager will promptly provide the Subadviser with
any guidelines and procedures applicable to the Subadviser or the Portfolio
adopted from time to time by the Board of Directors of the Fund and agrees to
promptly provide the Subadviser copies of all amendments thereto.
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolio (excluding that
necessary for the determination of net asset value and shareholder accounting
services). The Subadviser shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Subadviser pursuant to this Section
3.
D. The Subadviser will select brokers and dealers to effect all
portfolio transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolio in accordance with such policies or practices as may be established by
the Board of Directors and described in the Fund's currently effective
Prospectus and SAI, as amended from time to time. In placing orders for the
purchase or sale of investments for the Portfolio, in the name of the Portfolio
or its nominees, the Subadviser shall use its best efforts to obtain for the
Portfolio the most favorable price and best execution available, considering all
of the circumstances, and shall maintain records adequate to demonstrate
compliance with this requirement.
Subject to the appropriate policies and procedures approved by the
Board of Directors, the Subadviser may, to the extent authorized by Section
28(e) of the Securities and Exchange Act of 1934, cause the Portfolio to pay a
broker or dealer that provides brokerage or research services to the Manager,
the Subadviser, or the Portfolio an amount of commissions for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided
viewed in terms of that particular transaction or the Subadviser's overall
responsibilities to the Portfolio or its other advisory clients. To the extent
authorized by said Section 28(e) and the Fund's Board of Directors, the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the most favorable
4
<PAGE>
price and best execution available, the Subadviser may also consider sales of
shares of the Fund as a factor in the selection of brokers and dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients of
the Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
F. The Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
4. Compensation of the Subadviser. The Investment Manager will pay
the Subadviser, with respect to the Portfolio, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolio's assets and accrued on a daily basis.
5. Non-Exclusivity. The Investment Manager agrees that the services
of the Subadviser are not to be deemed exclusive and the Subadviser is free to
act as investment manager to various investment companies and as fiduciary for
other managed accounts. The Subadviser shall, for all purposes herein, be
deemed to be an independent contractor and shall, unless otherwise provided or
authorized, have no authority to act for or represent the Fund or the Investment
Manager in any way or otherwise be deemed an agent of the Fund or Investment
Manager other than in furtherance of its duties and responsibilities as set
forth in this Subadvisory Agreement.
6. Books and Records. The Subadviser agrees that all books and
records which it maintains for the Fund are the Fund's property, and, in the
event of termination of this Agreement for any reason, the Subadviser agrees
promptly to return to the Fund, free from any claim or retention of rights by
the Subadviser, all records relating to the Portfolio. The Subadviser also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to either party or make the book and records available for
inspection by representatives of regulatory authorities. In connection with its
duties hereunder, the Subadviser further agrees to maintain, prepare and
preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
5
<PAGE>
The Subadviser will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose such
records or information in any manner other than expressly authorized by the
Fund, or if disclosure is expressly required by applicable federal or state
regulatory authorities or by this Agreement. The Subadviser will furnish any
informational reports requested by any state insurance commissioner.
7. Liability. The Subadviser will not be liable for any loss
suffered by the Fund in connection with any investment policy established by the
Fund for the purchase, sale or redemption of any securities at the direction of
the Board of Directors of the Fund or the Investment Manager. Nothing herein
contained shall be construed to protect the Subadviser against any liability
resulting from the willful misfeasance, bad faith or gross negligence of the
Subadviser in the performance of its duties or from reckless disregard of its
obligations and duties under this Subadviser Agreement.
8. Indemnification. The Adviser agrees to indemnify and hold
harmless the Subadviser from and against any and all claims, losses, liabilities
or damages (including reasonable attorney's fees and other related expenses)
("Losses"), howsoever arising, from or in connection with this Agreement or the
performance by the Subadviser of its duties hereunder; provided, however, that
nothing contained herein shall require that the Subadviser be indemnified for
Losses resulting from willful misfeasance, bad faith or gross negligence of, or
from reckless disregard of, the duties of the Subadviser or any of its
employees.
9. Reliance on Documents. The Board of Directors of the Fund or its
officers or agent will provide timely information to the Subadviser regarding
such matters as purchases and redemptions of shares in the Portfolio, the cash
requirements, and cash available for investment in the Portfolio, and all other
information as may be reasonably necessary or appropriate in order for the
Subadviser to perform its responsibilities hereunder.
Neither the Fund or the Investment Manager, nor their respective
designees or agents, shall use any material describing or identifying the
Subadviser or its affiliates without the prior consent of the Subadviser. Any
material utilized by the Fund, the Investment Manager or their respective
designees or agents which contain information as to the Subadviser and/or its
affiliates shall be submitted to the Subadviser for approval prior to use, not
less than five (5) business days before such approval is requested.
The Investment Manager has herewith furnished the Subadviser copies of
the Fund's Prospectus, Articles of Incorporation and By-Laws as currently in
effect and agrees during the continuance of the Agreement to furnish the
Subadviser copies of any amendments or supplements thereto before or at the time
the amendments or supplements become effective. The Subadviser will be entitled
to rely on all such documents furnished to it by the Investment Manager or the
Fund.
6
<PAGE>
10. Duration and Termination of the Agreement. This Subadvisory
Agreement shall become effective as of the date first written above and remain
in force until August 28, 1999. Thereafter, it shall continue in effect from
year to year, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (b) a
majority of those directors who are not parties to this Subadvisory Agreement,
not interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated, without the payment of any penalty, by the Board of
Directors of the Fund, by a vote of a majority of the outstanding shares of the
Portfolio, or by the Investment Manager on sixty days' written notice to the
Subadviser, or by the Subadviser on sixty days' written notice to the Fund or
the Investment Manager. Termination by the Board of Directors or by the
Investment Manager shall be subject to shareholder approval to the extent
legally required. This Agreement shall automatically terminate in the event of
its assignment or in the event of termination of the Investment Management
Agreement.
11. Amendments of the Agreement. Except to the extent permitted by
the Investment Company Act or the rules or regulations thereunder or pursuant to
any exemptive relief granted by the Securities and Exchange Commission ("SEC"),
this Agreement may be amended by the parties only if such amendment, if
material, is specifically approved by the vote of a majority of the outstanding
voting securities of the Portfolio (unless such approval is not required by
Section 15 of the Investment Company Act as interpreted by the SEC or its staff)
and by the vote of a majority of the Independent Directors cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to the Portfolio if a
majority of the outstanding voting securities of the Portfolio vote to approve
the amendment, notwithstanding that amendment may not have been approved by a
majority of the outstanding voting securities of any other portfolio affected by
the amendment or all the portfolios of the Fund.
12. Definitions. The terms "assignment", "interested person", and
"majority of the outstanding voting securities", when used in this Agreement,
shall have the respective meaning specified under the Investment Company Act and
the rules thereunder.
13. Notices. Any notice that is required to be given by the parties
to each other under the terms of this Agreement shall be given in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, NY 10026
Attn: Diane Minardi
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<PAGE>
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
14. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New
Hampshire as at the time in effect and the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable. To the extent that the applicable law of the State of New Hampshire
or any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable, the latter shall control.
15. Use of Subadviser's Name. Neither the Fund nor the Manager or
any affiliate or agent thereof shall make reference to or use the name, and any
derivative thereof or logo associated with that name, of the Subadviser or any
of its affiliates in any advertising or promotional materials without the prior
approval of the Subadviser. Upon termination of this Agreement, the Manager and
the Fund shall forthwith cease to use such name (or derivative or logo) as soon
as reasonably practicable.
16. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the Portfolio.
17. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
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18. Severability. Should any portion of this Agreement for any
reason be held to be void in law or in equity, the Agreement shall be construed,
insofar as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT ADVISORY
CORPORATION
ATTEST: /s/ Thomas Elwood BY: /s/ Ronald Angarella
TITLE: Assist Secretary TITLE: President
J.P. MORGAN INVESTMENT
MANAGEMENT INC
ATTEST: /s/ Diane Minand BY: /s/ Kathleen F. Burns
TITLE: Vice President TITLE: Vice President
9
<PAGE>
SCHEDULE A
INVESTMENT SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio .30% of first $200 Million
Massachusetts Financial Services .25% over $200 Million
- ------------------------------------------------------------------------------
Growth and Income Portfolio .50%
Warburg Pincus
- ------------------------------------------------------------------------------
World Growth Stock Portfolio .50% of first $200 Million
Templeton Global Advisors Limited .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Balanced Portfolio .45% of first $100 Million
J.P. Morgan Investment Management .40% of next $100 Million
.35% over $200 Million
.30% over $400 Million
- ------------------------------------------------------------------------------
Emerging Growth Portfolio .40%
Massachusetts Financial Services
- ------------------------------------------------------------------------------
Bond Portfolio .35% of first $200 Million
Chubb Asset Managers, Inc. .30% of next $1.1 Billion
.25% over $1.3 Billion
- ------------------------------------------------------------------------------
Gold Stock Portfolio .50% of first $200 Million
Van Eck Associates Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Domestic Growth Portfolio .50% of first $200 Million
Pioneering Management Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Capital Growth Portfolio .75% of first $200 Million
Janus Capital Corporation .70% of next $1.1 Billion
.65% over $1.3 Billion
- ------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
<PAGE>
Exhibit 5.H
INVESTMENT SUBADVISORY AGREEMENT
EMERGING GROWTH PORTFOLIO
MONEY MARKET PORTFOLIO
THIS AGREEMENT, made this 28th day of August, 1997, is between CHUBB INVESTMENT
ADVISORY CORPORATION, a Tennessee corporation with offices at One Granite Place,
Concord, New Hampshire, 03301 (the "Investment Manager" or "Manager") and
Massachusetts Financial Services Company, (the "Subadviser") a Delaware
corporation with offices at 500 Boylston Street, Boston, Massachusetts 02116.
