<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
GCG Trust
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Golden American Life Inc.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
THE GCG TRUST
1001 JEFFERSON STREET, SUITE 400
WILMINGTON, DE 19801
800-366-0066
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JULY 29, 1996
To the Shareholders of The GCG Trust:
Notice is hereby given to the holders of shares of beneficial interest (the
"Shares") of The GCG Trust (the "Trust"), a Massachusetts business trust, that
a Special Meeting of the Shareholders of the Trust (the "Meeting") will be
held at 1001 Jefferson Street, Suite 400, Wilmington, Delaware, 19801, on July
29, 1996, at 10:00 a.m., local time, for the following purposes:
1. To approve a new Management Agreement (the "New Management Agreement")
between the Trust and Directed Services, Inc. ("DSI") to be effective
upon the acquisition of BT Variable, Inc. ("BTV") by Equitable of Iowa
Companies ("Equitable of Iowa"), which New Management Agreement would be
substantively identical to the current Management Agreement which
presently is in effect.
2. To approve the following new Portfolio Management Agreements (the "New
Portfolio Management Agreements") among the Trust, DSI and the
respective portfolio managers listed below to be effective upon the
acquisition of BTV by Equitable of Iowa:
(A) A new Portfolio Management Agreement with respect to the All-Growth
Series among the Trust, DSI and Warburg, Pincus Counsellors, Inc.
(B) A new Portfolio Management Agreement with respect to the Capital
Appreciation Series among the Trust, DSI and Chancellor Trust
Company.
(C) A new Portfolio Management Agreement with respect to the Emerging
Markets Series and the Market Manager Series among the Trust, DSI
and Bankers Trust Company.
(D) A new Portfolio Management Agreement with respect to the Fully
Managed Series among the Trust, DSI and T. Rowe Price Associates,
Inc.
(E) A new Portfolio Management Agreement with respect to the Multiple
Allocation Series and Strategic Equity Series among the Trust, DSI
and Zweig Advisors Inc.
(F) A new Portfolio Management Agreement with respect to the Natural
Resources Series among the Trust, DSI and Van Eck Associates
Corporation.
(G) A new Portfolio Management Agreement with respect to the Real
Estate Series among the Trust, DSI and E.I.I. Realty Securities,
Inc.
(H) A new Portfolio Management Agreement with respect to the Rising
Dividends Series among the Trust, DSI and Kayne, Anderson
Investment Management, L.P.
(I) A new Portfolio Management Agreement with respect to the Small Cap
Series among the Trust, DSI and Fred Alger Management, Inc.
(J) A new Portfolio Management Agreement with respect to the Value
Equity Series among the Trust, DSI and Eagle Asset Management, Inc.
<PAGE>
3. To approve a new Portfolio Management Agreement among the Trust, DSI and
Equitable Investment Services, Inc., with respect to the Limited
Maturity Bond Series and the Liquid Asset Series to be effective upon
the acquisition of BTV by Equitable of Iowa.
4. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Trustees has fixed the close of business on June 21, 1996, as
the record date for the determination of shareholders entitled to notice of
and to vote at the Meeting or any adjournment thereof.
By Order of the Board of Trustees,
/s/ Myles Tashman
Myles R. Tashman
Secretary
July 1, 1996
MANAGEMENT OF THE TRUST RECOMMENDS THAT YOU CAST YOUR VOTE FOR THE APPROVAL OF
THE NEW MANAGEMENT AGREEMENT AND PORTFOLIO MANAGEMENT AGREEMENTS.
YOUR VOTE IS IMPORTANT! PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE
ENCLOSED PROXY, DATE AND SIGN IT, AND RETURN IT IN THE ACCOMPANYING POSTAGE
PREPAID ENVELOPE.
IF YOU SIGN, DATE AND RETURN THE PROXY BUT GIVE NO VOTING INSTRUCTIONS, YOUR
SHARES WILL BE VOTED IN FAVOR OF ALL PROPOSALS NOTICED ABOVE.
2
<PAGE>
THE GCG TRUST
1001 JEFFERSON STREET, SUITE 400 WILMINGTON, DE 19801 800-366-0066
----------------
PROXY STATEMENT
----------------
SPECIAL MEETING OF SHAREHOLDERS
JULY 29, 1996
This Proxy Statement is furnished in connection with the solicitation by the
Board of Trustees (the "Board") of The GCG Trust (the "Trust"), a
Massachusetts business trust, of proxies to be voted at a Special Meeting of
the Shareholders of the Trust, and at any and all adjournments thereof (the
"Meeting"), to be held at 1001 Jefferson Street, Suite 400, Wilmington,
Delaware, 19801, on July 29, 1996, at 10:00 a.m. local time. The approximate
mailing date of this Proxy Statement and accompanying form of proxy is July 5,
1996.
The Board has fixed the close of business on June 21, 1996, as the record
date (the "Record Date") for the determination of holders of shares of
beneficial interest ("Shares") of the Trust entitled to vote at the Meeting.
Shareholders on the Record Date will be entitled to one vote for each full
Share held and a fractional vote for each fractional Share.
The Board of Trustees of the Trust is soliciting shareholder votes on
proposals affecting more than one Series. The following tables summarize the
proposals and indicate which shareholders are being requested to vote on each
proposal:
<TABLE>
<CAPTION>
PROPOSAL SERIES
-------- ---------------------------------------------------
ALL- CAPITAL EMERGING FULLY
GROWTH APPRECIATION MARKETS MANAGED
<C> <S> <C> <C> <C> <C>
1. New Management Agreement X X X X
2. New Portfolio Management
Agreements--
Existing Portfolio X X X X
Managers 2(A) 2(B) 2(C) 2(D)
3. New Portfolio Management
Agreement--
New Portfolio Manager
<CAPTION>
LIMITED
MATURITY LIQUID MARKET MULTIPLE NATURAL
BOND ASSET MANAGER ALLOCATION RESOURCES
<C> <S> <C> <C> <C> <C> <C>
1. New Management Agreement X X X X X
2. New Portfolio Management
Agreements--
Existing Portfolio X X X
Managers 2(C) 2(E) 2(F)
3. New Portfolio Management X X
Agreement--
New Portfolio Manager
<CAPTION>
REAL RISING SMALL STRATEGIC VALUE
ESTATE DIVIDENDS CAP EQUITY EQUITY
<C> <S> <C> <C> <C> <C> <C>
1. New Management Agreement X X X X X
2. New Portfolio Management X X X X X
Agreements-- 2(G) 2(H) 2(I) 2(E) 2(J)
Existing Portfolio
Managers
3. New Portfolio Management
Agreement--
New Portfolio Manager
</TABLE>
- -------------------------------------------------------------------------------
1
<PAGE>
The series comprise 14 of the operational portfolios or "Series" of the
Trust. The Shares of the Series currently are offered to insurance company
separate accounts to serve as an investment medium for variable annuity
contracts and variable life insurance policies (collectively, "Variable
Contracts") issued by insurance companies. Some of these separate accounts are
registered with the Securities and Exchange Commission as investment
companies. In accordance with the Investment Company Act of 1940, as amended
(the "1940 Act"), it is expected that an insurance company issuing a Variable
Contract funded by a registered separate account that participates in the
Trust will request voting instructions from the owners of the Variable
Contracts ("Variable Contract Owners") and will vote Shares or other voting
interests in the separate account in proportion to the voting instructions
received. Each insurance company is required to vote Shares of the Series held
by its registered separate accounts in accordance with instructions received
from Variable Contract Owners. The insurance company is also required to vote
Shares of the Series held in each registered separate account for which it has
not received instructions in the same proportion as it votes Shares held by
that separate account for which it has received instructions. Shares held by
an insurance company in its general account, if any, must be voted in the same
proportion as the votes cast with respect to Shares held in all of the
insurer's separate accounts, in the aggregate. Variable Contract Owners
permitted to give instructions for the Series and the number of Shares for
which such instructions may be given for purposes of voting at the Meeting,
and at any adjournment thereof, will be determined as of the Record Date for
the Meeting. In connection with the solicitation of such instructions from
Variable Contract Owners, it is expected that participating insurance
companies will furnish a copy of this Proxy Statement to Variable Contract
Owners. The participating insurance companies have fixed the close of business
on July 24, 1996, as the last day on which voting instructions will be
accepted. A proxy may be revoked at any time before it is voted by the
furnishing of a written revocation, properly executed, to the Trust's
Secretary before the Meeting or by attending the Meeting. In addition to the
solicitation of proxies by mail, proxies may be solicited by officers and
employees of the Trust or participating insurance companies or their agents or
affiliates personally or by telephone. All expenses in connection with the
solicitation of the proxies will be borne by Equitable of Iowa Companies.
VOTING. Shares which represent interests in a particular Series of the Trust
vote separately on those matters which pertain only to that Series. These
matters are Proposals 1, 2, 3 and, as appropriate, any other business which
may properly come before the Meeting. With respect to such matters, a vote of
all Shareholders of the Trust may not be binding on a Series whose
Shareholders have not approved such matter. The voting requirement for
approval of each proposal requires a vote of the "majority of the outstanding
voting securities" of a Series which means the lesser of: (i) 67% or more of
the Shares of each Series entitled to vote thereon present at the Meeting, if
the holders of more than 50% of the outstanding Shares of the Series are
present or represented by proxy; or (ii) more than 50% of the outstanding
Shares of the Series.
A Portfolio Management Agreement must be approved separately by each Series
to which the Portfolio Management Agreement pertains. Approval of each
Portfolio Management Agreement is contingent upon approval of the New
Management Agreement by the shareholders of the pertinent Series. If the New
Management Agreement is approved and the New Portfolio Management Agreements
are each approved by a majority vote of the outstanding Shares of the
applicable Series, the New Portfolio Management Agreements will take effect
concurrently with the New Management Agreement. If the shareholders of a
Series should fail to approve the New Portfolio Management Agreement, the
Board of Trustees shall meet to consider appropriate action. If the
shareholders of a Series should fail to approve a New Portfolio Management
Agreement that pertains to more than one Series, the Portfolio Manager may
serve under the Portfolio Management Agreement with respect to any Series
whose shareholders have approved the Portfolio Management Agreement. In such
event, the Board of Trustees shall meet to consider appropriate action.
In the event that a quorum is present at the Meeting but sufficient votes to
approve any of the proposals are not received, the persons named as proxies
may propose one or more adjournments of such Meeting to permit further
solicitation of proxies provided they determine that such an adjournment and
additional solicitation is reasonable and in the interest of the shareholders
based on a consideration of all relevant factors including the nature of the
relevant proposal, the percentage of votes then cast, the percentage of
negative votes then cast, the
2
<PAGE>
nature of the proposed solicitation activities and the nature of the reasons
for such solicitation. A vote may be taken on a proposal in this Proxy
Statement for the Trust prior to any adjournment if sufficient votes have been
received for approval of that proposal.
The presence in person or by proxy of the holders of thirty percent of the
outstanding Shares is required to constitute a quorum at the Meeting. As of
the Record Date, the sole shareholders of the Series were participating
insurance companies. Since participating insurance companies are the legal
owners of the Shares, attendance by the participating insurance companies at
the meeting will constitute a quorum under the Trust's Amended and Restated
Agreement and Declaration of Trust. Shares beneficially held by Variable
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.
The Trust knows of no items of business other than those mentioned in the
Items 1 through 3 of the Notice which will be presented for consideration at
the Meeting. If any other matters are properly presented, it is the intention
of the persons named as proxies to vote proxies in accordance with their best
judgment.
BACKGROUND INFORMATION. Directed Services, Inc. ("DSI"), 1001 Jefferson
Street, Suite 400, Wilmington, DE 19801, is the Trust's Manager and
Distributor. See Attachment B for a list of the Directors and the principal
executive officer of DSI. DSI is a wholly owned subsidiary of BT Variable,
Inc. ("BTV"). BTV is a wholly owned subsidiary of Whitewood Properties Corp.
("Whitewood") which, in turn, is a wholly owned subsidiary of Bankers Trust
Company ("Bankers Trust"). Golden American Life Insurance Company ("Golden
American") is a wholly owned subsidiary of BTV and an affiliate of DSI.
Equitable of Iowa Companies ("Equitable of Iowa") is a holding company for
Equitable Life Insurance Company of Iowa ("Equitable Life"), USG Annuity &
Life Company ("USG"), Locust Street Securities, Inc. ("Locust Street") and
Equitable Investment Services, Inc. Equitable of Iowa currently is not
affiliated with Bankers Trust, Whitewood, BTV, DSI, Golden American or any of
the current Portfolio Managers of the Trust.
On May 3, 1996, Whitewood and Equitable of Iowa entered into a Stock
Purchase Agreement pursuant to which Equitable of Iowa has agreed, subject to
certain conditions and regulatory approvals, that it or an affiliate will
acquire 100% ownership of BTV (the "Transaction"). Consummation of the
Transaction may constitute an "assignment" (as defined in the 1940 Act) of the
current Management Agreement between the Trust and DSI ("Current Management
Agreement"). Additionally, consummation of the Transaction may constitute an
assignment of the Portfolio Management Agreements between the Trust, DSI and
the respective Portfolio Managers as those entities are identified below. The
total purchase price to be paid by Equitable of Iowa to Whitewood is $144
million in cash, which includes repayment of $51 million in debt owed by BTV
to Bankers Trust. A specific proportion of this consideration has not been
apportioned to the value of DSI.
Section 15(f) of the 1940 Act permits the sale of controlling interests in
an investment adviser to an investment company to occur, including receipt by
the investment adviser or any of its affiliated persons of an amount or
benefit in connection with such sale, as long as two conditions are satisfied.
First, an "unfair burden" must not be imposed on the investment company for
which the investment adviser acts in such capacity as a result of the sale of
such interests, or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden," as defined in the 1940 Act,
includes any arrangement during the two-year period after any such transaction
whereby the investment adviser (or predecessor or successor adviser) or any
interested person of any such adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the investment company or its
security holders (other than fees for bona fide investment advisory and any
other services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than ordinary fees for bona fide principal underwriting services).
Management of the Trust is aware of no circumstances arising from the
Transaction that might result in the imposition of an "unfair burden" on the
Trust. Moreover, Equitable of Iowa has agreed with Whitewood that subsequent
to consummation of the Transaction it would conduct its business, subject to
applicable fiduciary duties, to ensure that no "unfair burden" would be
imposed on the Trust by or as a result of the Transaction.
3
<PAGE>
The second condition of Section 15(f) is that during the three-year period
immediately following consummation of a transaction to which Section 15(f) is
applicable, at least 75% of the investment company's board of trustees must
not be "interested persons" (as defined in the 1940 Act) of such investment
company, investment adviser or predecessor adviser. The Board of Trustees
presently consists of five Trustees, two of whom, Messrs. Terry L. Kendall and
John L. Murphy, are interested persons of DSI. To facilitate compliance with
this provision of Section 15(f) of the 1940 Act, at the June 10, 1996 Board of
Trustees meeting, John L. Murphy submitted his resignation as a Trustee
effective upon the consummation of the Transaction.
PROPOSAL 1
APPROVAL OF A NEW MANAGEMENT AGREEMENT
BETWEEN THE TRUST AND DIRECTED SERVICES, INC.
As stated above, consummation of the Transaction may constitute an
"assignment" of the Current Management Agreement between DSI and the Trust. As
required by the 1940 Act, the Current Management Agreement provides for
automatic termination in the event of an assignment. In anticipation of the
closing of the Transaction, and in order for DSI to continue to serve as
Manager to the Trust after consummation of the Transaction, a new Management
Agreement ("New Management Agreement") between DSI and the Trust must be
approved (i) by a majority of the Trustees, including a majority of the non-
interested Trustees of the Trust, and (ii) as to each Series, by holders of a
majority of the outstanding voting securities of each such Series of the
Trust. The New Management Agreement is included as Attachment A.
