Investment Company Act No. 811-5186
As filed with the Securities and Exchange Commission on September 20, 1996
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
________________________________________________________________________________
American Skandia Trust
________________________________________________________________________________
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
5) Total fee paid:
_____________________________________________________________________________
[x ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
_____________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
_____________________________________________________________________________
3) Filing Party:
_____________________________________________________________________________
4) Date Filed:
_____________________________________________________________________________
<PAGE>
American Skandia Life
Assurance Corporation
1 Corporate Drive
P.O. Box 883
Shelton, CT 06484-0883
Telephone (203) 926-1888
Fax (203) 929-8071
September 23, 1996
Dear Valued Customer,
As an American Skandia Life Assurance Corporation ("ASLAC") contract owner who
beneficially owns shares of the AST Phoenix Balanced Asset Portfolio (the
"Portfolio"), you are cordially invited to a special meeting of the shareholders
of the Portfolio to be held at the offices of ASLAC, 10th Floor, One Corporate
Drive, Shelton, CT, on October 11, 1996 at 10:00 a.m.
At the special meeting, shareholders are being asked to approve or disapprove
the following four proposals:
I. A proposal to approve a new Investment Management Agreement, with
American Skandia Investment Services, Inc. ("ASISI"), an affiliate of ASLAC,
pursuant to which ASISI will continue to act as investment manager of the
Portfolio.
II. A proposal to approve a new Sub-Advisory Agreement between ASISI and
Putnam Investment Management, Inc. regarding investment advice to the Portfolio.
III. A proposal to approve a change in the investment objective for the
Portfolio.
IV. A proposal to approve certain changes in the Portfolio's fundamental
investment restrictions.
Proposal I contemplates, among other things, an increase in the investment
management fee payable by the Portfolio, as described in the Proxy Statement.
Approval of Proposals I and II are made contingent upon each other. Moreover,
unless Proposals I and II are each approved, neither Proposal III nor IV will be
effected by the Portfolio. Therefore, a vote against either Proposal I or II
will have the effect of a vote against each other, as well as a vote against
both Proposals III and IV.
If Proposals I and II are approved by the Portfolio's shareholders, the name of
the Portfolio will be changed to the "AST Putnam Balanced Portfolio" effective
October 15, 1996.
Your vote is important no matter how large or small your holdings are. We urge
you to read the Proxy Statement thoroughly and to indicate your voting
instructions on the enclosed Proxy Card, date and sign it, and return it
promptly in the envelope provided to be received by American Skandia on or
before the close of business on October 9, 1996. The shares which you
beneficially own will be voted in accordance with instructions received by that
date. All shares of the Portfolio for which instructions are not received will
be voted in the same proportion as the votes cast by contract owners on the
proxy issues presented.
Any questions or concerns you may have regarding the special meeting or the
proxy should be directed to your financial representative.
Sincerely,
Gordon C. Boronow
President and Chief Operating Officer
American Skandia Life Assurance Corporation
<PAGE>
AMERICAN SKANDIA TRUST
One Corporate Drive
P.O. Box 883
Shelton, Connecticut 06484
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE AST PHOENIX BALANCED ASSET PORTFOLIO
To be held
October 11, 1996
To the Shareholders of the AST Phoenix Balanced Asset Portfolio of American
Skandia Trust:
Notice is hereby given that this Special Meeting of Shareholders of the
AST Phoenix Balanced Asset Portfolio (the "Portfolio") of American Skandia Trust
(the "Trust"), will be held at One Corporate Drive, Shelton, Connecticut 06484
on October 11, 1996 at 10:00 a.m. Eastern Time, or at such adjourned time as
may be necessary for the holders of a majority of the outstanding shares of the
Portfolio to vote (the "Meeting"), for the following purposes:
I. To consider the approval of a new Investment Management Agreement
between the Trust and American Skandia Investment Services, Incorporated
regarding management of the Portfolio.
II. To consider the approval of a new Sub-Advisory Agreement between
American Skandia Investment Services, Incorporated and Putnam Investment
Management, Inc. regarding investment advice to the Portfolio.
III. To consider the approval of a change in the Portfolio's investment
objective.
IV. To consider the approval of changes in the Portfolio's fundamental
investment restrictions.
V. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The matters referred to above are discussed in detail in the Proxy
Statement attached to this Notice. The Board of Trustees has fixed the close of
business on August 16, 1996 as the record date for determining shareholders
entitled to notice of, and to vote at, the Meeting, and only holders of record
of shares at the close of business on that date are entitled to notice of, and
to vote at, the Meeting. Each share of the Portfolio is entitled to one vote
with respect to proposals on which the Portfolio's shareholders are entitled to
vote.
You are cordially invited to attend the Meeting. All shareholders are
requested to complete, date and sign the enclosed form of proxy and return it
promptly in the envelope provided for that purpose. The enclosed proxy is being
solicited on behalf of the Board of Trustees.
YOUR VOTE IS IMPORTANT. IN ORDER TO AVOID THE UNNECESSARY EXPENSE OF FURTHER
SOLICITATION, WE URGE YOU TO INDICATE VOTING INSTRUCTIONS ON THE ENCLOSED PROXY,
DATE AND SIGN IT, AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED, NO MATTER HOW
LARGE OR SMALL YOUR HOLDINGS MAY BE. YOU MAY REVOKE IT AT ANY TIME PRIOR TO ITS
USE. THEREFORE, BY APPEARING AT THE MEETING, AND REQUESTING REVOCATION PRIOR TO
THE VOTING, YOU MAY REVOKE THE PROXY AND YOU CAN THEN VOTE IN PERSON.
By order of the Board of Trustees
Mary Ellen O'Leary
Corporate Secretary
American Skandia Trust
September 23, 1996
<PAGE>
Proxy Statement
AMERICAN SKANDIA TRUST
One Corporate Drive
P.O. Box 883
Shelton, Connecticut 06484
SPECIAL MEETING OF SHAREHOLDERS
OF THE AST PHOENIX BALANCED ASSET PORTFOLIO
OF
AMERICAN SKANDIA TRUST
To be held
October 11, 1996
This proxy statement and enclosed form of proxy are being furnished in
connection with the solicitation of proxies by the Board of Trustees of American
Skandia Trust (the "Trust") for use at a Special Meeting of Shareholders of the
AST Phoenix Balanced Asset Portfolio (the "Portfolio") of the Trust to be held
at One Corporate Drive, Shelton, Connecticut 06484 on October 11, 1996 at 10:00
a.m. Eastern Time (the "Meeting"), or at any adjournment thereof, for the
purposes set forth in the accompanying Notice of Meeting ("Notice"). The first
mailing of proxies and proxy statements to shareholders is anticipated to be on
or about September 23, 1996.
The costs of the Meeting, including the solicitation of proxies, will
be paid by American Skandia Investment Services, Incorporated ("ASISI" or the
"Manager"), the Investment Manager to the Portfolio. Voting instructions will be
solicited principally by mailing this Proxy Statement and its enclosures, but
proxies also may be solicited by telephone, telegraph, or in person by officers
or agents of the Trust or American Skandia Life Assurance Corporation ("ASLAC").
The Trust will forward proxy materials to record owners for any beneficial
owners that such record owners may represent.
The Annual Report of the Trust (the "Report"), including audited
financial statements for 1995, has been previously sent to shareholders. Such
report, however, does not form any part of the proxy soliciting material. The
Trust will furnish an additional copy of the Report, as well as the most recent
Semi-annual Report of the Trust, to a shareholder upon request, without charge,
by writing to the Trust at the above address or by calling 1-800-752-6342.
Shareholders of record at the close of business on August 16, 1996 (the
"Record Date") are entitled to notice of, and to vote at, the Meeting. Each
shareholder is entitled to one vote for each full share. As of the Record Date,
the following number of shares of beneficial interest of the Portfolio were
outstanding: 21,338,474. As of the Record Date, there is no beneficial owner of
more than 5% of the shares of the Portfolio to the knowledge of the Trust.
Currently, the Trust serves as a funding vehicle for certain variable
annuities issued by ASLAC, a stock life insurance company. By order of the
Securities and Exchange Commission, dated August 1, 1995, the Trust was granted
exemptive relief permitting it to offer and sell shares directly to qualified
pension and retirement plans outside the separate account context. As of the
Record Date, nearly 100% of the Portfolio's shares were legally owned by ASLAC.
ASLAC holds Portfolio shares attributable to variable annuity contracts in
American Skandia Life Assurance Corporation Variable Accounts Class B-1, Class
B-2, and Class B-3 (collectively, for purposes of this Proxy Statement, "ASLAC
Variable Accounts"), each of which is an investment company registered as such
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"). ASLAC Variable Accounts have various sub-accounts, each of which invests
exclusively in a corresponding portfolio of an underlying fund. ASLAC will
solicit voting instructions from variable annuity contract owners who
beneficially own shares of the Portfolio represented in the AST Phoenix Balanced
Asset Sub-account as of the Record Date (the "Contractowners").
All shares of the Portfolio held by the Contractowners will be voted by
ASLAC in accordance with voting instructions received from such Contractowners
at the Meeting and any adjournments thereof. ASLAC is entitled to vote shares
for which voting instructions are not received and will vote such shares in the
same proportion as the votes cast by the Contractowners on the proxy issues
presented. ASLAC has fixed the close of business on October 9, 1996 as the last
day for which voting instructions will be accepted.
Timely, properly executed proxies will be voted as Contractowners instruct.
The Board of Trustees intends to bring before the Meeting the matters set forth
in Proposals I, II, III, and IV of the foregoing Notice. Unless instructions to
the contrary are marked, proxies will be voted FOR each of the proposals set
forth in the Notice. The Trustees do not expect any other business to be brought
before the meeting. If, however, any other matters are properly presented to the
meeting for action, it is intended that the persons named in the enclosed proxy
will vote in accordance with their judgment. A Contractowner executing and
returning a proxy may revoke it at any time prior to its exercise by written
notice of such revocation to the Secretary of the Trust, by execution of a
subsequent proxy, or by voting in person at the Meeting.
The presence in person or by proxy of the holders of a majority of the
outstanding shares is required to constitute a quorum at the Meeting. Since
ASLAC is the legal owner of nearly 100% of the Portfolio's shares, ASLAC's
presence at the Meeting constitutes a quorum under the Trust's By-laws. Shares
beneficially held by Contractowners present in person or represented by proxy at
the Meeting will be counted for the purpose of calculating the votes cast on the
issues before the Meeting.
Approval of each proposal requires the vote of a "majority of the
outstanding voting securities" of the Portfolio, as defined in the Investment
Company Act, which means the vote of 67% or more of the shares of the Portfolio
present at the Meeting, if the holders of more than 50% of the outstanding
shares of the Portfolio are present or represented by proxy, or the vote of more
than 50% of the outstanding shares of the Portfolio, whichever is less. Approval
of Proposals I and II are made contingent upon each other. Moreover, unless
Proposals I and II are each approved, neither Proposal III nor IV will be
effected by the Portfolio. Therefore, a vote against either Proposal I or II
will have the effect of a vote against each other, as well as a vote against
both Proposals III and IV.
In the event that sufficient votes to approve any proposal are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment will
require the affirmative vote of a majority of those shares represented at the
Meeting in person or by proxy. If a quorum is present, the persons named as
proxies will vote those proxies which they are entitled to vote FOR the proposal
in favor of such adjournment and will vote those proxies required to be voted
AGAINST the proposal against any such adjournment. Any proposals for which
sufficient favorable votes have been received by the time of the Meeting may be
acted upon and such vote shall be considered final regardless of whether the
Meeting is adjourned to permit additional solicitation with respect to any other
proposal. Proxies submitted without voting instructions will be voted FOR the
proposals.
PROPOSAL I
APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE TRUST
AND AMERICAN SKANDIA INVESTMENT SERVICES, INCORPORATED
Background
Since May 1, 1993, ASISI has served as Investment Manager to the
Portfolio pursuant to an Investment Management Agreement (the "Present
Investment Management Agreement") with the Trust. The Present Investment
Management Agreement, effective May 1, 1993 and as annually renewed thereafter,
provides, among other things, that in carrying out its responsibility to
supervise and manage all aspects of the Portfolio's operations, the Manager may
engage, subject to the approval of the Board of Trustees and, where required,
the shareholders of the Portfolio, a Sub-adviser to provide advisory services in
relation to the Portfolio, and delegate to the Sub-adviser duties to, among
other things:
(1) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the
Portfolio, and whether concerning the individual issuers whose
securities are included in the Portfolio or the activities in which
they engage, or with respect to securities which the Manager considers
desirable for inclusion in the Portfolio;
(2) determine what issuers and securities shall be represented in the
Portfolio's portfolio and regularly report them in writing to the Board
of Trustees;
(3) formulate and implement continuing programs for the purchases and
sales of the securities of such issuers and regularly report in writing
on them to the Board of Trustees; and
(4) take all actions on behalf of the Portfolio which appear to the
Trust necessary to carry into effect such purchase and sale programs
and supervisory functions as mentioned earlier, including the placing
of orders for the purchase and sale of portfolio securities.
In accordance with this provision for delegation of authority, the
Manager has entered into a sub-advisory agreement (the "Present Sub-Advisory
Agreement"), effective May 1, 1996, with Phoenix Investment Counsel, Inc.
("Phoenix"), pursuant to which the above duties have been delegated by the
Manager to Phoenix. Phoenix has served as Sub-adviser to the Portfolio since May
1, 1993.
The Present Investment Management Agreement and the Present
Sub-Advisory Agreement were initially approved by the Board of Trustees,
including a majority of the Trustees who are not "interested persons" of the
Trust (as defined under the Investment Company Act) (the "Independent
Trustees"), on March 30, 1993, annually renewed thereafter, and reapproved on
March 7, 1995. On April 16, 1996, the Board of Trustees, including a majority of
the Independent Trustees, reapproved the Present Investment Management Agreement
and approved the Present Sub-Advisory Agreement in its current form.
The Board of Trustees, through the Manager, has received a tendered
resignation from Phoenix as Sub-adviser to the Portfolio. At a meeting held on
August 13, 1996, the Board of Trustees received a proposal from the Manager to
engage Putnam Investment Management, Inc. ("Putnam Management") to provide
sub-advisory services for the Portfolio. In connection with its recommendation,
the Manager proposed to enter into a new investment management agreement with
the Trust (the "New Investment Management Agreement") and a new sub-advisory
agreement (the "New Sub-Advisory Agreement") with Putnam Management, both of
which would become effective October 15, 1996. The terms and conditions of the
New Investment Management Agreement and the Sub-Advisory Agreement are identical
in all material respects with those of the Present Investment Management
Agreement and the Present Sub-Advisory Agreement, respectively, with the
exception of an increased fee rate, the effective date and termination date, the
identity of the Sub-adviser, and a change in the name of the Portfolio to the
"AST Putnam Balanced Portfolio."
As hereinafter described in greater detail, Putnam Management is a
subsidiary of Putnam Investments, Inc., a holding company which in turn is
wholly owned by Marsh & McLennan Companies, Inc., a publicly-owned holding
company whose principal businesses are international insurance and reinsurance
brokerage, employee benefit consulting and investment management. Putnam
Management is one of America's oldest and largest money management firms,
managing mutual funds since 1937. At July 31, 1996, Putnam Management and its
affiliates managed assets in excess of $146 billion.
In support of its recommendation to engage Putnam Management as Sub-adviser
to the Portfolio, the Manager informed the Board of Trustees of its belief that,
based upon its discussions with Putnam Management, implementation of certain
revised investment strategies would be desirable and the appointment of Putnam
Management would facilitate the implementation of the desired strategies. Such
investment strategies, reflected in proposed changes to the Portfolio's
investment objective and certain fundamental investment restrictions as
described under Proposals III and IV herein, are similar to those employed by
Putnam Management in its management of The George Putnam Fund of Boston (the
"Putnam Fund"), an open-end management company with a current investment
objective and current investment restrictions substantially similar to those
proposed herein. In the opinion of the Manager, engagement of Putnam Management
as Sub-adviser to the Portfolio would also assist in developing new markets for
the Portfolio and efforts to increase the Portfolio's net assets.
On August 13, 1996 and September 3, 1996, the Board of Trustees, including
a majority of the Independent Trustees, voted unanimously to recommend to the
shareholders of the Portfolio that they approve the New Investment Management
Agreement and the New Sub-Advisory Agreement, each effective October 15, 1996
(or four business days after any subsequent approval of such agreements by the
Portfolio's shareholders, whichever is later), and authorized the submission of
the new agreements for shareholder approval. The Board of Trustees also approved
a change in the name of the Portfolio to the "AST Putnam Balanced Portfolio,"
subject to shareholder approval of Proposals I and II described herein. Subject
to the receipt of shareholder approval, the Present Investment Management
Agreement and the Present Sub-Advisory Agreement will be terminated as discussed
herein as of the opening of business on October 15, 1996.
The Present Investment Management Agreement
The following description of the material terms of the Present
Investment Management Agreement is qualified in its entirety by reference to the
form of such agreement attached to this Proxy Statement as Exhibit A-1.
The Present Investment Management Agreement requires the Manager to furnish
the Portfolio with, at a minimum, investment advice and investment management
and administrative services with respect to the Portfolio, subject to the
supervision of the Board of Trustees and in conformity with the stated policies
of the Portfolio. Under the terms of the Present Investment Management
Agreement, the Manager's services to the Portfolio are not to be deemed
exclusive, and the Manager is permitted to render investment advisory and
corporate administrative or other services to others (including other investment
companies) and to engage in other activities. The Manager may engage a
sub-adviser to provide advisory services in relation to the Portfolio.
The Manager is responsible for certain expenses in connection with the
trading function and investment program of the Portfolio. The Manager is
required to furnish, at its expense and without cost to the Trust, the services
of a President, Secretary, and one or more Vice Presidents of the Trust, to the
extent such additional officers may be required by the Trust for the proper
conduct of its affairs, and to provide or obtain for the Portfolio, and
thereafter supervise, such executive, administrative, clerical and shareholder
servicing services as are deemed advisable by the Board of Trustees. The Trust
pays other expenses, including, but not limited to, brokerage commissions,
legal, auditing, taxes or governmental fees, the cost of preparing share
certificates, custodian, depository, transfer and shareholder service agent
costs, expenses of issue, sale, redemption and repurchase of shares, expenses of
registering and qualifying shares for sale, insurance premiums on property or
personnel (including officers and Trustees if available) of the Trust which
inure to its benefit, expenses relating to Trustee and shareholder meetings, the
cost of preparing and distributing reports and notices to shareholders, the fees
and other expenses incurred by the Trust in connection with membership in
investment company organizations, and the cost of printing copies of
prospectuses and statements of additional information distributed to
shareholders.
The Present Investment Management Agreement also provides that in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties thereunder on the part of the Manager or any
of its officers, trustees, or employees, the Manager shall not be subject to
liability to the Trust or to any shareholder of the Portfolio for any act or
omission in the course of, or connected with, rendering services thereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security.