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business
as a diversified open-end management investment company and is registered as
such under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of
which represents a separate Portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as
investment manager of the Portfolios, as set forth in an Investment Management
Agreement between the Fund and the Investment Manager dated August 28, 1997,
(the "Investment Management Agreement") pursuant to which it was agreed that the
Investment Manager may contract with the Subadviser, or other parties for
certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act");
WHEREAS, the Investment Manager desires to retain the Subadviser to
render investment management services to the Fund's Emerging Growth Portfolio
and Money Market Portfolio (the "Portfolios") in the manner and on the terms
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree as
follows:
1. Appointment of the Subadviser. The Manager hereby appoints the
Subadviser to act as an investment subadviser for the Portfolios and to manage
the investment and reinvestment of the assets of the Portfolios, subject to the
supervision of the Directors of the Fund and the terms and conditions of this
Agreement. The Subadviser will be an independent contractor and will have no
authority to act for or represent the Fund or Manager in any way or otherwise be
deemed an agent of the Fund or Manager except as expressly
<PAGE>
authorized in this Agreement or another writing by the Fund, Manager and the
Subadviser. Notwithstanding the foregoing, the Subadviser may execute account
documentation, agreements, contracts and other documents as the Subadviser may
be requested by brokers, dealers, counterparties and other persons in connection
with the Subadviser's management of the assets of the Portfolios, provided that
the Subadviser receives the express agreement and consent of the Manager and/or
the Fund's Board of Directors to execute such documentation, agreements,
contracts and other documents. In such respect, and only for this limited
purpose, the Subadviser shall act at the Manager and/or the Fund's agent and
attorney-in-fact.
2. Duties of the Subadviser. The Subadviser hereby agrees, subject
to the supervision of the Investment Manager and the Board of Directors of the
Fund, (1) to act as the Subadviser of the Portfolios, (2) to manage the
investment and reinvestment of the assets of the Portfolios for the period and
on the terms and conditions set forth in this Agreement, and (3) during the term
hereof, to render the services and to assume the obligations herein set forth in
return for the compensation provided for herein and to bear all expenses of its
performance of such services and obligations.
3. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment of
the assets of the Portfolios and determine the composition of the assets of the
Portfolios, subject always to the direction and control of the Directors of the
Fund and the Manager and in accordance with the provisions of the Fund's
registration statement, as amended from time to time. In fulfilling its
obligations to manage the investment and reinvestment of the assets of the
Portfolios, the Subadviser will:
(i) obtain and evaluate pertinent economic, statistical,
financial, and other information affecting the economy generally and individual
companies or industries, the securities of which are included in the Portfolios
or are under consideration for inclusion in the Portfolios;
(ii) formulate and implement a continuous investment program
for the Portfolios (a) consistent with the investment objectives, policies, and
restrictions of the Portfolios as stated in the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolios's currently effective Prospectus and
Statement of Additional Information ("SAI") as amended from time to time, and
(b) in compliance with the requirements applicable to both regulated investment
companies and segregated asset accounts under Subchapters M and L of the
Internal Revenue Code of 1986, as amended, and requirements applicable to
registered investment companies under applicable laws;
(iii) take whatever steps are necessary to implement the
investment program for the Portfolios by the purchase and sale of securities and
other investments authorized under the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolios's currently effective Prospectus and
SAI, including the placing of orders for such purchases and sales;
2
<PAGE>
(iv) subject to the consent of the Subadviser, regularly
report to the Directors of the Fund and the Manager with respect to the
implementation of the investment program and, in addition and subject to the
consent of the Subadviser, provide such statistical information and special
reports concerning the Portfolios and/or important developments materially
affecting the investments held, or contemplated to be purchased, by the
Portfolios, as may reasonably be requested by the Manager or the Directors of
the Fund, including attendance at Board of Directors Meetings, as reasonably
requested, to present such information and reports to the Board.
B. To facilitate the Subadviser's fulfillment of its obligations
under this Agreement, the Manager will undertake the following:
(i) the Manager agrees promptly to provide the Subadviser
with all amendments or supplements to the Registration Statement, the Fund's
Agreement and Articles of Incorporation, and Bylaws;
(ii) the Manager agrees, on an ongoing basis, to notify the
Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolios;
(iii) the Manager agrees to provide or cause to be provided to
the Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolios under
this Agreement, including, without limitation, information concerning the
Portfolios, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolios's
affairs;
(iv) the Manager agrees to provide or cause to be provided to
the Subadviser on an ongoing basis, such information as is reasonably requested
by the Subadviser for performance by the Subadviser of its obligations under
this Agreement, and the Subadviser shall not be in breach of any term of this
Agreement or be deemed to have acted negligently if the Manager fails to provide
or cause to be provided such requested information and the Subadviser relies on
the information most recently furnished to the Subadviser;
(v) the Manager will promptly provide the Subadviser with
any guidelines and procedures applicable to the Subadviser or the Portfolios
adopted from time to time by the Board of Directors of the Fund and agrees to
promptly provide the Subadviser copies of all amendments thereto; and
(vi) the Board of Directors of the Fund or its officers or
agent will provide timely information to the Subadviser regarding such matters
as purchases and redemptions of shares in the Portfolios, the cash requirements,
and cash available for investment in the Portfolios and all other information as
may be reasonably necessary or appropriate in order for the Subadviser to
perform its responsibilities hereunder.
3
<PAGE>
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment required for it to
faithfully perform its duties under this agreement. The Subadviser shall not be
obligated to pay any expenses of or for the Portfolios not expressly assumed by
the Subadviser pursuant to this Section 3.
D. The Subadviser will select brokers and dealers to effect all
Portfolios transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolios in accordance with such policies or practices as may be established
by the Board of Directors and described in the Fund's currently effective
Prospectus and SAI, as amended from time to time. In placing orders for the
purchase or sale of investments for the Portfolios, in the name of the
Portfolios or its nominees, the Subadviser shall use its best efforts to obtain
for the Portfolios the most favorable price and best execution available,
considering all of the circumstances, and shall maintain records adequate to
demonstrate compliance with this requirement.
Subject to the appropriate policies and procedures approved by the
Board of Directors, the Subadviser may, to the extent authorized by Section
28(e) of the Securities and Exchange Act of 1934, cause the Portfolios to pay a
broker or dealer that provides brokerage or research services to the Manager,
the Subadviser, or the Portfolios an amount of commissions for effecting a
Portfolios transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided
viewed in terms of that particular transaction or the Subadviser's overall
responsibilities to the Portfolios or its other advisory clients. To the extent
authorized by said Section 28(e) and the Fund's Board of Directors, the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the most favorable price and best execution
available, the Subadviser may also consider sales of shares of the Fund as a
factor in the selection of brokers and dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolios as well as other clients
of the Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolios and to its other clients.
4
<PAGE>
F. The Subadviser will maintain all accounts, books and records with
respect to the Portfolios as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
4. Compensation of the Subadviser. The Investment Manager will pay
the Subadviser, with respect to the Portfolios, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolios's assets and accrued on a daily basis.
5. Non-Exclusivity. The Investment Manager agrees that the services
of the Subadviser are not to be deemed exclusive and the Subadviser is free to
act as investment manager to various investment companies and as fiduciary for
other managed accounts.
6. Books and Records. The Subadviser agrees that all books and
records which it maintains for the Fund are the Fund's property, and, in the
event of termination of this Agreement for any reason, the Subadviser agrees
promptly to return to the Fund, free from any claim or retention of rights by
the Subadviser, all records relating to the Portfolios. The Subadviser also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to either party or make the book and records available for
inspection by representatives of regulatory authorities. In connection with its
duties hereunder, the Subadviser further agrees to maintain, prepare and
preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
The Subadviser will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose such
records or information in any manner other than expressly authorized by the
Fund, or if disclosure is expressly required by applicable federal or state
regulatory authorities or by this Agreement. The Subadviser will furnish any
informational reports requested by any state insurance commissioner.
7. Liability. The Subadviser will not be liable for any loss
suffered by the Fund in connection with any investment policy established by the
Fund for the purchase, sale or redemption of any securities at the direction of
the Board of Directors of the Fund or the Investment Manager. Nothing herein
contained shall be construed to protect the Subadviser against any liability
resulting from the willful misfeasance, bad faith or gross negligence of the
Subadviser in the performance of its duties or from reckless disregard of its
obligations and duties under this Subadviser Agreement.
8. Documents. Neither the Fund or the Investment Manager, nor their
respective designees or agents, shall use any material describing or identifying
the Subadviser or its affiliates without the prior consent of the Subadviser.
Any material utilized by the Fund, the Investment Manager or their respective
designees or agents which contain information as to the
5
<PAGE>
Subadviser and/or its affiliates shall be submitted to the Subadviser for
approval prior to use, not less than five (5) business days before such approval
is requested.
9. Duration and Termination of the Agreement. This Subadvisory
Agreement shall become effective as of the date first written above and remain
in force until August 28, 1999. Thereafter, it shall continue in effect from
year to year, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolios, and (b) a
majority of those directors who are not parties to this Subadvisory Agreement,
not interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated, without the payment of any penalty, by the Board of
Directors of the Fund, by a vote of a majority of the outstanding shares of the
Portfolios, or by the Investment Manager on sixty days' written notice to the
Subadviser, or by the Subadviser on sixty days' written notice to the Fund or
the Investment Manager. Termination by the Board of Directors or by the
Investment Manager shall be subject to shareholder approval to the extent
legally required. This Agreement shall automatically terminate in the event of
its assignment or in the event of termination of the Investment Management
Agreement.
10. Amendments of the Agreement. Except to the extent permitted by
the Investment Company Act or the rules or regulations thereunder or pursuant to
any exemptive relief granted by the Securities and Exchange Commission ("SEC"),
this Agreement may be amended by the parties only if such amendment, if
material, is specifically approved by the vote of a majority of the outstanding
voting securities of the Portfolios (unless such approval is not required by
Section 15 of the Investment Company Act as interpreted by the SEC or its staff)
and by the vote of a majority of the Independent Directors cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to the Portfolios if a
majority of the outstanding voting securities of the Portfolios vote to approve
the amendment, notwithstanding that amendment may not have been approved by a
majority of the outstanding voting securities of any other Portfolios affected
by the amendment or all the Portfolios of the Fund.
11. Definitions. The terms "assignment", "interested person", and
"majority of the outstanding voting securities", when used in this Agreement,
shall have the respective meaning specified under the Investment Company Act and
the rules thereunder.
12. Notices. Any notice that is required to be given by the parties
to each other under the terms of this Agreement shall be given in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
6
<PAGE>
(a) If to the Subadviser:
Massachusetts Financial Services Company,
500 Boylston Street,
Boston, Massachusetts 02116.
