Investment Company Act No. 811-5186
As filed with the Securities and Exchange Commission on April 7, 1998
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 ss. 240.14a-11(c) or ss. 240.14a-12
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American Skandia Trust
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<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
April 2, 1998
Dear Valued Customer,
As an American Skandia Life Assurance Corporation ("ASLAC") contract owner who
beneficially owns shares of the Federated Utility Income Portfolio (the
"Portfolio") of American Skandia Trust ("AST"), you are cordially invited to a
special meeting of the shareholders of the Portfolio to be held at the offices
of ASLAC, One Corporate Drive, Shelton, CT, on April 29, 1998 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
Neuberger&Berman Management Incorporated 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.
Approval of each proposal is made contingent upon approval of all four
proposals. Therefore, a vote against any proposal will have the effect of a vote
against each other proposal.
If the proposals are approved by the Portfolio's shareholders, the name of the
Portfolio will be changed to the "Neuberger&Berman Mid-Cap Value Portfolio"
effective May 1, 1998.
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 April 28, 1998. The shares that 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,
/s/Gordon C. Boronow
Gordon C. Boronow
President and Deputy Chief Executive 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
FEDERATED UTILITY INCOME PORTFOLIO
To be held
April 29, 1998
To the Shareholders of the Federated Utility Income Portfolio of American
Skandia Trust:
Notice is hereby given that this Special Meeting of Shareholders of the
Federated Utility Income Portfolio (the "Portfolio") of American Skandia Trust
(the "Trust"), will be held at One Corporate Drive, Shelton, Connecticut 06484
on April 29, 1998 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 Neuberger&Berman
Management Incorporated 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 March 9, 1998 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 on
each proposal.
You are cordially invited to attend the Meeting. If you do not expect
to attend, you 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
/s/Eric C. Freed
Eric C. Freed
Secretary
American Skandia Trust
April 2, 1998
PROXY STATEMENT
AMERICAN SKANDIA TRUST
One Corporate Drive
P.O. Box 883
Shelton, Connecticut 06484
SPECIAL MEETING OF SHAREHOLDERS
OF THE FEDERATED UTILITY INCOME PORTFOLIO
OF
AMERICAN SKANDIA TRUST
To be held
April 29, 1998
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 Federated Utility Income Portfolio (the "Portfolio") of the Trust to be held
at One Corporate Drive, Shelton, Connecticut 06484 on April 29, 1998 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 April 7, 1998.
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 the fiscal year ended December 31, 1997, has been
previously sent to shareholders. 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 March 9, 1998 (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: 13,931,709.696. 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 an underlying mutual fund for variable
annuities issued by life insurance companies, including ASLAC, a stock life
insurance company. As of the Record Date, 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
Account B (Class 1 Sub-Accounts), ASLAC Variable Account B (Class 2
Sub-Accounts) and ASLAC Variable Account B (Class 3 Sub-Accounts) (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 Federated Utility Income Sub-account as of the Record Date
(the "Contractowners"). Because Contractowners are indirectly invested in the
Portfolio through their contracts and have the right to instruct ASLAC how to
vote shares of the Portfolio on all matters requiring a shareholder vote,
Contractowners should consider themselves shareholders of the Portfolio for
purposes of this Proxy Statement.
American Skandia Investment Services, Incorporated ("ASISI") is the
investment manager for all the Trust's investment portfolios, including the
Portfolio. ASISI is a wholly-owned subsidiary of American Skandia Investment
Holding Corporation ("ASIHC"). ASIHC is also the owner of all the 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 Skandia Insurance Company Ltd., a Swedish company located at
Sveavagen 44, S-103, Stockholm, Sweden.
Under a Sub-advisory Agreement with ASISI, Federated Investment
Counseling ("Federated") serves as sub-advisor to the Portfolio and, subject to
the supervision and control of ASISI and the Board of Trustees, determines the
securities to be purchased for and sold from the Portfolio. Federated is a
wholly-owned subsidiary of Federated Investors, and both are located at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779.
The Administrator of the Portfolio, and every other portfolio of the
Trust, is PFPC Inc., a Delaware corporation located at 103 Bellevue Parkway,
Wilmington, Delaware 19809.
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 April 27, 1998 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 (collectively,
the "Proposals"). Unless instructions to the contrary are marked, proxies will
be voted FOR each of the Proposals. 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 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 Contract-owners 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 of the Proposals 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 each of Proposals I, II, III and IV is made contingent upon
approval of all Proposals. Therefore, a vote against any of Proposals I, II, III
or IV will have the effect of a vote against each other Proposal.
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. The persons named as proxies will vote those
proxies which they are entitled to vote FOR or AGAINST any such adjournment in
their discretion. 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 the Portfolio commenced operations on May 4, 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,
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-advisor to provide advisory services in
relation to the Portfolio, and delegate to the sub-advisor the duty, among other
things to formulate and implement the Portfolio's investment program, including
the duty to determine what issuers and securities will be purchased for or sold
from the Portfolio.
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, 1993 and revised in certain non-material respects
on May 1, 1996, with Federated, pursuant to which the above duties have been
delegated by the Manager to Federated. Federated has served as sub-advisor to
the Portfolio since the Portfolio commenced operations on May 4, 1993.
The Present Investment Management Agreement and the Present
Sub-Advisory Agreement have been annually 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"), since the Portfolio's inception. The Agreements were reapproved by
the Board most recently on April 11, 1997. The Present Investment Management
Agreement and Present Sub-Advisory Agreement were not, and were not required to
be, approved by the shareholders of the Portfolio after the Portfolio commenced
operations.
The Board of Trustees, through the Manager, has received a tendered
resignation from Federated as sub-advisor to the Portfolio. At a meeting held on
March 2, 1998, the Board of Trustees received a proposal from the Manager to
effect various changes to the investment objective and stated investment
policies and restrictions applicable to the Portfolio, as described in Proposals
III and IV below, and to engage Neuberger & Berman Management Incorporated ("N&B
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 N&B
Management, both of which would become effective May 1, 1998 (or four business
days after the last date on which all Proposals have received shareholder
approval, whichever is later) (such date being hereinafter referred to as the
"Effective Date"). As hereinafter described in greater detail, the terms and
conditions of the New Investment Management Agreement and the New 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 elimination of
provisions in the Present Investment Management Agreement for reimbursement of
certain of the Portfolio's normal operating expenses by the Manager, the
effective date, the identity of the sub-advisor, and a change in the name of the
Portfolio to the "Neuberger & Berman Mid-Cap Value Portfolio." In addition,
certain clarifying changes that are not believed to be material have been made
to the New Sub-Advisory Agreement.
As hereinafter described in greater detail, Federated is a Delaware
Trust and a wholly owned subsidiary of Federated Investors. Federated and other
subsidiaries of Federated Investors serve as investment advisers to a number of
investment companies and private accounts. At December 31, 1997 Federated and
its affiliates managed or administered assets in excess of $120 billion.
In support of its recommendation to engage N&B Management as
sub-advisor to the Portfolio, the Manager informed the Board of Trustees of its
belief that, based in part upon its discussions with Federated, implementation
of a revised investment objective and of revised investment policies and
restrictions would be desirable in light of fundamental changes in securities
issued by utilities caused by changes in the utility sector itself. The Manager
also expressed the belief that the appointment of N&B Management would
facilitate the formulation and implementation of an appropriate investment
program to pursue the Portfolio's revised investment objective. In the opinion
of the Manager, engagement of N&B Management as sub-advisor to the Portfolio
would also assist in efforts to increase the Portfolio's net assets.
On March 2, 1998, the Board of Trustees, including a majority of the
Independent Trustees, gave preliminary approval to the New Investment Management
Agreement and the New Sub-Advisory Agreement, each effective on the Effective
Date (as defined earlier), and authorized the submission of the Proposals for
shareholder approval and the preparation of this proxy statement. It is
anticipated that formal approval of the New Investment Management Agreement and
the New Sub-Advisory Agreement by the Board of Trustees will take place at a
meeting scheduled to be held on April 8, 1998. At such meeting, Management will
recommend that the Board of Trustees also approve a change in the name of the
Portfolio to the "Neuberger & Berman Mid-Cap Value Portfolio," subject to
shareholder approval of all of the Proposals. Subject to shareholder approval of
each of the Proposals, the Present Investment Management Agreement and the
Present Sub-Advisory Agreement will be terminated as of the opening of business
on the Effective Date.
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, at a minimum, with 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-advisor 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 $50
million of the Portfolio's average daily net assets, plus .60% of the
Portfolio's average daily net assets in excess of $50 million. Under the terms
of the Present Investment Management Agreement, the Manager has agreed to
reimburse the Portfolio for any fiscal year in order to prevent the total of all
ordinary business expenses of the Portfolio for such fiscal year, including all
management and administration fees, but excluding taxes, interest, brokerage
commissions and fees and extraordinary expenses, such as litigation, from
exceeding 1.25% of the Portfolio's average daily net assets (such agreement as
set forth in the Present Investment Management Agreement being hereinafter
referred to as the "Contractual Expense Reimbursement Provision").