At the Board of Trustees meeting held on June 10, 1996, the Trustees,
including all of the non-interested Trustees, concluded that, if the
Transaction occurs, entry by the Trust into the New Management Agreement would
be in the best interests of the Trust and the Trust's shareholders. The Board
unanimously approved the New Management Agreement and recommended such New
Management Agreement for approval by the shareholders of the Trust at a
Special Meeting. The New Management Agreement would take effect upon the later
to occur of (i) the obtaining of shareholder approval, or (ii) the closing of
the Transaction. The New Management Agreement, if approved by shareholders,
will continue in effect until two years after its effective date and
thereafter for successive annual periods as long as such continuance is
approved in accordance with the 1940 Act.
In the event that shareholders of the Trust do not approve the New
Management Agreement, Whitewood and Equitable of Iowa have reserved the right
to determine whether to consummate the Transaction. If the Transaction is not
consummated, DSI would continue to serve as Manager of all Series of the Trust
under the Current Management Agreement.
The Current Management Agreement, dated October 1, 1993, and amended on
November 7, 1994, September 29, 1995, and December 29, 1995, provides, among
other things, that DSI is appointed as manager of the activities of the Trust,
subject to the direction of the Board of Trustees. As such, DSI has agreed to
provide advisory, management, administrative, and other services with respect
to each Series of the Trust. Further, DSI in fulfilling its obligations has
agreed to provide general, overall advice and guidance with respect to each
Series and provide advice and guidance to the Trustees, and oversee the
management of the investments of each Series and the composition of each
Series' portfolio of securities and investments, including cash, and the
purchase, retention and disposition of such securities and cash, all in
accordance with each Series' investment objective and policies as stated in
the Trust's current registration statement. Additionally, DSI has agreed to
select and recommend for consideration by the Trust's Board of Trustees
investment advisory firms to provide investment advice to one or more of the
Series and, at the expense of DSI, to engage such investment advisory firms
("the Portfolio Managers") to render investment advice and management of the
investments of such series. DSI has agreed to monitor and evaluate the
performance of the Portfolio Managers with respect to the investment
objectives and policies of the Series and to monitor their activities to
ensure compliance with the 1940 Act and
4
<PAGE>
all applicable federal and state laws and regulations. DSI also has agreed to
provide or procure on behalf of the Trust, at its expense, custodian,
portfolio accounting and transfer agency, dividend disbursing and other
services necessary for the ordinary operation of the Trust. Under the New
Management Agreement, all services provided by DSI would continue.
Pursuant to the Current Management Agreement, neither DSI nor its
stockholders, officers, directors, employees, or agents shall be subject to,
and the Trust will indemnify such persons from and against, any liability for,
or any damages, expenses, or losses incurred in connection with any act or
omission connected with or arising out of any services rendered under the
Current Management Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of DSI's duties, or by reason of
reckless disregard of DSI's obligations and duties under the Current
Management Agreement.
The Current Management Agreement also provides that, except as otherwise may
be required by the 1940 Act, neither DSI nor its stockholders, officers,
directors, employees, or agents shall be subject to, and the Trust will
indemnify such persons from any liability for, or any damages, expenses, or
losses incurred in connection with, any act or omission by a Portfolio Manager
or any of the Portfolio Managers' stockholders or partners, officers,
directors, employees, or agents connected with or arising out of any services
rendered under a Portfolio Management Agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in the performance of DSI's duties
under the Current Management Agreement, or by reason of reckless disregard of
DSI's obligations and duties under the Current Management Agreement. Under the
New Management Agreement, the same rights will be granted to and the same
responsibilities will be imposed on DSI.
The Current Management Agreement was last renewed by the Board of Trustees
at a meeting held on September 21, 1995, and was last submitted to
shareholders of the Trust for approval on August 31, 1993. The Current
Management Agreement provides that it may be terminated at any time without
payment of any penalty, by DSI or the Board of Trustees, or by a vote of a
majority of the outstanding voting shares of each Series. Additionally, the
Current Management Agreement automatically and immediately terminates in the
event of its assignment.
As compensation for the actions of DSI under the Current Management
Agreement, the Trust pays DSI the following fees at an annual rate equal to a
percentage of the average daily net assets of each Series (based on combined
assets of the indicated groups of Series) which fees are computed and accrued
daily and paid monthly:
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<S> <C>
All-Growth, Capital
Appreciation, 1.00% of first $750 million;
Fully Managed, Multiple
Allocation, 0.95% of next $1.25 billion;
Natural Resources, Real
Estate, 0.90% of next $1.5 billion; and
Rising Dividends, Small Cap, 0.85% of amount in excess of $3.5
Strategic Equity and Value billion.
Equity
Limited Maturity Bond and 0.60% of first $200 million;
Liquid Asset 0.55% of next $300 million; and
0.50% of amount in excess of $500 million.
Emerging Markets 1.5% of average daily net assets.
</TABLE>
Under the Current Management Agreement, the Trust pays DSI on behalf of the
Market Manager Series a quarterly fee equal to an annual rate of 1.0% of the
average daily net assets of the Series. Under the New Management Agreement,
the schedule of compensation payable to DSI will not change.
5
<PAGE>
During 1995, the Trust paid DSI pursuant to the scheduled compensation
described previously the following fee amounts:
<TABLE>
<CAPTION>
AGGREGATE
SERIES * FEE
-------- -----------
<S> <C>
All-Growth $ 832,889
Capital Appreciation $ 1,055,352
Emerging Markets $ 817,859
Fully Managed $ 1,102,160
Limited Maturity Bond $ 516,872
Liquid Asset $ 254,546
Market Manager $ 51,724
Multiple Allocation $ 3,056,095
Natural Resources $ 291,869
Real Estate $ 347,823
Rising Dividends $ 641,200
Strategic Equity $ 11,085
Value Equity $ 108,140
</TABLE>
* The Small Cap Series commenced operations on January 2, 1996.
There were no other material payments made by any Series to DSI, or any
affiliated person of DSI, during 1995.
The Trust has entered into a Distribution Agreement with DSI for DSI to
serve as the Distributor of Shares of the Trust. DSI is a registered broker-
dealer and a member of the National Association of Securities Dealers, Inc.
("NASD"), and serves as Distributor, without remuneration from the Trust. DSI
also serves as the Distributor for the Variable Contracts issued by Golden
American. After an initial two-year term, the Distribution Agreement continues
in effect from year to year provided such continuance is approved at least
annually with respect to the Trust by the Board of Trustees (or by the
Shareholders of the Trust) and by the non-interested Trustees. As required by
the 1940 Act, the Distribution Agreement provides for its automatic
termination in the event of an assignment. As noted above, consummation of the
Transaction may constitute an assignment under the 1940 Act. The Board of
Trustees of the Trust, including the non-interested trustees, has approved a
new Distribution Agreement between the Trust and DSI, on the same terms and
conditions as the current Distribution Agreement (except for dates of
execution, effectiveness and termination) which new Distribution Agreement
will take effect in the event the Transaction is consummated.
BOARD OF TRUSTEES' EVALUATION. The Board of Trustees, including the non-
interested Trustees, has determined that, by approving the New Management
Agreement on behalf of the Trust, the Trust can best assure itself that the
services currently provided by DSI will continue after the Transaction without
interruption. The Board has determined that, as with the Current Management
Agreement, the New Management Agreement will enable the Trust to obtain
services of high quality at costs deemed appropriate, reasonable and in the
best interests of the Trust and its Shareholders.
IN EVALUATING THE NEW MANAGEMENT AGREEMENT, THE BOARD TOOK INTO ACCOUNT
THAT, EXCEPT FOR THE DATES OF EXECUTION, EFFECTIVENESS AND TERMINATION, THERE
ARE NO DIFFERENCES BETWEEN THE TERMS AND CONDITIONS OF THE TRUST'S CURRENT
MANAGEMENT AGREEMENT AND THE NEW MANAGEMENT AGREEMENT, INCLUDING THE TERMS
RELATING TO THE SERVICES TO BE PROVIDED THEREUNDER BY DSI AND THE FEES AND
EXPENSES PAYABLE TO THE TRUST.
The Board also considered the terms of the New Management Agreement, and the
possible effects of the Transaction upon the Trust and DSI's organization, and
upon the ability of DSI to provide advisory and other services to the Trust.
The Board also considered the qualifications of DSI to provide an appropriate
range of management and administrative services, the performance record of
DSI, and the financial condition of DSI. The standards used by the Board in
its evaluation were reviewed by the Trust's legal counsel. In light of the
circumstances, the Trustees concluded that the terms of the New Management
Agreement are fair and reasonable.
6
<PAGE>
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW MANAGEMENT AGREEMENT, RECOMMENDS
APPROVAL OF THE NEW MANAGEMENT AGREEMENT BETWEEN THE TRUST AND DSI.
PROPOSALS 2(A)--2(J)
APPROVAL OF NEW PORTFOLIO MANAGEMENT AGREEMENTS FOR THE ALL-GROWTH SERIES,
CAPITAL APPRECIATION SERIES, EMERGING MARKETS SERIES, FULLY MANAGED SERIES,
MARKET MANAGER SERIES, MULTIPLE ALLOCATION SERIES, NATURAL RESOURCES SERIES,
REAL ESTATE SERIES, RISING DIVIDENDS SERIES, SMALL CAP SERIES, STRATEGIC
EQUITY SERIES AND VALUE EQUITY SERIES.
As stated above, the Transaction will result in a change of control of DSI
and may operate to terminate automatically the portfolio management agreements
currently applicable to each of the previously identified Series
(collectively, the "Current Portfolio Management Agreements"). In order for
the management of each Series to continue uninterrupted after the Transaction,
shareholder approval of "New Portfolio Management Agreements" is being sought.
Each of the Current Portfolio Management Agreements requires the Portfolio
Manager to provide, subject to supervision by the Trust's Board of Trustees
and DSI, a continuous investment program for the Series' portfolio and to
determine the composition of the assets of the Series' portfolio, including
determination of the purchase, retention, or sale of the securities, cash, and
other investments contained in the portfolio. Each of the Current Portfolio
Management Agreements requires the Portfolio Manager to provide investment
research and conduct a continuous program of evaluation, investment, sales,
and reinvestment of the Series' assets by determining the securities and other
investments that shall be purchased, sold, closed or exchanged for the Series,
when these transactions should be executed, and what portion of the assets of
the Series should be held in the various securities and other investments in
which it may invest, all in accordance with the Series' investment objectives
and policies. Under the New Portfolio Management Agreements, all services and
responsibilities of the Portfolio Managers would continue.
Pursuant to each of the Current Portfolio Management Agreements, a Portfolio
Manager is not subject to liability for, or subject to any damages, expenses,
or losses in connection with, any act or omission connected with or arising
out of any services rendered under the applicable agreement, except by reason
of willful misfeasance, bad faith, or gross negligence in the performance of
its duties, or by reason of reckless disregard of its obligations and duties
under the agreement. Under the New Portfolio Management Agreements, the same
responsibilities will be imposed on the Portfolio Managers.
Each of the Current Portfolio Management Agreements provides that it will
terminate automatically in the event of its "assignment," as that term is
described in the 1940 Act. In addition, each such agreement may be terminated
by the DSI or by the Portfolio Manager upon 60 days' written notice to the
other parties, and by the Trust upon the vote of a majority of the Trust's
Board of Trustees or a majority of the outstanding shares of the applicable
Series, upon 60 days' written notice to DSI or the respective Portfolio
Manager.
For the services provided by the Portfolio Managers pursuant to each of the
Current Portfolio Management Agreements, DSI, and not the Trust, pays a
monthly fee (except for the Market Manager Series which is paid quarterly) at
the following annual rates, which are expressed as percentages of the value of
the average daily net assets of each Series:
<TABLE>
<CAPTION>
PORTFOLIO MANAGER SERIES RATE
----------------- ------ ----
<S> <C> <C>
Warburg, Pincus Counsellors, Inc. All-Growth 0.50%
("Warburg, Pincus")
Chancellor Trust Company Capital Appreciation 0.50%
("Chancellor")
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO MANAGER SERIES RATE
----------------- ------ ----
<S> <C> <C>
Bankers Trust Company Emerging Markets 0.75%
("Bankers Trust")
T. Rowe Price Associates, Inc. Fully Managed 0.50%
("T. Rowe Price")
Bankers Trust Market Manager 0.50%
Zweig Advisors Inc. Multiple Allocation 0.50%
("Zweig")
Van Eck Associates Corporation Natural Resources 0.50%
("Van Eck")
E.I.I. Realty Securities, Inc. Real Estate 0.50%
("E.I.I. Realty")
Kayne, Anderson Investment Management, L.P. Rising Dividends 0.50%
("Kayne, Anderson")
Fred Alger Management, Inc. Small Cap 0.50%
("Fred Alger")
Zweig Strategic Equity 0.50%
Eagle Asset Management, Inc. Value Equity 0.50%
("Eagle Asset")
</TABLE>
Under the New Portfolio Management Agreements, the schedule of compensation
payable to the Portfolio Managers will not change.
Fees paid by DSI to the Portfolio Managers for their services under the
Current Portfolio Management Agreements for the year ended December 31, 1995,
were as follows: Warburg, Pincus--$417,408 for the All-Growth Series;
Chancellor--$559,368 for the Capital Appreciation Series; Bankers Trust--
$410,190 for the Emerging Markets Series and $22,410 for the Market Manager
Series; T. Rowe Price--$552,676 for the Fully Managed Series; Zweig--
$1,623,170 for the Multiple Allocation Series and $5,543 for the Strategic
Equity Series; Van Eck--$150,474 for the Natural Resources Series; E.I.I.
Realty--$174,495 for the Real Estate Series; Kayne, Anderson--$325,429 for the
Rising Dividends Series; and Eagle Asset--$54,070 for the Value Equity Series.
The Small Cap Series commenced operations January 2, 1996.
THE NEW PORTFOLIO MANAGEMENT AGREEMENTS. The New Portfolio Management
Agreements will be among the Trust, DSI and each of the following:
<TABLE>
<CAPTION>
PORTFOLIO MANAGER SERIES
----------------- ------
<S> <C>
Warburg, Pincus All-Growth
Chancellor Capital Appreciation
Bankers Trust Emerging Markets
T. Rowe Price Fully Managed
Bankers Trust Market Manager
Zweig Multiple Allocation
Van Eck Natural Resources
E.I.I. Realty Real Estate
Kayne, Anderson Rising Dividends
Fred Alger Small Cap
Zweig Strategic Equity
Eagle Asset Value Equity
</TABLE>
At the June 10, 1996 meeting of the Board of Trustees, each of the New
Portfolio Management Agreements was approved unanimously by the Board of
Trustees, including all of the Trustees who are not interested parties to the
New Portfolio Management Agreements or interested persons of such parties. The
New Portfolio Management Agreements with Warburg, Pincus, Chancellor, Bankers
Trust, T. Rowe Price, Zweig, Van Eck,
8
<PAGE>
E.I.I. Realty, Kayne, Anderson, Fred Alger, and Eagle Asset, are included as
Exhibits A, B, C, D, E, F, G, H, I, and J, respectively.
The New Portfolio Management Agreement for each Series as approved by the
Board of Trustees is submitted for approval by the shareholders of the Series
to which the New Portfolio Management Agreement applies. The New Portfolio
Management Agreements must be voted upon separately by the Series to which a
New Portfolio Management Agreement pertains. If the New Portfolio Management
Agreement is approved by the vote of a majority of the outstanding shares of
the applicable Series, it will take effect upon the closing of the Transaction
and will continue in effect for two years and thereafter for successive annual
periods as long as such continuance is approved in accordance with the 1940
Act. For this purpose, the vote of the holders of a majority of the Series'
outstanding shares means the lesser of: (i) 67% or more of the shares of each
Series entitled to vote thereon present at the Meeting, if the holders of more
than 50% of the outstanding shares of the Series are present or represented by
proxy; or (ii) more than 50% of the outstanding shares of the Series. If the
Shareholders of a Series should fail to approve the New Portfolio Management
Agreement that pertains to that Series, the Portfolio Manager may continue to
serve in that capacity with respect to any other Series whose shareholders
approve the New Portfolio Management Agreement. In such an event, the Board of
Trustees shall meet to consider appropriate action. If the Shareholders of any
Series should fail to approve the New Portfolio Management Agreements,
Equitable of Iowa and Whitewood have reserved the right to determine whether
to consummate the Transaction. If the Transaction is not consummated the
Portfolio Managers will continue to service all Series of the Trust under the
Current Portfolio Management Agreements.