As compensation for the services performed and the facilities furnished by
the Manager under the Present Investment Management Agreement, the Manager
receives a fee payable monthly at an annual rate of .75% of the first $75
million of the Portfolio's average daily net assets, plus .65% of the
Portfolio's average daily net assets in excess of $75 million. Additionally,
under the terms of the Present Investment Management Agreement, if and to the
extent that the total of all ordinary business expenses of the Portfolio for any
fiscal year of the Trust, including all management and administration fees, but
excluding taxes, interest, brokerage commissions and fees and extraordinary
expenses, such as litigation, exceeds 1.25% of the Portfolio's average daily net
assets, the Manager agrees to pay the Trust such excess expenses, and if
required to do so pursuant to applicable statute or regulatory authority, to pay
the Trust such excess expenses no later than the last day of the first month of
the next succeeding fiscal year of the Trust. The aggregate fee paid by the
Trust to the Manager for services rendered under the Present Investment
Management Agreement for the fiscal year ended December 31, 1995 was $1,107,736.
The Present Investment Management Agreement provides that it will
continue in effect from year to year if specifically approved at least annually,
either by the Board of Trustees or by the vote of a majority of the Portfolio's
outstanding voting securities (as defined under the Investment Company Act). In
either event, such continuance shall also be approved by the vote of a majority
of the Board of Trustees who are not parties to the agreement or interested
persons of a party to the agreement (other than as trustees of the Trust) cast
in person at a meeting called for the purpose of voting on such continuance.
These provisions reflect the requirements of the Investment Company Act. The
Present Investment Management Agreement may be terminated at any time, without
penalty or prejudice to the completion of any transaction already initiated on
behalf of the Portfolio, on 60 days' written notice to the other party to the
agreement by (i) the vote of the Board of Trustees; (ii) the vote of a majority
of the Portfolio's outstanding voting securities; or (iii) the Manager. The
Present Investment Management Agreement will terminate effective May 1, 1997, if
not reapproved, or automatically in the event of its "assignment" (as defined
under the Investment Company Act).
Subject to receipt of shareholder approval of Proposals I and II described
herein, the Present Investment Management Agreement will be terminated effective
as of the opening of business on October 15, 1996. The decision to terminate the
Present Investment Management Agreement rather than to allow its continuance
reflects the determination of the Board of Trustees and the Manager that it
would be in the interests of the Portfolio's shareholders to enter into the New
Investment Management Agreement described below. If the Present Investment
Management Agreement is terminated, the Manager's compensation thereunder shall
be prorated to the date of termination.
The New Investment Management Agreement
The following description of the material terms of the New Investment
Management Agreement is qualified in its entirety by reference to the form of
such Agreement attached to this Proxy Statement as Exhibit A-2.
The terms and conditions of the New Investment Management Agreement are
identical in all material respects to those of the Present Investment Management
Agreement, with the exception of the increased investment management fee rate
payable by the Trust, the effective date and termination date, and the name of
the Portfolio. As compensation for the services to be performed and the
facilities to be furnished by the Manager under the New Investment Management
Agreement, the Manager will receive a fee payable monthly at an annual rate of
.75% of the average daily net assets of the Portfolio not in excess of $300
million, plus .70% of the Portfolio's average daily net assets in excess of $300
million. Like the Present Investment Management Agreement, under the terms of
the New Investment Management Agreement, if and to the extent that the total of
all ordinary business expenses of the Portfolio for any fiscal year of the
Trust, including all management and administration fees, but excluding taxes,
interest, brokerage commissions and fees and extraordinary expenses, such as
litigation, exceeds 1.25% of the Portfolio's average daily net assets, the
Manager agrees to pay the Trust such excess expenses, and if required to do so
pursuant to applicable statute or regulatory authority, to pay the Trust such
excess expenses no later than the last day of the first month of the next
succeeding fiscal year of the Trust.
The following table reflects the current annual fees and other expenses
incurred by the Portfolio under the Present Investment Management Agreement for
the fiscal year ending December 31, 1995, as well as the pro forma annual fees
and other expenses which would have been incurred by the Portfolio under the
proposed New Investment Management Agreement for the same time period. The
figures are stated as a percentage of average net assets of the Portfolio and do
not reflect any applicable expenses or charges, including sales loads, that may
be imposed with respect to ASLAC Variable Accounts.
<TABLE>
<CAPTION>
Current Annual Pro Forma Annual
Portfolio Operating Expenses Portfolio Operating Expenses
<S> <C> <C>
Management Fee 0.70% 0.75%
Other Expenses 0.24% 0.24%
Total Portfolio Operating Expenses 0.94% 0.99%
</TABLE>
Expense Examples: The examples shown below assume that the total annual expenses
for the Portfolio throughout the period specified will be the lower of the total
annual expenses without any applicable reimbursement or expenses after any
applicable reimbursement. Such examples are illustrative only and should not be
considered a representation of past or future expenses of the Portfolio. Actual
expenses may be greater or less than those shown below.
A shareholder would pay the following expenses (rounded to the nearest
dollar) on a $1,000 investment, assuming 5% annual return at the end of each
time period:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Current Expense Examples: 10 30 52 116
Pro-Forma Expense Examples: 10 32 55 121
</TABLE>
For the year ending December 31, 1995, the amount of the investment
management fee paid by the Trust to the Manager for services rendered under the
Present Investment Management Agreement was $1,107,736. If the New Investment
Management Agreement had been effect for the year ending December 31, 1995, the
amount of the investment management fee paid by the Trust to the Manager for
services rendered under the New Investment Management Agreement would have been
$1,191,538, an increase of 7.6% above the actual amount paid.
If the New Investment Management Agreement is approved by the shareholders
of the Portfolio, it will become effective October 15, 1996 (subject also to
shareholder approval of Proposal II), or four business days after any subsequent
approval of the agreement by the Portfolio's shareholders, whichever is later.
The New Investment Management Agreement will continue in effect from year to
year if specifically approved at least annually, either by the Board of Trustees
or by the vote of a majority of the Portfolio's outstanding voting securities
(as defined under the Investment Company Act). In either event, such continuance
shall also be approved by the vote of a majority of the Board of Trustees who
are not parties to the agreement or interested persons of a party to the
agreement (other than as trustees of the Trust) cast in person at a meeting
called for the purpose of voting on such continuance. These provisions reflect
the requirements of the Investment Company Act. Like the Present Investment
Management Agreement, the New Investment Management Agreement may be terminated
at any time, without penalty or prejudice to the completion of any transactions
already initiated on behalf of the Portfolio, on 60 days' written notice to the
other party to the agreement by (i) the vote of the Board of Trustees; (ii) the
vote of a majority of the Portfolio's outstanding voting securities; or (iii)
the Manager. The New Investment Management Agreement would terminate effective
October 15, 1997, if not reapproved, or automatically in the event of its
"assignment" (as defined under the Investment Company Act).
The Manager and Other Information
The Manager is registered as an investment adviser with the Securities
and Exchange Commission pursuant to the Investment Advisers Act of 1940, as
amended, as well as with the securities commissions of thirty-two state
jurisdictions. The Manager does not currently serve as investment adviser or
sub-adviser to any registered investment company other than the Trust. The
principal executive officer of the Manager is Jan R. Carendi, who is also a
director of the Manager and Executive Vice President and Member of Executive
Management Group, Skandia Insurance Company Ltd. ("SICL"), Sveavagen 44, S-103
50 Stockholm, Sweden. The other officers and directors of the Manager and the
officers of the Manager who are also officers or members of the Board of
Trustees of the Trust are set forth below:
<TABLE>
<CAPTION>
Name and Position with ASISI Principal Occupation and Address
<S> <C> <C> <C>
Jan R. Carendi* Executive Vice President and
Chief Executive Officer Member of Executive Management Group
and Director Skandia Insurance Company Ltd.
Sveavagen 44, S-103 50 Stockholm, Sweden
Gordon C. Boronow* President and Chief Operating Officer
Director American Skandia Life Assurance Corporation
One Corporate Drive, Shelton, CT 06484
Thomas M. Mazzaferro* Executive Vice President and Chief Financial Officer
President, Chief Operating Officer, American Skandia Life Assurance Corporation
Chief Financial Officer and Director One Corporate Drive, Shelton, CT 06484
C. Ake Svensson Vice President and Corporate Controller
Treasurer and Director American Skandia Investment Holding Corporation
One Corporate Drive, Shelton, CT 06484
N. David Kuperstock Vice President, Product Development
Director American Skandia Life Assurance Corporation
One Corporate Drive, Shelton, CT 06484
Rodney D. Runestad Vice President and Valuation Actuary
Director American Skandia Life Assurance Corporation
One Corporate Drive, Shelton, CT 06484
Wade A. Dokken President, Chief Operating Officer
Director and Chief Marketing Officer
American Skandia Marketing, Incorporated
One Corporate Drive, Shelton, CT 06484
Richard G. Davy, Jr.* Controller
Controller American Skandia Investment Services, Incorporated
One Corporate Drive, Shelton, CT 06484
M. Priscilla Pannell* Assistant Corporate Secretary
Corporate Secretary American Skandia Life Assurance Corporation
One Corporate Drive, Shelton, CT 06484
Kristen E. Newall Administrative Coordinator
Assistant Corporate Secretary American Skandia Investment Holding Corporation
One Corporate Drive, Shelton, CT 06484
</TABLE>
*Individuals who are also Trustees or officers of the Trust.
The Manager is a wholly-owned subsidiary of American Skandia Investment
Holding Corporation ("ASIHC"), a Delaware corporation. ASIHC is also the owner
of all the issued and outstanding shares of ASLAC and American Skandia
Marketing, Incorporated ("ASM"), which is the principal underwriter of ASLAC
variable annuity contracts. ASIHC is indirectly owned by SICL, a Swedish
company. The Manager's, ASIHC's, ASLAC's, and ASM's principal offices are
located in the same building at One Corporate Drive, Shelton, Connecticut 06484.
The Administrator of the Portfolio, and every other portfolio of the
Trust, as that term is defined under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), is PFPC Inc., a Delaware corporation located at
103 Bellevue Parkway, Wilmington, Delaware 19809.
The Evaluation by the Board of Trustees
In evaluating the New Investment Management Agreement, the Board of
Trustees requested and reviewed materials furnished by the Manager and Putnam
Management. These materials included financial statements and information
regarding the Manager and Putnam Management and their respective personnel and
operations. Consideration was given to the increased fee rates payable under the
New Investment Management Agreement and the New Sub-Advisory Agreement and the
amount of fees and expenses that would have been paid if such agreements had
been in effect during the past fiscal year, as well as the pro forma net
increase in expenses to the Manager and to the Portfolio at various asset levels
under the new fee structure. Consideration also was given to comparative fee and
expense information concerning other mutual funds with similar investment
objectives published by a widely recognized industry authority and to potential
indirect benefits in connection with the Portfolio and its investment operations
including any which may arise in connection with brokerage transactions.
In evaluating the New Investment Management Agreement, the Board of
Trustees considered that (1) the scope and quality of the services which the
Manager has provided under the Present Investment Management Agreement and
expects to provide under the New Investment Management Agreement have been and
are satisfactory; (2) although the investment management fee rate payable to the
Manager under the New Investment Management Agreement is higher than the
investment management fee rate payable under the Present Investment Management
Agreement, the management fee rate is competitive; (3) the terms of the New
Investment Management Agreement will remain materially unchanged from those of
the Present Investment Management Agreement, except for the effective date and
termination date, the name of the Portfolio, and the increased investment
management fee rate; and (4) the Manager's obligation under the Present
Investment Management Agreement to reimburse the Trust if and to the extent that
the total of all ordinary business expenses of the Portfolio for any fiscal year
of the Trust, including all management fees, exceeds 1.25% of the Portfolio's
average daily net assets would continue under the New Investment Management
Agreement. (For a further discussion of this limitation on the Portfolio's
expenses under the Present Investment Management Agreement and the New
Investment Management Agreement, see the respective discussions of each
agreement under this Proposal I.) The Board also gave consideration to the fact
that the sub-advisory fee rate payable by the Manager to Putnam Management under
the New Sub-Advisory Agreement would be higher than the sub-advisory fee rate
payable under the Present Sub-Advisory Agreement, with the result that the
effective rate of compensation realized by the Manager after paying the
sub-advisory fee under the new fee structure would have been 9.4% lower than
that realized under the present fee structure for the year ending December 31,
1995, as well as the Manager's belief that maintaining compensation at
competitive levels over the long term is necessary for the Manager to continue
to provide high quality services to the Portfolio. The Board of Trustees also
received assurances from the Manager that the scope and quality of its services
would not be diminished under the terms of the New Investment Management
Agreement. The Board of Trustees also considered the Manager's present
distribution strategies and willingness to devote appropriate resources to
develop new markets for the Portfolio.
Based upon its evaluation, the Board of Trustees determined that the
continuance of the Manager's role as Investment Manager of the Portfolio likely
would offer the Portfolio continued access to effective management and advisory
services and capabilities. The Board of Trustees concluded further that the
terms of the New Investment Management Agreement, including the fees
contemplated thereby, are fair and reasonable and in the best interests of the
Portfolio and its shareholders.
In order to provide for the services described in the New Investment
Management Agreement, the shareholders are being asked to approve the New
Investment Management Agreement.
THE TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL I.
ANY UNMARKED PROXIES WILL BE SO VOTED.
PROPOSAL II
APPROVAL OF A NEW SUB-ADVISORY AGREEMENT BETWEEN
AMERICAN SKANDIA INVESTMENT SERVICES, INCORPORATED
AND PUTNAM INVESTMENT MANAGEMENT, INC.
The Present Sub-Advisory Agreement
The following description of the Present Sub-Advisory Agreement is
qualified in its entirety by reference to the form of such agreement attached to
this Proxy Statement as Exhibit A-3.
Phoenix has advised the Portfolio since May 1, 1993. Under the terms of
the Present Sub-Advisory Agreement, Phoenix has agreed to furnish the Manager
with investment advisory services in connection with a continuous investment
program for the Portfolio which is to be managed in accordance with the
investment objective, investment policies and restrictions of the Portfolio as
set forth in the Prospectus and Statement of Additional Information of the Trust
and in accordance with the Trust's Declaration of Trust and By-laws. Subject to
the supervision and control of the Manager, which is in turn subject to the
supervision and control of the Board of Trustees, Phoenix, in its discretion,
determines and selects the securities to be purchased for and sold from the
Portfolio from time to time and places orders with and gives instructions to
brokers, dealers and others for all such transactions and causes such
transactions to be executed.
Additionally, pursuant to the terms of the Present Sub-Advisory
Agreement, Phoenix obtains and evaluates pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Portfolio, and
concerning the individual issuers whose securities are included in the Portfolio
or the activities in which they engage, or with respect to securities which
Phoenix considers desirable for inclusion in the Portfolio.
In furnishing the services under the Present Sub-Advisory Agreement,
Phoenix has agreed to comply with the requirements of the Investment Company Act
and subchapters L and M (including, respectively, Section 817(h) and Section
851(b)(1), (2), (3) and (4)) of the Internal Revenue Code, applicable to the
Portfolio, and the regulations promulgated thereunder. Phoenix has also agreed
to comply with (i) other applicable provisions of state or federal law; (ii) the
provisions of the Declaration of Trust and By-laws of the Trust; (iii) policies
and determinations of the Trust and Manager; (iv) the fundamental policies and
investment restrictions of the Trust, as set out in the Trust's Registration
Statement, under the Investment Company Act or as amended by the Trust's
shareholders; (v) the Prospectus and Statement of Additional Information of the
Trust; and (vi) investment guidelines or other instructions received in writing
from the Manager. Phoenix, at its expense, has agreed to furnish all necessary
investment facilities, including salaries of personnel required for it to
execute its duties faithfully.
Furthermore, Phoenix represents under the Present Sub-Advisory
Agreement that it has reviewed the Registration Statement of the Trust,
including any amendments or supplements thereto and any Proxy Statement relating
to the approval of the Present Sub-Advisory Agreement, as filed with the
Securities and Exchange Commission, and represents and warrants that with
respect to disclosure about Phoenix or information relating directly or
indirectly to Phoenix, such Registration Statement or Proxy Statement contains,
as of the date of the Present Sub-Advisory Agreement, no untrue statement of any
material fact and does not omit any statement of material fact which is required
to be stated therein or necessary to make the statements contained therein not
misleading.
The Present Sub-Advisory Agreement requires Phoenix to use its best
judgment, efforts, advice and good faith in the performance of its services
under the Present Sub-Advisory Agreement. However, so long as Phoenix has acted
in good faith and has used its best efforts, then in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations under the Present Sub-Advisory Agreement, Phoenix shall not be
liable to the Trust or its shareholders or to the Manager for any act or
omission resulting in any loss suffered in any portfolio of the Trust in
connection with any service to be provided therein.
The Manager is responsible for payment of Phoenix's compensation under
the Present Sub-Advisory Agreement. Phoenix's compensation for the services
provided under the Present Sub-Advisory Agreement is computed at an annual rate
and is payable monthly in arrears, based on the average daily net assets of the
Portfolio for each month. For all services rendered, the Manager calculates and
pays Phoenix at the annual rate of .50% of the portion of the Portfolio's
average daily net assets not in excess of $25 million, plus .40% of the portion
of the Portfolio's average daily net assets over $25 million but not in excess
of $75 million, plus .30% of the portion of the Portfolio's average daily net
assets in excess of $75 million. In computing the fee to be paid to Phoenix, the
net asset value of the Portfolio is valued as set forth in the current
registration statement of the Trust. The aggregate fee paid by the Manager to
Phoenix for services rendered under the Present Sub-Advisory Agreement for the
fiscal year ended December 31, 1995 was $576,648.
The Present Sub-Advisory Agreement provides that it shall remain in
effect for one year from the date of the agreement, and is renewable annually
thereafter by specific approval of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Portfolio (as defined under
the Investment Company Act). In either event, such renewal shall also be
approved by the vote of a majority of the Independent Trustees, cast in person
at a meeting called for the purpose of voting on such renewal. The Present
Sub-Advisory Agreement may be terminated at any time without penalty upon 60
days' written notice to the other party to the agreement, and will automatically
terminate in the event of its "assignment" by either party (as defined under the
Investment Company Act) or (provided Phoenix has received prior written notice
thereof) upon termination of the Present Investment Management Agreement. Unless
the Present Sub-Advisory Agreement is renewed, or otherwise terminated, the
agreement will terminate effective May 1, 1997.
Subject to the receipt of shareholder approval of Proposals I and II
described herein, the Present Sub-Advisory Agreement will be terminated by the
resignation of Phoenix as Sub-adviser to the Portfolio, effective as of the
opening of business on October 15, 1996. Both the Manager and Phoenix have
mutually agreed that it would be in the interests of the Portfolio's
shareholders for the Manager to accept the resignation of Phoenix as Sub-adviser
to the Portfolio. The termination, rather than continuance, of the Present
Sub-Advisory Agreement reflects the Manager's determination that it would be in
the interests of the Portfolio's shareholders to enter into the New Sub-Advisory
Agreement described below. If the Present Sub-Advisory Agreement is terminated,
Phoenix's compensation thereunder shall be prorated to the date of termination.