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 by its terms will terminate
automatically if not reapproved annually or in the event of its "assignment" (as
defined under the Investment Company Act).
Subject to shareholder approval of each of the Proposals, the Present
Investment Management Agreement will be terminated as of the opening of business
on the Effective Date (as defined earlier). 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 will
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, elimination of the Contractual Expense Reimbursement
Provision, the effective date, and the name of the Portfolio. Although the New
Investment Management Agreement does not include the Contractual Expense
Reimbursement Provision, the Manager has voluntarily undertaken to reimburse the
Portfolio for any fiscal year in order to prevent Portfolio expenses which were
subject to the Contractual Expense Reimbursement Provision from exceeding 1.25%
of the average daily net assets of the Portfolio (such voluntary undertaking
being hereinafter referred to as the "Voluntary Expense Reimbursement
Agreement"). The Manager may terminate the Voluntary Expense Reimbursement
Agreement at any time. 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
.90% of the portion of the average daily net assets of the Portfolio not in
excess of $1 billion, plus .85% of the portion of the Portfolio's average daily
net assets over $1 billion.
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, 1997, 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 .65% .90%
Other Expenses .25% .25%
Total Portfolio Operating Expenses .90% 1.15%
</TABLE>
<PAGE>
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: 9 29 50 111
Pro-Forma Expense Examples: 12 37 64 140
</TABLE>
For the fiscal year ended December 31, 1997, the amount of the
investment management fee paid by the Trust to the Manager for services rendered
under the Present Investment Management Agreement was $886,649. If the New
Investment Management Agreement had been in effect for the fiscal year ended
December 31, 1997, 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 $1,217,473, an increase of 37.3% above the actual
amount paid.
If the New Investment Management Agreement is approved by the
shareholders of the Portfolio (and each of Proposals II, III and IV is
approved), it will become effective on the Effective Date (as defined earlier).
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
automatically if not reapproved annually or 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 advisor with the Securities
and Exchange Commission pursuant to the Investment Advisers Act of 1940, as
amended. At December 31, 1997 the Manager served as investment adviser to each
of the twenty-nine portfolios of the Trust. At December 31, 1997, the Manager
also served as investment advisor to five investment portfolios of American
Skandia Advisor Funds Inc. ("ASAF") an open-end management investment company,
and to each investment portfolio of American Skandia Master Trust ("ASMT") an
open-end management investment company comprised of five diversified investment
portfolios. Five additional ASAF portfolios invest all of their investable
assets in corresponding portfolios of ASMT with identical investment objectives,
policies and limitations and therefore do not require investment advisors. The
principal executive officer of the Manager is Jan R. Carendi, who is also a
member of the Board of Trustees of the Trust and 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 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 on the
following page:
<PAGE>
<TABLE>
<CAPTION>
Name and Position with ASISI Principal Occupation and Address
<S> <C> <C> <C>
Wade A. Dokken President and Chief Marketing Officer
Chairman, Deputy Chief Executive Officer American Skandia Marketing, Incorporated
and Director One Corporate Drive, Shelton, CT 06484
President and Chief Operating Officer
Gordon C. Boronow* American Skandia Life Assurance Corporation
Thomas M. Mazzaferro* Executive Vice President and Chief Financial Officer
President and American Skandia Life Assurance Corporation
Chief Financial Officer and Director One Corporate Drive, Shelton, CT 06484
John Birch Chief Operating Officer
Vice President American Skandia Investment Services, Inc.
One Corporate Drive, Shelton, CT 06848
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
Richard G. Davy, Jr.* Vice President, Mutual Fund Operations
Vice President, Mutual Fund Operations American Skandia Investment Services, Incorporated
and Director One Corporate Drive, Shelton, CT 06484
Anders O. Soderstrom President and Chief Information Officer
Executive Vice President and Chief Information Officer American Skandia Information Services
and Technology Corporation
One Corporate Drive, Shelton, CT 06484
C. Ake Svensson Vice President, Corporate Controller & Treasurer
Treasurer American Skandia Investment Holding Corporation
One Corporate Drive, Shelton, CT 06484
</TABLE>
*Individuals who are also Trustees or officers of the Trust.
The Evaluation by the Board of Trustees
In evaluating the New Investment Management Agreement, the Board of
Trustees reviewed materials furnished by the Manager and N&B Management. These
materials included financial statements and information regarding the Manager
and N&B 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 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 investment objectives comparable to that proposed in Proposal III published
by widely recognized industry authorities 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 when compared to fee rates
applicable to mutual funds having investment objectives comparable to that
proposed in Proposal III; (3) the terms of the New Investment Management
Agreement will not change materially from those of the Present Investment
Management Agreement, except for the effective date, the name of the Portfolio,
the increased investment management fee rate and the elimination of the
Contractual Expense Reimbursement Provision; and (4) the Manager's obligations
under the Voluntary Expense Reimbursement Agreement will be the same as its
obligations under the Contractual Expense Reimbursement Provision except for the
Manager's right to terminate the Voluntary Expense Reimbursement Agreement at
any time. (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 N&B 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 17.4% higher than
that realized under the present fee structure for the fiscal year ending
December 31, 1997, 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 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 as very important
the Manager's present distribution and marketing strategies and the Manager's
commitment to devote appropriate resources to develop new markets and attract
additional assets for the Portfolio in an increasingly competitive environment.
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 following implementation of the changes in the
Portfolio's investment objective and stated investment policies and restrictions
contemplated by Proposals III and IV. 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.
This Proposal I is made contingent upon shareholder approval of
Proposals II, III and IV. If any of the Proposals does not receive shareholder
approval, the Present Investment Management Agreement will remain in effect
subject to its terms.
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 NEUBERGER & BERMAN MANAGEMENT INCORPORATED
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.
Federated has served as sub-advisor to the Portfolio since the
Portfolio commenced operations on May 4, 1993. Under the terms of the Present
Sub-Advisory Agreement, Federated 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, Federated, in its discretion,
determines and selects the securities to be purchased for and sold from the
Portfolio and places orders with and gives instructions to brokers, dealers and
others to cause such transactions to be executed.
The Present Sub-Advisory Agreement requires Federated to use its best
efforts in the performance of its services under the Present Sub-Advisory
Agreement. However, the Agreement provides that, in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations under the Present Sub-Advisory Agreement, Federated 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 under the Present Sub-Advisory
Agreement.
The Manager is responsible for payment of Federated's compensation
under the Present Sub-Advisory Agreement. Federated'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 Federated at the annual rate of .50% of the portion of the
Portfolio's average daily net assets not in excess of $25 million, plus .35% of
the portion of the Portfolio's average daily net assets in excess of $25 million
but not in excess of $50 million, plus .25% of the portion of the Portfolio's
average daily net assets in excess of $50 million. In computing the fee to be
paid to Federated, the net asset value of the Portfolio is valued as set forth
in the current registration statement of the Trust.
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 Federated has received prior written notice
thereof) upon termination of the Present Investment Management Agreement.
Subject to shareholder approval of each of the Proposals, the Present
Sub-Advisory Agreement will be terminated by the resignation of Federated as
sub-advisor to the Portfolio as of the opening of business on the Effective Date
(as defined earlier). The Manager and Federated have mutually agreed that it
would be in the interests of the Portfolio's shareholders for the Manager to
accept the resignation of Federated as sub-advisor 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 effect the changes to the Portfolio's investment
objective and investment policies and restrictions contemplated by Proposals III
and IV and, if adopted, to enter into the New Sub-Advisory Agreement described
below. If the Present Sub-Advisory Agreement is terminated, Federated's
compensation thereunder will be prorated to the date of termination.
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
the name of the Portfolio. In addition, certain clarifying changes that are not
believed to be material have been made to the New Sub-Advisory Agreement. 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 N&B
Management a fee at the annual rate of .50% of the portion of the Portfolio's
average daily net assets not in excess of $750 million, plus .45% of the portion
of the Portfolio's average daily net assets over $750 million but not in excess
of $1 billion, plus .40% of the portion of the Portfolio's average daily net
assets in excess of $1 billion. In computing the fee to be paid to N&B
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 will be prorated to the date of
termination.
For the fiscal year ended December 31, 1997, the amount of the
sub-advisory fee paid by the Manager to Federated for services rendered under
the Present Sub-Advisory Agreement was $425,687. If the New Sub-Advisory
Agreement had been effect for the year ending December 31, 1997, the amount of
the sub-advisory fee paid by the Manager to N&B Management for services rendered
under the New Sub-Advisory Agreement would have been $676,374, an increase of
58.9% from the actual amount paid to Federated during such period.