THE TERMS OF EACH NEW PORTFOLIO MANAGEMENT AGREEMENT ARE IDENTICAL IN ALL
MATERIAL RESPECTS, INCLUDING THE FEES PAYABLE TO THE PORTFOLIO MANAGERS, TO
THE TERMS OF THE CURRENT PORTFOLIO MANAGEMENT AGREEMENTS.
INFORMATION ABOUT THE PORTFOLIO MANAGERS
PROPOSAL 2(A)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT
WITH WARBURG, PINCUS FOR THE ALL-GROWTH SERIES
INFORMATION ABOUT WARBURG, PINCUS
Warburg, Pincus, with offices at 466 Lexington Avenue, New York, New York
10017, is incorporated in the State of Delaware. Warburg, Pincus is a wholly
owned subsidiary of Warburg, Pincus Counsellors G.P., a New York general
partnership which has no business other than being a holding company of
Warburg, Pincus and its subsidiaries. E.M. Warburg, Pincus & Co., Inc. is
deemed to control Warburg, Pincus through its ownership of a class of voting
preferred stock. Warburg, Pincus is a professional investment counseling firm
which provides investment services to investment companies, employee benefit
plans, endowment funds, foundations and other institutions and individuals. As
of May 31, 1996, Warburg, Pincus managed approximately $16.3 billion of
assets, including approximately $9.7 billion of investment company assets.
Warburg, Pincus manages the assets of the All-Growth Series pursuant to a
Portfolio Management Agreement dated June 9, 1994, among the Trust, DSI, and
Warburg, Pincus. The Portfolio Management Agreement was last approved by the
Board of Trustees on September 21, 1995 and was approved by Shareholders of
the All-Growth Series at a meeting held on September 15, 1994.
See Exhibit L for a list of the directors and the principal executive
officer of Warburg, Pincus and a table setting forth the other investment
companies with similar investment objectives to those of the All-Growth Series
for which Warburg, Pincus serves as investment adviser or subadviser,
including the fees payable by such investment companies and their approximate
net assets.
The New Portfolio Management Agreement is included as Exhibit A.
9
<PAGE>
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(A)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the All-Growth Series and to recommend
approval to shareholders, the Board of Trustees, including the Trustees who
are not interested persons of DSI or Warburg, Pincus, considered various
matters and materials provided by DSI and Warburg, Pincus. Information
considered by the Trustees included, among other things, the following: (1)
the compensation to be received by Warburg, Pincus for its investment advisory
services and the fairness of such compensation, and that the fee under the New
Portfolio Management Agreement is the same as that under the Current Portfolio
Management Agreement; (2) the nature and the quality of the investment
advisory services to be rendered; and (3) the effect of the Transaction on the
services to be rendered under the New Portfolio Management Agreement.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGEMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND WARBURG, PINCUS.
PROPOSAL 2(B)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH CHANCELLOR FOR THE CAPITAL
APPRECIATION SERIES
INFORMATION ABOUT CHANCELLOR
Chancellor, with offices at 1166 Avenue of the Americas, New York, New York
10036, is a New York State chartered limited purpose trust company. Chancellor
is a wholly owned subsidiary of Chancellor Capital Management, Inc.
("Chancellor Capital"), which is owned 51% on a fully diluted basis by
Chancellor Partners, L.P. (the "Partnership"). Chancellor Partners, Inc. is
the General Partner of the Partnership and a group of employees of Chancellor
Capital are the limited partners of the Partnership. Robert G. Wade, Jr. is
the President and sole stockholder of Chancellor Partners, Inc. USF&G
Investment Management Group, Inc. owns convertible exchangeable preferred
stock in Chancellor Capital, representing the remaining 49% ownership interest
on a fully diluted basis of Chancellor Capital. Chancellor, its parent, and
its affiliates had over $31.53 billion in assets under management as of
February 29, 1996. Chancellor acts as investment adviser to individual and
institutional clients, including a variety of separately managed accounts and
an investment fund in a commingled employee benefit trust which have similar
investment objectives to those of the Capital Appreciation Series. See Exhibit
M for a list of the directors and the principal executive officer of
Chancellor.
Chancellor manages the assets of the Capital Appreciation Series pursuant to
a Portfolio Management Agreement dated September 30, 1992, and Addenda dated
October 1, 1993, and April 30, 1995, among the Trust, DSI, and Chancellor. The
Portfolio Management Agreement was last approved by the Board of Trustees on
September 21, 1995. The Addendum to the Portfolio Management Agreement dated
April 30, 1995, was approved by Shareholders of the Capital Appreciation
Series at a meeting held on April 28, 1995, and was submitted to Shareholders
for the purpose of approving a decrease in the portfolio management fee paid
by DSI to Chancellor.
The New Portfolio Management Agreement is included as Exhibit B.
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(B)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the Capital Appreciation Series and to
recommend approval to shareholders, the Board of Trustees, including the
Trustees who are not interested persons of DSI or Chancellor, considered
various matters and materials provided by DSI and Chancellor. Information
considered by the Trustees included, among other things, the following:
(1) the compensation to be received by Chancellor for its investment advisory
services and the fairness of such compensation, and that the fee under the New
Portfolio Management Agreement is the same as that under the
10
<PAGE>
Current Portfolio Management Agreement; (2) the nature and the quality of the
investment advisory services to be rendered; and (3) the effect of the
Transaction on the services to be rendered under the New Portfolio Management
Agreement.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND CHANCELLOR.
PROPOSAL 2(C)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH BANKERS TRUST FOR THE EMERGING
MARKETS SERIES AND THE MARKET MANAGER SERIES
INFORMATION ABOUT BANKERS TRUST
Bankers Trust, with offices at 130 Liberty Street, New York, New York 10006,
is a wholly owned subsidiary of Bankers Trust New York Corporation. As of
December 31, 1995, Bankers Trust New York Corporation was the seventh largest
bank holding company in the United States with total assets of approximately
$104 billion. Bankers Trust conducts a variety of general banking and trust
activities and is a leading wholesale supplier of financial services to the
domestic and international markets. The unit of Bankers Trust that serves as
Portfolio Manager to the Emerging Markets Series is the Global Investment
Management division which, as of December 31, 1995, managed institutional
assets approximating $185 billion. The unit of Bankers Trust that serves as
Portfolio Manager to the Market Manager Series is the Derivative Investment
Strategies Group.
Bankers Trust manages the assets of the Emerging Markets Series and Market
Manager Series pursuant to a Portfolio Management Agreement dated September
30, 1992, and Addenda dated October 1, 1993, and November 7, 1994, among the
Trust, DSI, and Bankers Trust. The Portfolio Management Agreement was last
approved by the Board of Trustees on September 21, 1995. The Portfolio
Management Agreement was approved by the sole Shareholder of the Emerging
Markets Series by written consent dated September 30, 1993, and was approved
by the sole Shareholder of the Market Manager Series by written consent dated
November 7, 1994.
BT Brokerage Corporation is a registered broker-dealer which is affiliated
with Bankers Trust. During the fiscal year ended December 31, 1995, the Market
Manager Series paid $1,425 (90.48% of total brokerage commissions) to BT
Brokerage Corporation.
See Exhibit N for a list of the directors and the principal executive
officer of Bankers Trust and a table setting forth the other investment
companies with similar investment objectives to those of the Emerging Markets
Series, including the fees payable by such investment companies and their
approximate net assets.
The New Portfolio Management Agreement is included as Exhibit C.
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(C)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the Emerging Markets Series and Market
Manager Series and to recommend approval to shareholders, the Board of
Trustees, including the Trustees who are not interested persons of DSI or
Bankers Trust, considered various matters and materials provided by DSI and
Bankers Trust. Information considered by the Trustees included, among other
things, the following: (1) the compensation to be received by Bankers Trust
for its investment advisory services and the fairness of such compensation,
and that the fees under the New Portfolio Management Agreement are the same as
those under the Current Portfolio Management Agreement; (2) the nature and the
quality of the investment advisory services to be rendered; and (3) the effect
of the Transaction on the services to be rendered under the New Portfolio
Management Agreement.
11
<PAGE>
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND BANKERS TRUST.
PROPOSAL 2(D)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT
WITH T. ROWE PRICE FOR THE FULLY MANAGED SERIES
INFORMATION ABOUT T. ROWE PRICE
T. Rowe Price is located at 100 East Pratt St., Baltimore, Maryland 21202.
T. Rowe Price was founded in 1937 by the late Thomas Rowe Price, Jr. and
currently serves as investment adviser to the Fully Managed Series. As of
December 31, 1995, T. Rowe Price and its affiliates managed over $70 billion
in assets of approximately 3.5 million individual and institutional investor
accounts.
T. Rowe Price manages the assets of the Fully Managed Series pursuant to a
Portfolio Management Agreement dated January 1, 1995, among the Trust, DSI,
and T. Rowe Price. The Portfolio Management Agreement was approved by the
Board of Trustees on December 20, 1994 and was approved by Shareholders of the
Fully Managed Series at a meeting held on April 28, 1995.
See Exhibit O for a list of the directors and the principal executive
officer of T. Rowe Price and a table setting forth the other investment
companies with similar investment objectives to those of the Fully Managed
Series, including the fees payable by such investment companies and their
approximate net assets.
The New Portfolio Management Agreement is included as Exhibit D.
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(D)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the Fully Managed Series and to recommend
approval to shareholders, the Board of Trustees, including the Trustees who
are not interested persons of DSI or T. Rowe Price, considered various matters
and materials provided by DSI and T. Rowe Price. Information considered by the
Trustees included, among other things, the following: (1) the compensation to
be received by T. Rowe Price for its investment advisory services and the
fairness of such compensation, and that the fees under the New Portfolio
Management Agreement are the same as those under the Current Portfolio
Management Agreement; (2) the nature and the quality of the investment
advisory services to be rendered; and (3) the effect of the Transaction on the
services to be rendered under the New Portfolio Management Agreement.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGEMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND T. ROWE PRICE.
PROPOSAL 2(E)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH ZWEIG FOR
THE MULTIPLE ALLOCATION SERIES AND THE STRATEGIC EQUITY SERIES
INFORMATION ABOUT ZWEIG
Zweig, with offices at 900 Third Avenue, New York, New York 10022, was
organized on May 7, 1986. Dr. Martin E. Zweig, the President of Zweig, has
been engaged in the business of providing investment advisory and portfolio
management services for over 25 years. He is currently affiliated with
investment advisers which, as of December 31, 1995, managed in excess of $10
billion in total assets of investment companies and pension
12
<PAGE>
plan, individual, and other securities accounts. Zweig currently serves as
investment adviser to The Zweig Fund, Inc., a closed-end, diversified
management investment company. Dr. Zweig owns approximately 64% of the
outstanding shares of Zweig. See Exhibit P for a list of the directors and the
principal executive officer of Zweig.
Zweig manages the assets of the Multiple Allocation Series and Strategic
Equity Series pursuant to a Portfolio Management Agreement dated September 30,
1992, and Addenda dated October 1, 1993, April 30, 1995, and September 29,
1995, among the Trust, DSI, and Zweig. The Portfolio Management Agreement was
last approved by the Board of Trustees on September 21, 1995. The Addendum to
the Portfolio Management Agreement dated April 30, 1995, was approved by
Shareholders of the Multiple Allocation Series at a meeting held on April 28,
1995, and was submitted to Shareholders for the purpose of approving a
decrease in the portfolio management fee paid by DSI to Zweig. The Portfolio
Management Agreement was approved by the sole Shareholder of the Strategic
Equity Series by written consent dated September 29, 1995.
Watermark Securities, Inc. and Zweig Securities Corp. are registered broker-
dealers which are affiliated with Zweig. During the fiscal year ended December
31, 1995, the Multiple Allocation Series paid $86,365 (16.61% of total
brokerage commissions) to Watermark Securities, Inc.
The New Portfolio Management Agreement is included as Exhibit E.
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(E)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the Multiple Allocation Series and
Strategic Equity Series and to recommend approval to shareholders, the Board
of Trustees, including the Trustees who are not interested persons of DSI or
Zweig, considered various matters and materials provided by DSI and Zweig.
Information considered by the Trustees included, among other things, the
following: (1) the compensation to be received by Zweig for its investment
advisory services and the fairness of such compensation, and that the fees
under the New Portfolio Management Agreement are the same as those under the
Current Portfolio Management Agreement; (2) the nature and the quality of the
investment advisory services to be rendered; and (3) the effect of the
Transaction on the services to be rendered under the New Portfolio Management
Agreement.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGEMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND ZWEIG.
PROPOSAL 2(F)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT
WITH VAN ECK FOR THE NATURAL RESOURCES SERIES
INFORMATION ABOUT VAN ECK
Van Eck, with offices at 99 Park Avenue, New York, New York 10016, acts as
investment adviser to ten other mutual funds and portfolios of pension plans
with similar investment objectives to the Natural Resources Series. In
addition, Van Eck acts as an adviser to nine other mutual funds with
investment objectives different from the Natural Resources Series. Total
aggregate assets under management of Van Eck as of December 31, 1995 were
approximately $1.65 billion. John C. van Eck and members of his family own
100% of the stock of Van Eck.
Van Eck manages the assets of the Natural Resources Series pursuant to a
Portfolio Management Agreement dated September 30, 1992, and Addenda dated
October 1, 1993, and April 30, 1995, among the Trust, DSI, and Van Eck. The
Portfolio Management Agreement was last approved by the Board of Trustees on
September 21, 1995. The Addendum to the Portfolio Management Agreement dated
April 30, 1995, was approved by
13
<PAGE>
Shareholders of the Natural Resources Series at a meeting held on April 28,
1995, and was submitted to Shareholders for the purpose of approving a
decrease in the portfolio management fee paid by DSI to Van Eck.
See Exhibit Q for a list of the directors and the principal executive
officer of Van Eck and a table setting forth the other investment companies
with similar investment objectives to those of the Natural Resources Series
for which Van Eck serves as investment adviser, including the fees payable by
such investment companies and their approximate net assets.
The New Portfolio Management Agreement is included as Exhibit F.
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(F)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the Natural Resources Series and to
recommend approval to shareholders, the Board of Trustees, including the
Trustees who are not interested persons of DSI or Van Eck, considered various
matters and materials provided by DSI and Van Eck. Information considered by
the Trustees included, among other things, the following: (1) the compensation
to be received by Van Eck for its investment advisory services and the
fairness of such compensation, and that the fees under the New Portfolio
Management Agreement are the same as those under the Current Portfolio
Management Agreement; (2) the nature and the quality of the investment
advisory services to be rendered; and (3) the effect of the Transaction on the
services to be rendered under the New Portfolio Management Agreement.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND VAN ECK.
PROPOSAL 2(G)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT
WITH E.I.I. REALTY FOR THE REAL ESTATE SERIES
INFORMATION ABOUT E.I.I. REALTY
E.I.I. Realty, with offices at 667 Madison Avenue, 16th Floor, New York, New
York 10021, serves as investment adviser to the Real Estate Series. See
Exhibit R for a list of the directors and the principal executive officer of
E.I.I. Realty.
E.I.I. Realty is a professional investment adviser which, with its
affiliates, has been providing services to employee benefit plans,
corporations, and high net worth individuals, both foreign and domestic, since
1983. As of December 31, 1995, E.I.I. Realty and/or its affiliates had
investment management authority with respect to approximately $520 million of
real estate securities assets. E.I.I. Realty is a wholly owned subsidiary of
European Investors Incorporated.