Phoenix's offices are located at 56 Prospect Street, Hartford,
Connecticut 06115-0480. As at December 31, 1995, Phoenix and its affiliates
managed assets totaling approximately $36 billion, including over $255 million
in assets of the Portfolio. As at June 30, 1996, Phoenix managed assets of the
Portfolio totaling approximately $264,258,213.
The New Sub-Advisory Agreement
The following description of the New Sub-Advisory Agreement is
qualified in its entirety by reference to the form of such agreement attached to
this Proxy Statement as Exhibit A-4.
The terms and conditions of the New Sub-Advisory Agreement are
identical in all material respects to those of the Present Sub-Advisory
Agreement, with the exception of the identity of the service provider, the
increased sub-advisory fee rate payable by the Manager, the effective date and
termination date, and the name of the Portfolio. As compensation for the
services to be rendered under the New Sub-Advisory Agreement, the Manager, and
not the Trust or the Portfolio, will pay Putnam Management a fee at the annual
rate of .45% of the portion of the average daily net assets of the Portfolio not
in excess of $150 million, plus .40% of the portion of Portfolio's average daily
net assets over $150 million but not in excess of $300 million, plus .35% of the
portion of the Portfolio's average daily net assets in excess of $300 million.
In computing the fee to be paid to Putnam Management, the net asset value of the
Portfolio shall be valued as set forth in the then current registration
statement of the Trust. If the New Sub-Advisory Agreement is terminated, the
payment shall be prorated to the date of termination.
For the year ending December 31, 1995, the amount of the sub-advisory
fee paid by the Manager to Phoenix for services rendered under the Present
Sub-Advisory Agreement was $576,648. If the New Sub-Advisory Agreement had been
effect for the year ending December 31, 1995, the amount of the sub-advisory fee
paid by the Manager to Putnam Management for services rendered under the New
Sub-Advisory Agreement would have been $710,487, an increase of 23.2% above the
actual amount paid. Had the New Investment Management Agreement been in effect
for the same time period, however, the amount of the investment management fee
paid by the Trust and incurred by the Portfolio would only have increased 7.6%
above the actual investment management fee paid.
As the Manager, and not the Trust or the Portfolio, is responsible for
payment of the sub-advisory fee to Putnam Management, such expense would not
increase the annual fees and other expenses incurred by the Portfolio. For a
description of the current annual fees and other expenses incurred by the
Portfolio under the Present Investment Management Agreement for the fiscal year
ending December 31, 1995, as well as the pro forma annual fees and other
expenses which would have been incurred by the Portfolio under the New
Investment Management Agreement for the same time period, see the discussion in
Proposal I under the heading, "The New Investment Management Agreement."
If the New Sub-Advisory Agreement is approved by the shareholders of the
Portfolio, it will become effective October 15, 1996 (subject also to
shareholder approval of Proposal I), or four business days after any subsequent
approval of the agreement by the Portfolio's shareholders, whichever is later.
The new Sub-Advisory Agreement will remain in effect for an initial one year
term, and is renewable thereafter by specific approval of the Board of Trustees
or by vote of a majority of the outstanding voting securities of the Portfolio
(as defined under the Investment Company Act). In either event, such renewal
shall also be approved by the vote of a majority of the Independent Trustees,
cast in person at a meeting called for the purpose of voting on such renewal.
Like the Present Sub-Advisory Agreement, the New Sub-Advisory Agreement may be
terminated at any time without penalty upon 60 days' written notice to the other
party to the agreement, and will automatically terminate in the event of its
"assignment" by either party (as defined under the Investment Company Act) or
(provided Putnam Management has received prior written notice thereof) upon
termination of the New Investment Management Agreement.
The Manager believes that changes in the investment strategies recommended
by Putnam Management and the regard for the high quality of Putnam Management's
investment advisory capabilities will facilitate efforts to increase the
Portfolio's assets with beneficial effects on portfolio and Trust expenses. As
discussed herein, the Board of Trustees and the Manager believe that the
increased overall fee structure for the Portfolio under the New Investment
Management Agreement and the New Sub-Advisory Agreement accurately reflects the
high quality of services to be provided under these agreements.
The Proposed Sub-Adviser
Putnam Management is a wholly owned subsidiary of Putnam Investments,
Inc., One Post Office Square, Boston, Massachusetts 02109, a holding company
that is in turn wholly owned by Marsh & McLennan Companies, Inc., which has
executive offices at 1166 Avenue of the Americas, New York, New York 10036.
Marsh & McLennan Companies, Inc. and its operating subsidiaries are professional
services firms with insurance and reinsurance brokering, consulting and
investment management businesses. At July 31, 1996, Putnam Management and its
affiliates managed assets in excess of $146 billion.
The directors of Putnam Management are George Putnam, Lawrence J. Lasser,
and Gordon H. Silver. The principal occupations of Messrs. Putnam, Lasser, and
Silver are as officers and directors of Putnam Management and certain of its
corporate affiliates. Mr. Putnam is the Chairman of the Trustees of the Putnam
family of funds. Mr. Lasser is the President and Chief Executive Officer of
Putnam Management. Mr. Silver is Senior Administrative Officer of Putnam
Management and other Putnam entities. The address of Putnam Management and the
business address of the directors and officers of Putnam Management is One Post
Office Square, Boston, Massachusetts 02109.
Putnam Management acts as investment adviser to various publicly owned
investment companies, some of which have investment objectives similar to the
investment objective of the Portfolio as contemplated by Proposal III of this
Proxy Statement (collectively, the "Comparable Putnam Funds"). For each
Comparable Putnam Fund, the chart below lists the total assets at June 30, 1996,
as well as the current management fee rate payable to Putnam Management:
<PAGE>
<TABLE>
<CAPTION>
Total Net Assets
Comparable Putnam Fund at June 30, 1996 Management Fee Rate
<S> <C> <C> <C>
The George Putnam Fund of $ 2,174,872,000 0.65% of the first $500 million of average net
Boston (the "Putnam Fund," as assets; plus 0.55% of the next $500 million; plus
defined earlier) 0.50% of the next $500 million; plus 0.45% of the
next $5 billion; plus 0.425% of the next $5 billion; plus
0.405% of the next $5 billion; plus 0.39% of the next $5
billion; plus 0.38% thereafter.
Putnam Balanced Retirement $ 519,168,000 0.65% of the first $500 million of average net
Fund assets; plus 0.55% of the next $500 million; plus
0.50% of the next $500 million; plus 0.45% of any excess
over $1.5 billion.
Putnam Convertible $ 980,729,000 0.65% of the first $500 million of average net
Income-Growth Trust assets; plus 0.55% of the next $500 million; plus
0.50% of the next $500 million; plus 0.45% of any excess
over $1.5 billion.
Putnam Equity Income Fund $ 610,678,000 0.65% of the first $500 million of average net
assets; plus 0.55% of the next $500 million; plus
0.50% of the next $500 million; plus 0.45% of the
next $5 billion; plus 0.425% of the next $5
billion; plus 0.405% of the next $5 billion; plus
0.39% of the next $5 billion; plus 0.38%
thereafter.
The Putnam Fund for Growth $18,129,661,000 0.65% of the first $500 million of average net
and Income assets; plus 0.55% of the next $500 million; plus
0.50% of the next $500 million; plus 0.45% of the next
$5 billion; plus 0.425% of the next $5 billion; plus
0.405% of the next $5 billion; plus 0.39% of the next
$5 billion; plus 0.38% thereafter.
Putnam Growth and Income Fund $ 1,040,666,000 Same as previous.
II
Putnam Investment Funds: $ 2,162,000 Same as previous.
Putnam Balanced Fund**
_______________
All Comparable Putnam Funds $23,457,936,000
</TABLE>
** With respect to the Putnam Investment Funds: Putnam Balanced Fund, Putnam
Management has agreed to waive its fees and, if necessary, reimburse expenses if
the expenses of the fund exceed 0.70% per annum through November 30, 1996.
Portfolio transaction expenses, taxes, payments under distribution plans and
extraordinary expenses are excluded from the limitation.
Putnam Management does not believe that the management fee rates set
forth above are directly comparable to the fees to be paid to Putnam Management
with respect to the management of the Portfolio under the New Sub-Advisory
Agreement since, for the funds listed above, Putnam Management provides a full
range of administrative services in addition to portfolio management.
The Evaluation by the Board of Trustees
In evaluating the New Sub-Advisory Agreement, the Board of Trustees
reviewed materials furnished by the Manager and Putnam Management. These
materials included financial statements and information regarding the Manager
and Putnam Management and their respective personnel and operations.
Consideration was given to the increased fee rates payable under the New
Investment Management Agreement and the New Sub-Advisory Agreement and the
amount of fees and expenses that would have been paid if such agreements had
been in effect during the past fiscal year, as well as the pro forma net
increase in expenses to the Manager and to the Portfolio at various asset levels
under the new fee structure. Consideration also was given to comparative fee and
expense information concerning other mutual funds with similar investment
objectives published by a widely recognized industry authority and to potential
indirect benefits in connection with the Portfolio and its investment operations
including any which may arise in connection with brokerage transactions.
In evaluating the New Sub-Advisory Agreement, the Board of Trustees
considered that (1) the reputation and standing of Putnam Management in the U.S.
mutual fund industry is generally excellent in light of, among other things, the
rating by nationally recognized fund rating services of funds managed by Putnam
Management; (2) the services to be delivered by Putnam Management to the
Portfolio's shareholders are expected to be of high quality; (3) although the
proposed sub-advisory fee rate under the New Sub-Advisory Agreement is higher
than the sub-advisory fee rate applicable under the Present Sub-Advisory
Agreement, the sub-advisory fee rate is competitive and accurately reflects the
high quality of services expected under the New Sub-Advisory Agreement,
including enhanced administrative capabilities; (4) the terms of the New
Sub-Advisory Agreement will remain materially unchanged from those of the
Present Sub-Advisory Agreement, except for the identity of the service provider,
the effective date and termination date, the name of the Portfolio, and the
increased sub-advisory fee rate; (5) Putnam Management has significant
experience in managing investment portfolios with investment objectives similar
to the investment objective described in Proposal III and, if approved, would
apply to the Portfolio (the "Comparable Putnam Funds," as defined earlier); (6)
Putnam Management managed combined assets of the Comparable Putnam Funds
totaling approximately $23.5 billion as at June 30, 1996; and (7) the historical
performance of the Putnam Fund, as managed by Putnam Management and having a
current investment objective, investment policies and investment restrictions
substantially identical to those described in Proposals III and IV herein, has
generally been better than the historical performance of the Portfolio as
sub-advised by Phoenix since the Portfolio's inception under the current
investment objective, investment policies and investment restrictions (measured
by investment returns and expense ratios and recognizing that such past
performance is no guarantee of future results for the Portfolio). The Board of
Trustees also received assurances that Putnam Management has considerable
staffing resources available and adequate capitalization to provide high quality
management services.
Based upon its evaluation, the Board of Trustees determined that the
Manager's engagement of Putnam Management as Sub-adviser to the Portfolio likely
would offer the Portfolio continued access to effective management and advisory
services and capabilities. The Board of Trustees concluded further that the
terms of the New Sub-Advisory Agreement, including the fees contemplated
thereby, are fair and reasonable and in the best interests of the Portfolio and
its shareholders.
In order to provide for the services described in the New Sub-Advisory
Agreement, the shareholders are being asked to approve the New Sub-Advisory
Agreement.
Portfolio Brokerage
Subject to the supervision of the Manager and the Board of Trustees,
decisions to buy and sell securities for each portfolio of the Trust, including
the Portfolio, are made by the portfolio's respective Sub-adviser. Subject to
the direction of the Manager, each Sub-adviser is authorized to allocate the
orders placed by it on behalf of the applicable portfolio to brokers who also
may provide research or statistical material, or other services to the portfolio
or the Sub-adviser for the use of the applicable portfolio. Such allocation
shall be in such amounts and proportions as the Sub-adviser shall determine in
accordance with the policy set forth in the Trust's Prospectus and Statement of
Additional Information or as the Board of Trustees may determine from time to
time, and the Sub-adviser will report such allocations either to the Manager,
which will report on such allocations to the Board of Trustees, or, if requested
by the Manager, directly to the Board of Trustees. Such reports will indicate
the brokers to whom such allocations have been made and the basis therefor. The
Sub-adviser may consider sale of shares of the portfolio, as well as the
recommendations of the Manager, as factors in the selection of brokers to
execute portfolio transactions for a portfolio, subject to the requirements of
best net price and most favorable execution.
Change in Portfolio Name
If Proposals I and II are approved, as of October 15, 1996, the name of the
Portfolio will be changed from the "AST Phoenix Balanced Asset Portfolio" to the
"AST Putnam Balanced Portfolio," and the New Investment Management Agreement and
the New Sub-Advisory Agreement will become effective.
As discussed earlier, the Portfolio's investment program will be based
upon the current investment program employed by Putnam Management in connection
with its management of The George Putnam Fund of Boston (the "Putnam Fund," as
defined earlier). In the opinion of the Manager and Putnam Management, the
proposed name is consistent with the proposed investment objective for the
Portfolio, as described more fully under Proposal III herein, and the overall
investment strategy to be employed by Putnam Management in managing the
Portfolio.
Proposals I and II are both made contingent upon shareholder approval
of each other. If either of Proposals I or II is not approved, the Present
Investment Management Agreement and the Present Sub-Advisory Agreement will
continue in effect.
THE TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL II.
ANY UNMARKED PROXIES WILL BE SO VOTED.
PROPOSAL III
APPROVAL OF A CHANGE IN THE
PORTFOLIO'S INVESTMENT OBJECTIVE
The Portfolio's current fundamental investment objective, which may not be
changed without approval of the shareholders of the Portfolio, is as follows:
The Portfolio seeks reasonable income, long-term capital growth
and conservation of capital.
The Portfolio invests based on combined considerations of risk, income,
capital enhancement and protection of capital value. The Portfolio's investments
may include any type or class of security, including, common stocks, fixed
income securities and securities convertible into common stocks. The Portfolio
may invest up to 35% of its net assets in high yield, high risk fixed income
securities. The Portfolio may also engage in certain options transactions, enter
into financial futures contracts and related contracts for hedging purposes,
invest in deferred or zero coupon debt obligations, and, in an effort to protect
its assets against major market declines, or for other temporary defensive
measure, retain cash or invest all or part of its assets in cash equivalents,
such as government securities and high grade commercial paper.
The Board of Trustees recommends that the shareholders adopt the
following fundamental investment objective for the Portfolio, which, if
approved, may not be changed without subsequent approval of the shareholders of
the Portfolio:
The Portfolio seeks to provide a balanced investment composed of a
well-diversified portfolio of stocks and bonds which will produce both
capital growth and current income.
As amended, the investment objective of the Portfolio would be
substantially similar to the current investment objective of The George Putnam
Fund of Boston (the "Putnam Fund," as defined earlier), an open-end management
investment company to which Putnam Management acts as investment adviser. The
Putnam Fund is categorized by a leading fund rating service as a "balanced" fund
for purposes of comparison to other funds. As a "balanced," fund, Putnam
Management classifies the Putnam Fund within its "growth and income" category of
funds, one of four categories of which the majority of funds managed by Putnam
Management are classified (namely, either Taxable Fixed Income, Tax-Free Fixed
Income, Growth, or Growth and Income). All balanced, growth and income, equity
income and convertible securities funds within the Putnam family of funds are
classified by Putnam Management into its "growth and income" category of funds.
In the opinion of the Manager and Putnam Management, the Portfolio is
appropriately categorized as a "balanced" fund.
In seeking the proposed investment objective, the Portfolio may invest
in almost any type of security or negotiable instrument, including cash or money
market instruments. The Portfolio's investments will include some securities
selected primarily to provide for capital protection, others selected for
dependable income and still others for growth in value. Ordinarily no more than
75% of the Portfolio's assets will consist of common stocks and that portion of
convertible securities attributable to conversion rights; however, the
proportion invested in each type of security is not fixed. The Portfolio may,
however, at times invest more than 75% of its assets in such securities if the
Sub-adviser determines that unusual market or economic conditions make it
appropriate to do so.
The Portfolio may invest in both higher-rated and lower-rated
fixed-income securities. The Portfolio will not, however, invest in securities
rated at the time of purchase lower than B by Moody's Investors Service, Inc.
("Moody's") or Standard & Poor's ("S&P") or in unrated securities which the
Sub-adviser determines are of comparable quality. Securities rated B are
predominantly speculative and have large uncertainties or major risk exposures
to adverse conditions. Securities rated lower than Baa by Moody's or BBB by S&P
and unrated securities of comparable quality are sometimes referred to as "junk
bonds." Under the current investment objective, the Portfolio may invest up to
35% of its net assets in such lower-rated or unrated securities, with no minimum
rating requirement. Under the proposed investment objective, there is no formal
limit on such investment. However, the Sub-adviser will seek to reduce the risks
of investing in lower-rated securities through careful investment analysis.
At times, the Sub-adviser may temporarily use alternative strategies
primarily designed to reduce fluctuations in the value of the Portfolio's assets
when conditions in the securities markets make pursuing the Portfolio's proposed
investment objective inconsistent with the best interests of its shareholders.
In implementing these defensive strategies, the Portfolio may concentrate its
investments in debt securities, preferred stocks, cash or money market
instruments or invest in any other securities the Sub-adviser considers
consistent with such defensive strategies.
The Manager has expressed its belief to the Board of Trustees that the
proposed change to the investment objective of the Portfolio is in the interests
of the shareholders of the Portfolio.
This Proposal III is made contingent upon shareholder approval of
Proposals I and II. If either of Proposals I or II is not approved, the current
investment objective will continue in effect and will apply to the Portfolio.
THE TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL III.
ANY UNMARKED PROXIES WILL BE SO VOTED.
PROPOSAL IV
APPROVAL OF CHANGES IN THE PORTFOLIO'S
FUNDAMENTAL INVESTMENT RESTRICTIONS
As described in more detail below, the Board of Trustees, including the
Independent Trustees, are recommending to the shareholders of the Portfolio that
they approve a number of changes to the Portfolio's fundamental investment
restrictions. Generally, the purpose behind these proposed changes is to conform
the investment program of the Portfolio with the current investment program
employed by Putnam Management in its management of The George Putnam Fund of
Boston (the "Putnam Fund," as defined earlier). If this Proposal IV is approved,
the investment restrictions as proposed below would be substantially similar to
the current corresponding investment restrictions of the Putnam Fund.
Reclassification of Certain Investment Restrictions from "Fundamental" to
"Non-Fundamental"
The Portfolio currently is subject to certain investment restrictions
which are "fundamental" policies and may not be changed without approval of the
shareholders of the Portfolio. The Portfolio also is subject to certain
non-fundamental investment restrictions which may be changed by the Board of
Trustees without shareholder approval.
The Manager, after discussions with Putnam Management, has proposed to the
Board of Trustees that certain of the Portfolio's investment restrictions
discussed below be reclassified from "fundamental" investment restrictions to
"non-fundamental" investment restrictions to provide the Portfolio with
additional flexibility to pursue its investment objective consistent with
applicable laws in effect from time to time. The Investment Company Act does not
require any of these investment restrictions to be classified as "fundamental."