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the Commonwealth of
Massachusetts as at the time in effect and the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable. To the extent that the applicable law of the Commonwealth of
Massachusetts or any of the provisions herein, conflict with the applicable
provisions of the Investment Company Act or other federal laws and regulations
which may be applicable, the latter shall control.
14. Use of Subadviser's Name. Neither the Fund nor the Manager or
any affiliate or agent thereof shall make reference to or use the name, and any
derivative thereof or logo associated with that name, of the Subadviser or any
of its affiliates in any advertising or promotional materials, without the prior
approval of the Subadviser. Upon termination of this Agreement, the Manager and
the Fund shall forthwith cease to use such name (or derivative or logo) as soon
as reasonably practicable.
15. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the Portfolios.
16. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
7
<PAGE>
17. Severability. Should any portion of this Agreement for any
reason be held to be void in law or in equity, the Agreement shall be construed,
insofar as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT
ADVISORY CORPORATION
ATTEST: /s/ Thomas Elwood BY: /s/ Ronald Angarella
----------------------- --------------------------
TITLE: Assistant Secretary TITLE: President
------------------------ -----------------------
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
ATTEST: /s/ James Des Maries BY: /s/ Arnold D. Scott
----------------------- --------------------------
TITLE: Vice President TITLE: Senior Vice President
------------------------ -----------------------
8
<PAGE>
SCHEDULE A
INVESTMENT SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio .30% of first $200 Million
Massachusetts Financial Services .25% over $200 Million
- ------------------------------------------------------------------------------
Growth and Income Portfolio .50%
Warburg Pincus
- ------------------------------------------------------------------------------
World Growth Stock Portfolio .50% of first $200 Million
Templeton Global Advisors Limited .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Balanced Portfolio .45% of first $100 Million
J.P. Morgan Investment Management .40% of next $100 Million
.35% over $200 Million
.30% over $400 Million
- ------------------------------------------------------------------------------
Emerging Growth Portfolio .40%
Massachusetts Financial Services
- ------------------------------------------------------------------------------
Bond Portfolio .35% of first $200 Million
Chubb Asset Managers, Inc. .30% of next $1.1 Billion
.25% over $1.3 Billion
- ------------------------------------------------------------------------------
Gold Stock Portfolio .50% of first $200 Million
Van Eck Associates Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Domestic Growth Portfolio .50% of first $200 Million
Pioneering Management Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Capital Growth Portfolio .75% of first $200 Million
Janus Capital Corporation .70% of next $1.1 Billion
.65% over $1.3 Billion
- ------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
<PAGE>
Exhibit 5.I
INVESTMENT SUBADVISORY AGREEMENT
BOND PORTFOLIO
THIS AGREEMENT, made this 28th day of August, 1997, is between CHUBB INVESTMENT
ADVISORY CORPORATION, a Tennessee corporation with offices at One Granite Place,
Concord, New Hampshire, 03301 (the "Investment Manager" or "Manager") and Chubb
Asset Management Inc., (the "Subadviser") a Delaware corporation with offices at
15 Mountview Road, Warren New Jersey 07061.
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business
as a diversified open-end management investment company and is registered as
such under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of
which represents a separate portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as
investment manager of the Portfolio, as set forth in an Investment Management
Agreement between the Fund and the Investment Manager dated August 28, 1997,
(the "Investment Management Agreement") pursuant to which it was agreed that the
Investment Manager may contract with the Subadviser, or other parties for
certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act");
WHEREAS, the Investment Manager desires to retain the Subadviser to
render investment management services to the Fund's Bond Portfolio (the
"Portfolio") in the manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree as
follows:
<PAGE>
1. Appointment of the Subadviser. The Manager hereby appoints the
Subadviser to act as an investment subadviser for the Portfolio and to manage
the investment and reinvestment of the assets of the Portfolio, subject to the
supervision of the Directors of the Fund and the terms and conditions of this
Agreement. The Subadviser will be an independent contractor and will have no
authority to act for or represent the Fund or Manager in any way or otherwise be
deemed an agent of the Fund or Manager except as expressly authorized in this
Agreement or another writing by the Fund, Manager and the Subadviser.
Notwithstanding the foregoing, the Subadviser may execute account documentation,
agreements, contracts and other documents as the Subadviser may be requested by
brokers, dealers, counterparts and other persons in connection with the
Subadviser's management of the assets of the Portfolio, provided that the
Subadviser receives the express agreement and consent of the Manager and/or the
Fund's Board of Directors to execute such documentation, agreements, contracts
and other documents. In such respect, and only for this limited purpose, the
Subadviser shall act at the Manager and/or the Fund's agent and attorney-in-
fact.
2. Duties of the Subadviser. The Subadviser hereby agrees, subject
to the supervision of the Investment Manager and the Board of Directors of the
Fund, (1) to act as the Subadviser of the Portfolio, (2) to manage the
investment and reinvestment of the assets of the Portfolio for the period and on
the terms and conditions set forth in this Agreement, and (3) during the term
hereof, to render the services and to assume the obligations herein set forth in
return for the compensation provided for herein and to bear all expenses of its
performance of such services and obligations.
3. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment of
the assets of the Portfolio and determine the composition of the assets of the
Portfolio, subject always to the direction and control of the Directors of the
Fund and the Manager and in accordance with the provisions of the Fund's
registration statement, as amended from time to time. In fulfilling its
obligations to manage the investment and reinvestment of the assets of the
Portfolio, the Subadviser will:
(i) obtain and evaluate pertinent economic, statistical,
financial, and other information affecting the economy generally and individual
companies or industries, the securities of which are included in the Portfolio
or are under consideration for inclusion in the Portfolio;
2
<PAGE>
(ii) formulate and implement a continuous investment program
for the Portfolio (a) consistent with the investment objectives, policies, and
restrictions of the Portfolio as stated in the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
Statement of Additional Information ("SAI") as amended from time to time, and
(b) in compliance with the requirements applicable to both regulated investment
companies and segregated asset accounts under Subchapters M and L of the
Internal Revenue Code of 1986, as amended, and requirements applicable to
registered investment companies under applicable laws;
(iii) take whatever steps are necessary to implement the
investment program for the Portfolio by the purchase and sale of securities and
other investments authorized under the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
SAI, including the placing of orders for such purchases and sales;
(iv) regularly report to the Directors of the Fund and the
Manager with respect to the implementation of the investment program and, in
addition, provide such statistical information and special reports concerning
the Portfolio and/or important developments materially affecting the investments
held, or contemplated to be purchased, by the Portfolio, as may reasonably be
requested by the Manager or the Directors of the Fund, including attendance at
Board of Directors Meetings, as reasonably requested, to present such
information and reports to the Board;
(v) provide determinations of the fair value of certain
portfolio securities when market quotations are not readily available for the
purpose of calculating the Portfolio's net asset value in accordance with
procedures and methods established by the Directors of the Fund;
(vi) provide any and all information, records and supporting
documentation about accounts the Subadviser manages that have investment
objectives, policies, and strategies substantially similar to those employed by
the Subadviser in managing the Portfolio which may be reasonably necessary,
under applicable laws, to allow the Portfolio or its agent to present
information concerning the Subadviser's prior performance in the Prospectus and
the SAI of the Portfolio and any permissible reports and materials prepared by
the Portfolio or its agent; and
(vii) establish appropriate interfaces with the Fund's Manager
in order to provide such Manager with all necessary information requested by the
Manager.
B. To facilitate the Subadviser's fulfillment of its obligations
under this Agreement, the Manager will undertake the following:
(i) the Manager agrees promptly to provide the Subadviser
with all amendments or supplements to the Registration Statement, the Fund's
Agreement and Articles of Incorporation, and Bylaws;
3
<PAGE>
(ii) the Manager agrees, on an ongoing basis, to notify the
Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolio;
(iii) the Manager agrees to provide or cause to be provided to
the Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolio under
this Agreement, including, without limitation, information concerning the
Portfolio, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolio's
affairs;
(iv) the Manager agrees to provide or cause to be provided to
the Subadviser on an ongoing basis, such information as is reasonably requested
by the Subadviser for performance by the Subadviser of its obligations under
this Agreement, and the Subadviser shall not be in breach of any term of this
Agreement or be deemed to have acted negligently if the Manager fails to provide
or cause to be provided such requested information and the Subadviser relies on
the information most recently furnished to the Subadviser; and
(v) the Manager will promptly provide the Subadviser with
any guidelines and procedures applicable to the Subadviser or the Portfolio
adopted from time to time by the Board of Directors of the Fund and agrees to
promptly provide the Subadviser copies of all amendments thereto.
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolio (excluding that
necessary for the determination of net asset value and shareholder accounting
services). The Subadviser shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Subadviser pursuant to this Section
3.
D. The Subadviser will select brokers and dealers to effect all
portfolio transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolio in accordance with such policies or practices as may be established by
the Board of Directors and described in the Fund's currently effective
Prospectus and SAI, as amended from time to time. In placing orders for the
purchase or sale of investments for the Portfolio, in the name of the Portfolio
or its nominees, the Subadviser shall use its best efforts to obtain for the
Portfolio the most favorable price and best execution available, considering all
of the circumstances, and shall maintain records adequate to demonstrate
compliance with this requirement.
4
<PAGE>
Subject to the appropriate policies and procedures approved by the
Board of Directors, the Subadviser may, to the extent authorized by Section
28(e) of the Securities and Exchange Act of 1934, cause the Portfolio to pay a
broker or dealer that provides brokerage or research services to the Manager,
the Subadviser, or the Portfolio an amount of commissions for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided
viewed in terms of that particular transaction or the Subadviser's overall
responsibilities to the Portfolio or its other advisory clients. To the extent
authorized by said Section 28(e) and the Fund's Board of Directors, the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the most favorable price and best execution
available, the Subadviser may also consider sales of shares of the Fund as a
factor in the selection of brokers and dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients of
the Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
F. The Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
4. Compensation of the Subadviser. The Investment Manager will pay
the Subadviser, with respect to the Portfolio, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolio's assets and accrued on a daily basis.