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 ended December 31, 1997, 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 (and each of Proposals I, III and IV is approved), it will become
effective on the Effective Date (as defined earlier). 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 N&B
Management has received prior written notice thereof) upon termination of the
New Investment Management Agreement.
The Manager believes that implementation of changes to the investment
objective and to the stated investment policies and restrictions of the
Portfolio as described in Proposals III and IV together with the regard for the
high quality of the investment advisory capabilities of N&B Management will
facilitate efforts to increase the Portfolio's assets with possible 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-Advisor
N&B Management and its predecessor firms and affiliates have
specialized in the management of investment companies since 1950. N&B Management
has executive offices at 605 Third Avenue, New York, New York 10158-0180. All of
the voting stock of N&B Management is owned by individuals who are principals of
Neuberger & Berman, LLC ("Neuberger & Berman"). The principals having the three
largest principal interests in Neuberger & Berman are Robert Appel, Dietrich
Weismann and Marvin C. Schwartz. Neuberger & Berman, a member firm of the New
York Stock Exchange, Inc. and other principal exchanges, acts as the principal
broker in the purchase and sale of securities and the sale of covered call
options for portfolios managed by N&B Management and provides N&B Management
with certain assistance in the management of portfolios without added cost to
such portfolios. Neuberger & Berman and its affiliates, including N&B
Management, manage securities accounts, including mutual funds, that had
approximately $52.9 billion in assets as of December 31, 1997.
The principal executive officer of N&B Management is Stanley Egener and its
directors are Richard A. Cantor, Stanley Egener, Theodore P. Giuliano, Michael
M. Kassen, Irwin Lainoff and Lawrence Zicklin. The principal occupations of
Messrs. Cantor, Egener, Giuliano, Kassen, Lainoff and Zicklin are as principals
of Neuberger & Berman (in the case of Mr. Egener, also as principal executive
officer of N&B Management).
N& B Management acts as investment manager to various registered
investment companies, some series of which have investment objectives and
programs similar to the proposed investment objective and program for the
Portfolio set forth in Proposal III of this Proxy Statement (collectively, the
"Comparable N&B Funds"). Each of the Comparable N&B Funds is a "master fund" in
which one or more "feeder funds", having identical investment objectives and
policies as their corresponding "master funds", invest all their assets.
Neuberger&Berman serves as sub-advisor for all such "master funds", for which it
is compensated by N&B Management based on direct and indirect costs. As
investment manager to the Comparable N&B Funds, N&B Management performs certain
administrative and other duties, which it will not be required to perform for
the Portfolio under the New Sub-advisory Agreement. For each Comparable N & B
Fund, the chart below lists the net assets at December 31, 1997, as well as the
current management fee rate payable to N&B Management:
<TABLE>
<CAPTION>
Net Assets
Comparable N & B Fund at December 31, 1997 Fee Rate
--------------------- -------------------- --------
<S> <C> <C> <C>
Neuberger&Berman Partners $3,830,066,838 0.55% of the first $250 million of the
Portfolio (a series of Equity Portfolio's average daily net assets, 0.525% of
Managers Trust) the next $250 million, 0.50% of the next $250
million, 0.475% of the next $250 million, 0.45%
of the next $500 million, and 0.425% of the average
daily net assets in excess of $1.5 billion.
AMT Partners Investments (a series $1,626,673,233 0.55% of the first $250 million of the Series'
of Advisers Managers Trust) average daily net assets, 0.525% of the next
$250 million, 0.50% of the next $250 million,
0.475% of the next $250 million, 0.45% of the
next $500 million, and 0.425% of average daily
net assets in excess of $1.5 billion.
All Comparable N & B Funds $5,456,740,071
</TABLE>
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 N&B Management. These materials
included financial statements and information regarding the Manager and N&B
Management and their respective personnel and operations. Consideration was
given to the increased fee rates payable by the Portfolio 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 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 investment objectives comparable
to that proposed in Proposal III published by widely recognized industry
authorities and to potential indirect benefits in connection with the Portfolio
and its investment operations, including any which may arise in connection with
brokerage transactions.
Neuberger & Berman will act as the Portfolio's principal broker in the
purchase and sale of portfolio securities and the sale of covered options and
will receive transactional fees from the Portfolio in connection with the
transactions that it effects. In order to implement the change in investment
objective proposed in Proposal III, it will be necessary to effect a substantial
restructuring of the investment portfolio of the Portfolio. Neuberger & Berman
will receive transactional fees from the Portfolio in connection with such
restructuring, the aggregate amount of which is not presently determinable but
may be substantial.
In evaluating the New Sub-Advisory Agreement, the Board of Trustees
considered that (1) the reputation and standing of N&B Management in the U.S.
mutual fund industry is generally excellent; (2) the services to be delivered by
N&B 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 for
funds with investment objectives comparable to that proposed in Proposal III and
accurately reflects the high quality of services expected under the New
Sub-Advisory Agreement; (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, the name of
the Portfolio, and the increased sub-advisory fee rate; (5) N&B Management has
significant experience in managing investment portfolios with investment
objectives comparable to that proposed in Proposal III (the "Comparable N & B
Funds," as defined earlier); and (6) N&B Management managed combined assets of
the Comparable N & B Funds totaling approximately $5.5 billion as at December
31, 1997. The Board of Trustees also received assurances that N&B 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 N&B Management as sub-advisor to the Portfolio likely
would offer the Portfolio continued access to effective management and advisory
services and capabilities following implementation of the changes in the
Portfolio's investment objective and stated investment policies and restrictions
contemplated by Proposals III and IV. 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.
Change in Portfolio Name
If each of the Proposals is approved, as of the Effective Date (as
defined earlier), the name of the Portfolio will be changed from the "Federated
Utility Income Portfolio" to the "Neuberger & Berman Mid-Cap Value Portfolio,"
and the New Investment Management Agreement and the New Sub-Advisory Agreement
will become effective.
This Proposal II is made contingent upon shareholder approval of each
of Proposals I, III and IV. If any of the Proposals is not approved, the Present
Sub-Advisory Agreement will continue in effect subject to its terms.
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 (the "Present
Investment Objective"), which may not be changed without approval of the
shareholders of the Portfolio, is as follows:
The investment objective of the Portfolio is to achieve high current
income and moderate capital appreciation by investing primarily in
equity and debt securities of utility companies.
The Board of Trustees recommends that the shareholders adopt the
following fundamental investment objective for the Portfolio (the "Proposed
Investment Objective"), which, if approved, may not be changed without
subsequent approval of the shareholders of the Portfolio:
The investment objective of the Portfolio is to seek capital growth.
The Portfolio pursues the Present Investment Objective by investing in
equity and debt securities of utility companies that produce, transmit or
distribute gas and electric energy as well as those companies that provide
communications facilities such as telephone and telegraph companies. The
Portfolio is required to invest at least 65% of its total assets in securities
of utility companies and invests primarily in common stocks of utilities. Common
stocks are selected by the Portfolio's sub-advisor on the basis of traditional
research techniques, including assessment of earnings and dividend growth
prospects and the risk and volatility of the company's industry as well as other
factors such as product position, market share or profitability. The Portfolio
may also invest in preferred stocks, convertible securities, corporate bonds,
notes and warrants of these companies and in cash, U.S. government securities
and money market instruments in proportions determined by the Sub-advisor.
Certain risks have been and continue to be associated with the utility industry,
including difficulty in earning adequate returns on investment despite frequent
rate increases, restrictions on operations and increased costs and delays due to
government regulations, building or construction delays, environmental
regulations, difficulty of the capital markets in absorbing utility debt and
equity securities and difficulties in obtaining fuel at reasonable prices.
Investments in utility fixed income securities have involved credit risk which,
to date, has been reduced by the Portfolio's sub-advisor through credit
research. Notwithstanding these various risks, investments in utility securities
have been regarded by investors as predictable and dependable sources of
dividend and interest income involving reduced risk to capital, in part, because
of the benefits resulting from the exclusive or nearly exclusive nature of the
franchises held by utilities within their respective service territories and the
general focus of such organizations upon their heavily regulated utility
business activities.
Based in part upon discussions with Federated, the Manager has informed
the Board of its belief that fundamental changes have occurred in the utility
industry and, consequently, in the securities of public utilities.
In this regard, legislative or regulatory initiatives have been
undertaken in certain states of the U.S. to increase competition among utilities
for customers and otherwise to reduce regulation of utility companies' business
activities. In the opinion of the Manager, similar initiatives are likely to be
undertaken in other states and to lead to increasing rate competition among
utilities. The Manager further believes that utility companies will respond to
these regulatory and competitive developments, among other things, by
diversifying into non-utility activities and products with varying degrees of
success. In the Manager's opinion, these various factors over time will combine
to affect adversely the predictability and dependability of dividend and
interest income and the relative safety of capital which have been associated
with investments in utility securities and efforts to achieve the Portfolio's
current investment objective of seeking high current income, as a consequence,
will become increasingly difficult. The Manager believes that investors
ultimately will no longer consider the utility sector as an attractive asset
class. Indeed, industry sources indicate that the comparative rate of asset
inflows into utility funds compared to bond and other types of equity funds has
declined substantially in recent years. Although the Portfolio realized net
purchases of $44 million in 1997, the Manager believes that the Portfolio's
asset growth in future years would not keep pace with other Trust portfolios if
ASLAC continues to offer the Portfolio as an investment option for its variable
insurance products.