E.I.I. Realty manages the assets of the Real Estate Series pursuant to a
Portfolio Management Agreement dated January 1, 1995, among the Trust, DSI,
and E.I.I. Realty. The Portfolio Management Agreement was approved by the
Board of Trustees on December 20, 1994. The Portfolio Management Agreement was
approved by the Shareholders of the Real Estate Series at a meeting held on
April 28, 1995.
The New Portfolio Management Agreement is included as Exhibit G.
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(G)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the Real Estate Series and to recommend
approval to shareholders, the Board of Trustees, including the Trustees
14
<PAGE>
who are not interested persons of DSI or E.I.I. Realty, considered various
matters and materials provided by DSI and E.I.I. Realty. Information
considered by the Trustees included, among other things, the following: (1)
the compensation to be received by E.I.I. Realty for its investment advisory
services and the fairness of such compensation, and that the fees under the
New Portfolio Management Agreement are the same as those under the Current
Portfolio Management Agreement; (2) the nature and the quality of the
investment advisory services to be rendered; and (3) the effect of the
Transaction on the services to be rendered under the New Portfolio Management
Agreement.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND E.I.I. REALTY.
PROPOSAL 2(H)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH
KAYNE, ANDERSON FOR THE RISING DIVIDENDS SERIES
INFORMATION ABOUT KAYNE, ANDERSON
Kayne, Anderson, with offices at 1800 Avenue of the Stars, Suite 200, Los
Angeles, California 90067, is a registered investment adviser organized on
June 29, 1994 as a California limited partnership succeeding to the investment
advisory business of Kayne, Anderson Investment Management, Inc., which was
founded in 1984 by Richard A. Kayne and John E. Anderson. Kayne, Anderson is
in the business of furnishing investment advice to institutional and private
clients. The General Partner is KAIM Traditional, LLC. Messrs. Kayne, Anderson
and Rudnick in the aggregate own 95% of the LLC. As of December 31, 1995,
Kayne, Anderson managed portfolios which, in the aggregate, amounted to
approximately $1.63 billion. See Exhibit S for a list of the principal
executive officer of Kayne, Anderson and the members of the general partner of
Kayne, Anderson.
Kayne, Anderson manages the assets of the Rising Dividends Series pursuant
to a Portfolio Management Agreement dated October 1, 1993, and an Addendum
dated April 30, 1995, among the Trust, DSI, and Kayne, Anderson. The Portfolio
Management Agreement was last approved by the Board of Trustees on September
21, 1995. The Addendum to the Portfolio Management Agreement dated April 30,
1995, was approved by Shareholders of the Rising Dividends Series at a meeting
held on April 28, 1995, and was submitted to Shareholders for the purpose of
approving a decrease in the portfolio management fee paid by DSI to Kayne,
Anderson.
The New Portfolio Management Agreement is included as Exhibit H.
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(H)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the Rising Dividends Series and to
recommend approval to shareholders, the Board of Trustees, including the
Trustees who are not interested persons of DSI or Kayne, Anderson, considered
various matters and materials provided by DSI and Kayne, Anderson. Information
considered by the Trustees included, among other things, the following: (1)
the compensation to be received by Kayne, Anderson for its investment advisory
services and the fairness of such compensation, and that the fees under the
New Portfolio Management Agreement are the same as those under the Current
Portfolio Management Agreement; (2) the nature and the quality of the
investment advisory services to be rendered; and (3) the effect of the
Transaction on the services to be rendered under the New Portfolio Management
Agreement.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGEMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND KAYNE, ANDERSON.
15
<PAGE>
PROPOSAL 2(I)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT
WITH FRED ALGER FOR THE SMALL CAP SERIES
INFORMATION ABOUT FRED ALGER
Fred Alger, with offices at 75 Maiden Lane, New York, New York 10038, serves
as investment adviser to the Small Cap Series. Fred Alger has been in the
business of providing investment advisory services since 1964 and, as of March
31, 1996, had approximately $5.5 billion under management, $3.7 billion in
mutual fund accounts and $1.8 billion in other advisory accounts. Fred Alger
is owned by Fred Alger & Company, Incorporated, which in turn is owned by
Alger Associates, Inc., a financial services holding company. Fred M. Alger
III and his brother, David D. Alger, are the majority shareholders of Alger
Associates, Inc. and may be deemed to control that company and its
subsidiaries.
Fred Alger manages the assets of the Small Cap Series pursuant to a
Portfolio Management Agreement dated December 29, 1995, among the Trust, DSI,
and Fred Alger. The Portfolio Management Agreement was approved by the Board
of Trustees on December 5, 1995. The Portfolio Management Agreement was
approved by the sole Shareholder of the Small Cap Series by written consent
dated December 29, 1995.
See Exhibit T for a list of the directors and the principal executive
officer of Fred Alger and a table setting forth the other investment companies
with similar investment objectives to those of the Small Cap for which Fred
Alger serves as investment adviser, including the fees payable by such
investment companies and their approximate net assets.
The New Portfolio Management Agreement is included as Exhibit I.
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(I)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the Small Cap Series and to recommend
approval to shareholders, the Board of Trustees, including the Trustees who
are not interested persons of DSI or Fred Alger, considered various matters
and materials provided by DSI and Fred Alger. Information considered by the
Trustees included, among other things, the following: (1) the compensation to
be received by Fred Alger for its investment advisory services and the
fairness of such compensation, and that the fees under the New Portfolio
Management Agreement are the same as those under the Current Portfolio
Management Agreement; (2) the nature and the quality of the investment
advisory services to be rendered; and (3) the effect of the Transaction on the
services to be rendered under the New Portfolio Management Agreement.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND FRED ALGER.
PROPOSAL 2(J)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT
WITH EAGLE ASSET FOR THE VALUE EQUITY SERIES
INFORMATION ABOUT EAGLE ASSET
Eagle Asset, with offices at 880 Carillon Parkway, St. Petersburg, Florida
33716, is a registered investment adviser organized on February 8, 1984 as a
Florida corporation. See Exhibit U for a list of the directors and the
principal executive officer of Eagle Asset.
16
<PAGE>
Eagle Asset is in the business of managing institutional clients and
individual accounts on a discretionary basis. Eagle Asset is a wholly owned
subsidiary of Raymond James Financial, Inc., a publicly traded company whose
shares are listed on the New York Stock Exchange. Thomas A. James is the
principal shareholder of Raymond James Financial, Inc.
Eagle Asset manages the assets of the Value Equity Series pursuant to a
Portfolio Management Agreement dated January 1, 1995, among the Trust, DSI,
and Eagle Asset. The Portfolio Management Agreement was approved by the Board
of Trustees on September 27, 1994. The Portfolio Management Agreement was
approved by the sole Shareholder of the Value Equity Series by written consent
dated December 30, 1994.
Raymond James & Associates, Inc. is a registered broker-dealer which is
affiliated with Eagle Asset. During the fiscal year ended December 31, 1995,
the Value Equity Series paid $240 (0.40% of total brokerage commissions) to
Raymond James & Associates, Inc.
The New Portfolio Management Agreement is included as Exhibit J.
THE TRUSTEES' RECOMMENDATION--PROPOSAL 2(J)
In determining whether or not it was appropriate to approve the New
Portfolio Management Agreement for the Value Equity Series and to recommend
approval to shareholders, the Board of Trustees, including the Trustees who
are not interested persons of DSI or Eagle Asset, considered various matters
and materials provided by DSI and Eagle Asset. Information considered by the
Trustees included, among other things, the following: (1) the compensation to
be received by Eagle Asset for its investment advisory services and the
fairness of such compensation, and that the fee under the New Portfolio
Management Agreement is the same as that under the Current Portfolio
Management Agreement; (2) the nature and the quality of the investment
advisory services to be rendered; and (3) the effect of the Transaction on the
services to be rendered under the New Portfolio Management Agreement.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW PORTFOLIO MANAGMENT AGREEMENT,
RECOMMENDS THE APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE
TRUST, DSI AND EAGLE ASSET.
PROPOSAL 3
APPROVAL OF A NEW PORTFOLIO MANAGEMENT AGREEMENT FOR
THE LIMITED MATURITY BOND SERIES AND THE LIQUID ASSET SERIES
As stated above, consummation of the Transaction will result in a change of
the control of DSI and may operate to automatically terminate the Current
Portfolio Management Agreement applicable to the Limited Maturity Bond Series
and Liquid Asset Series. Shareholder approval of a new Portfolio Management
Agreement with Equitable Investment Services, Inc. ("New Equitable Investment
Services Portfolio Management Agreement") is being sought.
The New Equitable Investment Services Portfolio Management Agreement
requires Equitable Investment Services, Inc. ("Equitable Investment Services")
to provide, subject to supervision of the Trust's Board of Trustees and DSI, a
continuous investment program for each of the Limited Maturity Bond Series'
and Liquid Asset Series' portfolios and to determine the composition of the
assets of each of these Series' portfolios, including determination of the
purchase, retention, or sale of the securities, cash, or other investments
contained in the portfolios. The New Equitable Investment Services Portfolio
Management Agreement also requires Equitable Investment Services to provide
investment research and conduct a continuous program of evaluation,
investment, sales and reinvestment of each of these Series' assets by
determining the securities and other investments that shall be purchased,
sold, closed or exchanged for each Series, when these transactions should be
executed and what portion of the assets of each Series should be held in the
various securities and other investments in which they may invest, all in
accordance with each Series' investment objective and policies.
17
<PAGE>
Pursuant to the New Equitable Investment Services Portfolio Management
Agreement, the Portfolio Manager will not be subject to liability for, or
subject to any damages, expenses, or losses in connection with any act or
omission arising out of any services rendered except by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties under the
agreement. The same responsibilities will be imposed on Equitable Investment
Services as are imposed upon Bankers Trust, the current Portfolio Manager of
the Series' portfolios.
For the services provided by Portfolio Manager pursuant to the New Equitable
Investment Services Portfolio Management Agreement, DSI, and not the Trust,
will pay a monthly fee at the following annual rates, which are expressed as
percentages of the value of the average daily net assets of each Series:
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<S> <C>
Limited Maturity Bond 0.30% of the first $25 million;
0.25% of the next $50 million;
0.20% of the next $75 million;
0.15% of the amount over $150 million,
subject to a minimum annual fee of $35,000
(payable at the end of each calendar year).
Liquid Asset 0.20% of the first $25 million;
0.15% of the next $50 million;
0.10% of the amount over $750 million,
subject to a minimum annual fee of $35,000
(payable at the end of each calendar year).
</TABLE>
Under the New Equitable Investment Services Portfolio Management Agreement,
the schedule of compensation payable to Equitable Investment Services will not
change from the schedule of compensation currently payable to Bankers Trust.
Fees paid to Bankers Trust for services under the Bankers Trust Portfolio
Management Agreement for the year ended December 31, 1995, were as follows:
$222,697 for the Limited Maturity Bond Series and $76,360 for the Liquid Asset
Series.
THE NEW EQUITABLE INVESTMENT SERVICES PORTFOLIO MANAGEMENT AGREEMENT
At the June 10, 1996, meeting of the Board of Trustees, the New Portfolio
Management Agreement for the Limited Maturity Bond Series and Liquid Asset
Series was approved by the Board, including the majority of the Trustees who
are not interested parties to the New Equitable Investment Services Portfolio
Management Agreement or interested persons of such parties. The New Equitable
Investment Services Management Agreement is included as Exhibit K.
The New Equitable Investment Services Management Agreement for the Limited
Maturity Bond Series and Liquid Asset Series as approved the Board of Trustees
is submitted for approval by the shareholders of each Series. The New
Equitable Investment Services Portfolio Management Agreement shall be voted
upon separately by each of the Limited Maturity Bond Series and Liquid Asset
Series. If it is approved by the vote of a majority of the outstanding Shares
of each Series, it will take effect upon the closing of the Transaction and
will continue in effect for two years and thereafter for successive annual
periods as long as such continuance is approved in accordance with the 1940
Act. For this purpose, the vote of the holders of the majority of a Series'
outstanding Shares means the lesser of: (i) the vote of 67% or more of the
Shares of each Series entitled to vote thereon present at the Meeting, if more
than 50% outstanding Shares of the Series are present or represented; or (ii)
more than 50% of the outstanding Shares of each Series. If the shareholders of
either Series should fail to approve the New Equitable Investment Services
Portfolio Management Agreement, but it is approved by the other Series,
Equitable Investment Services may act as the Portfolio Manager with respect to
the Series whose shareholders approve the New Equitable Investment Services
Portfolio Management Agreement. In such an event, the Board of Trustees will
consider what appropriate action to take. Such action may include entering
into new portfolio
18
<PAGE>
management arrangements, subject to approval of shareholders of the affected
Series, or the possible resubmission of the Proposal to shareholders at a
later date. If the Transaction is not consummated, Bankers Trust will continue
to serve as Portfolio Manager for the Limited Maturity Bond Series and Liquid
Asset Series under the current Bankers Trust Portfolio Management Agreement.
INFORMATION ABOUT EQUITABLE INVESTMENT SERVICES
Equitable Investment Services is an Iowa corporation with its place of
business at 699 Walnut Street, Des Moines, Iowa 50309. Equitable Investment
Services is an investment adviser registered under the Investment Advisers Act
of 1940. Equitable Investment Services is a wholly owned subsidiary of
Equitable of Iowa and an affiliate of Equitable Life, USG and Locust Street
Securities. Equitable Life is an Iowa domiciled life insurance company. USG is
an Oklahoma domiciled life insurance company. Equitable Life and USG offer
their individual annuity and life insurance products in 49 states and the
District of Columbia. Locust Street is an Iowa corporation which is registered
with the Securities and Exchange Commission as a broker-dealer and is a member
of the NASD. Equitable Life, USG, Locust Street and Equitable Investment
Services currently are not affiliated with Bankers Trust, Whitewood, BTV, DSI,
Golden American or any of the current Portfolio Managers of Trust. The address
of Equitable of Iowa is 604 Locust Street, Des Moines, Iowa 50319. Equitable
Investment Services is the investment adviser to, and administrator of, the
Equi-Select Series Trust. The Equi-Select Series Trust is the investment
medium for variable annuities issued by Equitable Life. The Equi-Select Series
Trust has assets of approximately $150 million. In addition to its
responsibility for the overall management of the investment strategies and
policies of the ten portfolios of the Equi-Select Series Trust, Equitable
Investment Services directly manages the Money Market Portfolio, Mortgage-
Backed Securities Portfolio, and Advantage Portfolio of the Equi-Select Series
Trust. Additionally, Equitable Investment Services serves as the investment
adviser to Equitable Life and USG, and in such capacity Equitable Investment
Services manages over $8.6 billion of their general account assets, comprised
primarily investment grade corporate bonds, mortgage backed securities, non-
investment grade corporate bonds, and commercial mortgages.
For a list of the directors and the principal executive officer of Equitable
Investment Services and a list of investment companies with investment
objectives similar to those of the Liquid Asset Series and the Limited
Maturity Bond Series for which Equitable Investment Services serves as
investment adviser, including the fees payable by each series and their
approximate net assets, see Exhibit V. It is anticipated that upon
consummation of the Transaction, Terry L. Kendall, an interested person of the
Trust, will become a director of Equitable Investment Services.
THE TRUSTEES' RECOMMENDATION
In determining whether or not it was appropriate to approve the New
Equitable Investment Services Portfolio Management Agreement and to recommend
approval to the shareholders, the Board of Trustees, including the Trustees
who are not interested persons of the Trust, DSI or Equitable Investment
Services considered several factors, including: (1) the compensation to be
paid by DSI (not the Trust) under the New Equitable Investment Services
Portfolio Management Agreement, and the fairness and reasonableness of the
compensation, which the Board noted is the same compensation paid to the
current Portfolio Manager; (2) the nature and quality of the portfolio
management services, including research capabilities and in particular credit
research, expected to be rendered in the future by Equitable Investment
Services; (3) the background, prior experience and performance of Equitable
Investment Services; (4) Equitable Investment Services' experience in
investing in the types of securities eligible for the Liquid Assets Series and
Limited Maturity Bond Series; (5) performance information of Equitable
Investment Services' investment accounts; (6) the financial condition of
Equitable Investment Services; and (7) the anticipated working relationship
between DSI and Equitable Investment Services resulting from the firms'
affiliation.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF ANY PARTY TO THE NEW EQUITABLE INVESTMENT SERVICES
PORTFOLIO MANAGMENT AGREEMENT, RECOMMENDS THE APPROVAL OF THE NEW EQUITABLE
INVESTMENT SERVICES PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST, DSI AND
EQUITABLE INVESTMENT SERVICES.