5. Non-Exclusivity. The Investment Manager agrees that the services
of the Subadviser are not to be deemed exclusive and the Subadviser is free to
act as investment manager to various investment companies and as fiduciary for
other managed accounts. The Subadviser shall, for all purposes herein, be
deemed to be an independent contractor and shall, unless otherwise provided or
authorized, have no authority to act for or represent the Fund or the Investment
Manager in any way or otherwise be deemed an agent of the Fund or Investment
Manager other than in furtherance of its duties and responsibilities as set
forth in this Subadvisory Agreement.
5
<PAGE>
6. Books and Records. The Subadviser agrees that all books and
records which it maintains for the Fund are the Fund's property, and, in the
event of termination of this Agreement for any reason, the Subadviser agrees
promptly to return to the Fund, free from any claim or retention of rights by
the Subadviser, all records relating to the Portfolio. The Subadviser also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to either party or make the book and records available for
inspection by representatives of regulatory authorities. In connection with its
duties hereunder, the Subadviser further agrees to maintain, prepare and
preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
The Subadviser will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose such
records or information in any manner other than expressly authorized by the
Fund, or if disclosure is expressly required by applicable federal or state
regulatory authorities or by this Agreement. The Subadviser will furnish any
informational reports requested by any state insurance commissioner.
7. Liability. The Subadviser will not be liable for any loss
suffered by the Fund in connection with any investment policy established by the
Fund for the purchase, sale or redemption of any securities at the direction of
the Board of Directors of the Fund or the Investment Manager. Nothing herein
contained shall be construed to protect the Subadviser against any liability
resulting from the willful misfeasance, bad faith or gross negligence of the
Subadviser in the performance of its duties or from reckless disregard of its
obligations and duties under this Subadviser Agreement.
8. Reliance on Documents. The Board of Directors of the Fund or its
officers or agent will provide timely information to the Subadviser regarding
such matters as purchases and redemptions of shares in the Portfolio, the cash
requirements, and cash available for investment in the Portfolio, and all other
information as may be reasonably necessary or appropriate in order for the
Subadviser to perform its responsibilities hereunder.
Neither the Fund or the Investment Manager, nor their respective
designees or agents, shall use any material describing or identifying the
Subadviser or its affiliates without the prior consent of the Subadviser. Any
material utilized by the Fund, the Investment Manager or their respective
designees or agents which contain information as to the Subadviser and/or its
affiliates shall be submitted to the Subadviser for approval prior to use, not
less than five (5) business days before such approval is requested.
The Investment Manager has herewith furnished the Subadviser copies of
the Fund's Prospectus, Articles of Incorporation and By-Laws as currently in
effect and agrees during the continuance of the Agreement to furnish the
Subadviser copies of any amendments or supplements thereto before or at the time
the amendments or supplements become effective. The Subadviser will be entitled
to rely on all such documents furnished to it by the Investment Manager or the
Fund.
6
<PAGE>
9. Duration and Termination of the Agreement. This Subadvisory
Agreement shall become effective as of the date first written above and remain
in force until August 28, 1999. Thereafter, it shall continue in effect from
year to year, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (b) a
majority of those directors who are not parties to this Subadvisory Agreement,
not interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated, without the payment of any penalty, by the Board of
Directors of the Fund, by a vote of a majority of the outstanding shares of the
Portfolio, or by the Investment Manager on sixty days' written notice to the
Subadviser, or by the Subadviser on sixty days' written notice to the Fund or
the Investment Manager. Termination by the Board of Directors or by the
Investment Manager shall be subject to shareholder approval to the extent
legally required. This Agreement shall automatically terminate in the event of
its assignment or in the event of termination of the Investment Management
Agreement.
10. Amendments of the Agreement. Except to the extent permitted by
the Investment Company Act or the rules or regulations thereunder or pursuant to
any exemptive relief granted by the Securities and Exchange Commission ("SEC"),
this Agreement may be amended by the parties only if such amendment, if
material, is specifically approved by the vote of a majority of the outstanding
voting securities of the Portfolio (unless such approval is not required by
Section 15 of the Investment Company Act as interpreted by the SEC or its staff)
and by the vote of a majority of the Independent Directors cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to the Portfolio if a
majority of the outstanding voting securities of the Portfolio vote to approve
the amendment, notwithstanding that amendment may not have been approved by a
majority of the outstanding voting securities of any other portfolio affected by
the amendment or all the portfolios of the Fund.
11. Definitions. The terms "assignment", "interested person", and
"majority of the outstanding voting securities", when used in this Agreement,
shall have the respective meaning specified under the Investment Company Act and
the rules thereunder.
12. Notices. Any notice that is required to be given by the parties
to each other under the terms of this Agreement shall be given in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Chubb Asset Managers, Inc.
15 Mountain View Road
Warren, New Jersey 07061
Attn: Michael O'Reilly
7
<PAGE>
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New
Hampshire as at the time in effect and the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable. To the extent that the applicable law of the State of New Hampshire
or any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable, the latter shall control.
14. Use of Subadviser's Name. Neither the Fund nor the Manager or
any affiliate or agent thereof shall make reference to or use the name, and any
derivative thereof or logo associated with that name, of the Subadviser or any
of its affiliates in any advertising or promotional materials without the prior
approval of the Subadviser, which approval shall not be unreasonably withheld or
delayed. Upon termination of this Agreement, the Manager and the Fund shall
forthwith cease to use such name (or derivative or logo) as soon as reasonably
practicable.
15. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the Portfolio.
16. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
8
<PAGE>
17. Severability. Should any portion of this Agreement for any
reason be held to be void in law or in equity, the Agreement shall be construed,
insofar as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT ADVISORY CORPORATION
ATTEST: /s/ Thomas Elwood BY: /s/ Ronald Angarella
TITLE: Asst. Secretary_______ TITLE: President
CHUBB ASSET MANAGERS, INC.
ATTEST: /s/ Thomas Schwartz BY: /s/ Michael O'Reilly_______
TITLE: Vice President_______ TITLE: President
9
<PAGE>
SCHEDULE A
INVESTMENT SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio .30% of first $200 Million
Massachusetts Financial Services .25% over $200 Million
- ------------------------------------------------------------------------------
Growth and Income Portfolio .50%
Warburg Pincus
- ------------------------------------------------------------------------------
World Growth Stock Portfolio .50% of first $200 Million
Templeton Global Advisors Limited .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Balanced Portfolio .45% of first $100 Million
J.P. Morgan Investment Management .40% of next $100 Million
.35% over $200 Million
.30% over $400 Million
- ------------------------------------------------------------------------------
Emerging Growth Portfolio .40%
Massachusetts Financial Services
- ------------------------------------------------------------------------------
Bond Portfolio .35% of first $200 Million
Chubb Asset Managers, Inc. .30% of next $1.1 Billion
.25% over $1.3 Billion
- ------------------------------------------------------------------------------
Gold Stock Portfolio .50% of first $200 Million
Van Eck Associates Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Domestic Growth Portfolio .50% of first $200 Million
Pioneering Management Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Capital Growth Portfolio .75% of first $200 Million
Janus Capital Corporation .70% of next $1.1 Billion
.65% over $1.3 Billion
- ------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
<PAGE>
Exhibit 5.J
FORM OF INVESTMENT SUBADVISORY AGREEMENT
AND GROWTH PORTFOLIO INTERNATIONAL EQUITY PORTFOLIO
THIS AGREEMENT, made this 28th day of August, 1997, is between CHUBB INVESTMENT
ADVISORY CORPORATION, a Tennessee corporation with offices at One Granite Place,
Concord, New Hampshire, 03301 (the "Investment Manager" or "Manager") and
, (the "Subadviser") a corporation with offices at
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business
as an open-end management investment company and is registered as such under the
Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of
which represents a separate portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as
investment manager of the Portfolio, as set forth in an Investment Management
Agreement between the Fund and the Investment Manager dated August 28, 1997,
(the "Investment Management Agreement") pursuant to which it was agreed that the
Investment Manager may contract with the Subadviser, or other parties for
certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act");
WHEREAS, the Investment Manager desires to retain the Subadviser to
render investment management services to the Fund's Bond Portfolio (the
"Portfolio") in the manner and on the terms hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree as
follows:
<PAGE>
1. Appointment of the Subadviser. The Manager hereby appoints the
Subadviser to act as an investment subadviser for the Portfolio and to manage
the investment and reinvestment of the assets of the Portfolio, subject to the
supervision of the Directors of the Fund and the terms and conditions of this
Agreement. The Subadviser will be an independent contractor and will have no
authority to act for or represent the Fund or Manager in any way or otherwise be
deemed an agent of the Fund or Manager except as expressly authorized in this
Agreement or another writing by the Fund, Manager and the Subadviser.
Notwithstanding the foregoing, the Subadviser may execute account documentation,
agreements, contracts and other documents as the Subadviser may be requested by
brokers, dealers, counterparts and other persons in connection with the
Subadviser's management of the assets of the Portfolio, provided that the
Subadviser receives the express agreement and consent of the Manager and/or the
Fund's Board of Directors to execute such documentation, agreements, contracts
and other documents. In such respect, and only for this limited purpose, the
Subadviser shall act at the Manager and/or the Fund's agent and attorney-in-
fact.
2. Duties of the Subadviser. The Subadviser hereby agrees, subject
to the supervision of the Investment Manager and the Board of Directors of the
Fund, (1) to act as the Subadviser of the Portfolio, (2) to manage the
investment and reinvestment of the assets of the Portfolio for the period and on
the terms and conditions set forth in this Agreement, and (3) during the term
hereof, to render the services and to assume the obligations herein set forth in
return for the compensation provided for herein and to bear all expenses of its
performance of such services and obligations.
3. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment of
the assets of the Portfolio and determine the composition of the assets of the
Portfolio, subject always to the direction and control of the Directors of the
Fund and the Manager and in accordance with the provisions of the Fund's
registration statement, as amended from time to time. In fulfilling its
obligations to manage the investment and reinvestment of the assets of the
Portfolio, the Subadviser will:
(i) obtain and evaluate pertinent economic, statistical,
financial, and other information affecting the economy generally and individual
companies or industries, the securities of which are included in the Portfolio
or are under consideration for inclusion in the Portfolio;
2
<PAGE>
(ii) formulate and implement a continuous investment program
for the Portfolio (a) consistent with the investment objectives, policies, and
restrictions of the Portfolio as stated in the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
Statement of Additional Information ("SAI") as amended from time to time, and
(b) in compliance with the requirements applicable to both regulated investment
companies and segregated asset accounts under Subchapters M and L of the
Internal Revenue Code of 1986, as amended, and requirements applicable to
registered investment companies under applicable laws;
(iii) take whatever steps are necessary to implement the
investment program for the Portfolio by the purchase and sale of securities and
other investments authorized under the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolio's currently effective Prospectus and
SAI, including the placing of orders for such purchases and sales;
(iv) regularly report to the Directors of the Fund and the
Manager with respect to the implementation of the investment program and, in
addition, provide such statistical information and special reports concerning
the Portfolio and/or important developments materially affecting the investments
held, or contemplated to be purchased, by the Portfolio, as may reasonably be
requested by the Manager or the Directors of the Fund, including attendance at
Board of Directors Meetings, as reasonably requested, to present such
information and reports to the Board;
(v) provide determinations of the fair value of certain
portfolio securities when market quotations are not readily available for the
purpose of calculating the Portfolio's net asset value in accordance with
procedures and methods established by the Directors of the Fund;
(vi) provide any and all information, records and supporting
documentation about accounts the Subadviser manages that have investment
objectives, policies, and strategies substantially similar to those employed by
the Subadviser in managing the Portfolio which may be reasonably necessary,
under applicable laws, to allow the Portfolio or its agent to present
information concerning the Subadviser's prior performance in the Prospectus and
the SAI of the Portfolio and any permissible reports and materials prepared by
the Portfolio or its agent; and
(vii) establish appropriate interfaces with the Fund's Manager
in order to provide such Manager with all necessary information requested by the
Manager.
B. To facilitate the Subadviser's fulfillment of its obligations
under this Agreement, the Manager will undertake the following:
(i) the Manager agrees promptly to provide the Subadviser
with all amendments or supplements to the Registration Statement, the Fund's
Agreement and Articles of Incorporation, and Bylaws;
3
<PAGE>
(ii) the Manager agrees, on an ongoing basis, to notify the
Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolio;
(iii) the Manager agrees to provide or cause to be provided to
the Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolio under
this Agreement, including, without limitation, information concerning the
Portfolio, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolio's
affairs;
(iv) the Manager agrees to provide or cause to be provided to
the Subadviser on an ongoing basis, such information as is reasonably requested
by the Subadviser for performance by the Subadviser of its obligations under
this Agreement, and the Subadviser shall not be in breach of any term of this
Agreement or be deemed to have acted negligently if the Manager fails to provide
or cause to be provided such requested information and the Subadviser relies on
the information most recently furnished to the Subadviser; and
(v) the Manager will promptly provide the Subadviser with
any guidelines and procedures applicable to the Subadviser or the Portfolio
adopted from time to time by the Board of Directors of the Fund and agrees to
promptly provide the Subadviser copies of all amendments thereto.
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment necessary for the
efficient conduct of the investment affairs of the Portfolio (excluding that
necessary for the determination of net asset value and shareholder accounting
services). The Subadviser shall not be obligated to pay any expenses of or for
the Portfolio not expressly assumed by the Subadviser pursuant to this Section
3.
D. The Subadviser will select brokers and dealers to effect all
portfolio transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolio in accordance with such policies or practices as may be established by
the Board of Directors and described in the Fund's currently effective
Prospectus and SAI, as amended from time to time. In placing orders for the
purchase or sale of investments for the Portfolio, in the name of the Portfolio
or its nominees, the Subadviser shall use its best efforts to obtain for the
Portfolio the most favorable price and best execution available, considering all
of the circumstances, and shall maintain records adequate to demonstrate
compliance with this requirement.
4
<PAGE>
Subject to the appropriate policies and procedures approved by the
Board of Directors, the Subadviser may, to the extent authorized by Section
28(e) of the Securities and Exchange Act of 1934, cause the Portfolio to pay a
broker or dealer that provides brokerage or research services to the Manager,
the Subadviser, or the Portfolio an amount of commissions for effecting a
portfolio transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided
viewed in terms of that particular transaction or the Subadviser's overall
responsibilities to the Portfolio or its other advisory clients. To the extent
authorized by said Section 28(e) and the Fund's Board of Directors, the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the most favorable price and best execution
available, the Subadviser may also consider sales of shares of the Fund as a
factor in the selection of brokers and dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as other clients of
the Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolio and to its other clients.
F. The Subadviser will maintain all accounts, books and records with
respect to the Portfolio as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
4. Compensation of the Subadviser. The Investment Manager will pay
the Subadviser, with respect to the Portfolio, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolio's assets and accrued on a daily basis.
5. Non-Exclusivity. The Investment Manager agrees that the services
of the Subadviser are not to be deemed exclusive and the Subadviser is free to
act as investment manager to various investment companies and as fiduciary for
other managed accounts. The Subadviser shall, for all purposes herein, be
deemed to be an independent contractor and shall, unless otherwise provided or
authorized, have no authority to act for or represent the Fund or the Investment
Manager in any way or otherwise be deemed an agent of the Fund or Investment
Manager other than in furtherance of its duties and responsibilities as set
forth in this Subadvisory Agreement.
5
<PAGE>
6. Books and Records. The Subadviser agrees that all books and
records which it maintains for the Fund are the Fund's property, and, in the
event of termination of this Agreement for any reason, the Subadviser agrees
promptly to return to the Fund, free from any claim or retention of rights by
the Subadviser, all records relating to the Portfolio. The Subadviser also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to either party or make the book and records available for
inspection by representatives of regulatory authorities. In connection with its
duties hereunder, the Subadviser further agrees to maintain, prepare and
preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
The Subadviser will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose such
records or information in any manner other than expressly authorized by the
Fund, or if disclosure is expressly required by applicable federal or state
regulatory authorities or by this Agreement. The Subadviser will furnish any
informational reports requested by any state insurance commissioner.
7. Liability. The Subadviser will not be liable for any loss
suffered by the Fund in connection with any investment policy established by the
Fund for the purchase, sale or redemption of any securities at the direction of
the Board of Directors of the Fund or the Investment Manager. Nothing herein
contained shall be construed to protect the Subadviser against any liability
resulting from the willful misfeasance, bad faith or gross negligence of the
Subadviser in the performance of its duties or from reckless disregard of its
obligations and duties under this Subadviser Agreement.
8. Reliance on Documents. The Board of Directors of the Fund or its
officers or agent will provide timely information to the Subadviser regarding
such matters as purchases and redemptions of shares in the Portfolio, the cash
requirements, and cash available for investment in the Portfolio, and all other
information as may be reasonably necessary or appropriate in order for the
Subadviser to perform its responsibilities hereunder.
Neither the Fund or the Investment Manager, nor their respective
designees or agents, shall use any material describing or identifying the
Subadviser or its affiliates without the prior consent of the Subadviser. Any
material utilized by the Fund, the Investment Manager or their respective
designees or agents which contain information as to the Subadviser and/or its
affiliates shall be submitted to the Subadviser for approval prior to use, not
less than five (5) business days before such approval is requested.
The Investment Manager has herewith furnished the Subadviser copies of
the Fund's Prospectus, Articles of Incorporation and By-Laws as currently in
effect and agrees during the continuance of the Agreement to furnish the
Subadviser copies of any amendments or supplements thereto before or at the time
the amendments or supplements become effective. The Subadviser will be entitled
to rely on all such documents furnished to it by the Investment Manager or the
Fund.
6
<PAGE>
9. Duration and Termination of the Agreement. This Subadvisory
Agreement shall become effective as of the date first written above and remain
in force until August 28, 1999. Thereafter, it shall continue in effect from
year to year, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolio, and (b) a
majority of those directors who are not parties to this Subadvisory Agreement,
not interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated, without the payment of any penalty, by the Board of
Directors of the Fund, by a vote of a majority of the outstanding shares of the
Portfolio, or by the Investment Manager on sixty days' written notice to the
Subadviser, or by the Subadviser on sixty days' written notice to the Fund or
the Investment Manager. Termination by the Board of Directors or by the
Investment Manager shall be subject to shareholder approval to the extent
legally required. This Agreement shall automatically terminate in the event of
its assignment or in the event of termination of the Investment Management
Agreement.
10. Amendments of the Agreement. Except to the extent permitted by
the Investment Company Act or the rules or regulations thereunder or pursuant to
any exemptive relief granted by the Securities and Exchange Commission ("SEC"),
this Agreement may be amended by the parties only if such amendment, if
material, is specifically approved by the vote of a majority of the outstanding
voting securities of the Portfolio (unless such approval is not required by
Section 15 of the Investment Company Act as interpreted by the SEC or its staff)
and by the vote of a majority of the Independent Directors cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to the Portfolio if a
majority of the outstanding voting securities of the Portfolio vote to approve
the amendment, notwithstanding that amendment may not have been approved by a
majority of the outstanding voting securities of any other portfolio affected by
the amendment or all the portfolios of the Fund.
11. Definitions. The terms "assignment", "interested person", and
"majority of the outstanding voting securities", when used in this Agreement,
shall have the respective meaning specified under the Investment Company Act and
the rules thereunder.
12. Notices. Any notice that is required to be given by the parties
to each other under the terms of this Agreement shall be given in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
(a) If to the Subadviser:
Chubb Asset Managers, Inc.
7
<PAGE>
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New
Hampshire as at the time in effect and the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable. To the extent that the applicable law of the State of New Hampshire
or any of the provisions herein, conflict with the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable, the latter shall control.
14. Use of Subadviser's Name. Neither the Fund nor the Manager or
any affiliate or agent thereof shall make reference to or use the name, and any
derivative thereof or logo associated with that name, of the Subadviser or any
of its affiliates in any advertising or promotional materials without the prior
approval of the Subadviser, which approval shall not be unreasonably withheld or
delayed. Upon termination of this Agreement, the Manager and the Fund shall
forthwith cease to use such name (or derivative or logo) as soon as reasonably
practicable.
15. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the Portfolio.
16. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
8
<PAGE>
17. Severability. Should any portion of this Agreement for any
reason be held to be void in law or in equity, the Agreement shall be construed,
insofar as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT ADVISORY CORPORATION
ATTEST: /s/ BY: /s/
TITLE: Asst. TITLE:
CHUBB ASSET MANAGERS, INC.
ATTEST: /s/ BY: /s/
TITLE: Vice President_______ TITLE: President
9
<PAGE>
SCHEDULE A
INVESTMENT SUBADVISORY FEES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME OF PORTFOLIO ANNUAL FEE AS A PERCENTAGE OF
AVERAGE DAILY NET ASSETS
- ------------------------------------------------------------------------------
<S> <C> <C>
Money Market Portfolio .30% of first $200 Million
Massachusetts Financial Services .25% over $200 Million
- ------------------------------------------------------------------------------
Growth and Income Portfolio .50%
Warburg Pincus
- ------------------------------------------------------------------------------
World Growth Stock Portfolio .50% of first $200 Million
Templeton Global Advisors Limited .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Balanced Portfolio .45% of first $100 Million
J.P. Morgan Investment Management .40% of next $100 Million
.35% over $200 Million
.30% over $400 Million
- ------------------------------------------------------------------------------
Emerging Growth Portfolio .40%
Massachusetts Financial Services
- ------------------------------------------------------------------------------
Bond Portfolio .35% of first $200 Million
Chubb Asset Managers, Inc. .30% of next $1.1 Billion
.25% over $1.3 Billion
- ------------------------------------------------------------------------------
Gold Stock Portfolio .50% of first $200 Million
Van Eck Associates Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Domestic Growth Portfolio .50% of first $200 Million
Pioneering Management Corporation .45% of next $1.1 Billion
.40% over $1.3 Billion
- ------------------------------------------------------------------------------
Capital Growth Portfolio .75% of first $200 Million
Janus Capital Corporation .70% of next $1.1 Billion
.65% over $1.3 Billion
- ------------------------------------------------------------------------------
</TABLE>
EFFECTIVE:
----------------------------------
<PAGE>
Exhibit 5.K
INVESTMENT SUBADVISORY AGREEMENT
FORM OF HIGH YIELD BOND PORTFOLIO
THIS AGREEMENT, made this 28th day of August, 1997, is between CHUBB INVESTMENT
ADVISORY CORPORATION, a Tennessee corporation with offices at One Granite Place,
Concord, New Hampshire, 03301 (the "Investment Manager" or "Manager") and
Massachusetts Financial Services Company, (the "Subadviser") a Delaware
corporation with offices at 500 Boylston Street, Boston, Massachusetts 02116.
WITNESSETH:
WHEREAS, Chubb America Fund, Inc. (the "Fund") is engaged in business
as a diversified open-end management investment company and is registered as
such under the Investment Company Act of 1940 (the "Investment Company Act");
WHEREAS, the Fund issues separate classes or series of stock, each of
which represents a separate Portfolio of investments;
WHEREAS, the Fund's shareholders are and will be separate accounts
maintained by insurance companies for variable life insurance policies under
which income, gains, losses, whether or not realized, from assets allocated to
such accounts are, in accordance with the Policies, credited to or charged
against such accounts without regard to other income, gains, or losses of such
insurance companies;
WHEREAS, the Fund has employed the Investment Manager to act as
investment manager of the Portfolios, as set forth in an Investment Management
Agreement between the Fund and the Investment Manager dated August 28, 1997,
(the "Investment Management Agreement") pursuant to which it was agreed that the
Investment Manager may contract with the Subadviser, or other parties for
certain investment management services;
WHEREAS, the Subadviser is engaged in the business of rendering
investment advisory services and is registered as an investment adviser under
the Investment Advisers Act of 1940 (the "Advisers Act");
WHEREAS, the Investment Manager desires to retain the Subadviser to
render investment management services to the Fund's Emerging Growth Portfolio
and Money Market Portfolio (the "Portfolios") in the manner and on the terms
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained the Investment Manager and the Subadviser hereby agree as
follows:
1. Appointment of the Subadviser. The Manager hereby appoints the
Subadviser to act as an investment subadviser for the Portfolios and to manage
the investment and reinvestment of the assets of the Portfolios, subject to the
supervision of the Directors of the Fund and the terms and conditions of this
Agreement. The Subadviser will be an independent contractor and will have no
authority to act for or represent the Fund or Manager in any way or otherwise be
deemed an agent of the Fund or Manager except as expressly
<PAGE>
authorized in this Agreement or another writing by the Fund, Manager and the
Subadviser. Notwithstanding the foregoing, the Subadviser may execute account
documentation, agreements, contracts and other documents as the Subadviser may
be requested by brokers, dealers, counterparties and other persons in connection
with the Subadviser's management of the assets of the Portfolios, provided that
the Subadviser receives the express agreement and consent of the Manager and/or
the Fund's Board of Directors to execute such documentation, agreements,
contracts and other documents. In such respect, and only for this limited
purpose, the Subadviser shall act at the Manager and/or the Fund's agent and
attorney-in-fact.
2. Duties of the Subadviser. The Subadviser hereby agrees, subject
to the supervision of the Investment Manager and the Board of Directors of the
Fund, (1) to act as the Subadviser of the Portfolios, (2) to manage the
investment and reinvestment of the assets of the Portfolios for the period and
on the terms and conditions set forth in this Agreement, and (3) during the term
hereof, to render the services and to assume the obligations herein set forth in
return for the compensation provided for herein and to bear all expenses of its
performance of such services and obligations.
3. Services to be Rendered by the Subadviser to the Fund
A. The Subadviser will manage the investment and reinvestment of
the assets of the Portfolios and determine the composition of the assets of the
Portfolios, subject always to the direction and control of the Directors of the
Fund and the Manager and in accordance with the provisions of the Fund's
registration statement, as amended from time to time. In fulfilling its
obligations to manage the investment and reinvestment of the assets of the
Portfolios, the Subadviser will:
(i) obtain and evaluate pertinent economic, statistical,
financial, and other information affecting the economy generally and individual
companies or industries, the securities of which are included in the Portfolios
or are under consideration for inclusion in the Portfolios;
(ii) formulate and implement a continuous investment program
for the Portfolios (a) consistent with the investment objectives, policies, and
restrictions of the Portfolios as stated in the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolios's currently effective Prospectus and
Statement of Additional Information ("SAI") as amended from time to time, and
(b) in compliance with the requirements applicable to both regulated investment
companies and segregated asset accounts under Subchapters M and L of the
Internal Revenue Code of 1986, as amended, and requirements applicable to
registered investment companies under applicable laws;
(iii) take whatever steps are necessary to implement the
investment program for the Portfolios by the purchase and sale of securities and
other investments authorized under the Fund's Agreement and Articles of
Incorporation, Bylaws, and such Portfolios's currently effective Prospectus and
SAI, including the placing of orders for such purchases and sales;
2
<PAGE>
(iv) subject to the consent of the Subadviser, regularly
report to the Directors of the Fund and the Manager with respect to the
implementation of the investment program and, in addition and subject to the
consent of the Subadviser, provide such statistical information and special
reports concerning the Portfolios and/or important developments materially
affecting the investments held, or contemplated to be purchased, by the
Portfolios, as may reasonably be requested by the Manager or the Directors of
the Fund, including attendance at Board of Directors Meetings, as reasonably
requested, to present such information and reports to the Board.
B. To facilitate the Subadviser's fulfillment of its obligations
under this Agreement, the Manager will undertake the following:
(i) the Manager agrees promptly to provide the Subadviser
with all amendments or supplements to the Registration Statement, the Fund's
Agreement and Articles of Incorporation, and Bylaws;
(ii) the Manager agrees, on an ongoing basis, to notify the
Subadviser expressly in writing of each change in the fundamental and
nonfundamental investment policies of the Portfolios;
(iii) the Manager agrees to provide or cause to be provided to
the Subadviser with such assistance as may be reasonably requested by the
Subadviser in connection with its activities pertaining to the Portfolios under
this Agreement, including, without limitation, information concerning the
Portfolios, its available funds, or funds that may reasonably become available
for investment, and information as to the general condition of the Portfolios's
affairs;
(iv) the Manager agrees to provide or cause to be provided to
the Subadviser on an ongoing basis, such information as is reasonably requested
by the Subadviser for performance by the Subadviser of its obligations under
this Agreement, and the Subadviser shall not be in breach of any term of this
Agreement or be deemed to have acted negligently if the Manager fails to provide
or cause to be provided such requested information and the Subadviser relies on
the information most recently furnished to the Subadviser;
(v) the Manager will promptly provide the Subadviser with
any guidelines and procedures applicable to the Subadviser or the Portfolios
adopted from time to time by the Board of Directors of the Fund and agrees to
promptly provide the Subadviser copies of all amendments thereto; and
(vi) the Board of Directors of the Fund or its officers or
agent will provide timely information to the Subadviser regarding such matters
as purchases and redemptions of shares in the Portfolios, the cash requirements,
and cash available for investment in the Portfolios and all other information as
may be reasonably necessary or appropriate in order for the Subadviser to
perform its responsibilities hereunder.
3
<PAGE>
C. The Subadviser, at its expense, will furnish: (i) all necessary
investment and management facilities and investment personnel, including
salaries, expenses and fees of any personnel required for it to faithfully
perform its duties under this Agreement; and (ii) administrative facilities,
including bookkeeping, clerical personnel and equipment required for it to
faithfully perform its duties under this agreement. The Subadviser shall not be
obligated to pay any expenses of or for the Portfolios not expressly assumed by
the Subadviser pursuant to this Section 3.
D. The Subadviser will select brokers and dealers to effect all
Portfolios transactions subject to the conditions set forth herein. The
Subadviser will place all necessary orders with brokers, dealers, or issuers,
and will negotiate brokerage commissions if applicable. The Subadviser is
directed at all times to seek to execute brokerage transactions for the
Portfolios in accordance with such policies or practices as may be established
by the Board of Directors and described in the Fund's currently effective
Prospectus and SAI, as amended from time to time. In placing orders for the
purchase or sale of investments for the Portfolios, in the name of the
Portfolios or its nominees, the Subadviser shall use its best efforts to obtain
for the Portfolios the most favorable price and best execution available,
considering all of the circumstances, and shall maintain records adequate to
demonstrate compliance with this requirement.