ASLAC has informed the Board that, effective May 1, 1998, it no longer
intends to offer the Portfolio with the Present Investment Objective as an
investment option for its variable annuity and other investment oriented
insurance products thus precluding future asset growth through additional
assets.
For the above reasons, the Manager and the Board believe that it would
be in the interests of the stockholders to approve the Proposed Investment
Objective. The investment program formulated by N&B Management and described in
this Proposal III and Proposal IV will be designed to increase capital with
reasonable risk. The investment program contemplated by the Proposed Investment
Objective would allow the Portfolio to diversify its holdings beyond the
required holdings of utility securities and without regard to the receipt of
high current income, thereby providing additional flexibility to pursue
investment opportunities in the other sectors with the potential for
appreciation and reducing risks associated with investments concentrated in a
particular sector.
In order to implement the Proposed Investment Objective, it will be
necessary to effect a substantial restructuring of the investment portfolio of
the Portfolio. Such restructuring will entail transactional costs, the aggregate
amounts of which cannot be determined at this time but which may be substantial.
The restructuring will be conducted in an orderly manner and, during the
restructuring, the Portfolio's holdings may continue to include certain
securities that were held when the Portfolio was subject to the Present
Investment Objective.
In seeking the Proposed Investment Objective, the Portfolio will invest
principally in common stocks of medium to large capitalization companies using a
value-oriented investment approach. A value-oriented portfolio manager buys
stocks that are selling for less than what the manager believes they are worth,
including stocks that are currently under-researched or temporarily out of
favor. N&B Management believes that undervalued securities are more likely to
appreciate in price and be subject to less risk of price decline than securities
whose market prices have already reached their perceived economic value. This
approach also contemplates selling securities when they are considered to have
reached this potential. The Portfolio may invest in various types of securities
or negotiable instruments, including cash or money market instruments.
In seeking the Proposed Investment Objective, N&B Management will have
the ability to employ many of the investment methods, with the associated risks,
described in the sections of the registration statement for the Trust (the
"Registration Statement") applicable to the Portfolio. In addition, N&B
Management has informed the Manager that the Portfolio may make additional types
of investments and engage in additional portfolio management techniques beyond
those currently described in the Registration Statement as applicable to the
Portfolio under the Present Investment Objective, subject to the investment
policies and restrictions applicable to the Portfolio and to any guidelines
adopted by the Board of Trustees. The risk associated with investments in the
Portfolio if this Proposal III is approved and implemented will depend upon the
investments made on its behalf by N&B Management. Although the Portfolio
ordinarily will invest primarily in common stocks, when market conditions
warrant it may invest in preferred stocks, securities convertible into or
exchangeable for common stocks, U.S. Government and agency securities, debt
securities, or money market instruments, or may retain assets in cash or cash
equivalents. The Portfolio may not necessarily buy any or all of the types of
securities or use any or all of the techniques that are described in the
Registration Statement or herein. As discussed in more detail below, special
risk factors apply to the additional types of investments that may be made and
additional techniques that may be utilized by the Portfolio in pursuing the
Proposed Investment Objective, including investments in foreign securities,
options contracts, zero coupon bonds, and debt securities rated below investment
grade. Among the techniques which may be used by N&B Management in pursuing the
Proposed Investment Objective and which are not available in pursuing the
Present Investment Objective or which are available but are subject to
limitations are the following:
Short-Term Trading. While the sub-advisor does not purchase securities
with the intention of profiting from short-term trading, the Portfolio may sell
portfolio securities when N&B Management believes that such action is advisable.
Therefore, the Portfolio may have higher portfolio turnover than other mutual
funds with comparable investment objectives. High turnover involves
correspondingly greater brokerage commissions and other transaction costs.
Foreign Currency Transactions. The Portfolio may enter into forward
contracts in order to protect against adverse changes in foreign currency
exchange rates, to facilitate transactions in foreign securities and to
repatriate dividend or interest income received in foreign currencies. The
Portfolio may enter into contracts to purchase foreign currencies to protect
against an anticipated rise in the U.S. dollar price of securities it intends to
purchase. The Portfolio may also enter into contracts to sell foreign currencies
to protect against a decline in value of its foreign currency denominated
portfolio securities due to a decline in the value of foreign currencies against
the U.S. dollar.
If the Portfolio enters into a forward contract to sell foreign
currency, it may be required to place cash, fixed income or equity securities in
a segregated account in an amount equal to the value of the Portfolio's total
assets committed to the consummation of the forward contract. Although these
contracts can protect the Portfolio from adverse exchange rates, they will
involve risk of loss if N&B Management fails to predict foreign currency values
correctly.
Call Options. The Portfolio may try to reduce the risk of securities
price changes (hedge) or generate income by writing (selling) covered call
options against securities held in its portfolio having a market value not
exceeding 10% of its net assets and may purchase call options in related closing
transactions. The purchaser of a call option acquires the right to buy a
portfolio security at a fixed price during a specified period. The maximum price
the seller may realize on the security during the option period is the fixed
price. The seller continues to bear the risk of a decline in the security's
price, although the risk is reduced by the premium received for writing the
option.
The writing of options is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions including transactional expense, price
volatility and a high degree of leverage. The writing of options could result in
significant increases in the Portfolio's turnover rate. The writing of options
also could result in the inability of the Portfolio to purchase or sell a
security at a time that would otherwise be favorable for it to do so, or the
need for the Portfolio to sell a security at a disadvantageous time, due to its
need to maintain "cover" or to segregate securities in connection with its use
of options. Options are considered derivatives.
In pursuing the Present Investment Objective, the Portfolio reserves
the right to write call options on all or a portion of its entire investment
portfolio but will not write such options on more than 25% of its total assets
unless a higher limit is authorized by the Board of Trustees.
The call options written by the Portfolio in pursuing the Present
Investment Objective must be listed on a recognized options exchange. Options
are traded both on national securities exchanges and in the over-the-counter
("OTC") market. If this Proposal III is approved and implemented, call options
may be written on a recognized exchange or in the OTC market. Exchange-traded
options are issued by a clearing organization affiliated with the exchange on
which the option is listed; the clearing organization in effect guarantees
completion of every exchange-traded option. In contrast, OTC options are
contracts between the Portfolio and its counter-party with no clearing
organization guarantee. Thus, when the Portfolio sells or purchases an OTC
option, it generally will be able to "close out" the option prior to its
expiration only by entering into a "closing purchase transaction" with the
dealer to whom or from whom the Portfolio originally sold or purchased the
option. N&B Management intends to monitor the creditworthiness of dealers with
which the Portfolio may engage in OTC options, and will limit counterparties in
such transactions to dealers with a net worth of at least $20 million as
reported in their latest financial statements.
When-Issued Securities. In a when-issued transaction, the Portfolio
commits to purchase securities in order to secure an advantageous price and
yield at the time of the commitment and pays for the securities when they are
delivered at a future date (generally within two months). If the seller fails to
complete the sale, the Portfolio may lose the opportunity to obtain a favorable
price and yield. When-issued securities may decline or increase in value during
the period from the Portfolio's investment commitment to the settlement of the
purchase, which may magnify fluctuation in the Portfolio's net asset value.
Under the Present Investment Objective, Federated's stated intention is not to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of the Portfolio's
assets. N&B Management will not be subject to this stated intention in pursuing
the Proposed Investment Objective.
Foreign Securities. The Portfolio may invest in U.S. dollar-denominated
foreign securities. Foreign securities are those of issuers organized and doing
business principally outside the U.S., including non-U.S. governments, their
agencies, and instrumentalities. The Portfolio may invest in foreign securities
denominated in or indexed to foreign currencies, which may also be affected by
the fluctuation of the foreign currencies relative to the U.S. dollar,
irrespective of the performance of the underlying investment. N&B Management
will consider these factors in making investments for the Portfolio. The
Portfolio may invest in U.S. dollar-denominated and non-U.S. dollar-denominated
corporate and government debt securities of foreign issuers. In addition, the
Portfolio may enter into forward foreign currency contracts (agreements to
exchange one currency for another at a future date) to manage currency risks and
to facilitate transactions in foreign securities.