Moreover, many of the prohibitions underlying these investment restrictions
reflect the requirements of the Investment Company Act and certain state
securities laws and, in the absence of such restrictions, would still be
applicable to the Portfolio. If the Shareholders of the Portfolio approve this
Proposal IV, the Board of Trustees thereafter may change any one or more of such
"non-fundamental" investment restrictions without the delay and expense to the
Portfolio of arranging for shareholder approval to the extent provided under
applicable law.
(1) The Portfolio currently is subject to the following fundamental
investment restriction concerning the purchase of securities of other investment
companies:
The Portfolio will not purchase securities of other investment
companies, except in connection with a merger, consolidation,
acquisition or reorganization, or by purchase in the open market of
securities of closed-end investment companies where no underwriter or
dealer's commission or profit, other than a customary broker's
commission, is involved and only if immediately thereafter not more
than 10% of the Portfolio's total assets, at market value, would be
invested in such securities, or by investing no more than 5% of the
Portfolio's total assets in other open-end investment companies or by
purchasing no more than 3% of any one open-end investment company's
securities.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
non-fundamental investment restriction:
The Portfolio may not invest in the securities of any other registered
open-end investment companies, except as they may be acquired as part
of a merger or consolidation or acquisition of assets or by purchases
in the open market involving only customary brokers' commissions.
If this Proposal IV is approved, the Portfolio would continue to be
subject to a substantially similar investment restriction, since the prohibition
underlying the current fundamental investment restriction of the Portfolio
reflects the requirements of the Investment Company Act and, in the absence of
such restriction, would still apply to the Portfolio. Under the proposed
non-fundamental investment restriction, however, in the event that the
Investment Company Act or applicable state law is amended, the Portfolio would
not be required to conduct a shareholders meeting, with attendant delay and
expense, in order to respond to any provisions of the amended law of potential
benefit to the Portfolio.
(2) The Portfolio currently is also subject to the following
fundamental investment restriction concerning investment in companies for the
purpose of exercising control or management:
The Portfolio will not invest in companies for the purpose of
exercising control or management.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
non-fundamental investment restriction:
The Portfolio may not invest for the purpose of exercising control or
management.
If this Proposal IV is approved, the Portfolio would continue to be
subject to the same investment restriction, since the proposed non-fundamental
investment restriction reflects the requirements of the current fundamental
investment restriction. Under the proposed non-fundamental investment
restriction, however, the Board of Trustees, if deemed appropriate in its
judgment, would have the flexibility to respond to any future changes in
applicable law and modify the investment restriction without the attendant delay
and expense of arranging for a shareholders meeting.
(3) The Portfolio currently is also subject to the following
fundamental investment restriction concerning the purchase or retention of
securities of certain issuers:
The Portfolio will not purchase or retain securities of any issuer
(other than the shares of the Portfolio) if to the Trust's knowledge,
the officers and Trustees of the Trust and the officers and directors
of the Investment Manager who individual own beneficially more than 1/2
of 1% of the outstanding securities of such issuer, together own
beneficially more than 5% of such outstanding securities.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
non-fundamental investment restriction:
The Portfolio may not invest in securities of any issuer, if, to the
knowledge of the Portfolio, officers and Trustees of the Trust and officers and
directors of the Investment Manager and the Sub-advisor who beneficially own
more than 0.5% of the securities of that issuer together own more than 5% of
such securities.
The prohibition underlying the current fundamental investment
restriction reflects the requirements of applicable state securities law and, in
the absence of such restriction, would still be applicable to the Portfolio. If
this Proposal IV is approved and the current fundamental investment restriction
is reclassified as a substantially similar non-fundamental investment
restriction, the Board of Trustees, if deemed appropriate in its judgment, would
have the flexibility to respond to any future changes in applicable law and
modify the investment restriction without the attendant delay and expense of
arranging for a shareholders meeting.
(4) The Portfolio currently is also subject to the following
fundamental investment restriction concerning the making of short sales and
maintaining a short position:
The Portfolio will not make short sales of securities or maintain a
short position.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
non-fundamental investment restriction:
The Portfolio may not make short sales of securities or maintain a
short position for the account of the Portfolio unless at all times
when a short position is open it owns an equal amount of such
securities or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of
the same issue as, and in equal amount to, the securities sold short.
The current fundamental investment restriction is unnecessarily
restrictive. The prohibition underlying the investment restriction reflects the
requirements of applicable state securities law and, in the absence of such
restriction, would still be applicable to the Portfolio. Under the proposed
non-fundamental investment restriction, the Portfolio would only be permitted to
enter into short sales in cases where it owns or has the right to acquire at no
added cost securities identical to those sold short. Short sales on any other
basis would not be permitted.
By reclassifying the investment restriction from fundamental to
non-fundamental, the Board of Trustees, if deemed appropriate in its judgment,
would be able to respond to any future changes in applicable law and modify the
investment restriction without the attendant delay and expense of arranging for
a shareholder meeting. Short sales in cases where securities identical to those
sold short are not owned or cannot be acquired at no cost may involve risk of
loss and current rules of the Securities and Exchange Commission ("SEC") would
require the Portfolio to hold qualifying debt instruments in a segregated
account to cover the amount of its exposure in connection with such
transactions.
(5) The Portfolio currently is also subject to the following
fundamental investment restriction concerning investment in mineral exploration
or development programs:
The Portfolio will not invest in oil, gas or other mineral exploration
or development programs, although the Portfolio may purchase securities
of issuers which engage in whole or in part in such activities.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
non-fundamental investment restriction:
The Portfolio may not buy or sell oil, gas, or other mineral leases,
rights or royalty contracts.
If this Proposal IV is approved, the proposed non-fundamental
investment restriction would more closely reflect the current investment
restriction applicable to the Putnam Fund regarding investments in oil and gas
and other mineral interests. If adopted, the Portfolio would continue to be
permitted to invest in securities of issuers which engage in whole or in part in
activities involving such interests.
By reclassifying the investment restriction from fundamental to
non-fundamental, the Board of Trustees would also be afforded flexibility to
consider future modification or elimination of the investment restriction if
deemed appropriate.
(6) The Portfolio currently is also subject to the following
fundamental investment restriction concerning investment in puts, calls and
straddles:
The Portfolio will not invest in puts, calls, straddles and any
combination thereof, except that the Portfolio may (i) write (sell)
exchange-traded covered call options on portfolio securities and on
securities indices and engage in closing purchase transactions and (ii)
invest up to 2% of its total assets in exchange-traded covered call and
put options on securities and securities indices.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
non-fundamental investment restriction:
The Portfolio may not engage in puts, calls, straddles or any
combination thereof, except that the Portfolio may buy and sell put and
call options (and any combination thereof) on securities, on financial
futures contracts, and on securities indices.
The current fundamental investment restriction permits the Portfolio to
effect only sales of exchange-traded covered call options on portfolio
securities and securities indices and to invest only up to 2% of the Portfolio's
total assets in exchange-traded covered call and put options on securities and
securities indices. Under the proposed investment restriction, the Portfolio
would be afforded additional investment flexibility to buy and sell both call
and put options (not necessarily covered nor exchanged-traded) on securities,
securities indices and also on financial futures contracts. Although the
proposed investment restriction would permit the Portfolio to invest in any
combination of put and call options without limitation as to amount, the
Portfolio does not intend, as a matter of non-fundamental investment policy, for
the aggregate value of the securities underlying the options to exceed 25% of
the Portfolio's assets.
By reclassifying the investment restriction from fundamental to
non-fundamental, the Board of Trustees would also be afforded flexibility to
consider future modification or elimination of the investment restriction if
deemed appropriate.
(7) The Portfolio currently is also subject to the following fundamental
investment restriction concerning the purchase of securities of issuers which
have a record of less than three years' continuous operation ("unseasoned"
issuers):
The Portfolio will not purchase securities of any issuer which
together with predecessors has a record of less than three years'
continuous operation, if as a result more than 5% of the market value
of the total net assets of the Portfolio would then be invested in such
securities.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
non-fundamental investment restriction:
The Portfolio may not invest in securities of an issuer which, together
with any predecessors, controlling persons, general partners and
guarantors, have a record of less than three years' continuous business
operation or relevant business experience, if, as a result, the
aggregate of such investments would exceed 5% of the value of the
Portfolio's net assets; provided, however, that this restriction shall
not apply to any obligations of the U.S. government or its
instrumentalities or agencies.
The prohibition underlying the current fundamental investment
restriction reflects the requirements of applicable state securities law and, in
the absence of such restriction, would still be applicable to the Portfolio. The
proposed non-fundamental investment restriction more closely reflects the
applicable state law requirement.
Under the proposed non-fundamental investment restriction, the Portfolio
would continue to be permitted to invest up to 5% of its assets in "unseasoned"
issuers. In determining investments to which the limitation does not apply, the
Portfolio would be able to take into consideration not only the period of
business operations of the issuer itself and its predecessors, but the
operations and relevant business experience of controlling persons, general
partners and guarantors. As a result, the Portfolio will have additional
flexibility to invest in companies that have been in operation for less than
three years, including start-up companies and other companies with limited
operating histories. Many of these companies would have relatively small market
capitalizations (under $1 billion). Although investments in such companies may
provide opportunities for capital growth, such investments involve greater risk.
These companies frequently have limited product lines, markets and financial
resources. Securities issued by such companies typically trade less frequently
and in limited volume and may be traded on regional exchanges or
over-the-counter. The value of such securities may fluctuate more than those of
securities issued by larger "seasoned" companies.
By reclassifying the investment restriction from fundamental to
non-fundamental, the Board of Trustees would also be afforded flexibility to
consider future modification or elimination of the investment restriction if
deemed appropriate.
(8) The Portfolio currently is also subject to the following
fundamental investment restriction concerning pledging, mortgaging or
hypothecating the Portfolio's assets:
The Portfolio will not pledge, mortgage or hypothecate the Portfolio's
assets to an extent greater than 10% of the market of the Portfolio's
total assets to secure borrowing made pursuant to [the Portfolio's
fundamental restriction governing borrowing.]
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
non-fundamental investment restriction:
The Portfolio may not pledge, hypothecate, mortgage or otherwise
encumber its assets in excess of 33 1/3% of its total assets (taken at
cost) in connection with permitted borrowings.
The current fundamental investment restriction on the Portfolio's
ability to pledge assets is unnecessarily restrictive. The prohibition
underlying the investment restriction reflects the requirements of only one
State's securities law and, in the absence of such restriction, would still be
applicable to the Portfolio. The proposed non-fundamental investment restriction
complies with that State's securities law requirements.
If this Proposal IV is approved, the proposed non-fundamental
investment restriction would increase the Portfolio's ability to pledge assets
up to one-third of the total assets of the Portfolio. This provides, among other
things, additional flexibility in meeting collateral requirements for permitted
borrowings and, consequently, greater assurance that the Portfolio's ability to
make permitted borrowings when necessary or desirable will not be constrained
unnecessarily. The proposed investment restriction applies only to pledges of
assets in connection with borrowings. Other arrangements, such as assets pledged
in connection with forward commitments, would not be limited, although they
arguably could constitute encumbrances. To the extent that the assets of the
Portfolio are pledged, the Portfolio may have less flexibility in liquidating
its assets. This may entail greater market risk and, if a large portion of
assets was involved, impairment of the Portfolio's ability to meet redemption
requests or other obligations without delay.
By reclassifying the investment restriction from fundamental to
non-fundamental, the Board of Trustees would also be afforded flexibility to
consider future modification or elimination of the investment restriction if
deemed appropriate.
(9) The Portfolio currently is also subject to the following
fundamental investment restriction concerning investment in illiquid securities:
The Portfolio may purchase illiquid securities, including repurchase
agreements providing for settlement more than seven days after notice
and restricted securities deemed to be illiquid, but such securities
may not constitute more than 10% of the Portfolio's securities.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
non-fundamental investment restriction:
The Portfolio may not invest in (a) securities which at the time of
such investment are not readily marketable, (b) securities restricted
as to resale, excluding securities determined by the Trustees of the
Trust (or the person designated by the Trustees of the Trust to make
such determination) to be readily marketable, and (c) repurchase
agreements maturing in more than seven days, if, as a result, more than
15% of the Portfolio's net assets (taken at current value) would be
invested in securities described in (a), (b) and (c) above.
The present fundamental investment restriction of the Portfolio no
longer reflects current regulatory requirements and is unnecessarily
restrictive. The proposed non-fundamental investment restriction reflects the
current requirements of the SEC with regard to investments in illiquid
securities. If the proposed change is approved, the Portfolio would be permitted
to invest a greater percentage of its assets in securities for which market
quotations are not readily available. Moreover, the proposed restriction makes
clear that investment in securities restricted as to resale determined by the
Trustees or their designees to be readily marketable are excluded from the
restriction's percentage limitation. Investments in illiquid securities may
impair the Portfolio's ability to determine the fair market value of such
investments for purposes of calculating the Portfolio's net asset value.
By reclassifying the investment restriction from fundamental to
non-fundamental, the Board of Trustees would also be afforded flexibility to
consider future modification or elimination of the investment restriction if
deemed appropriate.
(10) The Portfolio currently is also subject to the following two
fundamental investment restrictions:
(a) The Portfolio will not buy any securities or other property on
margin (except for such short-term credits as are necessary for the
clearance of transactions).
(b) The Portfolio will not make investment in real estate or
commodities or commodities contracts, although (i) the Portfolio may
purchase securities of issuers which deal in real estate or commodities
and may purchase securities which are secured by interests in real
estate, specifically, securities issued by real estate investment
trusts and (ii) the Portfolio may engage in transactions in financial
futures contracts and related options, provided that the sum of the
initial margin deposits on such Portfolio's existing futures positions
and the premiums paid for related options would not exceed in the
aggregate 2% of the Portfolio's total assets.
The Manager has proposed to the Board of Trustees that the first
fundamental investment restriction noted above concerning the purchase of
securities or other property on margin, and a portion of the second fundamental
investment restriction noted above concerning the Portfolio's ability to engage
in transactions in financial futures contracts and related options, be replaced
by the following proposed single non-fundamental investment restriction:
The Portfolio may not purchase securities on margin, except such
short-term credits as may be necessary for the clearance of purchases
and sales of securities, and except that it may make margin payments in
connection with financial futures contracts or options.
The prohibition underlying the current fundamental investment restriction
reflects the requirements of the Investment Company Act and, in the absence of
such restriction, would still be applicable to the Portfolio. If this Proposal
IV is approved and the current fundamental investment restriction is
reclassified as a substantially similar non-fundamental investment restriction,
the Board of Trustees, if deemed appropriate in its judgment, would have the
flexibility to respond to any future changes in applicable law and modify the
investment restriction without the attendant delay and expense of arranging for
a shareholders meeting.
Changes in Certain Fundamental Investment Restrictions
In addition to the proposed changes discussed above, the Manager has
proposed to the Board of Trustees that certain other of the Portfolio's
fundamental investment restrictions discussed below be changed in the following
manner:
(1) The Portfolio currently is subject to the following fundamental
investment restriction concerning investment in a single industry:
The Portfolio will not concentrate the portfolio investments in any
one industry. To comply with this restriction, no security may be
purchased by the Portfolio if such purchase would cause the value of
the Portfolio's aggregate investment in any one industry to exceed 25%
of the market value of the Portfolio's total assets.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
fundamental investment restriction:
The Portfolio will not purchase securities (other than securities of
the U.S. government, its agencies or instrumentalities) if, as a result
of such purchase, more than 25% of the Portfolio's total assets would
be invested in any one industry.
The proposed fundamental investment restriction incorporates clarifying
changes. Among other things, the proposed investment restriction makes clear
that the Portfolio may invest in securities of the U.S. government or its
agencies or instrumentalities without regard to the 25% limitation. While the
current restriction, in the Manager's view, does not limit such investments, the
proposed change would avoid any future ambiguity.
(2) The Portfolio currently is also subject to the following
fundamental investment restriction concerning the borrowing of money:
The Portfolio will not borrow money, except that the Portfolio may (i)
borrow money for the Portfolio for temporary administrative purposes
provided that any such borrowing does not exceed 10% of the market
value of the Portfolio's total assets and (ii) borrow money for the
Portfolio for investment purposes, provided that such borrowing is (a)
authorized by the Board of Trustees, (b) limited to 5% of the market
value of the Portfolio's total assets and (c) subject to an agreement
by the lender that any recourse is limited to the assets of the
Portfolio.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following proposed
fundamental investment restriction:
The Portfolio will not borrow money in excess of 10% of the value
(taken at the lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made, and
then only from banks as a temporary measure to facilitate the meeting
of redemption requests (not for leverage) which might otherwise require
the untimely disposition of portfolio investments or for extraordinary
or emergency purposes. Such borrowings will be repaid before any
additional investments are purchased.
The proposed fundamental investment restriction clarifies the
circumstances under which the Portfolio will borrow money. Under the proposed
investment restriction, the Portfolio would be permitted to borrow up to 10% of
its assets to facilitate efforts to meet redemptions and for other emergency
purposes. The Portfolio would not be permitted to borrow for investment purposes
as currently allowed under the present investment restriction. The proposed
borrowing restriction would not apply to permissible margin transactions,
including those involving financial futures contracts or options. The proposed
investment restriction would eliminate any ambiguity regarding the Portfolio's
borrowing activities.
(3) The Portfolio currently is also subject to the following
fundamental investment restriction concerning investment in a single issuer:
The Portfolio will not purchase the securities of any issuer, other
than obligations issued or guaranteed as to principal and interest by
the United States government or its agencies or instrumentalities, if
immediately thereafter (i) more than 5% of the market value of the
Portfolio's total assets would be invested in the securities of such
issuer or (ii) more than 10% of the outstanding securities of any class
of such issuer would be held by the Portfolio or by all of the
portfolios of the Trust in the aggregate.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following two proposed
fundamental investment restrictions:
(a) The Portfolio will not, with respect to 75% of its total assets,
invest in the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Portfolio (taken at
current value) would be invested in the securities of such issuer;
provided that this limitation does not apply to obligations issued or
guaranteed as to interest or principal by the U.S.
government or its agencies or instrumentalities.
(b) The Portfolio will not, with respect to 75% of its total assets,
acquire more than 10% of the outstanding voting securities of any issuer.
The proposed fundamental investment restrictions would allow the
Portfolio maximum flexibility to conduct its investment program as a
"diversified" investment company under the Investment Company Act. The
Investment Company Act prohibits a diversified fund, such as the Portfolio, from
investing, with respect to 75% of its total assets, in securities of an issuer
if as a result more than 5% of the Portfolio's total assets would be invested in
such issuer or the Portfolio would own more than 10% of the outstanding voting
securities of such issuer. The proposed investment restrictions reflect the more
flexible limitations of the Investment Company Act. The current fundamental
investment restriction could impair the Portfolio's ability to pursue its
investment objective by unnecessarily preventing it from investing in desirable
opportunities.