19
<PAGE>
ADDITIONAL INFORMATION
OUTSTANDING SHARES
As of the Record Date, there were the following number of Shares outstanding
for each Series of the Trust:
<TABLE>
<CAPTION>
SERIES SHARES OUTSTANDING
------ ------------------
<S> <C>
All-Growth 6,780,622.807
Capital Appreciation 9,084,347.860
Emerging Markets 5,387,968.382
Fully Managed 8,689,378.393
Limited Maturity Bond 7,314,386.901
Liquid Asset 42,998,135.020
Market Manager 494,701.295
Multiple Allocation 23,041,686.729
Natural Resources 2,033,167.322
Real Estate 2,651,932.410
Rising Dividends 6,688,075.610
Small Cap 1,685,848.702
Strategic Equity 1,812,979.445
Value Equity 2,864,914.708
</TABLE>
SHAREHOLDERS OF THE TRUST
As of the Record Date, the following persons were known to the Trust to be
the beneficial owner of more than 5% of the Shares of any Series of the Trust:
<TABLE>
<CAPTION>
NAME AND ADDRESS
OF BENEFICIAL OWNER SERIES SHARES HELD %OF SHARES
------------------- ---------------- ----------- ----------
<S> <C> <C> <C>
David & Anita Swann Market Manager 45,241.276 9.15
Charitable Remainder Trust
Darald Libby Market Manager 28,236.587 5.71
Charitable Remainder Unitrust
George Berman Market Manager 25,159.723 5.09
Charitable Remainder Trust
Albert & Bertha Markstein Strategic Equity 117,753.623 6.50
Living Trust
</TABLE>
OFFICERS OF THE TRUST
The principal executive officers of the Trust and their ages and principal
occupations are set forth below. The executive officers of the Trust are
elected annually and serve until his or her successor shall have been duly
elected and qualified.
<TABLE>
<CAPTION>
NAME AND AGE POSITION WITH THE TRUST AND OTHER PRINCIPAL OCCUPATIONS
------------ -------------------------------------------------------
<S> <C>
Terry L. Kendall (49) Chairman of the Board and President of the Trust;
Managing Director, Bankers Trust Company; President,
Director, and Chief Executive Officer, Golden
American; President, Director, and Chief Executive
Officer, BTV; Chairman of the Board and President of
Separate Account D of Golden American Life Insurance
Company ("Separate Account D"); formerly, President
and Chief Executive Officer, United Pacific Life
Insurance Company (1983-1993).
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE POSITION WITH THE TRUST AND OTHER PRINCIPAL OCCUPATIONS
------------ -------------------------------------------------------
<S> <C>
Barnett Chernow (46) Vice President of Trust; Executive Vice President,
BTV, October 1993 to present; Senior Vice President
and Chief Financial Officer, Reliance Insurance
Company, August 1977 to July 1993.
Myles R. Tashman (53) Secretary of Trust; Executive Vice President, Golden
American; Executive Vice President, BTV; Secretary
of Separate Account D; formerly, Senior Vice
President and General Counsel, United Pacific Life
Insurance Company (1986-1993).
Mary Bea Wilkinson (39) Treasurer of Trust; Senior Vice President, Golden
American, November 1993 to present; Senior Vice
President, BTV, November 1993 to present; Assistant
Vice President, CIGNA Insurance Companies, August
1993 to October 1993; various positions with United
Pacific Life Insurance Company, January 1987 to July
1993, and was Vice President and Controller upon
leaving.
</TABLE>
DISTRIBUTOR
Shares of the Trust are distributed through Directed Services, Inc. (the
"Distributor"). The Distributor's address is 1001 Jefferson Street, Suite 400,
Wilmington, DE 19801. The Distributor is a registered broker-dealer and a
member of the NASD and acts as Distributor without remuneration from the
Trust.
ADJOURNMENT
In the event that sufficient votes in favor of any of the proposals set
forth in the Notice of the Meeting are not received by the time scheduled for
the Meeting, the persons named as Proxies may propose one or more adjournments
of the Meeting after the date set for the original Meeting to permit further
solicitation of proxies with respect to any such proposals. In addition, if,
in the judgment of the persons named as Proxies, it is advisable to defer
action on one or more proposals, the persons named as Proxies may propose one
or more adjournments of the Meeting for a reasonable time. Any such
adjournments will require the affirmative vote of a majority of the votes cast
on the questions in person or by proxy at the session of the Meeting to be
adjourned, as required by the Trust's Amended and Restated Agreement and
Declaration of Trust and By-Laws. The persons named as Proxies will vote in
favor of such adjournment those Proxies which they are entitled to vote in
favor of such proposals. They will vote against any such adjournment those
Proxies required to be voted against any of such proposals. None of the costs
of any additional solicitation and of any adjourned session will be borne by
the Trust. Any proposals for which sufficient favorable votes have been
received by the time of the Meeting will be acted upon and such action will be
final regardless of whether the Meeting is adjourned to permit additional
solicitation with respect to any other proposal.
ANNUAL REPORT
The Trust's 1995 Annual Report to Shareholders was mailed to shareholders on
or about February 26, 1996. IF YOU SHOULD DESIRE AN ADDITIONAL COPY OF AN
ANNUAL REPORT, IT CAN BE OBTAINED, WITHOUT CHARGE, FROM DSI BY CALLING (800)
366-0066.
COSTS OF SOLICITATION.
The costs associated with the Meeting will be paid by Equitable of Iowa.
Neither the Trust nor its Shareholders will bear any costs associated with
this meeting.
OTHER BUSINESS
The management of the Trust knows of no other business to be presented at
the meeting other than the matters set forth in this Statement. If any other
business properly comes before the meeting, the persons designated as proxies
will exercise their best judgment in deciding how to vote on such matters.
21
<PAGE>
SHAREHOLDER PROPOSALS
Pursuant to the applicable laws of the Commonwealth of Massachusetts, the
Amended and Restated Agreement and Declaration of Trust and the By-Laws of the
Trust, the Trust need not hold annual or regular shareholder meetings,
although special meetings may be called for a specific Series, or for the
Trust as a whole, for purposes such as electing or removing Trustees, changing
fundamental policies or approving a contract for investment advisory services.
Therefore, it is probable that no annual meeting of shareholders will be held
in 1997 or in subsequent years until so required by the 1940 Act or other
applicable laws. For those years in which annual shareholder meetings are
held, proposals which shareholders of the Trust intend to present for
inclusion in the proxy materials with respect to the annual meeting of
shareholders must be received by the Trust within a reasonable period of time
before the solicitation is made.
Please complete the enclosed authorization card and return it promptly in
the enclosed self-addressed postage-paid envelope. You may revoke your proxy
at any time prior to the meeting by written notice to the Trust or by
submitting an authorization card bearing a later date.
By Order of the Board of Trustees,
/s/ Myles Tashman
Myles R. Tashman
Secretary
Wilmington, Delaware
July 1, 1996
22
<PAGE>
ATTACHMENT AND EXHIBIT INDEX
<TABLE>
<CAPTION>
ATTACHMENT ATTACHMENT DESCRIPTION
---------- ----------------------
<C> <S>
New Management Agreement between The GCG Trust and Directed Servic-
A es, Inc.
B Other information regarding Directed Services, Inc.
<CAPTION>
EXHIBIT EXHIBIT DESCRIPTION
---------- -------------------
<C> <S>
A New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and Warburg, Pincus Counsellors, Inc.
B New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and Chancellor Trust Company
C New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and Bankers Trust Company
D New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and T. Rowe Price Associates, Inc.
E New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and Zweig Advisors Inc.
F New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and Van Eck Associates Corporation
G New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and E.I.I. Realty Securities, Inc.
H New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and Kayne, Anderson Investment Management, L.P.
I New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and Fred Alger Management, Inc.
J New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and Eagle Asset Management, Inc.
K New Portfolio Management Agreement among The GCG Trust, Directed
Services, Inc. and Equitable Investment Services, Inc.
L Other information regarding Warburg, Pincus Counsellors, Inc.
M Other information regarding Chancellor Trust Company
N Other information regarding Bankers Trust Company
O Other information regarding T. Rowe Price Associates, Inc.
P Other information regarding Zweig Advisors Inc.
Q Other information regarding Van Eck Associates Corporation
R Other information regarding E.I.I. Realty Securities, Inc.
S Other information regarding Kayne, Anderson Investment Management,
L.P.
T Other information regarding Fred Alger Management, Inc.
U Other information regarding Eagle Asset Management, Inc.
V Other information regarding Equitable Investment Services, Inc.
</TABLE>
23
<PAGE>
ATTACHMENT A
MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996 between The GCG Trust ("Trust"), a
Massachusetts business trust, and Directed Services, Inc. ("Manager"), a New
York corporation (the "Agreement").
WHEREAS, the Trust is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest in
separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future; and
WHEREAS, the Trust desires to avail itself of the services of the Manager
for the provision of advisory, management, administrative, and other services
for the Trust; and
WHEREAS, the Manager is willing to render such services to the Trust.
Therefore, in consideration of the premises, the promises and mutual
covenants herein contained, it is agreed between the parties as follows:
1. Appointment. The Trust hereby appoints the Manager, subject to the
direction of the Board of Trustees, for the period and on the terms set forth
in this Agreement, to provide advisory, management, administrative, and other
services, as described herein, with respect to the Series identified on
Schedule A, such series together with all other series subsequently
established by the Trust with respect to which the Trust desires to retain the
Manager to render advisory, management, administrative, and other services
hereunder and with respect to which the Manager is willing to do so being
herein collectively referred to as the "Series." The Manager accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided. In the event the Trust establishes one or more
series other than the Series with respect to which it desires to retain the
Manager to render advisory, management, administrative, and other services
hereunder, it shall notify the Manager in writing. If the Manager is willing
to render such services it shall notify the Trust in writing, whereupon such
series shall become a Series hereunder.
2. Services of the Manager. The Manager represents and warrants that it is
registered as an investment adviser under the Investment Advisers Act of 1940
and in all states where required, and will maintain such registration for so
long as required by applicable law. Subject to the general supervision of the
Board of Trustees of the Trust, the Manager shall provide the following
advisory, management, administrative, and other services with respect to the
Series:
(a) Provide general, overall advice and guidance with respect to the
Series and provide advice and guidance to the Trust's Trustees, and oversee
the management of the investments of the Series and the composition of each
Series' portfolio of securities and investments, including cash, and the
purchase, retention and disposition thereof, in accordance with each
Series' investment objective or objectives and policies as stated in the
Trust's current registration statement, which management shall be provided
by others selected by the Manager and approved by the Board of Trustees as
provided below or directly by the Manager as provided in Section 3 of this
Agreement;
(b) Analyze, select and recommend for consideration by the Trust's Board
of Trustees investment advisory firms (however organized) to provide
investment advice to one or more of the Series, and, at the expense of the
Manager, engage (which engagement may also be by the Trust) such investment
advisory firms to render investment advice and manage the investments of
such Series and the composition of each
Attachment A-1
<PAGE>
such Series' portfolio of securities and investments, including cash, and
the purchase, retention and disposition thereof, in accordance with the
Series' investment objective or objectives and policies as stated in the
Trust's current registration statement (any such firms approved by the
Board of Trustees and engaged by the Trust and/or the Manager are referred
to herein as "Portfolio Managers");
(c) Periodically monitor and evaluate the performance of the Portfolio
Managers with respect to the investment objectives and policies of the
Series;
(d) Monitor the Portfolio Managers for compliance with the investment
objective or objectives, policies and restrictions of each Series, the 1940
Act, Subchapter M of the Internal Revenue Code, Section 817(h) of the
Internal Revenue Code, and if applicable, regulations under such
provisions, and other applicable law;
(e) If appropriate, analyze and recommend for consideration by the
Trust's Board of Trustees termination of a contract with a Portfolio
Manager under which the Portfolio Manager provided investment advisory
services to one or more of the Series;
(f) Supervise Portfolio Managers with respect to the services that such
Portfolio Managers provide under respective portfolio management agreements
("Portfolio Management Agreements"), although the Manager is not
authorized, except as provided in Section 3 of the Agreement, directly to
make determinations with respect to the investment of a Series' assets or
the purchase or sale of portfolio securities or other investments for a
Series;
(g) Provide all supervisory, management, and administrative services
reasonably necessary for the operation of the Series other than the
investment advisory services performed by the Portfolio Managers, including
but not limited to, (i) coordinating all matters relating to the operation
of the Series, including any necessary coordination among the Portfolio
Managers, custodian, transfer agent, dividend disbursing agent, and
portfolio accounting agent (including pricing and valuation of the Series'
portfolios), accountants, attorneys, and other parties performing services
or operational functions for the Trust, (ii) providing the Trust and the
Series, at the Manager's expense, with the services of a sufficient number
of persons competent to perform such administrative and clerical functions
as are necessary to ensure compliance with federal securities laws and to
provide effective supervision and administration of the Series; (iii)
maintaining or supervising the maintenance by third parties selected by the
Manager of such books and records of the Trust and the Series as may be
required by applicable federal or state law; (iv) preparing or supervising
the preparation by third parties selected by the Manager of all federal,
state, and local tax returns and reports relating to the Series required by
applicable law; (v) preparing and filing and arranging for the distribution
of proxy materials and periodic reports to shareholders of the Series as
required by applicable law; (vi) preparing and arranging for the filing of
registration statements and other documents with the Securities and
Exchange Commission (the "SEC") and other federal and state regulatory
authorities as may be required by applicable law; (vii) taking such other
action with respect to the Trust as may be required by applicable law in
connection with the Series, including without limitation the rules and
regulations of the SEC and other regulatory agencies; and (viii) providing
the Trust, at the Manager's expense, with adequate personnel, office space,
communications facilities, and other facilities necessary for operation of
the Series as contemplated in this Agreement;
(h) Provide or procure on behalf of the Trust and the Series, and at the
expense of the Manager, the following services for the Series: (i)
custodian services to provide for the safekeeping of the Series' assets;
(ii) portfolio accounting services to maintain the portfolio accounting
records for the Series; (iii) transfer agency services for the Series; (iv)
dividend disbursing services for the Series, and (v) other services
necessary for the ordinary operation of the Series. The Trust may, but is
not required to, be a party to any agreement with any third person
contracted to provide the services referred to in this Section 2(h);
(i) Render to the Board of Trustees of the Trust such periodic and
special reports as the Board may reasonably request; and
(j) Make available its officers and employees to the Board of Trustees
and officers of the Trust for consultation and discussions regarding the
administration and management of the Series and services provided to the
Trust under this Agreement.
Attachment A-2
<PAGE>
3. Investment Management Authority. In the event that a Portfolio Management
Agreement pertaining to a Series is terminated or if, at any time, no
Portfolio Manager is engaged to manage the assets of a Series of the Trust,
then with respect to any such Series, the Manager, subject to the supervision
of the Trust's Board of Trustees, will provide a continuous investment program
for the Series' portfolio and determine the composition of the assets of the
Series' portfolio, including determination of the purchase, retention, or sale
of the securities, cash, and other investments contained in the portfolio. The
Manager will provide investment research and conduct a continuous program of
evaluation, investment, sales, and reinvestment of the Series' assets by
determining the securities and other investments that shall be purchased,
entered into, sold, closed, or exchanged for the Series, when these
transactions should be executed, and what portion of the assets of the Series
should be held in the various securities and other investments in which it may
invest, and the Manager is hereby authorized to execute and perform such
services on behalf of the Series. To the extent permitted by the investment
policies of the Series, the Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to, and execute and
perform, foreign currency exchange contracts on behalf of the Series. The
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the SEC, as amended.