The Portfolio may invest in ADRs, EDRs, GDRs, and IDRs. ADRs (sponsored or
unsponsored) are receipts typically issued by a U.S. bank or trust company
evidencing its ownership of the underlying foreign securities. Most ADRs are
denominated in U.S. dollars and are traded on a U.S. stock exchange. Issuers of
the securities underlying unsponsored ADRs are not contractually obligated to
disclose material information in the U.S. and, therefore, there may not be a
correlation between such information and the market value of the unsponsored
ADR. EDRs and IDRs are receipts typically issued by a European bank or trust
company evidencing its ownership of the underlying foreign securities. GDRs are
receipts issued by either a U.S. or non-U.S. banking institution evidencing its
ownership of the underlying foreign securities and are often denominated in U.S.
dollars.
Investments in foreign securities could be affected by factors
generally not thought to be present in the U.S. Such factors include, but are
not limited to, varying custody, brokerage and settlement practices; difficulty
in pricing some foreign securities; and potentially adverse local, political
economic, social, or diplomatic developments, the investment significance of
which may be difficult to discern.
In addition, the risks of investing in securities of foreign companies
and governments include changes in currency exchange rates and currency exchange
control regulations or other foreign or U.S. laws or restrictions applicable to
such investments or devaluations of foreign currencies. A decline in the
exchange rate would reduce the value of certain portfolio securities
irrespective of the performance of the underlying investment. Investments in
depositary receipts (whether or not denominated in U.S. Dollars) may be subject
to exchange controls and changes in rates of exchange with the U.S. dollar
because the underlying security is usually denominated in foreign currency. All
of the foregoing risks may be intensified in emerging industrialized and less
developed countries.
In pursuing the Present Investment Objective, the Portfolio does not
invest more than 15% of total assets in securities of foreign issuers not listed
on recognized exchanges and, as a matter of practice, the Portfolio does not
invest in the securities of a foreign issuer if risk in the form of
nationalization, confiscation, domestic marketability or other national or
international restrictions appears to the Portfolio's sub-advisor to be
substantial. If this Proposal III is approved and implemented, the Portfolio may
only invest up to 10% of the value of its total assets, measured at the time of
investment, in foreign securities. The 10% limitation will not apply with
respect to foreign securities that are denominated in U.S. dollars.
Fixed Income Securities. In seeking the Proposed Investment Objective,
the Portfolio may invest in fixed income or debt securities, the values of which
are likely to decline in times of rising interest rates and rise in times of
falling interest rates. In general, the longer the maturity of a fixed income
security, the more pronounced is the effect of a change in interest rates on the
value of the security. High quality debt securities are securities that have
received a rating from at least one nationally recognized statistical rating
organization ("NRSRO"), such as Standard & Poor's Rating Group ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), Fitch Investors Services, or Duff & Phelps
Credit Rating Co. in one of the two highest rating categories (the highest
category in the case of commercial paper) or, if not rated by any NRSRO, such as
U.S. Government and Agency securities, have been determined by the sub-advisor
to be of comparable quality. Investment grade debt securities are those
receiving ratings from at least one NRSRO in one of the four highest rating
categories, or, if unrated by any NRSRO, deemed comparable by the Sub-advisor to
such rated securities. Securities rated by Moody's in its fourth highest
category (Baa) may have speculative characteristics; a change in economic
factors could lead to a weakened capacity of the issuer to repay.
Lower-Rated Fixed Income Securities. Debt securities rated lower than
Baa by Moody's or BBB by S&P and comparable unrated securities are considered to
be below investment grade. In pursuing the Proposed Investment Objective, the
Portfolio may invest up to 15% of its net assets, measured at the time of
investment, in debt securities that are rated below investment grade or
comparable unrated securities. Securities rated below investment grade ("junk
bonds") are deemed by Moody's and S&P (or foreign statistical rating
organizations) to be predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of the
obligations. While such securities may be considered predominantly speculative,
as debt securities, they generally have priority over equity securities of the
same issuer and are generally better secured.
Debt securities in the lowest rating categories may involve a
substantial risk of default or may be in default. Changes in economic conditions
or developments regarding the individual issuer are more likely to cause price
volatility and weaken the capacity of the issuer of such securities to make
principal and interest payments than is the case for higher-grade debt
securities. An economic downturn affecting the issuer may result in an increased
incidence of default. In the case of lower-rated securities structured as zero
coupon or pay-in-kind securities, their market prices are affected to a greater
extent by interest rate changes, and therefore tend to be more volatile than
securities that pay interest periodically and in cash. N&B Management will
invest in such securities only when it concludes that the anticipated return to
the Portfolio on such an investment warrants exposure to the additional level of
risk.
Zero Coupon Securities. Zero coupon securities do not pay interest
currently; instead, they are sold at a discount from their face value and are
redeemed at face value when they mature. Because zero coupon bonds do not pay
current income, their prices can be very volatile when interest rates change.
U.S. Government and Agency Securities. U.S. Government securities are
obligations of the U.S. Treasury backed by the full faith and credit of the
United States. U.S. Government agency securities are issued or guaranteed by
U.S. Government agencies, instrumentalities, or other U.S. Government-sponsored
enterprises, such as the Government National Mortgage Association ("GNMA"),
Fannie Mae, formerly Federal National Mortgage Association ("FNMA"), Federal
Home Loan Mortgage Corporation ("FHLMC"), Student Loan Marketing Association
("SLMA"), Tennessee Valley Authority, and various federally chartered or
sponsored banks. Agency securities may be backed by the full faith and credit of
the United States, the issuer's ability to borrow from the U.S. Treasury,
subject to the Treasury's discretion in certain cases, or only by the credit of
the issuer. U. S. Government and agency securities include certain
mortgage-backed securities. The market prices of U.S. Government and agency
securities are not guaranteed by the government and generally fluctuate
inversely with changing interest rates.
-------------------------
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The Manager has expressed its belief to the Board of Trustees that
adoption of the Proposed Investment Objective is in the interests of the
shareholders of the Portfolio.
The Board believes that adoption of the Proposed Investment Objective,
coupled with the excellent reputation and performance history of N&B Management,
will be more likely to attract additional assets to the Portfolio with
consequent beneficial effects on Portfolio and Trust expenses. ASLAC has advised
the Board that it will continue to offer the Portfolio as an investment option
for its variable annuity and other investment oriented insurance products if the
Proposed Investment Objective is approved by shareholders of the Portfolio and
implemented.
This Proposal III is made contingent upon shareholder approval of each
of Proposals I, II and IV. If any one of the Proposals is not approved, the
Present 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, including the elimination of certain restrictions. Generally, the
purposes behind these proposed changes are (i) to conform the fundamental
investment restrictions to the Proposed Investment Objective and the investment
program which has been formulated by N&B Management for the Portfolio; (ii) to
increase the Portfolio's investment flexibility; and (iii) to conform the
fundamental restrictions applicable to the Portfolio to those which are
applicable to other portfolios of the Trust.
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 N&B 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 the Proposed 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, certain of the prohibitions underlying these investment
restrictions reflect the requirements of the Investment Company Act and, in the
absence of such restrictions, would still be applicable to the Portfolio. If the
Shareholders of the Portfolio approve this Proposal IV and the proposed changes
are implemented, 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.
If this Proposal IV is approved by the shareholders, the Portfolio will
be subject to the following fundamental investment restrictions (collectively,
the "Continuing Fundamental Investment Restrictions"), which are substantially
identical to those applicable to certain other portfolios of the Trust and are
similar to fundamental restrictions currently applicable to the Portfolio:
1. The Portfolio may not issue senior securities, except as
permitted under the Investment Company Act.
2. The Portfolio may not borrow money, except that the
Portfolio may (i) borrow money for non-leveraging, temporary or emergency
purposes, and (ii) engage in reverse repurchase agreements and make other
investments or engage in other transactions, which may involve a borrowing, in a
manner consistent with the Portfolio's investment objective and policies;
provided that the combination of (i) and (ii) shall not exceed 33 1/3% of the
value of the Portfolio's assets (including the amount borrowed) less liabilities
(other than borrowings) or such other percentage permitted by law. Any
borrowings which come to exceed this amount will be reduced in accordance with
applicable law. Subject to the above limitations, the Portfolio may borrow from
banks or other persons to the extent permitted by applicable law.
3. The Portfolio may not underwrite securities issued by other
persons, except to the extent that the Portfolio may be deemed to be an
underwriter (within the meaning of the Securities Act of 1933) in connection
with the purchase and sale of portfolio securities.
4. The Portfolio may not purchase or sell real estate unless
acquired as a result of the ownership of securities or other instruments;
provided that this restriction shall not prohibit a Portfolio from investing in
securities or other instruments backed by real estate or in securities of
companies engaged in the real estate business.
5. The Portfolio may not purchase or sell physical commodities
unless acquired as a result of the ownership of securities or instruments;
provided that this restriction shall not prohibit the Portfolio from (i)
engaging in permissible options and futures transactions and forward foreign
currency contracts in accordance with the Portfolio's investment policies, or
(ii) investing in securities of any kind.