Under the first proposed investment restriction noted above, the
Portfolio would be able to invest up to 25% of its total assets in the
securities of a single issuer, thus enabling the Portfolio to invest more of its
assets in securities of those issuers the Sub-adviser believes offer the
potential for capital growth, current income or both. Increased investments in
one or more issuers, however, may cause the value of portfolio shares to
fluctuate more widely than would otherwise occur if the Portfolio invested in a
greater number of issuers.
The second proposed investment restriction noted above would enhance
the Portfolio's investment flexibility by limiting the current 10% restriction
to voting securities and 75% of the Portfolio's total assets. Under the proposed
investment restriction, the Portfolio will be able to purchase more than 10% of
the outstanding voting securities of an issuer with respect to 25% of its total
assets. Moreover, only those securities held by the Portfolio and not securities
held by all other Portfolios of the Trust, would be applied to the 10%
limitation of the proposed investment restriction. In addition to the potential
benefits which the proposed restriction would afford the Portfolio, the
Portfolio may be subject to greater risk of an adverse change in the financial
condition or market perception of an issuer of its portfolio securities or
obligations and to greater risk of single adverse economic or market conditions
affecting an issuer of its portfolio securities.
(4) The Portfolio currently is also subject to the following
fundamental investment restriction concerning investment in real estate or
commodities or commodities contracts:
The Portfolio will not make investment in real estate or commodities
or commodities contracts, although (i) the Portfolio may purchase
securities of issuers which deal in real estate or commodities and may
purchase securities which are secured by interests in real estate,
specifically, securities issued by real estate investment trusts and
(ii) the Portfolio may engage in transactions in financial futures
contracts and related options, provided that the sum of the initial
margin deposits on such Portfolio's existing futures positions and the
premiums paid for related options would not exceed in the aggregate 2%
of the Portfolio's total assets.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restriction be replaced by the following two proposed
fundamental investment restrictions:
(a) The Portfolio will not purchase or sell real estate, although it
may purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate, and
securities which represent interests in real estate, and it may acquire
and dispose of real estate or interests in real estate acquired through
the exercise of its rights as a holder of debt obligations secured by
real estate or interests therein.
(b) The Portfolio will not invest in commodities or commodity contracts
except that it may purchase or sell financial futures contracts and
options thereon.
The first proposed fundamental investment restriction noted above would
clarify the real estate related investments that are permissible for the
Portfolio. Specifically, the proposed investment restriction would make clear
that the Portfolio also may invest in securities which represent interests in
real estate and that the Portfolio may hold and dispose of interests in real
estate acquired through investments in debt obligations secured by real estate
or interests therein (transactions which are permissible under the current
investment restriction).
The second proposed fundamental investment restriction noted above
would provide that while the Portfolio would not invest in commodities or
commodities contracts (prohibited under the current investment restriction), the
Portfolio may invest in financial futures contracts and options without the
current limitation. The current investment restriction provides that the sum of
the initial margin deposits on the Portfolio's financial futures positions and
the premiums paid for related options may not exceed in the aggregate 2% of the
Portfolio's total assets. The elimination of the limitation may have the result
of increasing the Portfolio's exposure in connection with financial futures and
options transactions.
(5) The Portfolio currently is also subject to the following two
fundamental investment restrictions concerning, respectively, cash and
securities loans:
(a) The Portfolio will not make cash loans, except that the Portfolio
may (i) purchase bonds, notes, debentures or similar obligations which
are customarily purchased by institutional investors whether publicly
distributed or not and (ii) enter into repurchase agreements, provided
that, no more than 10% of the market value of the Portfolio's net
assets may be subject to repurchase agreements maturing in more than
seven days.
(b) The Portfolio will not make securities loans, except that the
Portfolio may make loans of its securities provided that the market
value of the securities subject to any such loans does not exceed 25%
of the market value of the Portfolio's total assets.
The Manager has proposed to the Board of Trustees that the above
fundamental investment restrictions be replaced by the following single proposed
fundamental investment restriction:
The Portfolio will not make loans, except by purchase of debt
obligations in which the Portfolio may invest consistent with its
investment policies, by entering into repurchase agreements, or by
lending its portfolio securities.
The current fundamental investment restrictions concerning cash and
securities loans are overly restrictive. Under the proposed single fundamental
investment restriction, the Portfolio, consistent with its investment objective
and policies, would be permitted to enter into repurchase agreements without
limitation, provided, however, that no more than 15% of the Portfolio's net
assets, as discussed earlier, may be subject to repurchase agreements maturing
in more than seven days. Moreover, the proposed investment restriction would
allow the Portfolio to enter into securities loans without the current
limitation of 25% of the market value of the Portfolio's total assets.
Repurchase agreements and securities loans must be fully collateralized but may
involve some risk to the Portfolio if the other party defaults in its
obligations. If the other party in such transactions should become involved in
bankruptcy, insolvency or similar proceedings, it is possible that the Portfolio
may be treated as an unsecured creditor and be required to return the underlying
collateral to the other party's estate.
Elimination of Certain Fundamental Investment Restrictions
As a final matter, the Manager has also proposed to the Board of Trustees
that the following fundamental investment restriction of the Portfolio be
eliminated:
The Portfolio will not participate in a joint or joint and several trading
account in securities.
The prohibition underlying the above fundamental investment restriction
reflects current requirements of the Investment Company Act. Under the
Investment Company Act, the Portfolio generally is prohibited from participating
in a joint or joint and several trading account in securities, subject to an
exception for certain underwriting arrangements.
Notwithstanding the elimination of the above fundamental investment
restrictions, the Portfolio would continue to be subject to the provisions of
the Investment Company Act. Elimination of the above fundamental investment
restriction would afford flexibility to the Board of Trustees to respond to
changes in the Investment Company Act without the attendant delay and expense of
arranging for a shareholders meeting.
This Proposal IV is made contingent upon shareholder approval of Proposals
I and II. If either of Proposals I or II is not approved, the current
fundamental investment restrictions will continue in effect and will apply to
the Portfolio.
THE TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES,
RECOMMEND THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL IV.
ANY UNMARKED PROXIES WILL BE SO VOTED.
Shareholder Proposals
The Trust is not required to hold and will not ordinarily hold annual
shareholders' meetings. The Board of Trustees may call special meetings of the
shareholders for action by shareholder vote as required by the Investment
Company Act or the Trust's Declaration of Trust.
Pursuant to rules adopted by the SEC under the Exchange Act, a
shareholder may include in proxy statements relating to annual and other
meetings of the shareholders of the Trust certain proposals for shareholder
action which he or she intends to introduce at such special meetings; provided,
among other things, that such proposal must be received by the Trust a
reasonable time before a solicitation of proxies is made for such meeting.
Timely submission of a proposal does not necessarily mean that the proposal will
be included.
By order of the Board of Trustees
Mary Ellen O'Leary
Corporate Secretary
American Skandia Trust
<PAGE>
LIST OF EXHIBITS
EXHIBIT A-1 Form of Present Investment Management Agreement
EXHIBIT A-2 Form of New Investment Management Agreement
EXHIBIT A-3 Form of Present Sub-Advisory Agreement
EXHIBIT A-4 Form of New Sub-Advisory Agreement
<PAGE>
EXHIBIT A-1
INVESTMENT MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 1st day of May, 1993 by and between
American Skandia Trust, a Massachusetts business trust (the "Fund"), and
American Skandia Life Investment Management, Inc., a Connecticut corporation
(the "Investment Manager");
W I T N E S E T H
WHEREAS, the Fund is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the rules and regulations
promulgated thereunder; and
WHEREAS, the Investment Manager is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Investment
Advisers Act"); and
WHEREAS, the Fund and the Investment Manager desire to enter into
an agreement to provide for the management of the assets of the AST Balanced
Portfolio (the "Portfolio") on the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Management. The Investment Manager shall act as investment manager for
the Portfolio and shall, in such capacity, manage the investment operations of
the Portfolio, including the purchase, retention, disposition and lending of
securities, subject at all times to the policies and control of the Fund's Board
of Trustees. The Investment Manager shall give the Portfolio the benefit of its
best judgments, efforts and facilities in rendering its services as investment
manager.
2. Duties of Investment Manager. In carrying out its obligation under
paragraph 1 hereof, the Investment Manager shall:
(a) supervise and manage all aspects of the Portfolio's operations:
(b) provide the Portfolio or obtain for it, and thereafter supervise, such
executive, administrative, clerical and shareholder servicing services as are
deemed advisable by the Fund's Board of Trustees;
(c) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy material, tax returns, reports to the Portfolio's
shareholders, reports to and filings with the Securities and Exchange
Commission, state Blue Sky authorities and other applicable regulatory
authorities;
(d) provide to the Board of Trustees of the Fund on a regular basis,
written financial reports and analyses on the Portfolio's securities
transactions and the operations of comparable investment companies;
(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Portfolio, and whether
concerning the individual issuers whose securities are included in the Portfolio
or the activities in which they engage, or with respect to securities which the
Investment Manager considers desirable for inclusion in the Portfolio;
(f) determine what issuers and securities shall be represented in the
Portfolio's portfolio and regularly report them in writing to the Board of
Trustees;
(g) formulate and implement continuing programs for the purchases and sales
of the securities of such issuers and regularly report in writing thereon to the
Board of Trustees; and
(h) take, on behalf of the Portfolio, all actions which appear to the Fund
necessary to carry into effect such purchase and sale programs and supervisory
functions as aforesaid, including the placing of orders for the purchase and
sale of portfolio securities.
3. Broker-Dealer Relationships. The Investment Manager is responsible for
decisions to buy and sell securities for the Portfolio, broker-dealer selection,
and negotiation of its brokerage commission rates. The Investment Manager shall
determine the securities to be purchased or sold by the Portfolio pursuant to
its determinations with or through such persons, brokers or dealers, in
conformity with the policy with respect to brokerage as set forth in the Fund's
Prospectus and Statement of Additional Information, or as the Board of Trustees
may determine from time to time. Generally, the Investment Manager's primary
consideration in placing Portfolio securities transactions with broker-dealers
for execution is to obtain and maintain the availability of, execution at the
best net price and in the most effective manner possible. The Investment Manager
may consider sale of the shares of the Portfolio, subject to the requirements of
best net price and most favorable execution.
Consistent with this policy, the Investment Manager will take the following
into consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Portfolio on a continuing
basis. Accordingly, the cost of the brokerage commissions to the Portfolio may
be greater than that available from other brokers if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies and procedures as the Board of Trustees of the
Fund may determine, the Investment Manager shall not be deemed to have acted
unlawfully or to have breached any duty solely by reason of its having caused
the Portfolio to pay a broker or dealer that provides research services to the
Investment Manager for the Portfolio's use an amount of commission for effecting
a portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the
Investment Manager, determines in good faith that such amount of commission was
reasonable in relation to the value of the research services provided by such
broker, viewed in terms of either that particular transaction or the Investment
Manager's ongoing responsibilities with respect to the Portfolio. The Investment
Manager is further authorized to allocate the orders placed by it on behalf of
the Portfolio to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Investment Manager.
Such allocation shall be in such amounts and proportions as the Investment
Manager shall determine and the Investment Manager will report on said
allocations to the Board of Trustees of the Fund regularly as requested by the
Board and, in any event, at least once each calendar year if no specific request
is made, indicating the brokers to whom such allocations have been made and the
basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Investment Manager pursuant to this Agreement, as well as any other activities
undertaken by the Investment Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
Fund.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Investment Manager shall at all times conform to:
(a) all applicable provisions of the Investment Company Act and Investment
Advisers Act and any rules and regulations adopted thereunder, as amended; and
(b) the provisions of the Registration Statements of the Fund under the
Securities Act of 1933 and the Investment Company Act, including the investment
objectives, policies and restrictions, and permissible investments specified
therein; and
(c) the provisions of the Declaration of Trust of the Fund, as amended; and
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and the Investment Manager as follows:
(a) The Investment Manager shall furnish, at its expense and without cost
to the Fund, the services of a President, Secretary, and one or more Vice
Presidents of the Fund, to the extent at such additional officers may be
required by the Fund for the proper conduct of its affairs.
(b) The Investment Manager shall further maintain, at its expense and
without cost to the Fund, a trading function in order to carry out its
obligations under subparagraphs (f), (g) and (h) of paragraph 2 hereof to place
orders for the purchase and sale of portfolio securities for the Portfolio.
(c) Nothing in subparagraph (a) hereof shall be construed to require the
Investment Manager to bear:
(i) any of the costs (including applicable office space, facilities and
equipment) of the services of a principal financial officer of the Fund whose
normal duties consist of maintaining the financial accounts and books and
records of the Fund; including the reviewing of calculations of net asset value
and preparing tax returns; or
(ii) any of the costs (including applicable office space, facilities and
equipment) of the services of any of the personnel operating under the direction
of such principal financial officer. Notwithstanding the obligation of the Fund
to bear the expense of the functions referred to in clauses (i) and (ii) of this
subparagraph (c), the Investment Manager may pay the salaries, including any
applicable employment or payroll taxes and other salary costs, of the principal
financial officer and other personnel carrying out such functions and the Fund
shall reimburse the Investment Manager therefor upon proper accounting.
(d) All of the ordinary business expenses incurred in the operations of the
Fund and the offering of its shares shall be borne by the Fund unless
specifically provided otherwise in this paragraph 6. These expenses include but
are not limited to brokerage commissions, legal, auditing, taxes or governmental
fees, the cost of preparing share certificates, custodian, depository, transfer
and shareholder service agent costs, expenses of issue, sale, redemption and
repurchase of shares, expenses of registering and qualifying shares for sale,
insurance premiums on property or personnel (including officers and trustees if
available) of the Fund which inure to its benefit, expenses relating to trustee
and shareholder meetings, the cost of preparing and distributing reports and
notices to shareholders, the fees and other expenses incurred by the Fund in
connection with membership in investment company organizations and the cost of
printing copies of prospectuses and statements of additional information
distributed to shareholders.
7. Delegation of Responsibilities. Upon the request of the Fund's Board of
Trustees, the Investment Manager may perform services on behalf of the Fund
which are not required by this Agreement. Such services will be performed on
behalf of the Fund and the Investment Manager's cost in rendering such services
may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by the Investment Manager of any
Fund expense that the Investment Manager is not required to pay or assume under
this Agreement shall not relieve the Investment Manager of any of its
obligations to the Fund nor obligate the Investment Manager to pay or assume any
similar Fund expense on any subsequent occasion.
8. Engagement of Sub-advisors and Broker-Dealers. The Investment Manager
may engage, subject to approval of the Fund's Board of Trustees, and where
required, the shareholders of the Portfolio, a sub-advisor to provide advisory
services in relation to the Portfolio. Under such sub-advisory agreement, the
Investment Manager may delegate to the sub-advisor the duties outlined in
subparagraphs (e), (f), (g) and (h) of paragraph 2 hereof.
9. Compensation. The Fund shall pay the Investment Manager in full
compensation for services rendered hereunder an annual investment advisory fee,
payable monthly, of .75% of the first $75 million of the average daily net
assets of the Portfolio; plus .65% of the Portfolio's average daily net assets
in excess of $75 million.
10. Expense Limitation. If, for any fiscal year of the Fund, the total of
all ordinary business expenses of the Portfolio, including all investment
advisory and administration fees but excluding brokerage commissions and fees,
taxes, interest and extraordinary expenses such as litigation, would exceed
1.25% of the average daily net assets of the Portfolio, the Investment Manager
agrees to pay the Fund such excess expenses, and if required to do so pursuant
to such applicable statute or regulatory authority, to pay to the Fund such
excess expenses no later than the last day of the first month of the next
succeeding fiscal year of the Fund. For the purposes of this paragraph, the term
"fiscal year" shall exclude the portion of the Fund's current fiscal year which
shall have elapsed prior to the date hereof and shall include the portion of the
then current fiscal year which shall have elapsed at the date of termination of
this Agreement.
11. Non-Exclusivity. The services of the Investment Manager to the
Portfolio are not to be deemed to be exclusive, and the Investment Manager shall
be free to render investment advisory and corporate administrative or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers or directors of the
Investment Manager may serve as officers or trustees of the Fund, and that
officers or trustees of the Fund may serve as officers or directors of the
Investment Manager to the extent permitted by law; and that the officers and
directors of the Investment Manager are not prohibited from engaging in any
other business activity or from rendering services to any other person, or from
serving as partners, officers or directors of any other firm or corporation,
including other investment companies.
12. Term and Approval. This Agreement shall become effective on May 1, 1993
and shall continue in force and effect from year to year, provided that such
continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Trustees or (ii) by the vote of a majority
of the Portfolio's outstanding voting securities (as defined in Section 2(a)(42)
of the Investment Company Act); and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as Fund trustees), by votes cast in person at a meeting specifically
called for such purpose.
13. Termination. This Agreement may be terminated at any time without the
payment of any penalty or prejudice to the completion of any transactions
already initiated on behalf of the Portfolio, by vote of the Fund's Board of
Trustees or by vote of a majority of the Portfolio's outstanding voting
securities, or by the Investment Manager, on sixty (60) days' written notice to
the other party. The notice provided for herein may be waived by either party.
This Agreement automatically terminates in the event of its assignment, the term
"assignment" for the purpose having the meaning defined in Section 2(a)(4) of
the Investment Company Act.
14. Liability of Investment Manager and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Investment Manager or any of
its officers, trustees or employees, it shall not be subject to liability to the
Fund or to any shareholder of the Portfolio for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
15. Liability of Trustees and Shareholders. A copy of the Agreement and
Declaration of Trust of the Fund is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the trustees of the Fund as trustees and not
individually and that the obligations of this instrument are not binding upon
any of the trustees or shareholders individually but are binding only upon the
assets and property of the Fund. Federal and state laws impose responsibilities
under certain circumstances on persons who act in good faith, and therefore,
nothing herein shall in any way constitute a waiver of limitation of any rights
which the Fund or Investment Manager may have under applicable law.
16. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice, it is agreed that the address of the Fund shall be 126 High
Street, Boston, Massachusetts, 02110, and the address of the Investment Manager
shall be One Corporate Drive, Shelton, Connecticut 06484.
17. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Investment Company Act, shall be resolved by
reference to such term or provision of the Act and to interpretations thereof,
if any, by the United States Courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the Securities
and Exchange Commission issued pursuant to said Act. In addition, where the
effect of a requirement of the Investment Company Act, reflected in any
provision of this Agreement is released by rules, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
AMERICAN SKANDIA TRUST
Attest: /s/ Joan Chanda By: /s/ Gordon C. Boronow
AMERICAN SKANDIA LIFE
INVESTMENT MANAGEMENT, INC.
Attest: /s/ Patricia Randol By: /s/ Thomas M. Mazzaferro
<PAGE>
EXHIBIT A-2
INVESTMENT MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 15th day of October, 1996 by and between
American Skandia Trust, a Massachusetts business trust (the "Fund"), and
American Skandia Investment Services, Incorporated, a Connecticut corporation
(the "Investment Manager");
W I T N E S E T H
WHEREAS, the Fund is registered as an open-end, diversified
management investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the rules and regulations
promulgated thereunder; and
WHEREAS, the Investment Manager is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended (the "Investment
Advisers Act"); and
WHEREAS, the Fund and the Investment Manager desire to enter into
an agreement to provide for the management of the assets of the AST Putnam
Balanced Portfolio (the "Portfolio") on the terms and conditions hereinafter set
forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, the receipt whereof is
hereby acknowledged, the parties hereto agree as follows:
1. Management. The Investment Manager shall act as investment manager for
the Portfolio and shall, in such capacity, manage the investment operations of
the Portfolio, including the purchase, retention, disposition and lending of
securities, subject at all times to the policies and control of the Fund's Board
of Trustees. The Investment Manager shall give the Portfolio the benefit of its
best judgments, efforts and facilities in rendering its services as investment
manager.