Furthermore:
(a) The Manager will (1) take all steps necessary to manage the Series so
that it will qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code, (2) take all steps necessary to manage the
Series so as to ensure compliance by the Series with the diversification
requirements of Section 817(h) of the Internal Revenue Code and regulations
issued thereunder, and (3) use reasonable efforts to manage the Series so
as to ensure compliance by the Series with any other rules and regulations
pertaining to investment vehicles underlying variable annuity or variable
life insurance policies. In managing the Series in accordance with these
requirements, the Manager shall be entitled to receive and act upon advice
of counsel to the Trust or counsel to the Manager.
(b) The Manager will conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees, and the provisions of the Registration Statement of the Trust
under the Securities Act of 1933 and the 1940 Act, as supplemented or
amended.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Series as well as any other
investment advisory clients, the Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Manager in a manner that is fair and equitable in the
judgment of the Manager in the exercise of its fiduciary obligations to the
Trust and to such other clients.
(d) In connection with the purchase and sale of securities of the Series,
the Manager will arrange for the transmission to the custodian for the
Trust on a daily basis, of such confirmation, trade tickets, and other
documents and information, including, but not limited to, CUSIP, SEDOL, or
other numbers that identify securities to be purchased or sold on behalf of
the Series, as may be reasonably necessary to enable the custodian to
perform its administrative and recordkeeping responsibilities with respect
to the Series. With respect to portfolio securities to be purchased or sold
through the Depository Trust Company, the Manager will arrange for the
automatic transmission of the confirmation of such trades to the Trust's
custodian.
(e) The Manager will assist the custodian or portfolio accounting agent
for the Trust in determining, consistent with the procedures and policies
stated in the Registration Statement for the Trust, the value of any
portfolio securities or other assets of the Series for which the custodian
or portfolio accounting agent seeks assistance or review from the Manager.
The Manager will monitor on a daily basis the determination by the
custodian or portfolio accounting agent for the Trust of the value of
portfolio securities and other assets of the Series and the determination
of net asset value of the Series.
Attachment A-3
<PAGE>
(f) The Manager will make available to the Trust, promptly upon request,
all of the Series' investment records and ledgers as are necessary to
assist the Trust to comply with requirements of the 1940 Act and the
Investment Advisers Act of 1940, as well as other applicable laws. The
Manager will furnish to regulatory authorities having the requisite
authority any information or reports in connection with such services which
may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and
regulations.
(g) The Manager will regularly report to the Trust's Board of Trustees on
the investment program for the Series and the issuers and securities
represented in the Series' portfolio, and will furnish the Trust's Board of
Trustees with respect to the Series such periodic and special reports as
the Trustees may reasonably request.
(h) The Manager will not disclose or use any records or information
obtained pursuant to this Agreement (excluding investment research and
investment advice) in any manner whatsoever except as required to carry out
its duties as investment manager and administrator pursuant to this Section
3 or in the ordinary course of business in connection with placing orders
for the purchase and sale of securities, and will keep confidential any
information obtained pursuant to this Agreement, and disclose such
information only if the Board of Trustees of the Trust has authorized such
disclosure, or if such disclosure is expressly required by applicable
federal or state law or regulations or regulatory authorities having the
requisite authority.
(i) In rendering the services required under this Section of this
Agreement, the Manager may, from time to time, employ or associate with
itself such person or persons as it believes necessary to assist it in
carrying out its obligations under this Agreement. The Manager shall be
responsible for making reasonable inquires and for reasonably ensuring that
any employee of the Manager, any person or firm that the Manager has
employed or with which it has associated, or any employee thereof has not,
to the best of the Manager's knowledge, in any material connection with the
handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, or involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provisions of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
(j) In connection with its responsibilities under this Section 3, the
Manager is responsible for decisions to buy and sell securities and other
investments for the Series' portfolio, broker-dealer selection, and
negotiation of brokerage commission rates. The Manager's primary
consideration in effecting a security transaction will be to obtain the
best execution for the Series, taking into account the factors specified in
the Prospectus and/or Statement of Additional Information for the Trust,
which include price (including the applicable brokerage commission or
dollar spread), the size of the order, the nature of the market for the
security, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer involved, the quality of the
service, the difficulty of execution, execution capabilities and
operational facilities of the firms involved, and the firm's risk in
positioning a block of securities. Accordingly, the price to the Series in
any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified, in the judgment of
the Manager in the exercise of its fiduciary obligations to the Trust, by
other aspects of the portfolio execution services offered. Subject to such
policies as the Board of Trustees may determine and consistent with Section
28(e) of the Securities Exchange Act of 1934, the Manager shall not be
deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise solely by reason of its having caused the
Series to pay a broker-dealer for effecting a portfolio investment
transaction in excess of the amount of commission another broker-dealer
would have
Attachment A-4
<PAGE>
charged for effecting that transaction, if the Manager or its affiliate
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by
such broker-dealer, viewed in terms of either that particular transaction
or the Manager's or its affiliate's overall responsibilities with respect
to the Series and to their other clients as to which they exercise
investment discretion. To the extent consistent with these standards and in
accordance with Section 11(a) of the Securities Exchange Act of 1934 and
Rule 11a2-2(T) thereunder, the Manager is further authorized to allocate
the orders placed by it on behalf of the Series to the Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-
dealer, or to such brokers and dealers who also provide research or
statistical material or other services to the Series, the Manager or an
affiliate of the Manager. Such allocation shall be in such amounts and
proportions as the Manager shall determine consistent with the above
standards, and the Manager will report on said allocation regularly to the
Board of Trustees of the Trust indicating the broker-dealers to which such
allocations have been made and the basis therefor.
4. Conformity with Applicable Law. The Manager, in the performance of its
duties and obligations under this Agreement, shall act in conformity with the
Registration Statement of the Trust and with the instructions and directions
of the Board of Trustees of the Trust and will conform to, and comply with,
the requirements of the 1940 Act and all other applicable federal and state
laws and regulations.
5. Exclusivity. The services of the Manager to the Trust under this
Agreement are not to be deemed exclusive, and the Manager, or any affiliate
thereof, shall be free to render similar services to other investment
companies and other clients (whether or not their investment objectives and
policies are similar to those of any of the Series) and to engage in other
activities, so long as its services hereunder are not impaired thereby.
6. Documents. The Trust has delivered properly certified or authenticated
copies of each of the following documents to the Manager and will deliver to
it all future amendments and supplements thereto, if any:
(a) certified resolution of the Board of Trustees of the Trust
authorizing the appointment of the Manager and approving the form of this
Agreement;
(b) the Registration Statement as filed with the SEC and any amendments
thereto; and
(c) exhibits, powers of attorney, certificates and any and all other
documents relating to or filed in connection with the Registration
Statement described above.
7. Records. The Manager agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be
maintained by the Manager with respect to the Series by the 1940 Act. The
Manager further agrees that all records which it maintains for the Series are
the property of the Trust and it will promptly surrender any of such records
upon request.
8. Expenses. During the term of this Agreement, the Manager will pay all
expenses incurred by it in connection with its activities under this
Agreement, except such expenses as are assumed by the Trust under this
Agreement and such expenses as are assumed by a Portfolio Manager under its
Portfolio Management Agreement. The Manager further agrees to pay all
salaries, fees and expenses of any officer or trustee of the Trust who is an
officer, director or employee of the Manager or any of its affiliates. The
Manager shall be responsible for all of the expenses of its operations and for
the following expenses:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Trust's transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Trust's custodial services, including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of each
Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management reports (as appropriate) for each Series;
Attachment A-5
<PAGE>
(f) Expenses of maintaining the Trust's tax records;
(g) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence and qualification to do business, and
the registration of shares with federal and state securities or insurance
authorities;
(h) The Trust's ordinary legal fees, including the legal fees related to
the registration and continued qualification of the Trust's shares for
sale;
(i) Costs of printing stock certificates representing shares of the
Trust;
(j) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(k) Association membership dues; and
(l) Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
Commencing with the date of this Agreement, the Manager is responsible for
any remaining unamortized organizational expenses of the Series as of the
date of this Agreement.
The Trust shall be responsible for the following expenses:
(a) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Manager or an affiliate of the Manager;
(b) Taxes levied against the Trust;
(c) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Trust;
(d) Costs, including the interest expense, of borrowing money;
(e) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Manager, any Portfolio Manager, or any
affiliates of either; and
(f) Extraordinary expenses as may arise, including extraordinary
consulting expenses and extraordinary legal expenses incurred in connection
with litigation, proceedings, other claims (unless the Manager is
responsible for such expenses under Section 10 of this Agreement or a
Portfolio Manager is responsible for such expenses under the Section
entitled "Liability" of a Portfolio Management Agreement), and the legal
obligations of the Trust to indemnify its trustees, officers, employees,
shareholders, distributors, and agents with respect thereto.
9. Compensation. For the services provided by the Manager pursuant to this
Agreement, the Trust will pay to the Manager a fee at an annual rate equal to
a percentage of the average daily net assets of each Series as shown on
Schedule B to this Agreement. This fee shall be computed and accrued daily and
payable as shown on Schedule B.
10. Liability of the Manager. The Manager may rely on information reasonably
believed by it to be accurate and reliable. Except as may otherwise be
required by the 1940 Act or the rules thereunder, neither the Manager nor its
stockholders, officers, directors, employees, or agents shall be subject to,
and the Trust will indemnify such persons from and against, any liability for,
or any damages, expenses, or losses incurred in connection with, any act or
omission connected with or arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Manager's duties, or by reason of
reckless disregard of the Manager's obligations and duties under this
Agreement. Except as may otherwise be required by the 1940 Act or the rules
thereunder, neither the Manager nor its stockholders, officers, directors,
employees, or agents shall be subject to, and the Trust will indemnify such
persons from and against, any liability for, or any damages, expenses, or
losses incurred in connection with, any act or omission by a Portfolio Manager
or any of the Portfolio Manager's stockholders or partners, officers,
directors, employees, or agents connected with or arising out of any services
rendered under a Portfolio
Attachment A-6
<PAGE>
Management Agreement, except by reason of willful misfeasance, bad faith, or
gross negligence in the performance of the Manager's duties under this
Agreement, or by reason of reckless disregard of the Manager's obligations and
duties under this Agreement.
11. Continuation and Termination. This Agreement shall become effective on
the date first written above. Unless terminated as provided herein, the
Agreement shall continue in full force and effect for two (2) years from the
effective date of this Agreement, and shall continue from year to year there
after with respect to each Series so long as such continuance is specifically
approved at least annually (i) by the vote of a majority of the Board of
Trustees of the Trust, or (ii) by vote of a majority of the outstanding voting
shares of the Trust, and provided continuance is also approved by the vote of
a majority of the Board of Trustees of the Trust who are not parties to this
Agreement or "interested persons" (as defined in the 1940 Act) of the Trust or
the Manager, cast in person at a meeting called for the purpose of voting on
such approval. This Agreement may not be amended in any material respect
without a majority vote of the outstanding voting shares (as defined in the
1940 Act). However, any approval of this Agreement by the holders of a
majority of the outstanding shares (as defined in the 1940 Act) of a Series
shall be effective to continue this Agreement with respect to such Series
notwithstanding (i) that this Agreement has not been approved by the holders
of a majority of the outstanding shares of any other Series or (ii) that this
Agreement has not been approved by the vote of a majority of the outstanding
shares of the Trust, unless such approval shall be required by any other
applicable law or otherwise. This Agreement may be terminated by the Trust at
any time, without the payment of any penalty, by vote of a majority of the
entire Board of Trustees of the Trust or by a vote of a majority of the
outstanding voting shares of the Trust, or with respect to a Series, by vote
of a majority of the outstanding voting shares of such Series, on sixty (60)
days' written notice to the Manager, or by the Manager at any time, without
the payment of any penalty, on sixty (60) days' written notice to the Trust.
This Agreement will automatically and immediately terminate in the event of
its "assignment" (as described in the 1940 Act).
12. Use of Name. It is understood that the name or any derivative thereof or
logo associated with the name Directed Services, Inc. is the valuable property
of the Manager, and that the Trust and/or the Series have the right to use
such name (or derivative or logo) only so long as this Agreement shall
continue with respect to such Trust and/or Series. Upon termination of this
Agreement, the Trust (or Series) shall forthwith cease to use such name (or
derivative or logo) and, in the case of the Trust, shall promptly amend its
Agreement and Declaration of Trust to change its name (if such name is
included therein).
13. Notice. Notices of any kind to be given to the Manager by the Trust
shall be in writing and shall be duly given if mailed or delivered to the
Manager at 1001 Jefferson Street, Suite 400, Wilmington, Delaware 19801, or at
such other address or to such individual as shall be specified by the Manager
to the Trust. Notices of any kind to be given to the Trust by the Manager
shall be in writing and shall be duly given if mailed or delivered to 1001
Jefferson Street, Suite 400, Wilmington, Delaware 19801, or at such other
address or to such individual as shall be specified by the Trust to the
Manager.
14. Trust Obligation. A copy of the Trust's Amended and Restated Agreement
and Declaration of Trust is on file with the Secretary of the Commonwealth of
Massachusetts and notice is hereby given that the Agreement has been executed
on behalf of the Trust by the Trustees of the Trust in their capacity as
trustees and not individually. The obligations of this Agreement shall only be
binding upon the assets and property of the Trust and shall not be binding
upon any trustee, officer, or shareholder of the Trust individually.
15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
16. Applicable Law.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, or any
rules or order of the SEC thereunder.
Attachment A-7
<PAGE>
(b) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(c) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE GCG TRUST
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
DIRECTED SERVICES, INC.
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
Attachment A-8
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in the attached Management
Agreement, to which Directed Services, Inc. shall act as Manager are as
follows:
Multiple Allocation Series
Fully Managed Series
Limited Maturity Bond Series
Natural Resources Series
Real Estate Series
All-Growth Series
Liquid Asset Series
Capital Appreciation Series
Rising Dividends Series
Emerging Markets Series
Market Manager Series
Value Equity Series
Strategic Equity Series
Small Cap Series
Managed Global Series
Attachment A-9
<PAGE>
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Directed Services, Inc. (the "Manager") to the
following Series of The GCG Trust (the "Trust"), pursuant to the attached
Management Agreement, the Trust will pay the Manager a fee, payable monthly
for each Series except the Market Manager Series, which will be payable
quarterly, based on the average daily net assets of the Series at the
following annual rates of the average daily net assets of the Series.
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<S> <C>
Multiple Allocation, Fully Managed, 1.00% of first $750 million;
Natural Resources, Real Estate, All- 0.95% of next $1.25 billion;
Growth, 0.90% of next $1.5 billion;
Capital Appreciation, Rising Dividends, and
Value Equity, Strategic Equity, and 0.85% of amount in excess of $3.5
Small Cap Series: billion
Limited Maturity Bond and Liquid Asset 0.60% of first $200 million;
Series: 0.55% of next $300 million;
and
0.50% of amount in excess of $500
million
Emerging Markets Series: 1.50%
Market Manager Series: 1.00%
Managed Global Series: 1.25% of first $500 million;
1.05% of amount in excess of $500
million
</TABLE>
Attachment A-10
<PAGE>
ATTACHMENT B
OTHER INFORMATION REGARDING DIRECTED SERVICES, INC.
The directors and the principal executive officer of DSI and their principal
occupations are as shown below. Except for Mr. Kendall, whose principal
business address is 1001 Jefferson Street, Suite 400, Wilmington, Delaware
19801, the principal business address of each Director is 280 Park Avenue, New
York, New York 10017.
<TABLE>
<CAPTION>
NAME AND POSITION WITH DSI PRINCIPAL OCCUPATION
-------------------------- --------------------
<C> <S>
Paul Daniel Borge, Jr. Managing Director, Bankers Trust
Director Company; Director, Golden American
Life Insurance Company, Whitewood
Properties Corp. and BT Variable, Inc.