6. The Portfolio may not make loans, except that the Portfolio
may (i) lend portfolio securities in accordance with the Portfolio's investment
policies in amounts up to 33 1/3% of the total assets of the Portfolio taken at
market value, (ii) purchase money market securities and enter into repurchase
agreements, and (iii) acquire publicly distributed or privately placed debt
securities.
7. The Portfolio may not purchase any security if, as a
result, more than 25% of the value of the Portfolio's assets would be invested
in the securities of issuers having their principal business activities in the
same industry; provided that this restriction does not apply to investments in
obligations issued or guaranteed by the U.S. Government or any of its agencies
or instrumentalities (or repurchase agreements with respect thereto).
8. The Portfolio may not, with respect to 75% of the value of
its total assets, purchase the securities of any issuer (other than securities
issued or guaranteed by the U. S. Government or any of its agencies or
instrumentalities) if, as a result, (i) more that 5% of the value of the
Portfolio's total assets would be invested in the securities of such issuer, or
(ii) more than 10% of the outstanding voting securities of such issuer would be
held by the Portfolio.
If a restriction on the Portfolio's investments is adhered to at the
time an investment is made, a subsequent change in the percentage of Portfolio
assets invested in certain securities or other instruments, or change in average
duration of the Portfolio's investment portfolio, resulting from changes in the
value of the Portfolio's total assets, will not be considered a violation of the
restriction; provided, however, that the asset coverage requirement applicable
to borrowings shall be maintained in the manner contemplated by applicable law.
With respect to Continuing Investment Restrictions (2) and (6), the
Portfolio will not borrow or lend to any other fund unless it applies for and
receives an exemptive order from the Securities and Exchange Commission (the
"Commission"), if so required, or the Commission issues rules permitting such
transactions. There is no assurance the Commission would grant any order
requested by a Portfolio or promulgate any rules allowing such transactions.
If this Proposal IV is approved by shareholders and implemented, the
Portfolio will be subject to the Continuing Investment Restrictions and the
Continuing Investment Restrictions will be the only fundamental investment
restrictions applicable to the Portfolio.
In addition to the above Continuing Investment Restrictions, certain
fundamental investment restrictions (the "Affected Investment Restrictions")
have applied to the Portfolio in connection with the Present Investment
Objective and to certain other portfolios of the Trust. The Manager recommends
the following changes to these Affected Investment Restrictions as they apply to
the Portfolio.
(1) The Portfolio is subject to the following two Affected Investment
Restrictions concerning the purchase of securities or other property on margin:
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).
The Portfolio will not purchase any securities on
margin, other than in connection with the purchase of put
options on financial futures contracts, but may obtain such
short-term credits as may be necessary for the clearance of
transactions.
The Manager has proposed to the Board of Trustees that the two Affected
Investment Restrictions set forth above be replaced by the following
non-fundamental investment restriction:
The Portfolio may not purchase securities on margin from
brokers, except that the Portfolio may obtain such short-term
credits as are necessary for the clearance of securities
transactions. Margin payments in connection with transactions
in futures contracts and options on futures contracts shall
not constitute the purchase of securities on margin and shall
not be deemed to violate the foregoing limitation.
The proposed non-fundamental restriction would clarify the
applicability of the restriction to options on financial futures contracts in a
manner consistent with the Investment Company Act and provide greater
flexibility in seeking the Proposed Investment Objective by excluding from its
restrictions all transactions in futures contracts and all options on financial
futures contracts rather than just put options as contemplated by the second of
the two Affected Investment Restrictions set forth above. If this Proposal IV is
approved and the current Affected Investment Restrictions are replaced by the
proposed non-fundamental investment restriction, the Board of Trustees, if
deemed appropriate in its judgment, would have the flexibility to modify or
eliminate the investment restriction without the attendant delay and expense of
arranging for a shareholders meeting. The Portfolio's ability to engage in
margin transactions is limited by current positions taken by the Commission that
such transactions involve the issuance of senior securities and by other
investment restrictions which permit the Portfolio to borrow money in limited
circumstances.
(2) The Portfolio also is subject to the following Affected Investment
Restriction concerning short sales of securities:
The Portfolio will not sell securities short unless: (i)
during the time the short position is open, it owns an equal
amount of securities sold or securities readily and freely
convertible into or exchangeable, without payment of
additional consideration, for securities of the same issue as,
and equal in amount to, the securities sold short; and (ii)
not more than 10% of the current value of the Portfolio's net
assets is held as collateral for such sales at any one time.
The Manager has proposed to the Board of Trustees that the Affected
Investment Restriction set forth above be replaced by the following
non-fundamental investment restriction:
The Portfolio may not sell securities short unless it owns or
has the right to obtain securities equivalent in kind and
amount to the securities sold without payment of additional
consideration. Transactions in futures contracts and options
shall not constitute selling securities short.
The Manager believes that the current Affected Investment Restriction
is unnecessarily restrictive and could impair the ability of the Portfolio to
seek the Proposed Investment Objective. Under the proposed non-fundamental
investment restriction, the Portfolio still would only be permitted to enter
into short sales where it has the right to obtain securities equivalent in kind
and amount to the securities sold short. Short sales on any other basis would
not be permitted. The proposed non-fundamental investment restriction, however,
would clarify the treatment of futures contracts and options by explicitly
excluding them from the application of the restriction and would eliminate the
limitation on short sales if more than 10% of the current value of the
Portfolio's net assets is held as collateral for all such sales.
By reclassifying the Affected Investment Restriction from fundamental
to non-fundamental, the Board of Trustees, if deemed appropriate in its
judgment, would be able to modify or eliminate the investment restriction
without the attendant delay and expense of arranging for a shareholders meeting.
In the event that the non-fundamental restriction is eliminated or modified by
the Board of Trustees to permit short sales in cases where securities identical
to those sold short are not owned or cannot be required without additional cost,
the Portfolio may be subject to risk of loss and current rules of the Commission
would require the Portfolio to hold qualifying instruments in a segregated
account to cover the amount of its exposure in connection with the transactions.
Elimination of Certain Fundamental Investment Restrictions
The Portfolio is subject to the following Affected Investment
Restriction mandating a minimum level of investments in utility company
securities:
(1) The Portfolio will invest at least 25% of its total assets in
securities of utility companies.
If the Proposed Investment Objective set forth in this Proposal III is
approved and implemented, the above Affected Investment Restriction would not be
consistent with the Portfolio's new investment objective. The Manager therefore
has proposed to the Board of Trustees that the above Affected Investment
Objective be eliminated.
(2) The Portfolio also is subject to the following Affected Investment
Restriction concerning investments in commodities:
The Portfolio will not purchase or sell commodities. However,
the Portfolio may purchase options on Portfolio securities and
on financial futures contracts for hedging purposes only.
The Manager has proposed to the Board of Trustees that the above
Affected Investment Restriction be eliminated. If this Proposal IV is adopted
and implemented, the Portfolio would continue to be subject to Continuing
Investment Restriction 5 concerning investments in commodities which prohibits
the purchase or sale of physical commodities, subject to certain exceptions.
Elimination of the above Affected Investment Restriction in effect would limit
the prohibition against purchases or sales of commodities to transactions in
physical commodities, and, while the Portfolio is permitted under the Affected
Investment Contracts to engage in the purchase of options on Portfolio
securities and financial futures for hedging purposes, the proposed elimination
would expand the Portfolio's flexibility to engage in options and futures
transactions involving purchases or sales of all types and forward currency
contracts but only if permissible under the Portfolio's investment policies and
the Portfolio's Proposed Investment Objective and otherwise.
(3) The Portfolio also is subject to the following Affected Investment
Restriction concerning the purchase or sale of real estate:
The Portfolio will not purchase or sell real estate, although
it may invest in securities of companies whose business
involves the purchase or sale of real estate or in securities
which are secured by real estate or interests in real estate.
Management has proposed to the Board of Trustees that the above
Affected Investment Restriction be eliminated because it is substantially
identical to General Restriction 4.
(4) The Portfolio also is subject to the following two Affected
Investment Restrictions concerning the issuance of senior securities:
The Portfolio will not issue senior securities.
The Portfolio will not issue senior securities, except
that the Portfolio may borrow money and engage in reverse
repurchase agreements in amounts up to one-third of the value
of its net assets, including the amounts borrowed.
The Manager has proposed to the Board of Trustees that both of the
above Affected Investment Restrictions be eliminated. The issuance of senior
securities by an investment company is governed by and generally prohibited
under the requirements of the Investment Company Act, subject to certain
exceptions for borrowing arrangements. Continuing Investment Restriction 1
prohibits the issuance of senior securities by the Portfolio "except as
permitted under the Investment Company Act." In permitting only certain
specified transactions, the Manager believes that the above Affected Investment
Restriction is unnecessarily restrictive and would impair the Portfolio's
ability to respond promptly to advantageous changes in the law. The Portfolio
would continue to be subject to Continuing Restriction 1 concerning the issuance
of senior securities notwithstanding elimination of the above Affected
Investment Restriction but would have added flexibility in the issuance of
senior securities if and to the extent permitted by the Investment Company Act
without the expense and delay of arranging a shareholders meeting.