Subject to the appropriate policies and procedures approved by the
Board of Directors, the Subadviser may, to the extent authorized by Section
28(e) of the Securities and Exchange Act of 1934, cause the Portfolios to pay a
broker or dealer that provides brokerage or research services to the Manager,
the Subadviser, or the Portfolios an amount of commissions for effecting a
Portfolios transaction in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
determines, in good faith, that such amount of commission is reasonable in
relationship to the value of such brokerage or research services provided
viewed in terms of that particular transaction or the Subadviser's overall
responsibilities to the Portfolios or its other advisory clients. To the extent
authorized by said Section 28(e) and the Fund's Board of Directors, the
Subadviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of such action. In
addition, subject to seeking the most favorable price and best execution
available, the Subadviser may also consider sales of shares of the Fund as a
factor in the selection of brokers and dealers.
E. On occasions when the Subadviser deems the purchase or sale of a
security to be in the best interest of the Portfolios as well as other clients
of the Subadviser, the Subadviser to the extent permitted by applicable laws and
regulations, may, but shall be under no obligation to, aggregate the securities
to be purchased or sold to attempt to obtain a more favorable price or lower
brokerage commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Subadviser in the manner the Subadviser
considers to be the most equitable and consistent with its fiduciary obligations
to the Portfolios and to its other clients.
4
<PAGE>
F. The Subadviser will maintain all accounts, books and records with
respect to the Portfolios as are required of an investment adviser of a
registered investment company pursuant to the Investment Company Act and
Advisers Act and the rules thereunder.
4. Compensation of the Subadviser. The Investment Manager will pay
the Subadviser, with respect to the Portfolios, the compensation specified in
Appendix A to this Agreement. Payments shall be made to the Subadviser on the
first day of each month; however, this advisory fee will be calculated on the
daily average value of the Portfolios's assets and accrued on a daily basis.
5. Non-Exclusivity. The Investment Manager agrees that the services
of the Subadviser are not to be deemed exclusive and the Subadviser is free to
act as investment manager to various investment companies and as fiduciary for
other managed accounts.
6. Books and Records. The Subadviser agrees that all books and
records which it maintains for the Fund are the Fund's property, and, in the
event of termination of this Agreement for any reason, the Subadviser agrees
promptly to return to the Fund, free from any claim or retention of rights by
the Subadviser, all records relating to the Portfolios. The Subadviser also
agrees upon request of the Investment Manager or the Fund, promptly to surrender
the books and records to either party or make the book and records available for
inspection by representatives of regulatory authorities. In connection with its
duties hereunder, the Subadviser further agrees to maintain, prepare and
preserve books and records in accordance with the Investment Company Act and
rules thereunder, including but not limited to, Rule 31a-1 and 31a-2.
The Subadviser will use records or information obtained under this
Agreement only for the purposes contemplated hereby, and will not disclose such
records or information in any manner other than expressly authorized by the
Fund, or if disclosure is expressly required by applicable federal or state
regulatory authorities or by this Agreement. The Subadviser will furnish any
informational reports requested by any state insurance commissioner.
7. Liability. The Subadviser will not be liable for any loss
suffered by the Fund in connection with any investment policy established by the
Fund for the purchase, sale or redemption of any securities at the direction of
the Board of Directors of the Fund or the Investment Manager. Nothing herein
contained shall be construed to protect the Subadviser against any liability
resulting from the willful misfeasance, bad faith or gross negligence of the
Subadviser in the performance of its duties or from reckless disregard of its
obligations and duties under this Subadviser Agreement.
8. Documents. Neither the Fund or the Investment Manager, nor their
respective designees or agents, shall use any material describing or identifying
the Subadviser or its affiliates without the prior consent of the Subadviser.
Any material utilized by the Fund, the Investment Manager or their respective
designees or agents which contain information as to the
5
<PAGE>
Subadviser and/or its affiliates shall be submitted to the Subadviser for
approval prior to use, not less than five (5) business days before such approval
is requested.
9. Duration and Termination of the Agreement. This Subadvisory
Agreement shall become effective as of the date first written above and remain
in force until August 28, 1999. Thereafter, it shall continue in effect from
year to year, but only so long as such continuance is specifically approved at
least annually by (a) the Board of Directors of the Fund, or by the vote of a
majority of the outstanding voting securities of the Portfolios, and (b) a
majority of those directors who are not parties to this Subadvisory Agreement,
not interested persons of any party to this Subadvisory Agreement, cast in
person at a meeting called for the purpose of voting on such approval. This
Agreement may be terminated, without the payment of any penalty, by the Board of
Directors of the Fund, by a vote of a majority of the outstanding shares of the
Portfolios, or by the Investment Manager on sixty days' written notice to the
Subadviser, or by the Subadviser on sixty days' written notice to the Fund or
the Investment Manager. Termination by the Board of Directors or by the
Investment Manager shall be subject to shareholder approval to the extent
legally required. This Agreement shall automatically terminate in the event of
its assignment or in the event of termination of the Investment Management
Agreement.
10. Amendments of the Agreement. Except to the extent permitted by
the Investment Company Act or the rules or regulations thereunder or pursuant to
any exemptive relief granted by the Securities and Exchange Commission ("SEC"),
this Agreement may be amended by the parties only if such amendment, if
material, is specifically approved by the vote of a majority of the outstanding
voting securities of the Portfolios (unless such approval is not required by
Section 15 of the Investment Company Act as interpreted by the SEC or its staff)
and by the vote of a majority of the Independent Directors cast in person at a
meeting called for the purpose of voting on such approval. The required
shareholder approval shall be effective with respect to the Portfolios if a
majority of the outstanding voting securities of the Portfolios vote to approve
the amendment, notwithstanding that amendment may not have been approved by a
majority of the outstanding voting securities of any other Portfolios affected
by the amendment or all the Portfolios of the Fund.
11. Definitions. The terms "assignment", "interested person", and
"majority of the outstanding voting securities", when used in this Agreement,
shall have the respective meaning specified under the Investment Company Act and
the rules thereunder.
12. Notices. Any notice that is required to be given by the parties
to each other under the terms of this Agreement shall be given in writing,
delivered, or mailed postpaid to the other party, or transmitted by facsimile
with acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:
6
<PAGE>
(a) If to the Subadviser:
Massachusetts Financial Services Company,
500 Boylston Street,
Boston, Massachusetts 02116.
(b) If to the Investment Manager:
Chubb Investment Advisory Corporation
One Granite Place
Concord, NH 03301
Attn: Ronald Angarella
Facsimile (603) 224-1691
13. Governing Law. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the Commonwealth of
Massachusetts as at the time in effect and the applicable provisions of the
Investment Company Act or other federal laws and regulations which may be
applicable. To the extent that the applicable law of the Commonwealth of
Massachusetts or any of the provisions herein, conflict with the applicable
provisions of the Investment Company Act or other federal laws and regulations
which may be applicable, the latter shall control.
14. Use of Subadviser's Name. Neither the Fund nor the Manager or
any affiliate or agent thereof shall make reference to or use the name, and any
derivative thereof or logo associated with that name, of the Subadviser or any
of its affiliates in any advertising or promotional materials, without the prior
approval of the Subadviser. Upon termination of this Agreement, the Manager and
the Fund shall forthwith cease to use such name (or derivative or logo) as soon
as reasonably practicable.
15. Entire Agreement. This Agreement contains the entire
understanding and agreement of the parties with respect to the Portfolios.
16. Headings. The headings in the sections of this Agreement are
inserted for convenience of reference only and shall not constitute a part
hereof.
7
<PAGE>
17. Severability. Should any portion of this Agreement for any
reason be held to be void in law or in equity, the Agreement shall be construed,
insofar as is possible, as if such portion had never been contained herein.
CHUBB INVESTMENT
ADVISORY CORPORATION
ATTEST: BY:
-------------------- -----------------------
TITLE: TITLE:
--------------------- --------------------
MASSACHUSETTS FINANCIAL
SERVICES COMPANY
ATTEST: BY:
-------------------- -----------------------
TITLE: TITLE:
--------------------- --------------------
8
<PAGE>
Exhibit 6
FUND DISTRIBUTION AGREEMENT
Between
CHUBB AMERICA FUND, INC.
and
CHUBB SECURITIES CORPORATION
<PAGE>
Table of Contents
-----------------
1. Appointment of the Distributor 2
2. Exclusive Nature of Duties 2
3. Sale and Redemption of Shares of the Fund 3
4. Duties of the Fund 4
5. Duties of the Distributor 5
6. Independent Contractor 6
7. Payment of Expenses 6
8. Duration and Termination of This Agreement 7
9. Governing Law 8
10. Miscellaneous 8
<PAGE>
FUND DISTRIBUTION AGREEMENT
---------------------------
AGREEMENT made this 13th day of May, 1997, between CHUBB AMERICA FUND,
INC., a corporation organized under the laws of Maryland (the "Fund"), and CHUBB
SECURITIES CORPORATION, a New Hampshire corporation (the "Distributor");
WITNESSETH:
WHEREAS, the Fund is registered under the Investment Company Act of 1940
(the "Investment Company Act") as a diversified open-end management investment
company;
WHEREAS, it is in the interest of the Fund to offer its shares for sale
continuously pursuant to a prospectus and statement of additional information,
as now and hereafter amended or supplemented (the "Prospectus") which is
currently effective under the Securities Act of 1933 (the "Securities Act"), to
Chubb Life Insurance Company of America ("Chubb") for allocation to Chubb's
Separate Account A and to any other separate accounts of Chubb or any of its
affiliated insurance companies or to separate accounts of unaffiliated insurance
companies that have entered into a Participation Agreement with the Fund (all
eligible purchasers of such shares being referred to collectively as the
"Purchasers"); and
WHEREAS, the Fund is comprised of separate portfolios, listed on the
attached Schedule A, as it may be amended from time to time, each of
1
<PAGE>
which pursues its investment objectives through separate investment policies;
WHEREAS, the Distributor is a broker-dealer registered with the Securities
and Exchange Commission;
WHEREAS, the Distributor is also the principal underwriter and distributor
of variable life insurance policies issued by Chubb and funded by Separate
Account A; and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering to the Purchasers of shares
of common stock, par value $.01 per share, of the Fund's Portfolios (the
"Shares"), in order to promote the growth of the Fund and facilitate the
distribution of its Shares.