2. Duties of Investment Manager. In carrying out its obligation under
paragraph 1 hereof, the Investment Manager shall:
(a) supervise and manage all aspects of the Portfolio's operations:
(b) provide the Portfolio or obtain for it, and thereafter supervise, such
executive, administrative, clerical and shareholder servicing services as are
deemed advisable by the Fund's Board of Trustees;
(c) arrange, but not pay for, the periodic updating of prospectuses and
supplements thereto, proxy material, tax returns, reports to the Portfolio's
shareholders, reports to and filings with the Securities and Exchange
Commission, state Blue Sky authorities and other applicable regulatory
authorities;
(d) provide to the Board of Trustees of the Fund on a regular basis,
written financial reports and analyses on the Portfolio's securities
transactions and the operations of comparable investment companies;
(e) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or the Portfolio, and whether
concerning the individual issuers whose securities are included in the Portfolio
or the activities in which they engage, or with respect to securities which the
Investment Manager considers desirable for inclusion in the Portfolio;
(f) determine what issuers and securities shall be represented in the
Portfolio's portfolio and regularly report them in writing to the Board of
Trustees;
(g) formulate and implement continuing programs for the purchases and sales
of the securities of such issuers and regularly report in writing thereon to the
Board of Trustees; and
(h) take, on behalf of the Portfolio, all actions which appear to the Fund
necessary to carry into effect such purchase and sale programs and supervisory
functions as aforesaid, including the placing of orders for the purchase and
sale of portfolio securities.
3. Broker-Dealer Relationships. The Investment Manager is responsible for
decisions to buy and sell securities for the Portfolio, broker-dealer selection,
and negotiation of its brokerage commission rates. The Investment Manager shall
determine the securities to be purchased or sold by the Portfolio pursuant to
its determinations with or through such persons, brokers or dealers, in
conformity with the policy with respect to brokerage as set forth in the Fund's
Prospectus and Statement of Additional Information, or as the Board of Trustees
may determine from time to time. Generally, the Investment Manager's primary
consideration in placing Portfolio securities transactions with broker-dealers
for execution is to obtain and maintain the availability of, execution at the
best net price and in the most effective manner possible. The Investment Manager
may consider sale of the shares of the Portfolio, subject to the requirements of
best net price and most favorable execution.
Consistent with this policy, the Investment Manager will take the following
into consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Portfolio on a continuing
basis. Accordingly, the cost of the brokerage commissions to the Portfolio may
be greater than that available from other brokers if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies and procedures as the Board of Trustees of the
Fund may determine, the Investment Manager shall not be deemed to have acted
unlawfully or to have breached any duty solely by reason of its having caused
the Portfolio to pay a broker or dealer that provides research services to the
Investment Manager for the Portfolio's use an amount of commission for effecting
a portfolio investment transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the
Investment Manager, determines in good faith that such amount of commission was
reasonable in relation to the value of the research services provided by such
broker, viewed in terms of either that particular transaction or the Investment
Manager's ongoing responsibilities with respect to the Portfolio. The Investment
Manager is further authorized to allocate the orders placed by it on behalf of
the Portfolio to such brokers and dealers who also provide research or
statistical material, or other services to the Fund or the Investment Manager.
Such allocation shall be in such amounts and proportions as the Investment
Manager shall determine and the Investment Manager will report on said
allocations to the Board of Trustees of the Fund regularly as requested by the
Board and, in any event, at least once each calendar year if no specific request
is made, indicating the brokers to whom such allocations have been made and the
basis therefor.
4. Control by Board of Trustees. Any investment program undertaken by the
Investment Manager pursuant to this Agreement, as well as any other activities
undertaken by the Investment Manager on behalf of the Fund pursuant thereto,
shall at all times be subject to any directives of the Board of Trustees of the
Fund.
5. Compliance with Applicable Requirements. In carrying out its obligations
under this Agreement, the Investment Manager shall at all times conform to:
(a) all applicable provisions of the Investment Company Act and Investment
Advisers Act and any rules and regulations adopted thereunder, as amended; and
(b) the provisions of the Registration Statements of the Fund under the
Securities Act of 1933 and the Investment Company Act, including the investment
objectives, policies and restrictions, and permissible investments specified
therein; and
(c) the provisions of the Declaration of Trust of the Fund, as amended; and
(d) the provisions of the By-laws of the Fund, as amended; and
(e) any other applicable provisions of state and federal law.
6. Expenses. The expenses connected with the Fund shall be allocable
between the Fund and the Investment Manager as follows:
(a) The Investment Manager shall furnish, at its expense and without cost
to the Fund, the services of a President, Secretary, and one or more Vice
Presidents of the Fund, to the extent that such additional officers may be
required by the Fund for the proper conduct of its affairs.
(b) The Investment Manager shall further maintain, at its expense and
without cost to the Fund, a trading function in order to carry out its
obligations under subparagraphs (f), (g) and (h) of paragraph 2 hereof to place
orders for the purchase and sale of portfolio securities for the Portfolio.
(c) Nothing in subparagraph (a) hereof shall be construed to require the
Investment Manager to bear:
(i) any of the costs (including applicable office space, facilities and
equipment) of the services of a principal financial officer of the Fund whose
normal duties consist of maintaining the financial accounts and books and
records of the Fund; including the reviewing of calculations of net asset value
and preparing tax returns; or
(ii) any of the costs (including applicable office space, facilities and
equipment) of the services of any of the personnel operating under the direction
of such principal financial officer. Notwithstanding the obligation of the Fund
to bear the expense of the functions referred to in clauses (i) and (ii) of this
subparagraph (c), the Investment Manager may pay the salaries, including any
applicable employment or payroll taxes and other salary costs, of the principal
financial officer and other personnel carrying out such functions and the Fund
shall reimburse the Investment Manager therefor upon proper accounting.
(d) All of the ordinary business expenses incurred in the operations of the
Fund and the offering of its shares shall be borne by the Fund unless
specifically provided otherwise in this paragraph 6. These expenses include but
are not limited to brokerage commissions, legal, auditing, taxes or governmental
fees, the cost of preparing share certificates, custodian, depository, transfer
and shareholder service agent costs, expenses of issue, sale, redemption and
repurchase of shares, expenses of registering and qualifying shares for sale,
insurance premiums on property or personnel (including officers and trustees if
available) of the Fund which inure to its benefit, expenses relating to trustee
and shareholder meetings, the cost of preparing and distributing reports and
notices to shareholders, the fees and other expenses incurred by the Fund in
connection with membership in investment company organizations and the cost of
printing copies of prospectuses and statements of additional information
distributed to shareholders.
7. Delegation of Responsibilities. Upon the request of the Fund's Board of
Trustees, the Investment Manager may perform services on behalf of the Fund
which are not required by this Agreement. Such services will be performed on
behalf of the Fund and the Investment Manager's cost in rendering such services
may be billed monthly to the Fund, subject to examination by the Fund's
independent accountants. Payment or assumption by the Investment Manager of any
Fund expense that the Investment Manager is not required to pay or assume under
this Agreement shall not relieve the Investment Manager of any of its
obligations to the Fund nor obligate the Investment Manager to pay or assume any
similar Fund expense on any subsequent occasion.
8. Engagement of Sub-advisors and Broker-Dealers. The Investment Manager
may engage, subject to approval of the Fund's Board of Trustees, and where
required, the shareholders of the Portfolio, a sub-advisor to provide advisory
services in relation to the Portfolio. Under such sub-advisory agreement, the
Investment Manager may delegate to the sub-advisor the duties outlined in
subparagraphs (e), (f), (g) and (h) of paragraph 2 hereof.
9. Compensation. The Fund shall pay the Investment Manager in full
compensation for services rendered hereunder an annual investment advisory fee,
payable monthly, of .75% of the average daily net assets of the Portfolio not in
excess of $300 million; plus .70% of the Portfolio's average daily net assets in
excess of $300 million.
10. Expense Limitation. If, for any fiscal year of the Fund, the total of
all ordinary business expenses of the Portfolio, including all investment
advisory and administration fees but excluding brokerage commissions and fees,
taxes, interest and extraordinary expenses such as litigation, would exceed
1.25% of the average daily net assets of the Portfolio, the Investment Manager
agrees to pay the Fund such excess expenses, and if required to do so pursuant
to such applicable statute or regulatory authority, to pay to the Fund such
excess expenses no later than the last day of the first month of the next
succeeding fiscal year of the Fund. For the purposes of this paragraph, the term
"fiscal year" shall exclude the portion of the Fund's current fiscal year which
shall have elapsed prior to the date hereof and shall include the portion of the
then current fiscal year which shall have elapsed at the date of termination of
this Agreement.
11. Non-Exclusivity. The services of the Investment Manager to the
Portfolio are not to be deemed to be exclusive, and the Investment Manager shall
be free to render investment advisory and corporate administrative or other
services to others (including other investment companies) and to engage in other
activities. It is understood and agreed that officers or directors of the
Investment Manager may serve as officers or trustees of the Fund, and that
officers or trustees of the Fund may serve as officers or directors of the
Investment Manager to the extent permitted by law; and that the officers and
directors of the Investment Manager are not prohibited from engaging in any
other business activity or from rendering services to any other person, or from
serving as partners, officers or directors of any other firm or corporation,
including other investment companies.
12. Term and Approval. This Agreement shall become effective on October 15,
1996 and shall continue in force and effect from year to year, provided that
such continuance is specifically approved at least annually:
(a) (i) by the Fund's Board of Trustees or (ii) by the vote of a majority
of the Portfolio's outstanding voting securities (as defined in Section 2(a)(42)
of the Investment Company Act); and
(b) by the affirmative vote of a majority of the trustees who are not
parties to this Agreement or interested persons of a party to this Agreement
(other than as Fund trustees), by votes cast in person at a meeting specifically
called for such purpose.
13. Termination. This Agreement may be terminated at any time without the
payment of any penalty or prejudice to the completion of any transactions
already initiated on behalf of the Portfolio, by vote of the Fund's Board of
Trustees or by vote of a majority of the Portfolio's outstanding voting
securities, or by the Investment Manager, on sixty (60) days' written notice to
the other party. The notice provided for herein may be waived by either party.
This Agreement automatically terminates in the event of its assignment, the term
"assignment" for the purpose having the meaning defined in Section 2(a)(4) of
the Investment Company Act.
14. Liability of Investment Manager and Indemnification. In the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties hereunder on the part of the Investment Manager or any of
its officers, trustees or employees, it shall not be subject to liability to the
Fund or to any shareholder of the Portfolio for any act or omission in the
course of, or connected with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale of any security.
15. Liability of Trustees and Shareholders. A copy of the Agreement and
Declaration of Trust of the Fund is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the trustees of the Fund as trustees and not
individually and that the obligations of this instrument are not binding upon
any of the trustees or shareholders individually but are binding only upon the
assets and property of the Fund. Federal and state laws impose responsibilities
under certain circumstances on persons who act in good faith, and therefore,
nothing herein shall in any way constitute a waiver of limitation of any rights
which the Fund or Investment Manager may have under applicable law.
16. Notices. Any notices under this Agreement shall be in writing,
addressed and delivered or mailed postage paid to the other party at such
address as such other party may designate for the receipt of such notice. Until
further notice, it is agreed that the address of the Fund shall be 126 High
Street, Boston, Massachusetts, 02110, and the address of the Investment Manager
shall be One Corporate Drive, Shelton, Connecticut 06484.
17. Questions of Interpretation. Any question of interpretation of any term
or provision of this Agreement having a counterpart in or otherwise derived from
a term or provision of the Investment Company Act, shall be resolved by
reference to such term or provision of the Act and to interpretations thereof,
if any, by the United States Courts or in the absence of any controlling
decision of any such court, by rules, regulations or orders of the Securities
and Exchange Commission issued pursuant to said Act. In addition, where the
effect of a requirement of the Investment Company Act, reflected in any
provision of this Agreement is released by rules, regulation or order of the
Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective officers on the day and year first
above written.
AMERICAN SKANDIA TRUST
Attest: By: _______________________________
Gordon C. Boronow
___________________________________ Vice President
AMERICAN SKANDIA INVESTMENT
SERVICES, INCORPORATED
Attest: By: _________________________________
Thomas M. Mazzaferro
___________________________________ President & Chief Operating Officer
<PAGE>
EXHIBIT A-3
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is between American Skandia Investment Services,
Incorporated (the "Investment Manager") and Phoenix Investment Counsel, Inc.
(the "Sub-Advisor").
WHEREAS American Skandia Trust (the "Trust") is a Massachusetts business trust
organized with one or more series of shares, and is registered as an investment
company under the Investment Company Act of 1940 (the "ICA"); and
WHEREAS the trustees of the Trust (the "Trustees") have engaged the Investment
Manager to act as investment manager for the AST Phoenix Balanced Asset
Portfolio (the "Portfolio") under the terms of a management agreement, dated May
1, 1993, with the Trust (the "Management Agreement"); and
WHEREAS the Investment Manager has engaged the Sub-Advisor and the Trustees have
approved the engagement of the Sub-Advisor to provide investment advice and
other investment services set forth below;
NOW, THEREFORE the Investment Manager and the Sub-Advisor agree as follows:
1. Investment Services. The Sub-Advisor will furnish the Investment Manager with
investment advisory services in connection with a continuous investment program
for the Portfolio which is to be managed in accordance with the investment
objective, investment policies and restrictions of the Portfolio as set forth in
the Prospectus and Statement of Additional Information of the Trust and in
accordance with the Trust's Declaration of Trust and By-Laws. Officers,
directors, and employees of Sub-Advisor will be available to consult with
Investment Manager and the Trust, their officers, employees and Trustees
concerning the business of the Trust. Investment Manager will promptly furnish
Sub-Advisor with any amendments to such documents. Such amendments will not be
effective with respect to the Sub-Advisor until receipt thereof.
Subject to the supervision and control of the Investment Manager, which
is in turn subject to the supervision and control of the Trust's Board of
Trustees, the Sub-Advisor, will in its discretion determine and select the
securities to be purchased for and sold from the Portfolio from time to time and
will place orders with and give instructions to brokers, dealers and others for
all such transactions and cause such transactions to be executed. The Portfolio
will be maintained by a custodian bank (the "Custodian") and the Investment
Manager will authorize the Custodian to honor orders and instructions by
employees of the Sub-Advisor authorized by the Investment Manager to settle
transactions in respect of the Portfolio. No assets may be withdrawn from the
Portfolio other than for settlement of transactions on behalf of the Portfolio
except upon the written authorization of appropriate officers of the Trust who
shall have been certified as such by proper authorities of the Trust prior to
the withdrawal.
The Sub-Advisor will obtain and evaluate pertinent information about
significant developments and economic, statistical and financial data, domestic,
foreign or otherwise, whether affecting the economy generally or the Portfolio,
and concerning the individual issuers whose securities are included in the
Portfolio or the activities in which they engage, or with respect to securities
which the Sub-Advisor considers desirable for inclusion in the Portfolio.
The Sub-Advisor represents that it reviewed the Registration Statement
of the Trust, including any amendments or supplements thereto, and any Proxy
Statement relating to the approval of this Agreement, as filed with the
Securities and Exchange Commission and represents and warrants that with respect
to disclosure about the Sub-Advisor or information relating directly or
indirectly to the Sub-Advisor, such Registration Statement or Proxy Statement
contains, as of the date hereof, no untrue statement of any material fact and
does not omit any statement of material fact which was required to be stated
therein or necessary to make the statements contained therein not misleading.
The Sub-Advisor further represents and warrants that it is an investment advisor
registered under the Investment Advisers Act of 1940, as amended, and under the
laws of all jurisdictions in which the conduct of its business hereunder
requires such registration.
Sub-Advisor shall use its best judgment, effort, and advice in
rendering services under this Agreement.
In furnishing the services under this Agreement, the Sub-Advisor will
comply with the requirements of the ICA and subchapters L and M (including,
respectively, Section 817(h) and Section 851(b)(1), (2), (3) and (4)) of the
Internal Revenue Code, applicable to the Portfolio, and the regulations
promulgated thereunder. Sub-Advisor shall comply with (i) other applicable
provisions of state or federal law; (ii) the provision of the Declaration of
Trust and By-Laws of the Trust; (iii) policies and determinations of the Trust
and Investment Manager; (iv) the fundamental policies and investment
restrictions of the Trust, as set out in the Trust's registration statement
under the ICA, or as amended by the Trust's shareholders; (v) the Prospectus and
Statement of Additional Information of the Trust; and (vi) investment guidelines
or other instructions received in writing from Investment Manager. Sub-Advisor
shall supervise and monitor the investment program of the Portfolio.
Nothing in this Agreement shall be implied to prevent the Investment
Manager from engaging other sub-advisors to provide investment advice and other
services in relation to portfolios of the Trust for which Sub-Advisor does not
provide such services, or to prevent Investment Manager from providing such
services itself in relation to such portfolios.
2. Delivery of Documents to Sub-Advisor. The Investment Manager has
furnished the Sub-Advisor with copies of each of the following documents:
(a) The Declaration of Trust of the Trust as in effect on the date hereof;
(b) The By-laws of the Trust in effect on the date hereof;
(c) The resolutions of the Trustees approving the engagement of the
Sub-Advisor as Sub-Advisor to the Investment Manager and approving the form of
this agreement;
(d) The resolutions of the Trustees selecting the Investment Manager as
investment manager to the Trust and approving the form of the Investment
Manager's Management Agreement with the Trust;
(e) The Investment Manager's Management Agreement with the Trust;
(f) The Code of Ethics of the Trust and of the Investment Manager as
currently in effect; and
(g) A list of companies the securities of which are not to be bought or
sold for the Portfolio because of non-public information regarding such
companies that is available to Investment Manager or the Trust, or which, in the
sole opinion of the Investment Manager, it believes such non-public information
would be deemed to be available to Investment Manager and/or the Trust.
The Investment Manager will furnish the Sub-Advisor from time to time with
copies, properly certified or otherwise authenticated, of all amendments of or
supplements to the foregoing, if any. Such amendments or supplements as to items
(a) through (f) above will be provided within 30 days of the time such materials
became available to the Investment Manager. Such amendments or supplements as to
item (g) above will be provided not later than the end of the business day next
following the date such amendments or supplements become known to the Investment
Manager.
3. Delivery of Documents to the Investment Manager. The Sub-Advisor has
furnished the Investment Manager with copies of each of the following documents:
(a) The Sub-Advisor's Form ADV as filed with the Securities and Exchange
Commission;
(b) The Sub-Advisor's most recent balance sheet;
(c) Separate lists of persons who the Sub-Advisor wishes to have authorized
to give written and/or oral instructions to Custodians of Trust assets for the
Portfolio;
(d) The Code of Ethics of the Sub-Advisor as currently in effect.