Moreover, Continuing Restriction 2 concerning borrowings sets forth the
limitations on borrowing and repurchase agreements reflected in the second of
the above Affected Investment Restrictions and, additionally, makes clear that
no borrowings for purposes of investment leverage will be permitted at any
level. The above Affected Investment Restriction therefore is duplicative and
its elimination will avoid any future ambiguity.
(5) The Portfolio also is subject to the following Affected Investment
Restriction concerning borrowings:
The Portfolio will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a
temporary, extraordinary or emergency measure to facilitate
management of the Portfolio by enabling the Portfolio to meet
redemption requests when the liquidation of Portfolio
securities is deemed to be inconvenient or disadvantageous.
The Portfolio will not purchase any securities while any such
borrowings are outstanding. However, during the period any
reverse repurchase agreements are outstanding, but only to the
extent necessary to assure completion of the reverse
repurchase agreements, the Portfolio will restrict the
purchase of portfolio investments to money market instruments
maturing on or before the expiration date of the reverse
repurchase agreements.
The Manager has proposed to the Board of Trustees that the above
Affected Investment Restriction be eliminated. The Manager believes that the
above Affected Investment Restriction is unnecessarily restrictive and could
impair the ability of the Portfolio to seek the Proposed Investment Objective.
Continuing Investment Restriction 2 concerning borrowings prohibits borrowings
for purposes of investment leverage and would continue to apply to the Portfolio
notwithstanding the elimination of the above Affected Investment Restriction.
While Continuing Investment Restriction 2 allows borrowings for temporary or
emergency purposes, such borrowings are not limited to those needed to meet
redemption requests when the liquidation of Portfolio securities is deemed to be
inconvenient or disadvantageous thereby providing the Portfolio with flexibility
to meet other obligations through borrowings on a temporary or emergency basis
without liquidation of Portfolio securities. Lastly, the elimination would
provide the Portfolio with additional flexibility by removing the restrictions
on the purchase of securities during any period in which borrowings or reverse
repurchase agreements are outstanding since Continuing Investment Restriction 2,
unlike the above Affected Investment Restriction, does not prohibit the purchase
of any securities while borrowings are outstanding (subject to the exception set
forth in the Affected Investment Restriction for purchases of money market
instruments to complete reverse repurchase agreement obligations). Nevertheless,
the Manager has recommended that the following non-fundamental investment
objective be adopted:
The Portfolio may not purchase securities, if outstanding
borrowings, including any reverse repurchase agreements,
exceed 5% of its total assets.
This non-fundamental investment restriction would allow the Board of
Trustees, if deemed appropriate in its judgment, to modify or eliminate the
investment restriction without the attendant delay and expense of arranging a
shareholders meeting.
Elimination of the above Affected Investment Restriction would provide
the Portfolio with greater flexibility to borrow money consistent with the
requirements of the Investment Company Act and would permit the Portfolio to
respond to any future changes in applicable legal or regulatory requirements
without the expense and delay of arranging a shareholders meeting.
(6) The Portfolio also is subject to the following Affected Investment
Restrictions concerning Portfolio loans:
The Portfolio may lend Portfolio securities, as long as the
value of the loaned securities does not exceed one-third of
the value of the Portfolio's total assets. This shall not
prevent the holding of corporate bonds, debentures, notes,
certificates of indebtedness or other debt securities of an
issuer, repurchase agreements, or other transactions which are
permitted by the Portfolio's Investment Objective and
Policies.
The Manager has recommended to the Board of Trustees that the above
Affected Investment Restriction be eliminated. The prohibition set forth in the
above Affected Investment Restriction is substantially the same as the
prohibition set forth in clause (i) of Continuing Investment Restriction 6
concerning loans.
(7) The Portfolio also is subject to the following Affected Investment
Restriction concerning purchases of gas, oil and other mineral interests:
The Portfolio will not purchase interests in oil, gas or other
mineral exploration or development programs or leases,
although it may purchase securities of issuers which engage in
whole or in part in such activities.
Although the Portfolio has no present intention of purchasing interests
of the type prohibited by the Affected Investment Restriction set forth above,
the Manager has proposed to the Board of Trustees to eliminate the above
Affected Investment Restriction on the basis that it is unnecessary. The
prohibition reflects the requirements of state securities laws which are no
longer applicable.
(8) The Portfolio also is subject to the following Affected Investment
Restriction concerning diversification of investments:
The Portfolio will not purchase the securities of any issuer
(other than the U.S. government, its agencies, or
instrumentalities or instruments secured by the securities of
such issuers, such as repurchase agreements or cash or cash
items) if, as a result, more than 5% of the value of its total
assets would be invested in the securities of such issuer, or
acquire more than 10% of any class of voting securities of any
issuer. For these purposes, all common stock and preferred
stock of an issuer, taken together, will be deemed to be a
single class, regardless of priorities, series, designations,
or other differences.
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 assets would be
invested in such issuer of the Portfolio would own more than 10% of the
outstanding voting securities of such issuer. The Manager has proposed to the
Board of Trustees that the above Affected Investment Restriction be eliminated
because it is unnecessarily restrictive and could impair the Portfolio's ability
to pursue its investment objective by unnecessarily preventing it from investing
in desirable opportunities. If this Proposal IV is adopted and implemented, the
Portfolio would continue to be subject to Continuing Investment Restriction 8
concerning diversification of investments which reflects the more flexible
limitations of the Investment Company Act. Elimination of the above current
Affected Investment Restriction would allow the Portfolio maximum flexibility to
conduct its investment program as a "diversified" investment company under the
Investment Company Act.
If the above Affected Investment Restriction is eliminated, 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 Portfolio's sub-advisor believes offer
the potential for capital appreciation. 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 elimination of the above investment restriction 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 General
Investment Restriction 8, 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. In addition to the potential benefits which the elimination of the
Affected Investment 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.
(9) The Portfolio also is subject to the following Affected Investment
Restriction concerning investments in issuers that have been in operation for
less than three years:
The Portfolio will not invest more than 5% of the value of
this total assets in securities of companies, including their
predecessors, that have been in operation for less than three
years
The prohibition underlying the current Affected Investment Restriction
reflects requirements of state securities law which are no longer applicable.
Elimination of the Affected Investment Restriction set forth above, would
provide the Portfolio with additional flexibility, consistent with its
investment objective and other stated investment policies and restrictions, 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.
(10) The Portfolio also is subject to the following Affected Investment
Restriction concerning investments in warrants:
The Portfolio will not invest more than 5% of its net assets
in warrants, not more than 2% of which may be warrants not
listed on the New York Stock Exchange or American Stock
Exchange.
The Manager has proposed to the Board of Trustees that the above
fundamental restriction be eliminated. The prohibition underlying the current
Affected Investment Restriction reflects the requirements of state securities
laws which no longer are applicable to the Portfolio and elimination of the
above investment restriction would permit the Portfolio greater flexibility in
pursuing the Proposed Investment Objective.
(11) The Portfolio also is subject to the following Affected Investment
Restriction concerning investments in other investment companies:
A 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, than a
customary broker's commission, is involved and only if
immediately thereafter not more than 10% of this 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
Affected Investment Restriction be eliminated. The prohibition underlying the
current Affected Investment Restriction reflects the requirements of the
Investment Company Act which will continue to apply to the Portfolio if the
current fundamental restriction is eliminated. In the event that the Investment
Company Act is amended, the Portfolio would not be required to conduct a
shareholders meeting with attendant delay and expense in order to respond to any
changes in the law of potential benefit to the Portfolio.
(12) The Portfolio also is subject to the following Affected Investment
Restriction concerning investments for purposes of exercising control of
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
Affected Investment Restriction be eliminated as unnecessary. The Portfolio has
no present intention of purchasing securities for the purpose of exercising
control or management and, as a practical matter, the ability of the Portfolio
to exercise control or management of an issuer is subject to various state and
federal laws which will continue to apply to the Portfolio if the above Affected
Investment Restriction is eliminated. Moreover, elimination of the Affected
Investment Restriction would clarify the Portfolio's ability to influence
management of issuers when it is permissible and appropriate to do so, including
instances where issuers of portfolio securities may be in default of their
obligations.
(13) The Portfolio also is subject to the following Affected Investment
Restriction concerning investment in securities of issuers in which management
of the Trust or the Manager owns securities:
The Portfolio will not purchase or retain securities of any
issuer (other than the shares of such Portfolio) if to the
Trust's knowledge, the officers and Trustees of the Trust and
the officers and directors of the Investment Manager who
individually 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
Affected Investment Restriction be eliminated because the prohibitions
underlying the restriction reflect the requirements of state securities laws
which are no longer applicable. Elimination of the Affected Investment
Restriction would permit the Portfolio to invest in securities of any issuer
without regard to ownership in such issuer by management of the Trust or the
Manager, except to the extent prohibited by the Portfolio's investment objective
and other stated investment policies and restrictions and the Investment Company
Act.