NOW, THEREFORE, the parties agree as follows:
1. Appointment of the Distributor. The Fund hereby appoints the
------------------------------
Distributor as the principal underwriter and distributor of the Fund to sell its
Shares to the Purchasers, and the Distributor hereby accepts such appointment.
The Fund during the term of this Agreement shall sell its Shares to the
Purchasers at net asset value for each Portfolio determined in the manner set
forth in the Prospectus, and upon the terms and conditions set forth below. No
commission or other fee shall be charged or paid to any person or entity in
connection with the sale of Fund Shares hereunder.
2. Exclusive Nature of Duties. The Distributor shall be the exclusive
--------------------------
representative of the Fund to act as principal underwriter and distributor.
2
<PAGE>
3. Sale and Redemption of Shares of the Fund.
-----------------------------------------
(a) Orders for the sale, redemption or repurchase of the Fund's
Shares shall be transmitted directly from the Purchasers to the Fund or its
agent and payments for shares shall be transmitted by the Purchasers directly to
the Fund's custodian.
(b) The Fund shall have the right to suspend the redemption of
Shares of any of its Portfolios pursuant to the conditions set forth in the
Prospectus. The Fund shall also have the right to suspend the sale of Shares of
any or all of its Portfolios at any time when it is authorized to suspend
redemption of such Shares, or at any time when there shall have occurred an
extraordinary event or circumstance which, in the reasonable judgment of the
Fund, makes it impracticable or inadvisable to continue to sell any such shares.
(c) The Fund will give the Distributor prompt notice of any such
suspension and shall promptly furnish such other information in connection with
the sale and redemption of Shares as the Distributor reasonably requests.
On behalf of the Distributor, if requested, the Fund, or its agent,
in issuing Shares and processing redemptions and repurchase of Shares, shall
maintain a record of the time when a proper and complete order for each such
transaction was received by it and, to the extent legally required, confirm to
all Fund shareholders all transactions in the manner required by law, and shall
keep records of confirmations and all other records in connection with the sale,
redemption or repurchase of Fund shares required by, and subject to, all the
3
<PAGE>
terms and conditions of Rules 17a-3 and 17a-4 under the Securities Exchange Act
of 1934. All records required by this paragraph to be maintained by the Fund or
its agent shall (i) be and remain the property of the Fund's Distributor and
(ii) be at all times subject to inspection by the Securities and Exchange
Commission in accordance with Section 17(a) of said Act. The Fund shall have
access to all records maintained hereunder and, upon reasonable request, copies
shall be furnished to the Fund.
4. Duties of the Fund.
------------------
(a) The Fund shall furnish to the Director copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of Shares of the Fund. The
Fund shall also make available to the Distributor such number of copies of its
Prospectus as the Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the
necessary approval of its shareholders, all necessary action to fix the number
of its authorized Shares in each Portfolio and to register Shares under the
Securities Act of 1933 ("Securities Act"), to the end that there will be
available for sale such number of Shares in each Portfolio as may reasonably be
expected to be sold and issued.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of Shares of each of its Portfolios for
sale under the securities laws of such states as the Distributor and the Fund
may
4
<PAGE>
approve, if such qualification is required by such securities laws. Any such
qualification may be withheld, terminated or withdrawn by the Fund at any time
in its discretion. The Distributor shall furnish such information and other
material relating to its affairs and activities as may be required by the Fund
in connection with such qualification and with registration under the Securities
Act.
(d) The Fund will furnish, in reasonable quantities upon request by
the Distributor, copies of annual and interim reports of the Fund.
(e) The Fund shall promptly notify the Distributor if the
registration or qualification of any Fund shares under any state or Federal
securities laws, or the Fund's registration under the Investment Company Act of
1940 (the "1940 Act"), is suspended or terminated, or if any governmental body
or agency institutes proceedings to terminate the offer and sale of any Fund
shares in any jurisdiction.
5. Duties of the Distributor. The Distributor shall be subject to the
-------------------------
direction and control of the Fund in the sale of its shares and shall not be
obligated to sell any specific number of Shares in any Portfolios. In offering
or selling the Shares of the Fund, the Distributor shall in all respects duly
conform with the requirements of all federal and state laws and regulations and
the regulations of the National Association of Securities Dealers, Inc. (the
"NASD"), relating to the offer and sale of such securities. Neither the
Distributor nor any other person is authorized by the Fund to give any
Information or to make any representations, other than those contained in the
registration statement with
5
<PAGE>
respect to the Fund's Shares which is effective under the Securities Act,
including any amendment thereto, or related Prospectus and any advertising or
sales literature authorized by responsible officers of Chubb. The Distributor,
directly or through the Fund, as its agent, shall cause any sales literature,
advertising, or other similar materials to be filed and, if necessary, approved
by the NASD, the Securities and Exchange Commission, or any other required
securities regulatory body, as appropriate.
6. Independent Contractor. The Distributor shall act as an independent
----------------------
contractor and nothing herein contained shall constitute the Distributor, its
agents or representatives, or any employees thereof, as employees of the Fund in
connection with the sale of Shares of the Fund. The Distributor is responsible
for its own conduct and the employment, control and conduct of its agents and
employees and for injury to such agents or employees or to others through its
agents or employees. The Distributor assumes full responsibility for its agents
and employees under applicable statutes and agrees to pay all employer taxes
thereunder. The Distributor will maintain at its own expense insurance against
public liability in such an amount as the Fund and the Distributor may from time
to time agree.
7. Payment of Expenses. The Distributor will, from its own resources, pay
-------------------
or cause to be paid all of the following Fund expenses and costs;
(a) The distributing to new or prospective policyowners of the Fund's
Prospectus and periodic reports, and the costs of printing copies of such
6
<PAGE>
documents for this purpose, except that, to the extent counsel for the Fund
believes it to be legally permissible, the Distributor shall not be required to
bear printing and distribution costs for the Prospectus.
(b) The preparation, printing and distribution of other sales literature,
and
(c) All other expenses which are primarily for the purpose of promoting the
sale of the Fund's Shares.
Other than as aforesaid, the Distributor shall not be responsible for
paying any expenses of the Fund.
8. Duration and Termination of This Agreement. This Agreement shall
------------------------------------------
become effective as of the date first above written and shall remain in force
continuously thereafter, but only so long as such continuance is specifically
approved at least annually (as defined in the Investment Company Act) by (a) the
Board of Directors of the Fund, or by the vote of a majority of the outstanding
voting securities of the Fund, cast in person or by proxy, and (b) a majority of
those directors who are not parties to this Agreement, or interested persons of
any such party, cast in person at a meeting called for the purpose of voting
upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Board of Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Fund, or by the Distributor, on sixty days'
written notice to the other party. The Agreement shall automatically terminate
in the event of its assignment by either party.
7
<PAGE>
The terms "vote of a majority of the outstanding voting securities" and
"interested person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and rules thereunder.
9. Governing Law. This Agreement shall be construed in accordance with
-------------
the laws of the State of New Hampshire and the applicable provisions of the 1940
Act and rules thereunder. To the extent the applicable law of the State of New
Hampshire, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act or rules thereunder, the latter shall control.
10. Miscellaneous. The Distributor shall not disclose or use any records
-------------
or information obtained hereunder and, further, it shall keep confidential any
information obtained pursuant to its relationship with the Fund set forth
herein, and disclose such information only if the Fund has authorized such
disclosure, or if such disclosure is expressly required by appropriate Federal
or state regulatory authorities. The Distributor shall furnish state insurance
regulatory authorities with any information or reports in connection with the
services it provides to the Fund hereunder, which such authorities may request
in order to ascertain whether the variable life insurance operations of any
insurance company are being conducted in a manner consistent with applicable
laws or regulations.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in Concord, New Hampshire.
CHUBB AMERICA FUND, INC.
Attest:
By: /s/ Shari J. Lease By: /s/Ronald Angarella
------------------------------- -------------------------------
Title: Secretary Title: President
---------------------------- ----------------------------
CHUBB SECURITIES CORPORATION
Attest:
By: /s/ Shari J. Lease By: /s/Roanld Angarella
------------------------------- -------------------------------
Title: Assistant Secretary Title: President
---------------------------- ----------------------------
<PAGE>
Exhibit 10.a
September 2, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Chubb America Fund, Inc.
File Nos. 2-94479 and 811-4161
Commissioners:
This opinion is given in connection with the filing by Chubb America Fund,
Inc. a Maryland corporation (the "Fund") of an amendment to its Registration
Statement on Form N-1A under the Securities Act of 1933 (the "1933 Act") and
under the Investment Company Act of 1940 (the "1940 Act") with the Securities
and Exchange Commission for the purpose of adding three new separate series
(i.e., Growth Portfolio; International Equity Portfolio; and High Yield Bond
Portfolio common stock). The Fund's capital stock related to this series is
hereinafter referred to as the "Shares."
I have reviewed the Fund's Articles of Incorporation, as amended; its By-
Laws; its Board of Directors' resolutions authorizing the creation of the new
series and the issuance of the Shares; the Notification of Registration of on
Form N-8A filed with the Commission under the 1940 Act; Registration Statement
as originally filed with the SEC as well as Post-Effective Amendments No. 1
through 18 to the Registration Statement under the 1933 Act and Amendments No.
2 through 19 to the Registration Statement under the Investment Company Act of
1940 as filed with the SEC; and the Form of Post-Effective Amendment No. 19 to
the Registration Statement under the 1933 Act and Amendments No. 20 to the
Registration Statement under the Investment Company Act of 1940 substantially in
the form in which the former is to become effective; and such other corporate
records, certificates, documents and statutes that I have deemed relevant in
order to render the opinion expressed herein.
<PAGE>
Based on such examination, I am of the opinion that:
1. The Fund is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland.
2. The Shares to be offered for sale by the Fund issued in the manner
contemplated by the Registration Statement will be legally issued, fully
paid and nonassessable.
I consent to the use of this opinion as Exhibit 10(a) to the Registration
Statement.
Sincerely,
Thomas H. Elwood
Assistant Counsel