Richard A. Marin Managing Director, Bankers Trust
Director Company Company; Director, Whitewood
Properties Corp., BT Variable, Inc.,
and Golden American Life Insurance
Company.
Terry L. Kendall Managing Director, Bankers Trust
Director and Chief Executive Officer Company; President, Director, and
Chief Executive Officer, Golden
American Life Insurance Company;
President, Director, and Chief
Executive Officer, BT Variable, Inc.;
and Director, Whitewood Properties
Corp.
</TABLE>
DSI does not act as investment adviser to any other registered investment
companies with investment objectives and policies similar to those of the
Series of the Trust.
Attachment B-1
<PAGE>
THE GCG TRUST
An Affiliate of Bankers Trust Company 1001 Jefferson Street, Wilmington, DE
19801
Tel: (800) 366-0066 Fax: (302) 576-3430
July 1, 1996
Dear GoldenSelect Contractowner:
I'm writing to tell you about some very exciting changes concerning The GCG
Trust (the "Trust"), Golden American Life Insurance Company ("Golden
American"), and Directed Services, Inc. ("DSI"), the Trust's Manager, and to
send you proxy materials for an upcoming special meeting of shareholders of
the Trust that will be held on July 29, 1996. The Trust contains the mutual
fund portfolios that serve as the investment vehicles for your GoldenSelect
variable annuity and variable life insurance contracts.
The Trustees of the Trust have approved the proposals in the proxy
materials and recommend that you vote "FOR" the proposals on the enclosed
proxy card. I urge you to review the attached proxy statement, to cast your
vote, and to return promptly the enclosed proxy card in the envelope provided.
AGREEMENT TO ACQUIRE GOLDEN AMERICAN AND DSI BY EQUITABLE OF IOWA COMPANIES
Equitable of Iowa Companies has entered into an agreement to acquire Golden
American and DSI. The agreement is subject to several conditions, including
approval from certain state insurance authorities and approval of shareholders
of each series of the Trust of certain agreements, as described in the
attached proxy materials. Equitable of Iowa Companies is a New York Stock
Exchange listed company that owns Equitable Life Insurance Company of Iowa,
USG Annuity & Life Company, Locust Street Securities, Inc., and Equitable
Investment Services, Inc. It had assets of $10 billion as of March 31, 1996.
It is intended that Golden American and DSI would maintain their Delaware
operations and management. The acquisition would align Golden American and DSI
with a financially strong family of life insurance companies.
SPECIAL SHAREHOLDERS MEETING TO APPROVE CHANGES
A special meeting of shareholders has been called for purposes related to
the acquisition described above. Upon the closing of the agreement under which
Equitable of Iowa Companies would acquire Golden American and DSI, the
existing Management Agreement under which DSI serves as Manager to the Trust
would terminate. Similarly, the Portfolio Management Agreements with the
Portfolio Managers of the Trust's operating Series may also terminate.
Accordingly, shareholders will be asked to approve at the special meeting of
Shareholders (1) a new Management Agreement between the Trust and DSI, (2) new
Portfolio Management Agreements among the Trust, DSI, and each of the
Portfolio Managers of the Trust's operating Series, and (3) a new Portfolio
Management Agreement among the Trust, DSI and Equitable Investment Services,
Inc. ("EISI"), who is proposed to serve as a new Portfolio Manager to two of
the Trust's Series. The terms of the new Management Agreement and new
Portfolio Management Agreements are identical in all material respects to the
terms of the agreements they would replace, except that EISI would become the
Portfolio Manager to the Limited Maturity Bond Series and the Liquid Asset
Series. The proposals in this proxy statement are intended to keep in place
the current management for the Trust after the prospective change in the
ownership of DSI, and to add EISI as Portfolio Manager for two of the Trust's
Series.
We believe that the prospective acquisition by Equitable of Iowa Companies
will provide a financially strong parent for Golden American and DSI that is
committed to seeking growth in the assets of the Trust.
TRUSTEES RECOMMEND APPROVAL
The Trustees of the Trust have approved the proposals in the proxy
materials and recommend that you vote "FOR" the proposals on the enclosed
proxy. I urge you to review the attached proxy statement, to cast your vote,
and to return promptly the enclosed proxy in the envelope provided.
Sincerely,
/s/ Terry L. Kendall
Terry L. Kendall
President, The GCG Trust
<PAGE>
EXHIBIT A
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996 among The GCG Trust (the "Trust"), a
Massachusetts business trust, Directed Services, Inc. ("Manager"), a New York
corporation, and Warburg, Pincus Counsellors, Inc. ("Portfolio Manager"), a
Delaware corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint Warburg, Pincus
Counsellors, Inc. to act as Portfolio Manager to the Series designated on
Schedule A of this Agreement (the "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided. In the event the Trust designates one or more series other
than the Series with respect to which the Trust and the Manager wish to retain
the Portfolio Manager to render investment advisory services hereunder, they
shall notify the Portfolio Manager in writing. If the Portfolio Manager is
willing to render such services, it shall notify the Trust and Manager in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of the Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions
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as stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC"), as amended, copies of which shall be sent to the
Portfolio Manager by the Manager. The Portfolio Manager further agrees as
follows:
(a) The Portfolio Manager will (1) take all steps necessary to manage the
Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) take all steps necessary to
manage the Series so as to ensure compliance by the Series with the
diversification requirements of Section 817(h) of the Internal Revenue Code
and regulations issued thereunder, and (3) use reasonable efforts to manage
the Series so as to ensure compliance by the Series with any other rules
and regulations pertaining to investment vehicles underlying variable
annuity or variable life insurance policies. The Manager or the Trust will
notify the Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and
regulations issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all rules
and regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended,
of which the Portfolio Manager has received a copy. The Manager or the
Trust will notify the Portfolio Manager of pertinent provisions of
applicable state insurance law with which the Portfolio Manager must comply
under this Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of the Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients, subject to
review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis,
such confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the determination
by the portfolio accounting agent for the Trust of the valuation of
portfolio securities and other investments of the Series. The Portfolio
Manager will assist the custodian and portfolio accounting agent for the
Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value of
any portfolio securities or other assets of the Series for which the
custodian and portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Advisers Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
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(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with
respect to the Series such periodic and special reports as the Trustees and
the Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer 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 Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with these
standards, the Portfolio Manager is further authorized to allocate the orders
placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio
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Manager, or an affiliate of the Portfolio Manager. Such allocation shall be in
such amounts and proportions as the Portfolio Manager shall determine
consistent with the above standards, and the Portfolio Manager will report on
said allocation regularly to the Board of Trustees of the Trust indicating the
broker-dealers to which such allocations have been made and the basis
therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the post-effective amendment to the Registration Statement for the Trust filed
with the Securities and Exchange Commission that contains disclosure about the
Portfolio Manager, and represents and warrants that, with respect to the
disclosure about the Portfolio Manager or information relating, directly or
indirectly, to the Portfolio Manager, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not omit
any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Advisers Act and a duly registered investment
adviser in all states in which the Portfolio Manager is required to be
registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of the
Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management Reports (as appropriate) for the Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
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(q) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 14 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(r) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, as described on Schedule B.
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall immediately notify the
Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser;
or has commenced proceedings or an investigation that may result in any of
these actions, (2) upon having a reasonable basis for believing that the
Series has ceased to qualify or might not qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code, or (3) upon having
a reasonable basis for believing that the Series has ceased to comply with
the diversification provisions of Section 817(h) of the Internal Revenue
Code or the Regulations thereunder. The Portfolio Manager further agrees to
notify the Manager and the Trust immediately of any material fact known to
the Portfolio Manager respecting or relating to the Portfolio Manager that
is not contained in the Registration Statement or prospectus for the Trust,
or any amendment or supplement thereto, or of any statement contained
therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the
Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis for
believing that the Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section 817(h)
of the Internal Revenue Code or the Regulations thereunder.
9. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
11. Representations Respecting Portfolio Manager. The Manager and the Trust
agree that neither the Trust, the Manager, nor affiliated persons of the Trust
or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material
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approved in advance by the Portfolio Manager, except with the prior permission
of the Portfolio Manager. The parties agree that in the event that the Manager
or an affiliated person of the Manager sends sales literature or other
promotional material to the Portfolio Manager for its approval and the
Portfolio Manager has not commented within 30 days, the Manager and its
affiliated persons may use and distribute such sales literature or other
promotional material, although, in such event, the Portfolio Manager shall not
be deemed to have approved of the contents of such sales literature or other
promotional material.
12. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
15. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person,
if any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Portfolio Manager Indemnified Person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Manager's responsibilities to the Trust which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Manager, any of
its employees or representatives or any affiliate of or any person acting
on behalf of the Manager or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact supplied by, or which is the
responsibility of, the Manager and contained in the Registration Statement
or prospectus covering shares of the Trust or a Series, or any amendment
thereof or any supplement thereto, or the omission or alleged omission to
state therein a material fact known or which should have been known to the
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon information furnished to the Manager or the Trust or
to any affiliated person of the Manager by a Portfolio Manager Indemnified
Person; provided however, that in no case shall the indemnity in favor of
the Portfolio Manager Indemnified Person be deemed to protect such person
against any liability to which any such person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager, and each person, if any, who, within the meaning of Section 15
of the 1933 Act, controls ("controlling person") the Manager (all of such
persons being referred to as "Manager Indemnified Persons") against any and
all losses, claims, damages, liabilities, or litigation (including legal
and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal
Revenue Code, under any
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other statute, at common law or otherwise, arising out of the Portfolio
Manager's responsibilities as Portfolio Manager of the Series which (1) may
be based upon any misfeasance, malfeasance, or nonfeasance by the Portfolio
Manager, any of its employees or representatives, or any affiliate of or
any person acting on behalf of the Portfolio Manager, (2) may be based upon
a failure to comply with Section 2, Paragraph (a) of this Agreement, or (3)
may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or prospectus
covering the shares of the Trust or a Series, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact known or which should have been known to the Portfolio
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, if such a statement or omission was made
in reliance upon information furnished to the Manager, the Trust, or any
affiliated person of the Manager or Trust by the Portfolio Manager or any
affiliated person of the Portfolio Manager; provided, however, that in no
case shall the indemnity in favor of a Manager Indemnified Person be deemed
to protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
15 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person shall have notified
the Manager in writing within a reasonable time after the summons, notice,
or other first legal process or notice giving information of the nature of
the claim shall have been served upon such Portfolio Manager Indemnified
Person (or after such Portfolio Manager Indemnified Person shall have
received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Portfolio
Manager Indemnified Person, the Manager will be entitled to participate, at
its own expense, in the defense thereof or, after notice to the Portfolio
Manager Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Portfolio Manager Indemnified Person. If the Manager
assumes the defense of any such action and the selection of counsel by the
Manager to represent both the Manager and the Portfolio Manager Indemnified
Person would result in a conflict of interests and therefore, would not, in
the reasonable judgment of the Portfolio Manager Indemnified Person,
adequately represent the interests of the Portfolio Manager Indemnified
Person, the Manager will, at its own expense, assume the defense with
counsel to the Manager and, also at its own expense, with separate counsel
to the Portfolio Manager Indemnified Person, which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall
not be liable to the Portfolio Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the
Portfolio Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Manager
shall not have the right to compromise on or settle the litigation without
the prior written consent of the Portfolio Manager Indemnified Person if
the compromise or settlement results, or may result in a finding of
wrongdoing on the part of the Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 15 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the
Portfolio Manager of any such claim shall not relieve the Portfolio Manager
from any liability which it may have to the Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Manager
Indemnified Person, the Portfolio Manager will be entitled to participate,
at its own expense, in the defense thereof or, after notice to the Manager
Indemnified Person, to assume the
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defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Portfolio Manager assumes the defense of any such action and
the selection of counsel by the Portfolio Manager to represent both the
Portfolio Manager and the Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment
of the Manager Indemnified Person, adequately represent the interests of
the Manager Indemnified Person, the Portfolio Manager will, at its own
expense, assume the defense with counsel to the Portfolio Manager and, also
at its own expense, with separate counsel to the Manager Indemnified Person
which counsel shall be satisfactory to the Portfolio Manager and to the
Manager Indemnified Person. The Manager Indemnified Person shall bear the
fees and expenses of any additional counsel retained by it, and the
Portfolio Manager shall not be liable to the Manager Indemnified Person
under this Agreement for any legal or other expenses subsequently incurred
by the Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Portfolio
Manager shall not have the right to compromise on or settle the litigation
without the prior written consent of the Manager Indemnified Person if the
compromise or settlement results, or may result in a finding of wrongdoing
on the part of the Manager Indemnified Person.
16. Duration and Termination. This Agreement shall become effective on the
date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from the
date first indicated above and continue on an annual basis thereafter with
respect to the Series; provided that such annual continuance is specifically
approved each year by (a) the vote of a majority of the entire Board of
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Series, and (b) the vote of a
majority of those Trustees who are not parties to this Agreement or interested
persons (as such term is defined in the 1940 Act) of any such party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval. The Portfolio Manager shall not provide any services for a Series or
receive any fees on account of such Series with respect to which this
Agreement is not approved as described in the preceding sentence. However, any
approval of this Agreement by the holders of a majority of the outstanding
shares (as defined in the 1940 Act) of a Series shall be effective to continue
this Agreement with respect to the Series notwithstanding (i) that this
Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (ii) that this agreement has not
been approved by the vote of a majority of the outstanding shares of the
Trust, unless such approval shall be required by any other applicable law or
otherwise. Notwithstanding the foregoing, this Agreement may be terminated for
each or any Series hereunder: (a) by the Manager at any time without penalty,
upon sixty (60) days' written notice to the Portfolio Manager and the Trust,
(b) at any time without payment of any penalty by the Trust, upon the vote of
a majority of the Trust's Board of Trustees or a majority of the outstanding
voting securities of each Series, upon sixty (60) days' written notice to the
Manager and the Portfolio Manager, or (c) by the Portfolio Manager at any time
without penalty, upon sixty (60) days' written notice to the Manager and the
Trust. In the event of termination for any reason, all records of each Series
for which the Agreement is terminated shall promptly be returned to the
Manager or the Trust, free from any claim or retention of rights in such
record by the Portfolio Manager, although the Portfolio Manager may, at its
own expense, make and retain a copy of such records. The Agreement shall
automatically terminate in the event of its assignment (as such term is
described in the 1940 Act). In the event this Agreement is terminated or is
not approved in the manner described above, the Sections or Paragraphs
numbered 2(f), 9, 10, 11, 14, 15, and 18 of this Agreement shall remain in
effect, as well as any applicable provision of this Paragraph numbered 16.
17. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
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Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "Warburg, Pincus Counsellors, Inc." or
any derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust
and/or the Series have the right to use such name (or derivative or logo)
in offering materials of the Trust with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a portfolio manager to
the Trust and/or the Series. Upon termination of this Agreement between the
Trust, the Manager, and the Portfolio Manager, the Trust shall forthwith
cease to use such name (or derivative or logo).
19. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
20. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
A-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
By:
- ------------------------------------- -----------------------------------
Attest
- ------------------------------------- --------------------------------------
Title Title
DIRECTED SERVICES, INC.
By:
- ------------------------------------- -----------------------------------
Attest
- ------------------------------------- --------------------------------------
Title Title
WARBURG, PINCUS COUNSELLORS, INC.
By:
- ------------------------------------- -----------------------------------
Attest
- ------------------------------------- --------------------------------------
Title Title
A-10
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Warburg, Pincus Counsellors, Inc.
shall act as Portfolio Manager are as follows:
All-Growth Series
Managed Global Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Warburg, Pincus Counsellors, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rates of the average daily net assets of the Series:
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<C> <S>
All-Growth Series 0.50%
Managed Global Series 0.60% of the first $500 million;
0.50% of the amount over $500 million
</TABLE>
A-11
<PAGE>
EXHIBIT L
OTHER INFORMATION REGARDING WARBURG, PINCUS COUNSELLORS, INC.