The Sub-Advisor will furnish the Investment Manager from time to time with
copies, properly certified or otherwise authenticated, of all material
amendments of or supplements to the foregoing, if any. Such amendments or
supplements as to items (a) through (d) above will be provided within 30 days of
the time such materials became available to the Sub-Advisor.
4. Investment Advisory Facilities. The Sub-Advisor, at its expense, will
furnish all necessary investment facilities, including salaries of personnel
required for it to execute its duties faithfully.
5. Execution of Portfolio Transactions. Sub-Advisor is responsible for
decisions to buy and sell securities for the Portfolio, broker-dealer selection,
and negotiation of its brokerage commission rates. Sub-Advisor shall determine
the securities to be purchased or sold by the Portfolio pursuant to its
determinations with or through such persons, brokers or dealers, in conformity
with the policy with respect to brokerage as set forth in the Trust's Prospectus
and Statement of Additional Information, or as the Board of Trustees may
determine from time to time. Generally, Sub-Advisor's primary consideration in
placing Portfolio securities transactions with broker-dealers for execution is
to obtain and maintain the availability of best execution at the best net price
and in the most effective manner possible. The Sub-Advisor may consider sale of
the shares of the Portfolio, as well as recommendations of the Investment
Manager, subject to the requirements of best net price and most favorable
execution.
Consistent with this policy, the Sub-Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Portfolio on a continuing
basis. Accordingly, the cost of the brokerage commissions to the Portfolio may
be greater than that available from other brokers if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies and procedures as the Board of Trustees of the
Trust may determine, the Sub-Advisor shall not be deemed to have acted
unlawfully or to have breached any duty solely by reason of its having caused
the Portfolio to pay a broker-dealer that provides research services to the
Sub-Advisor for the Portfolio's use an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the
Sub-Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the research services provided by such
broker, viewed in terms of either that particular transaction or the
Sub-Advisor's ongoing responsibilities with respect to the Portfolio. The
Sub-Advisor is further authorized to allocate the orders placed by it on behalf
of the Portfolio to such broker-dealers who also provide research or statistical
material, or other services to the Portfolio or the Sub-Advisor. Such allocation
shall be in such amounts and proportions as the Sub-Advisor shall determine and
the Sub-Advisor will report on said allocations to the Investment Manager
regularly as requested by the Investment Manager and, in any event, at least
once each calendar year if no specific request is made, indicating the brokers
to whom such allocations have been made and the basis therefor.
6. Reports by Sub-Advisor. The Sub-Advisor shall furnish the Investment
Manager monthly, quarterly and annual reports concerning transactions and
performance of the Portfolio, including information required in the Trust's
Registration, in such form as may be mutually agreed, to review the Portfolio
and discuss the management of it. The Sub-Advisor shall permit the financial
statements, books and records with respect to the Portfolio to be inspected and
audited by the Trust, the Investment Manager or their agents at all reasonable
times during normal business hours. The Sub-Advisor shall immediately notify and
forward to both Investment Manager and legal counsel for the Trust any legal
process served upon it on behalf of the Investment Manager or the Trust. The
Sub-Advisor shall promptly notify the Investment Manager of any changes in any
information required to be disclosed in the Trust's Registration Statement.
7. Compensation of Sub-Advisor. The amount of the compensation to the
Sub-Advisor is computed at an annual rate. The fee is payable monthly in
arrears, based on the average daily net assets of the Portfolio for each month,
at the annual rates shown below.
For all services rendered, the Investment Manager will calculate and
pay the Sub-Advisor at the annual rate of: .50 of 1% of the portion of the
average daily net assets of the Portfolio not in excess of $25 million; .40 of
1% of the portion over $25 million but not in excess of $75 million; and .30 of
1% of the portion in excess of $75 million.
In computing the fee to be paid to the Sub-Advisor, the net asset value
of the Portfolio shall be valued as set forth in the then current registration
statement of the Trust. If this agreement is terminated, the payment shall be
prorated to the date of termination.
Investment Manager and Sub-Advisor shall not be considered as partners
or participants in a joint venture. Sub-Advisor will pay its own expenses for
the services to be provided pursuant to this Agreement and will not be obligated
to pay any expenses of Investment Manager or the Trust. Except as otherwise
provided herein, Investment Manager and the Trust will not be obligated to pay
any expenses of Sub-Advisor.
8. Confidential Treatment. It is understood that any information or
recommendation supplied by the Sub-Advisor in connection with the performance of
its obligations hereunder is to be regarded as confidential and for use only by
the Investment Manager, the Trust or such persons the Investment Manager may
designate in connection with the Portfolio. It is also understood that any
information supplied to Sub-Advisor in connection with the performance of its
obligations hereunder, particularly, but not limited to, any list of securities
which, on a temporary basis, may not be bought or sold for the Portfolio, is to
be regarded as confidential and for use only by the Sub-Advisor in connection
with its obligation to provide investment advice and other services to the
Portfolio.
9. Representations of the Parties. Each party to this Agreement hereby
acknowledges that it is registered as an investment advisor under the Investment
Advisers Act of 1940, it will use its reasonable best efforts to maintain such
registration, and it will promptly notify the other if it ceases to be so
registered, if its registration is suspended for any reason, or if it is
notified by any regulatory organization or court of competent jurisdiction that
it should show cause why its registration should not be suspended or terminated.
10. Liability. The Sub-Advisor shall use its best efforts and good faith in
the performance of its services hereunder. However, so long as the Sub-Advisor
has acted in good faith and has used its best efforts, then in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard for its
obligations hereunder, it shall not be liable to the Trust or its shareholders
or to the Investment Manager for any act or omission resulting in any loss
suffered in any portfolio of the Trust in connection with any service to be
provided herein. The Federal laws impose responsibilities under certain
circumstances on persons who act in good faith, and therefore, nothing herein
shall in any way constitute a waiver of limitation of any rights which the Trust
or Investment Manager may have under applicable law.
The Investment Manager agrees that the Sub-Advisor shall not be liable
for any failure to recommend the purchase or sale of any security on behalf of
the Portfolio on the basis of any information which might, in Sub-Advisor's
opinion, constitute a violation of any federal or state laws, rules or
regulations.
11. Other Activities of Sub-Advisor. Investment Manager agrees that the
Sub-Advisor and any of its partners or employees, and persons affiliated with it
or with any such partner or employee may render investment management or
advisory services to other investors and institutions, and such investors and
institutions may own, purchase or sell, securities or other interests in
property the same as or similar to those which are selected for purchase,
holding or sale for the Portfolio, and the Sub-Advisor shall be in all respects
free to take action with respect to investments in securities or other interests
in property the same as or similar to those selected for purchase, holding or
sale for the Portfolio. Purchases and sales of individual securities on behalf
of the Portfolio and other portfolios of the Trust or accounts for other
investors or institutions will be made on a basis that is equitable to all
portfolios of the Trust and other accounts. Nothing in this agreement shall
impose upon the Sub-Advisor any obligation to purchase or sell or recommend for
purchase or sale, for the Portfolio any security which it, its partners,
affiliates or employees may purchase or sell for the Sub-Advisor or such
partner's, affiliate's or employee's own accounts or for the account of any
other client, advisory or otherwise.
12. Continuance and Termination. This Agreement shall remain in full force
and effect for one year from the date hereof, and is renewable annually
thereafter by specific approval of the Board of Trustees of the Trust or by vote
of a majority of the outstanding voting securities of the Portfolio. Any such
renewal shall be approved by the vote of a majority of the Trustees who are not
interested persons under the ICA, cast in person at a meeting called for the
purpose of voting on such renewal. This agreement may be terminated without
penalty at any time by the Investment Manager or Sub-Advisor upon 60 days
written notice, and will automatically terminate in the event of its assignment
by either party to this Agreement, as defined in the ICA, or (provided
Sub-Advisor has received prior written notice thereof) upon termination of the
Investment Manager's Management Agreement with the Trust.
13. Notification. Sub-Advisor will notify the Investment Manager within a
reasonable time of any change in the personnel of the Sub-Advisor with
responsibility for making investment decisions in relation to the Portfolio or
who have been authorized to give instructions to a Custodian of the Trust.
Any notice, instruction or other communication required or contemplated
by this agreement shall be in writing. All such communications shall be
addressed to the recipient at the address set forth below, provided that either
party may, by notice, designate a different address for such party.
Investment Manager: American Skandia Investment Services, Incorporated
One Corporate Drive
Shelton, Connecticut 06484
Attention: Thomas M. Mazzaferro
President & Chief Operating Officer
Sub-Advisor: Phoenix Investment Counsel, Inc.
56 Prospect Street
P.O. Box 150480
Hartford, Connecticut 06115-0480
Attention: James K. Salonia
14. Indemnification. The Sub-Advisor agrees to indemnify and hold harmless
Investment Manager, any affiliated person within the meaning of Section 2(a)(3)
of the 1940 Act ("affiliated person") of Investment Manager and each person, if
any who, within the meaning of Section 15 of the Securities Act of 1933 (the
"1933 Act"), controls ("controlling person") Investment Manager, against any and
all losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses), to which Investment Manager or such affiliated person
or controlling person may become subject under the 1933 Act, the 1940 Act, the
Investment Adviser's Act of 1940 ("Adviser's Act"), under any other statute, at
common law or otherwise, arising out of Sub-Advisor's responsibilities as
portfolio manager of the Portfolio (1) to the extent of and as a result of the
willful misconduct, bad faith, or gross negligence by Sub-Advisor, any of
Sub-Advisor's employees or representatives or any affiliate of or any person
acting on behalf of Sub-Advisor, or (2) as a result of any untrue statement or
alleged untrue statement of a material fact contained in a prospectus or
statement of additional information covering the Portfolio or the Trust or any
amendment thereof or any supplement thereto or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statement therein not misleading, if such a statement or omission was
made in reliance upon written information furnished to Investment Manager, the
Trust or any affiliated person of the Investment Manager or the Trust or upon
verbal information confirmed by the Sub-Advisor in writing or (3) to the extent
of, and as a result of, the failure of the Sub-Advisor to execute, or cause to
be executed, Portfolio transactions according to the standards and requirements
of the 1940 Act; provided, however, that in no case is Sub-Advisor's indemnity
in favor of Investment Manager or any affiliated person or controlling person of
Investment Manager deemed to protect such person against any liability to which
any such person would otherwise be subject by reason of willful misconduct, bad
faith or gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties under this Agreement.
The Investment Manager agrees to indemnify and hold harmless Sub-Advisor,
any affiliated person within the meaning of Section 2(a)(3) of the 1940 Act
("affiliated person") of Sub-Advisor and each person, if any who, within the
meaning of Section 15 of the Securities Act of 1933 (the "1933 Act"), controls
("controlling person") Sub-Advisor, against any and all losses, claims, damages,
liabilities or litigation (including reasonable legal and other expenses), to
which Sub-Advisor or such affiliated person or controlling person may become
subject under the 1933 Act, the 1940 Act, the Investment Adviser's Act of 1940
("Adviser's Act"), under any other statute, at common law or otherwise, arising
out of Investment Manager's responsibilities as investment manager of the
Portfolio (1) to the extent of and as a result of the willful misconduct, bad
faith, or gross negligence by Investment Manager, any of Investment Manager's
employees or representatives or any affiliate of or any person acting on behalf
of Investment Manager, or (2) as a result of any untrue statement or alleged
untrue statement of a material fact contained in a prospectus or statement of
additional information covering the Portfolio or the Trust or any amendment
thereof or any supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, if such a statement or omission was made by
the Trust other than in reliance upon written information furnished by
Sub-Advisor, or any affiliated person of the Sub-Advisor or other than upon
verbal information confirmed by the Sub-Advisor in writing; provided, however,
that in no case is Investment Manager's indemnity in favor of Sub-Advisor or any
affiliated person or controlling person of Sub-Advisor deemed to protect such
person against any liability to which any such person would otherwise be subject
by reason of willful misconduct, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
15. Warranty. The Investment Manager represents and warrants that (i) the
appointment of the Sub-Advisor by the Investment Manager has been duly
authorized and (ii) it has acted and will continue to act in connection with the
transactions contemplated hereby, and the transactions contemplated hereby are,
in conformity with the Investment Company Act of 1940, the Trust's governing
documents and other applicable laws.
The Sub-Advisor represents and warrants that it is authorized to perform
the services contemplated to be performed hereunder.
16. Governing Law. This agreement is made under, and shall be governed by
and construed in accordance with, the laws of the State of Connecticut.
The effective date of this agreement is May 1, 1996.
FOR THE INVESTMENT MANAGER: FOR THE SUB-ADVISOR:
/s/ Thomas Mazzaferro /s/ Paul Atkins
Thomas Mazzaferro Senior Vice President
President & Chief Operating Officer
Date: April 17, 1996 Date: April 25, 1996
Attest: /s/ Ivette T. Aquilino Attest: /s/ James K. Salonia
<PAGE>
EXHIBIT A-4
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is between American Skandia Investment Services,
Incorporated (the "Investment Manager") and Putnam Investment Management, Inc.
(the "Sub-Advisor").
WHEREAS American Skandia Trust (the "Trust") is a Massachusetts business trust
organized with one or more series of shares, and is registered as an investment
company under the Investment Company Act of 1940 (the "ICA"); and
WHEREAS the trustees of the Trust (the "Trustees") have engaged the
Investment Manager to act as investment manager for the AST Putnam Balanced
Portfolio (the "Portfolio") under the terms of a management agreement, dated
October 15, 1996, with the Trust (the "Management Agreement"); and
WHEREAS the Investment Manager has engaged the Sub-Advisor and the Trustees have
approved the engagement of the Sub-Advisor to provide investment advice and
other investment services set forth below;
NOW, THEREFORE the Investment Manager and the Sub-Advisor agree as follows:
1. Investment Services. The Sub-Advisor will furnish the Investment Manager with
investment advisory services in connection with a continuous investment program
for the Portfolio which is to be managed in accordance with the investment
objective, investment policies and restrictions of the Portfolio as set forth in
the Prospectus and Statement of Additional Information of the Trust and in
accordance with applicable provisions of the Trust's Declaration of Trust and
By-laws provided to the Sub-Advisor from time to time by the Investment Manager.
Officers, directors, and employees of Sub-Advisor will be available to consult
with Investment Manager and the Trust, their officers, employees and Trustees
concerning the business of the Trust. Investment Manager will promptly furnish
Sub-Advisor with any amendments to any of the foregoing documents (the
"Documents"). Any amendments to the Documents will not be deemed effective with
respect to the Sub-Advisor until the Sub-Advisor's receipt thereof.
Subject to the supervision and control of the Investment Manager, which
is in turn subject to the supervision and control of the Trust's Board of
Trustees, the Sub-Advisor will in its discretion determine and select the
securities to be purchased for and sold from the Portfolio from time to time and
will place orders with and give instructions to brokers, dealers and others for
all such transactions and cause such transactions to be executed. Custody of the
Portfolio will be maintained by a custodian bank (the "Custodian") and the
Investment Manager will authorize the Custodian to honor orders and instructions
by employees of the Sub-Advisor designated by the Investment Manager to settle
transactions in respect of the Portfolio. No assets may be withdrawn from the
Portfolio other than for settlement of transactions on behalf of the Portfolio
except upon the written authorization of appropriate officers of the Trust who
shall have been certified as such by proper authorities of the Trust prior to
the withdrawal. The Sub-Advisor shall not be responsible for the provision of
administrative, bookkeeping or accounting services to the Trust. The Sub-Advisor
shall supply the Investment Manager and the Trust with such information as is
specifically provided herein, as required by the ICA or the Investment Advisers
Act of 1940, as amended (the "Advisers Act") in connection with the
Sub-Advisor's management of the Portfolio, or as may be necessary to supply the
information to the Investment Manager, the Trust, the Trust's Board of Trustees
or their respective agents required to be supplied under this Agreement. Any
records required to be maintained shall be the property of the Trust and
surrendered to the Trust promptly upon request or upon termination of this
Agreement. The Sub-Advisor may retain copies of any records surrendered to the
Trust.
To the extent deemed necessary by the Sub-Advisor in connection with
the investment program for the Portfolio, the Sub-Advisor will obtain and
evaluate pertinent information about significant developments and economic,
statistical and financial data, domestic, foreign or otherwise, whether
affecting the economy generally or the Portfolio, and concerning the individual
issuers whose securities are included in the Portfolio or the activities in
which they engage, or with respect to securities which the Sub-Advisor considers
desirable for inclusion in the Portfolio or such other information as the
Sub-Advisor deems relevant.
The Sub-Advisor represents that it reviewed the Registration Statement
of the Trust, including any amendments or supplements thereto, and any Proxy
Statement relating to the approval of this Agreement, as filed with the
Securities and Exchange Commission and represents and warrants that with respect
to disclosure about the Sub-Advisor or information relating to the Sub-Advisor
or the Sub-Advisor's activities in connection with the investment program for
the Portfolio, such Registration Statement or Proxy Statement contains, as of
the date thereof, no untrue statement of any material fact and does not omit any
statement of material fact which was required to be stated therein or necessary
to make the statements contained therein not misleading. The Sub-Advisor further
represents and warrants that it is an investment advisor registered under the
Advisers Act and under the laws of all jurisdictions in which the conduct of its
business hereunder requires such registration.
Sub-Advisor shall use its best judgment, effort, and advice in
rendering services under this Agreement.
In furnishing the services under this Agreement, the Sub-Advisor will
comply with the requirements of the ICA and subchapters L and M (including,
respectively, Section 817(h) and Section 851(b)(1), (2), (3) and (4)) of the
Internal Revenue Code, applicable to the Portfolio, and the regulations
promulgated thereunder, to the extent such compliance is within the
Sub-Advisor's control. Sub-Advisor shall also comply with (i) other applicable
provisions of state or federal law; (ii) the provisions of the Declaration of
Trust and By-laws of the Trust communicated to the Sub-Advisor pursuant to
paragraph 1 of this Agreement; (iii) policies and determinations of the Trust
and Investment Manager communicated to the Sub-Advisor in writing; (iv) the
fundamental policies and investment restrictions of the Trust, as set out in the
Trust's registration statement under the ICA, or as amended by the Trust's
shareholders; (v) the Prospectus and Statement of Additional Information of the
Trust; and (vi) investment guidelines or other instructions received in writing
from Investment Manager. Sub-Advisor shall supervise and monitor the activities
of its representatives, personnel and agents in connection with the investment
program of the Portfolio.
Nothing in this Agreement shall be implied to prevent the Investment
Manager from engaging other sub-advisors to provide investment advice and other
services in relation to portfolios of the Trust for which Sub-Advisor does not
provide such services, or to prevent Investment Manager from providing such
services itself in relation to such portfolios.