This Proposal IV is made contingent upon shareholder approval of
Proposals I, II and III. If any of the Proposals is not approved, the Continuing
and Affected Investment Restrictions will continue in effect and will apply to
the Portfolio.
<PAGE>
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 Commission, 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
/s/Eric C. Freed
Eric C. Freed
Secretary
American Skandia Trust
<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, Incorporated, a Connecticut corporation (the
"Investment Manager").
W I T N E S 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 Federated Utility Income
Portfolio of the Fund (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 the sale of 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 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 and
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 the 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 the
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 Agreement and 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.
<PAGE>
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-Advisers 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 0.75% of the first $50 million of the average daily net assets of
the Portfolio; plus .60% of the Portfolio's average daily net assets in excess
of $50 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 the 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 the 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 the 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: /s/ Gordon C. Boronow
/s/Joan M. Chanda
AMERICAN SKANDIA LIFE INVESTMENT
MANAGEMENT, INCORPORATED
Attest: By: /s/Thomas M. Mazzaferro
/s/Patricia E. Randol
<PAGE>
EXHIBIT A-2
INVESTMENT MANAGEMENT AGREEMENT
THIS AGREEMENT is made this 1st day of May, 1998, 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 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 Neuberger&Berman Mid-Cap
Value Portfolio of the Fund (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 the sale of 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 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 and
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 the 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 the
Investment Advisers Act and any rules and regulations adopted thereunder, as
amended; and
(b) the provisions of the Registration Statement 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 Agreement and 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.
<PAGE>
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-Advisers 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 0.90% of the portion of the average daily net assets of the
Portfolio not in excess of $1 billion; plus .85% of the portion of the net
assets in excess of $1 billion.
10. 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.
11. Term and Approval. This Agreement shall become effective on May 1, 1998 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.
12. 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" having the meaning defined in Section 2(a)(4) of the Investment
Company Act.
13. 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.
14. Liability of the 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 the Investment Manager may have under applicable law.
15. 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.
16. 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 the 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.
<PAGE>
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:
AMERICAN SKANDIA INVESTMENT
SERVICES, INCORPORATED
Attest: By:
<PAGE>
EXHIBIT A-3
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is between American Skandia Investment Services, Incorporated
(the "Investment Manager") and Federated Investment Counseling (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 Federated Utility Income 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.
<PAGE>
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 net
assets of the Portfolio not in excess of $25 million; .35 of 1% of the portion
over $25 million but not in excess of $50 million; and .25 of 1% of the portion
in excess of $50 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: Federated Investment Counseling
Federated Investors Tower
1001 Liberty Tower
Pittsburgh, Pennsylvania 15222-3779
Attention: Melissa Moore, Esq.
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/Mark L. Mallon
Thomas Mazzaferro
President & Chief Operating Officer
Date: April 19, 1996 Date: April 30, 1996
Attest: /s/Ivette Aquilino Attest: /s/Sandra A. Kelly
<PAGE>
EXHIBIT A-4
SUB-ADVISORY AGREEMENT
THIS AGREEMENT is between American Skandia Investment Services, Incorporated
(the "Investment Manager") and Neuberger&Berman Management Incorporated (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 Neuberger&Berman Mid-Cap Value
Portfolio (the "Portfolio") under the terms of a management agreement, dated May
1, 1998, 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, to the extent necessary in its sole judgment, 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 to the Sub-Advisor
or the investment program conducted by the Sub-Advisor for the Portfolio or
which otherwise relates directly or indirectly to the Sub-Advisor's activities
in connection with the Portfolio (such disclosure and information being
hereinafter collectively referred to as "Sub-Advisor Information"), such
Registration Statement or Proxy Statement contains, as of their respective dates
and, if later, the effective date of this Agreement, 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; it being understood that the Sub-Advisor shall have no
responsibility for any other portion of the Registration Statement or Proxy
Statement. 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.
In furnishing the services under this Agreement, the Sub-Advisor will
use its best efforts to comply with the requirements of the ICA and Sections
817(h) and Section 851(b)(2) and (3)) 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. The Investment Manager acknowledges to the Sub-Advisor
that the Investment Manager also is responsible to the Trust for monitoring
compliance with the foregoing requirements; it being understood that such
acknowledgement shall in no way diminish the Sub-Advisor's responsibilities
under this provision.
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;
(h) the Registration Statement of the Trust;
(i) the Proxy Statement relating to this Agreement; and
(j) the Investment Manager's most recent balance sheet.
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. The Investment Manager will advise the Sub-Advisor 30 days prior to the
effective date of any changes in the investment objective, investment policies,
or investment restrictions applicable to the Portfolio.
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. 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.
With respect to brokerage, 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 books and records maintained by
it 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 Sub-Advisor
Information included 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 the portion of the net assets
of the Portfolio not in excess of $750 million; .45% of the portion over $750
million but not in excess of $1 billion; and .40% of the portion in excess of $1
billion.
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 give the Portfolio the benefit of the
Sub-Advisor's best judgment and efforts in rendering its services hereunder. As
an inducement to the Sub-Advisor's undertaking to render these services, the
parties agree that, except as provided in Section 14 hereunder, the Sub-Advisor
shall not be liable to the Trust or its shareholders or to the Investment
Manager for any mistake in judgment or for any act or omission resulting in any
loss in connection with any service provided herein in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard for its
obligations hereunder. The Sub-Advisor and the Investment Manager further agree
that the Sub-Advisor shall bear no responsibilities or obligations for any
portfolios of the Trust other than the Portfolio and any other portfolio with
respect to which it serves as sub-advisor.
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 or accounts for other investors or institutions will be made on
a basis that is equitable to the Portfolio 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: John Birch
Vice President & Chief Operating Officer
Sub-Advisor: Neuberger&Berman Management Incorporated
605 Third Avenue
2nd Floor
New York, NY 10158-0180
Attention: Ellen Metzger
General 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 1940 Act ("affiliated person") of Investment Manager (which shall not be
deemed to include the Trust or the Portfolio) 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 Sub-Advisor Information set forth 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
for the purpose of inclusion in such prospectus or statement of additional
information, 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 requirements set forth in 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
Sub-Advisor Information set forth 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 for the purpose of inclusion in such
prospectus or statement of additional information; 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, 1998.
FOR THE INVESTMENT MANAGER: FOR THE SUB-ADVISOR:
John Birch
Vice President & Chief Operating Officer
Date: Date:
Attest: Attest:
<PAGE>
AMERICAN SKANDIA TRUST
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS OF THE
FEDERATED UTILITY INCOME PORTFOLIO
TO BE HELD ON APRIL 29, 1998
The undersigned hereby appoints 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 Portfolio to be held at 10:00 a.m., Eastern Time, on April
29, 1998 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 as checked below.
PLEASE SIGN BELOW 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 Federated Utility Income 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."
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST.
<TABLE>
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<S> <C>
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS
</TABLE>
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED DETACH AND RETURN THIS PORTION ONLY
AMERICAN SKANDIA TRUST -- FEDERATED UTILITY INCOME PORTFOLIO
THE BOARD OF TRUSTEES OF THE TRUST RECOMMENDS VOTING FOR THE FOLLOWING PROPOSALS:
THE UNITS REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR THE PROPOSALS IF NO CHOICE IS INDICATED.
Please be sure to sign and date this Proxy.
Vote on Proposals For Against Abstain
<S> <C> <C> <C>
I. PROPOSAL TO APPROVE A NEW INVESTMENT MANAGEMENT [] [] []
AGREEMENT BETWEEN THE TRUST AND AMERICAN
SKANDIA INVESTMENT SERVICES, INCORPORATED
REGARDING MANAGEMENT OF THE FEDERATED UTILITY
INCOME PORTFOLIO.
II. PROPOSAL TO APPROVE A NEW SUB-ADVISORY [] [] []
AGREEMENT BETWEEN AMERICAN SKANDIA INVESTMENT
SERVICES, INCORPORATED AND NEUBERGER&BERMAN
MANAGEMENT INCORPORATED REGARDING INVESTMENT
ADVICE TO THE FEDERATED UTILITY INCOME
PORTFOLIO.
III. PROPOSAL TO APPROVE A CHANGE IN THE PORTFOLIO'S [] [] []
INVESTMENT OBJECTIVE.
IV. PROPOSAL TO APPROVE CHANGES IN THE PORTFOLIO'S [] [] []
FUNDAMENTAL INVESTMENT RESTRICTIONS.
Approval of each Proposal is made contingent upon approval
of all Proposals.
__________________________________ Date: _________ ___________________________ Date: ________
Signature [PLEASE SIGN WITHIN BOX] Signature (Joint Owners)
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DETACH CARD
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