2. Delivery of Documents to Sub-Advisor. The Investment Manager has
furnished the Sub-Advisor with copies of each of the following documents:
(a) The Declaration of Trust of the Trust as in effect on the date hereof;
(b) The By-laws of the Trust in effect on the date hereof;
(c) The resolutions of the Trustees approving the engagement of the
Sub-Advisor as Sub-Advisor to the Investment Manager and approving the form of
this agreement;
(d) The resolutions of the Trustees selecting the Investment Manager as
investment manager to the Trust and approving the form of the Investment
Manager's Management Agreement with the Trust;
(e) The Investment Manager's Management Agreement with the Trust;
(f) The Code of Ethics of the Trust and of the Investment Manager as
currently in effect; and
(g) A list of companies the securities of which are not to be bought or
sold for the Portfolio because of non-public information regarding such
companies that is available to Investment Manager or the Trust, or which, in the
sole opinion of the Investment Manager, it believes such non-public information
would be deemed to be available to Investment Manager and/or the Trust.
The Investment Manager will furnish the Sub-Advisor from time to time
with copies, properly certified or otherwise authenticated, of all amendments of
or supplements to the foregoing, if any. Such amendments or supplements as to
items (a) through (f) above will be provided within 30 days of the time such
materials became available to the Investment Manager. Such amendments or
supplements as to item (g) above will be provided not later than the end of the
business day next following the date such amendments or supplements become known
to the Investment Manager.
3. Delivery of Documents to the Investment Manager. The Sub-Advisor has
furnished the Investment Manager with copies of each of the following documents:
(a) The Sub-Advisor's Form ADV as filed with the Securities and Exchange
Commission;
(b) The Sub-Advisor's most recent balance sheet;
(c) Separate lists of persons who the Sub-Advisor wishes to have authorized
to give written and/or oral instructions to Custodians of Trust assets for the
Portfolio;
(d) The Code of Ethics of the Sub-Advisor as currently in effect.
The Sub-Advisor will thereafter furnish the Investment Manager with
copies, properly certified or otherwise authenticated, of all material
amendments of or supplements to items (a), (c) and (d) above within 30 days of
the time such materials become available to the Sub-Advisor. With respect to
item (b) above, the Sub-Advisor will thereafter furnish the Investment Manager,
within 30 days of the time such materials become available to the Sub-Advisor,
with a copy of the Sub-Advisor's audited balance sheet as at the end of each
fiscal year of the Sub-Advisor.
4. Investment Advisory Facilities. The Sub-Advisor, at its expense, will
furnish all necessary investment facilities, including salaries of personnel
required for it to execute its duties faithfully.
5. Execution of Portfolio Transactions. Sub-Advisor is responsible for
decisions to buy and sell securities for the Portfolio, broker-dealer selection,
and negotiation of its brokerage commission rates. Sub-Advisor shall determine
the securities to be purchased or sold by the Portfolio pursuant to its
determinations with or through such persons, brokers or dealers, in conformity
with the policy with respect to brokerage as set forth in the Trust's Prospectus
and Statement of Additional Information, or as the Board of Trustees may
determine from time to time. Generally, Sub-Advisor's primary consideration in
placing Portfolio securities transactions with broker-dealers for execution is
to obtain and maintain the availability of best execution at the best net price
and in the most effective manner possible. The Sub-Advisor may consider sale of
the shares of the Portfolio, as well as recommendations of the Investment
Manager, subject to the requirements of best net price and most favorable
execution.
Consistent with this policy, the Sub-Advisor will take the following into
consideration: the best net price available; the reliability, integrity and
financial condition of the broker-dealer; the size of and difficulty in
executing the order; and the value of the expected contribution of the
broker-dealer to the investment performance of the Portfolio on a continuing
basis. Accordingly, the cost of the brokerage commissions to the Portfolio may
be greater than that available from other brokers if the difference is
reasonably justified by other aspects of the portfolio execution services
offered. Subject to such policies and procedures as the Board of Trustees of the
Trust may determine, the Sub-Advisor shall not be deemed to have acted
unlawfully or to have breached any duty solely by reason of its having caused
the Portfolio to pay a broker-dealer that provides research services to the
Sub-Advisor for the Portfolio's use an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission another
broker-dealer would have charged for effecting that transaction, if the
Sub-Advisor determines in good faith that such amount of commission was
reasonable in relation to the value of the research services provided by such
broker, viewed in terms of either that particular transaction or the
Sub-Advisor's ongoing responsibilities with respect to the Portfolio. The
Sub-Advisor is further authorized to allocate the orders placed by it on behalf
of the Portfolio to such broker-dealers who also provide research or statistical
material, or other services to the Portfolio or the Sub-Advisor. Such allocation
shall be in such amounts and proportions as the Sub-Advisor shall determine in
good faith in conformity with its responsibilities under applicable laws, rules
and regulations and the Sub-Advisor will report on said allocations to the
Investment Manager regularly as requested by the Investment Manager and, in any
event, at least once each calendar year if no specific request is made,
indicating the brokers to whom such allocations have been made and the basis
therefor.
6. Reports by Sub-Advisor. The Sub-Advisor shall furnish the Investment
Manager monthly, quarterly and annual reports concerning transactions and
performance of the Portfolio, including information requested for inclusion in
the Trust's Registration Statement, in such form as may be mutually agreed, to
review the Portfolio and discuss the management of it. The Sub-Advisor shall
permit the financial statements, books and records with respect to the Portfolio
to be inspected and audited by the Trust, the Investment Manager or their agents
at all reasonable times during normal business hours. The Sub-Advisor shall
immediately notify and forward to the Investment Manager and the Trust any legal
process served upon it on behalf of the Investment Manager or the Trust. The
Sub-Advisor shall promptly notify the Investment Manager of any changes in any
information concerning the Sub-Advisor or the Sub-Advisors activities in
connection with the investment program for the Portfolio required to be
disclosed in the Trust's Registration Statement.
7. Compensation of Sub-Advisor. The amount of the compensation to the
Sub-Advisor is computed at an annual rate. The fee is payable monthly in
arrears, based on the average daily net assets of the Portfolio for each month,
at the annual rates shown below.
For all services rendered, the Investment Manager will calculate and
pay the Sub-Advisor at the annual rate of: .45 of 1% of the portion of the
average daily net assets of the Portfolio not in excess of $150 million; plus
.40 of 1% of the portion of the average daily net assets of the Portfolio over
$150 million but not in excess of $300 million; plus .35 of 1% of the portion of
the average daily net assets of the Portfolio in excess of $300 million.
In computing the fee to be paid to the Sub-Advisor, the net asset value
of the Portfolio shall be valued as set forth in the then current registration
statement of the Trust. If this agreement is terminated, the payment shall be
prorated to the date of termination.
Investment Manager and Sub-Advisor shall not be considered as partners
or participants in a joint venture. Sub-Advisor will pay its own expenses for
the services to be provided pursuant to this Agreement and will not be obligated
to pay any expenses of Investment Manager or the Trust. Except as otherwise
provided herein, Investment Manager and the Trust will not be obligated to pay
any expenses of Sub-Advisor.
8. Confidential Treatment. It is understood that any information or
recommendation supplied by the Sub-Advisor in connection with the performance of
its obligations hereunder is to be regarded as confidential and for use only by
the Investment Manager, the Trust or such persons the Investment Manager may
designate in connection with the Portfolio. It is also understood that any
information supplied to Sub-Advisor in connection with the performance of its
obligations hereunder, particularly, but not limited to, any list of securities
which, on a temporary basis, may not be bought or sold for the Portfolio, is to
be regarded as confidential and for use only by the Sub-Advisor in connection
with its obligation to provide investment advice and other services to the
Portfolio.
9. Representations of the Parties. Each party to this Agreement hereby
acknowledges that it is registered as an investment advisor under the Advisers
Act, that it will use its reasonable best efforts to maintain such registration,
and that it will promptly notify the other if it ceases to be so registered, if
its registration is suspended for any reason, or if it is notified by any
regulatory organization or court of competent jurisdiction that it should show
cause why its registration should not be suspended or terminated.
10. Liability. The Sub-Advisor shall use its best efforts and good faith in
the performance of its services hereunder. However, so long as the Sub-Advisor
has acted in good faith and has used its best efforts, then in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard for its
obligations hereunder, it shall not be liable to the Trust or its shareholders
or to the Investment Manager for any act or omission resulting in any loss
suffered in any portfolio of the Trust in connection with any service to be
provided herein. The Federal laws impose responsibilities under certain
circumstances on persons who act in good faith, and therefore, nothing herein
shall in any way constitute a waiver of limitation of any rights which the Trust
or Investment Manager may have under applicable law.
The Investment Manager agrees that the Sub-Advisor shall not be liable
for any failure to recommend the purchase or sale of any security on behalf of
the Portfolio on the basis of any information which might, in Sub-Advisor's
opinion, constitute a violation of any federal or state laws, rules or
regulations.
11. Other Activities of Sub-Advisor. Investment Manager agrees that the
Sub-Advisor and any of its partners or employees, and persons affiliated with it
or with any such partner or employee may render investment management or
advisory services to other investors and institutions, and such investors and
institutions may own, purchase or sell, securities or other interests in
property the same as or similar to those which are selected for purchase,
holding or sale for the Portfolio, and the Sub-Advisor shall be in all respects
free to take action with respect to investments in securities or other interests
in property the same as or similar to those selected for purchase, holding or
sale for the Portfolio. Purchases and sales of individual securities on behalf
of the Portfolio and other portfolios of the Trust or accounts for other
investors or institutions will be made on a basis that is equitable to all
portfolios of the Trust and other accounts. Nothing in this agreement shall
impose upon the Sub-Advisor any obligation to purchase or sell or recommend for
purchase or sale, for the Portfolio any security which it, its partners,
affiliates or employees may purchase or sell for the Sub-Advisor or such
partner's, affiliate's or employee's own accounts or for the account of any
other client, advisory or otherwise.
12. Continuance and Termination. This Agreement shall remain in full force
and effect for one year from the date hereof, and is renewable annually
thereafter by specific approval of the Board of Trustees of the Trust or by vote
of a majority of the outstanding voting securities of the Portfolio. Any such
renewal shall be approved by the vote of a majority of the Trustees who are not
interested persons under the ICA, cast in person at a meeting called for the
purpose of voting on such renewal. This agreement may be terminated without
penalty at any time by the Investment Manager or Sub-Advisor upon 60 days
written notice, and will automatically terminate in the event of its assignment
by either party to this Agreement, as defined in the ICA, or (provided
Sub-Advisor has received prior written notice thereof) upon termination of the
Investment Manager's Management Agreement with the Trust.
13. Notification. Sub-Advisor will notify the Investment Manager within a
reasonable time of any change in the personnel of the Sub-Advisor with
responsibility for making investment decisions in relation to the Portfolio or
who have been authorized to give instructions to a Custodian of the Trust.
Any notice, instruction or other communication required or contemplated
by this agreement shall be in writing. All such communications shall be
addressed to the recipient at the address set forth below, provided that either
party may, by notice, designate a different address for such party.
Investment Manager: American Skandia Investment Services, Incorporated
One Corporate Drive
Shelton, Connecticut 06484
Attention: Thomas M. Mazzaferro
President & Chief Operating Officer
Sub-Advisor: Putnam Investment Management, Inc.
One Post Office Square
Boston, Massachusetts 02109
Attention: Charles A. Ruys de Perez, Esq.
Senior Vice President & Senior Counsel
14. Indemnification. The Sub-Advisor agrees to indemnify and hold harmless
Investment Manager, any affiliated person within the meaning of Section 2(a)(3)
of the ICA ("affiliated person") of Investment Manager and each person, if any
who, within the meaning of Section 15 of the Securities Act of 1933 (the "1933
Act"), controls ("controlling person") Investment Manager, against any and all
losses, claims, damages, liabilities or litigation (including reasonable legal
and other expenses), to which Investment Manager or such affiliated person or
controlling person may become subject under the 1933 Act, the ICA, the Advisers
Act, under any other statute, at common law or otherwise, arising out of
Sub-Advisor's responsibilities as portfolio manager of the Portfolio (1) to the
extent of and as a result of the willful misconduct, bad faith, or gross
negligence by Sub-Advisor, any of Sub-Advisor's employees or representatives or
any affiliate of or any person acting on behalf of Sub-Advisor, or (2) as a
result of any untrue statement or alleged untrue statement of a material fact
relating to the Sub-Advisor or the Sub-Advisor's activities in connection with
the investment program for the Portfolio contained in a prospectus or statement
of additional information covering the Portfolio or the Trust or any amendment
thereof or any supplement thereto or the omission or alleged omission to state
therein such a material fact required to be stated therein or necessary to make
the statement therein not misleading, if such a statement or omission was made
in reliance upon written information furnished to the Investment Manager, the
Trust or any affiliated person of the Investment Manager or the Trust by the
Sub-Advisor or upon verbal information confirmed by the Sub-Advisor in writing
or (3) to the extent of, and as a result of, the failure of the Sub-Advisor to
execute, or cause to be executed, Portfolio transactions according to the
standards and requirements of the ICA; provided, however, that in no case is
Sub-Advisor's indemnity in favor of Investment Manager or any affiliated person
or controlling person of Investment Manager deemed to protect such person
against any liability to which any such person would otherwise be subject by
reason of willful misconduct, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations and
duties under this Agreement; and, provided further, that in the case of an
alleged untrue statement or omission of a material fact for which the
Sub-Advisor provides this indemnity, the Investment Manager shall reimburse the
Sub-Advisor for all amounts paid pursuant to this indemnity unless a court of
competent jurisdiction shall issue a final judgment finding that such an untrue
statement or omission of material fact did occur.
The Investment Manager agrees to indemnify and hold harmless Sub-Advisor,
any affiliated person of Sub-Advisor and each controlling person of Sub-Advisor,
if any, against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses), to which Sub-Advisor or such
affiliated person or controlling person may become subject under the 1933 Act,
the ICA, the Advisers Act, under any other statute, at common law or otherwise,
arising out of Investment Manager's responsibilities as investment manager of
the Portfolio (1) to the extent of and as a result of the willful misconduct,
bad faith, or gross negligence by Investment Manager, any of Investment
Manager's employees or representatives or any affiliate of or any person acting
on behalf of Investment Manager, or (2) as a result of any untrue statement or
alleged untrue statement of a material fact contained in a prospectus or
statement of additional information covering the Portfolio or the Trust or any
amendment thereof or any supplement thereto or the omission or alleged omission
to state therein such a material fact required to be stated therein or necessary
to make the statement therein not misleading, if such a statement or omission
was made by the Trust other than in reliance upon written information furnished
by Sub-Advisor, or any affiliated person of the Sub-Advisor or other than upon
verbal information confirmed by the Sub-Advisor in writing; provided, however,
that in no case is Investment Manager's indemnity in favor of Sub-Advisor or any
affiliated person or controlling person of Sub-Advisor deemed to protect such
person against any liability to which any such person would otherwise be subject
by reason of willful misconduct, bad faith or gross negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
15. Warranty. The Investment Manager represents and warrants that (i) the
appointment of the Sub-Advisor by the Investment Manager has been duly
authorized and (ii) it has acted and will continue to act in connection with the
transactions contemplated hereby, and the transactions contemplated hereby are,
in conformity with the ICA, the Trust's governing documents and other applicable
laws.
The Sub-Advisor represents and warrants that it is authorized to perform
the services contemplated to be performed hereunder.
16. Governing Law. This agreement is made under, and shall be governed by
and construed in accordance with, the laws of the State of Connecticut.
The effective date of this agreement is October 15, 1996.
FOR THE INVESTMENT MANAGER: FOR THE SUB-ADVISOR:
Thomas Mazzaferro
President & Chief Operating Officer
Date: ____________________________ Date: ____________________________
Attest: ____________________________ Attest: ____________________________
<PAGE>
APPENDIX
(FORM OF PROXY)
<PAGE>
AMERICAN SKANDIA TRUST
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS OF
THE AST PHOENIX BALANCED ASSET PORTFOLIO
TO BE HELD ON OCTOBER 11, 1996
The undersigned hereby appoints Cynthia Gorgoretti, Maureen Gulick and
Deirdre Burke and each of them as the proxy or proxies of the undersigned, with
full power of substitution, to vote on behalf of the undersigned all shares of
beneficial interest of the above stated Portfolio of American Skandia Trust (or
"Trust") which the undersigned is entitled to vote at a Special Meeting of the
Shareholders of the AST Phoenix Balanced Asset Portfolio of the Trust to be held
at 10:00 a.m., Eastern Time, on October 11, 1996 at the offices of the Trust at
One Corporate Drive, 10th Floor, Shelton, Connecticut and at any adjournments
thereof, upon the matters described in the accompanying Proxy Statement and upon
any other business that may properly come before the meeting or any adjournment
thereof. Said proxies are directed to vote or to refrain from voting pursuant to
the Proxy Statement as checked on the reverse side upon the following matters.
PLEASE SIGN ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
The undersigned acknowledges receipt with this proxy of a copy of the
Combined Notice of Special Meeting of Shareholders and the Proxy Statement of
the AST Phoenix Balanced Asset Portfolio of the Trust. If a contract is jointly
held, each contract owner named should sign. If only one signs, his or her
signature will be binding. If the contract owner is a trust, custodial account
or other entity, the name of the trust or the custodial account should be
entered and the trustee, custodian, etc. should sign in his or her own name,
indicating that he or she is "Trustee," "Custodian," or other applicable
designation. If the contract owner is a partnership, the partnership should be
entered and the partner should sign in his or her own name, indicating that he
or she is a "Partner."
<PAGE>
PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C>
THE BOARD OF TRUSTEES OF THE TRUST I. PROPOSAL TO APPROVE A NEW INVESTMENT MANAGEMENT
RECOMMENDS VOTING FOR THE FOLLOWING AGREEMENT BETWEEN THE TRUST AND AMERICAN
PROPOSALS: SKANDIA INVESTMENT SERVICES, INCORPORATED
REGARDING MANAGEMENT OF THE AST PHOENIX
THE SHARES REPRESENTED HEREBY WILL BE BALANCED ASSET PORTFOLIO.
VOTED AS INDICATED OR FOR THE PROPOSALS IF
NO CHOICE IS INDICATED. II. PROPOSAL TO APPROVE A NEW SUB-ADVISORY
AGREEMENT BETWEEN AMERICAN SKANDIA INVESTMENT
THIS PROXY IS BEING SOLICITED ON BEHALF OF SERVICES, INCORPORATED AND PUTNAM INVESTMENT
THE BOARD OF TRUSTEES OF THE TRUST. MANAGEMENT, INC. REGARDING INVESTMENT ADVICE TO
THE AST PHOENIX BALANCED ASSET PORTFOLIO.
CONTRACT NUMBER:
III. PROPOSAL TO APPROVE A CHANGE IN THE PORTFOLIO'S
INVESTMENT OBJECTIVE.
IV. PROPOSAL TO APPROVE CHANGES IN THE PORTFOLIO'S
FUNDAMENTAL INVESTMENT RESTRICTIONS.
Please be sure to sign and date this Proxy Approval of Proposals I and II are made contingent upon each other. Each
of Proposals III and IV are made contingent upon approval of Proposals I
and II.
</TABLE>
_________________________ _________________________ RECORD DATE UNITS:
Shareholder sign here Co-owner sign here
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