The directors and principal executive officer of Warburg, Pincus and their
principal occupations are as shown below. The business address of each such
person is 466 Lexington Avenue, New York, New York 10017.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
WARBURG, PINCUS PRINCIPAL OCCUPATION
---------------------- --------------------
<S> <C>
Lionel I. Pincus Chief Executive Officer and Director of Warburg,
Chief Executive Officer and Pincus and similar positions with its affiliates.
Director
John L. Firth Chairman of the Board of Directors of Warburg,
Chairman of the Board of Pincus and similar positions with its affiliates.
Directors
John L. Vogelstein Director of Warburg, Pincus and similar positions
Director with its affiliates.
</TABLE>
Warburg, Pincus also serves as adviser or sub-adviser to other investment
companies. The following table lists the other investment companies or series
thereof, with an investment objective comparable to that of the All Growth
Series, the approximate net assets of each investment company at April 30,
1996, and the annual advisory fee charged by Warburg, Pincus (as a percentage
of average daily net assets).
<TABLE>
<CAPTION>
NET ASSETS INVESTMENT
NAME OF FUND ($ MILLIONS) ADVISER FEE
------------ ------------ -----------
<S> <C> <C>
Warburg Pincus Growth & Income Fund $1,133,950 0.75%
Variable Investors Series Trust--Growth & Income
Portfolio (sub-adviser) $ 6,230 0.50%
Alexander Hamilton Variable Insurance Trust--
Growth & Income Fund (sub-adviser) $ 5,441 0.50%
</TABLE>
From time to time, Warburg, Pincus waives some or all of its advisory fees,
which waivers are not reflected in the above table. Warburg, Pincus and its
affiliates and the co-administrator have undertaken to waive their respective
fees as necessary to limit the total operating expenses of the Warburg Pincus
Growth & Income Fund to 1.26% (for common shares) through May 3, 1997.
L-1
<PAGE>
EXHIBIT B
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996 among The GCG Trust (the "Trust"), a
Massachusetts business trust, Directed Services, Inc. ("Manager"), a New York
corporation, and Chancellor Trust Company ("Portfolio Manager"), a Delaware
corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint Chancellor Trust
Company to act as Portfolio Manager to the Series designated on Schedule A of
this Agreement (each a "Series") for the periods and on the terms set forth in
this Agreement. The Portfolio Manager accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided. In
the event the Trust designates one or more series other than the Series with
respect to which the Trust and the Manager wish to retain the Portfolio
Manager to render investment advisory services hereunder, they shall notify
the Portfolio Manager in writing. If the Portfolio Manager is willing to
render such services, it shall notify the Trust and Manager in writing,
whereupon such series shall become a Series hereunder, and be subject to this
Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for each Series' portfolio and determine the
composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of each Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of each Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of each Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC"), as
B-1
<PAGE>
amended, copies of which shall be sent to the Portfolio Manager by the
Manager. The Portfolio Manager further agrees as follows:
(a) The Portfolio Manager will (1) manage each Series so that it will
qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, (2) manage each Series so as to ensure compliance by
the Series with the diversification requirements of Section 817(h) of the
Internal Revenue Code and regulations issued thereunder, and (3) use
reasonable efforts to manage the Series so as to ensure compliance by each
Series with any other rules and regulations pertaining to investment
vehicles underlying variable annuity or variable life insurance policies.
The Manager or the Trust will notify the Portfolio Manager of any pertinent
changes, modifications to, or interpretations of Section 817(h) of the
Internal Revenue Code and regulations issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all rules
and regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended,
of which the Portfolio Manager has received a copy. The Manager or the
Trust will notify the Portfolio Manager of pertinent provisions of
applicable state insurance law with which the Portfolio Manager must comply
under this Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients, subject to
review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for a Series,
the Portfolio Manager will arrange for the transmission to the custodian
and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the determination
by the custodian and portfolio accounting agent for the Trust of the
valuation of portfolio securities and other investments of the Series. The
Portfolio Manager will assist the custodian and portfolio accounting agent
for the Trust in determining or confirming, consistent with the procedures
and policies stated in the Registration Statement for the Trust, the value
of any portfolio securities or other assets of the Series for which the
custodian and portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Advisers Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
B-2
<PAGE>
(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with
respect to the Series such periodic and special reports as the Trustees and
the Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer 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 Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with these
standards, the Portfolio Manager is further authorized to allocate the orders
placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the
B-3
<PAGE>
Series, the Portfolio Manager, or an affiliate of the Portfolio Manager. Such
allocation shall be in such amounts and proportions as the Portfolio Manager
shall determine consistent with the above standards, and the Portfolio Manager
will report on said allocation regularly to the Board of Trustees of the Trust
indicating the broker-dealers to which such allocations have been made and the
basis therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the post-effective amendment to the Registration Statement for the Trust filed
with the Securities and Exchange Commission that contains disclosure about the
Portfolio Manager, and represents and warrants that, with respect to the
disclosure about the Portfolio Manager or information relating, directly or
indirectly, to the Portfolio Manager, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not omit
any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Advisers Act and a duly registered investment
adviser in all states in which the Portfolio Manager is required to be
registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of each
Series's net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management Reports (as appropriate) for each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
B-4
<PAGE>
(q) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 15 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(r) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly as described in Schedule B.
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall immediately notify the
Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser;
or has commenced proceedings or an investigation that may result in any of
these actions, (2) upon having a reasonable basis for believing that the
Series has ceased to qualify or might not qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code, or (3) upon having
a reasonable basis for believing that the Series has ceased to comply with
the diversification provisions of Section 817(h) of the Internal Revenue
Code or the Regulations thereunder. The Portfolio Manager further agrees to
notify the Manager and the Trust immediately of any material fact known to
the Portfolio Manager respecting or relating to the Portfolio Manager that
is not contained in the Registration Statement or prospectus for the Trust,
or any amendment or supplement thereto, or of any statement contained
therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the
Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis for
believing that the Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section 817(h)
of the Internal Revenue Code or the Regulations thereunder.
9. Insurance Company Offerees. All parties acknowledge that the Trust will
offer its shares so that it may serve as an investment vehicle for variable
annuity contracts and variable life insurance policies issued by insurance
companies. The Trust and the Manager agree that shares of the Series may be
offered only to the separate accounts and general account of insurance
companies that are approved in writing by the Portfolio Manager. The Portfolio
Manager agrees that shares of this Series may be offered to separate accounts
and the general account of Golden American Variable Life Insurance Company and
to the general and separate accounts of any insurance companies that are or
become affiliated with Golden American Life Insurance Company. The Manager and
Trust agree that the Portfolio Manager shall be under no obligation to
investigate insurance companies to which the Trust offers or proposes to offer
its shares.
10. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
B-5
<PAGE>
11. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
12. Representations respecting Portfolio Manager. The Manager and the Trust
agree that neither the Trust, the Manager, nor affiliated persons of the Trust
or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
advance by the Portfolio Manager, except with the prior permission of the
Portfolio Manager. The parties agree that in the event that the Manager or an
affiliated person of the Manager sends sales literature or other promotional
material to the Portfolio Manager for its approval and the Portfolio Manager
has not commented within 30 days, the Manager and its affiliated persons may
use and distribute such sales literature or other promotional material,
although, in such event, the Portfolio Manager shall not be deemed to have
approved of the contents of such sales literature or other promotional
material.
13. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
14. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
15. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
16. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person,
if any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Portfolio Manager Indemnified Person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Manager's responsibilities to the Trust which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Manager, any of
its employees or representatives or any affiliate of or any person acting
on behalf of the Manager or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact supplied by, or which is the
responsibility of, the Manager and contained in the Registration Statement
or prospectus covering shares of the Trust or a Series, or any amendment
thereof or any supplement thereto, or the omission or alleged omission to
state therein a material fact known or which should have been known to the
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon information furnished to the Manager or the Trust or
to any affiliated person of the Manager
B-6
<PAGE>
by a Portfolio Manager Indemnified Person; provided however, that in no
case shall the indemnity in favor of the Portfolio Manager Indemnified
Person be deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of its duties, or by
reason of its reckless disregard of obligations and duties under this
Agreement.
(b) Notwithstanding Section 15 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager, and each person, if any, who, within the meaning of Section 15
of the 1933 Act, controls ("controlling person") the Manager (all of such
persons being referred to as "Manager Indemnified Persons") against any and
all losses, claims, damages, liabilities, or litigation (including legal
and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Portfolio Manager's responsibilities as Portfolio Manager of the
Series which (1) may be based upon any misfeasance, malfeasance, or
nonfeasance by the Portfolio Manager, any of its employees or
representatives, or any affiliate of or any person acting on behalf of the
Portfolio Manager, (2) may be based upon a failure to comply with Section
2, Paragraph (a) of this Agreement, or (3) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or prospectus covering the shares of the Trust or a
Series, or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact known or which should have been
known to the Portfolio Manager and was required to be stated therein or
necessary to make the statements therein not misleading, if such a
statement or omission was made in reliance upon information furnished to
the Manager, the Trust, or any affiliated person of the Manager or Trust by
the Portfolio Manager or any affiliated person of the Portfolio Manager;
provided, however, that in no case shall the indemnity in favor of a
Manager Indemnified Person be deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
16 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person shall have notified
the Manager in writing within a reasonable time after the summons, notice,
or other first legal process or notice giving information of the nature of
the claim shall have been served upon such Portfolio Manager Indemnified
Person (or after such Portfolio Manager Indemnified Person shall have
received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 16. In case any such action is brought against the Portfolio
Manager Indemnified Person, the Manager will be entitled to participate, at
its own expense, in the defense thereof or, after notice to the Portfolio
Manager Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Portfolio Manager Indemnified Person. If the Manager
assumes the defense of any such action and the selection of counsel by the
Manager to represent both the Manager and the Portfolio Manager Indemnified
Person would result in a conflict of interests and therefore, would not, in
the reasonable judgment of the Portfolio Manager Indemnified Person,
adequately represent the interests of the Portfolio Manager Indemnified
Person, the Manager will, at its own expense, assume the defense with
counsel to the Manager and, also at its own expense, with separate counsel
to the Portfolio Manager Indemnified Person, which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall
not be liable to the Portfolio Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the
Portfolio Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Manager
shall not have the right to compromise on or settle the litigation without
the prior written consent of the Portfolio Manager Indemnified Person if
the compromise or settlement results, or may result in a finding of
wrongdoing on the part of the Portfolio Manager Indemnified Person.
B-7
<PAGE>
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 16 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the
Portfolio Manager of any such claim shall not relieve the Portfolio Manager
from any liability which it may have to the Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 16. In case any such action is brought against the Manager
Indemnified Person, the Portfolio Manager will be entitled to participate,
at its own expense, in the defense thereof or, after notice to the Manager
Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Manager Indemnified Person. If the Portfolio Manager
assumes the defense of any such action and the selection of counsel by the
Portfolio Manager to represent both the Portfolio Manager and the Manager
Indemnified Person would result in a conflict of interests and therefore,
would not, in the reasonable judgment of the Manager Indemnified Person,
adequately represent the interests of the Manager Indemnified Person, the
Portfolio Manager will, at its own expense, assume the defense with counsel
to the Portfolio Manager and, also at its own expense, with separate
counsel to the Manager Indemnified Person which counsel shall be
satisfactory to the Portfolio Manager and to the Manager Indemnified
Person. The Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Portfolio Manager shall not
be liable to the Manager Indemnified Person under this Agreement for any
legal or other expenses subsequently incurred by the Manager Indemnified
Person independently in connection with the defense thereof other than
reasonable costs of investigation. The Portfolio Manager shall not have the
right to compromise on or settle the litigation without the prior written
consent of the Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the
Manager Indemnified Person.
17. Duration and Termination. This Agreement shall become effective on the
date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to each Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for such Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
such Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding shares of any other Series or
(ii) that this agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio Manager and the Trust, (b) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of each Series,
upon sixty (60) days' written notice to the Manager and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust. In the event of termination
for any reason, all records of each Series for which the Agreement is
terminated shall promptly be returned to the Manager or the Trust, free from
any claim or retention of rights in such record by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. The Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 10, 11, 12, 15, 16, and 19 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 17.
B-8
<PAGE>
18. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
19. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "Chancellor Trust Company" or any
derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust
and/or the Series have the right to use such name (or derivative or logo)
in offering materials of the Trust with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a portfolio manager to
the Trust and/or the Series. Upon termination of this Agreement between the
Trust, the Manager, and the Portfolio Manager, the Trust shall forthwith
cease to use such name (or derivative or logo).
20. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
21. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 17 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
B-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title
Title
DIRECTED SERVICES, INC.
_____________________________________
Attest By: _________________________________
_____________________________________
Title _____________________________________
Title
CHANCELLOR TRUST COMPANY
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
B-10
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Chancellor Trust Company shall act as
Portfolio Manager is as follows:
Capital Appreciation Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Chancellor Trust Company ("Portfolio Manager")
to the following Series of The GCG Trust, pursuant to the attached Portfolio
Management Agreement, the Manager will pay the Portfolio Manager a fee,
payable monthly, based on the average daily net assets of the Series at the
following annual rates of the average daily net assets of the Series.
<TABLE>
<CAPTION>
SERIES RATE
------ -----
<S> <C>
Capital Appreciation 0.50%
</TABLE>
B-11
<PAGE>
EXHIBIT M
OTHER INFORMATION REGARDING CHANCELLOR TRUST COMPANY
The principal executive officer and the directors of Chancellor Trust
Company and their principal occupations are as shown below. The business
address of each such person, unless otherwise indicated, is 1166 Avenue of the
Americas, New York, New York 10036.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
<S> <C>
Robert G. Wade, Jr. Chairman of the Board, Chancellor Capital
Chairman of the Board and Management, Inc. ("Chancellor Capital").
Director
Warren Shaw Chief Executive Officer, Chief Investment Officer
Chief Executive Officer, and Director, Chancellor Capital.
Chief
Investment Officer and
Director
Penny Zuckerwise President, Chief Operating Officer and Director,
President, Chief Operating Chancellor Capital.
Officer
and Director
Richard Collins Managing Director, Chancellor Capital.
Managing Director
John Ivers Managing Director, Chancellor Capital.
Managing Director and
Director
Margaret Riley Managing Director, Chancellor Capital.
Managing Director and
Director
Edward Smith Managing Director, Chancellor Capital.
Managing Director and
Director
Karen Southard Managing Director, Chancellor Capital.
Managing Director and
Director
Ted Ujazdowski Managing Director, Chancellor Capital.
Managing Director
Charles Wetzel Managing Director, Chancellor Capital.
Managing Director and
Director
John Sweeney Chief Investment Officer, USF&G Corporation.
Director
100 Light Street,
Baltimore, MD 21202
Dan Hale Executive Vice President, USF&G Corporation.
Director
100 Light Street,
Baltimore, MD 21202
</TABLE>
Chancellor Trust Company does not act as investment adviser to any other
investment companies with investment objectives and policies similar to those
of the Capital Appreciation Series.
M-1
<PAGE>
EXHIBIT C
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996, among The GCG Trust (the
"Trust"), a Massachusetts business trust, Directed Services, Inc. (the
"Manager"), a New York corporation, and Bankers Trust Company ("Portfolio
Manager"), a New York banking corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint Bankers Trust
Company to act as Portfolio Manager to the Series designated on Schedule A of
this Agreement (each a "Series") for the periods and on the terms set forth in
this Agreement. The Portfolio Manager accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided. In
the event the Trust designates one or more series other than the Series with
respect to which the Trust and the Manager wish to retain the Portfolio
Manager to render investment advisory services hereunder, they shall promptly
notify the Portfolio Manager in writing. If the Portfolio Manager is willing
to render such services, it shall so notify the Trust and Manager in writing,
whereupon such series shall become a Series hereunder, and be subject to this
Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for each Series' portfolio and determine the
composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of each Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of each Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of each Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make
C-1
<PAGE>
decisions for the Series as to foreign currency matters and make
determinations as to and execute and perform foreign currency exchange
contracts on behalf of the Series. The Portfolio Manager will provide the
services under this Agreement in accordance with the Series' investment
objective or objectives, policies, and restrictions as stated in the Trust's
Registration Statement filed with the Securities and Exchange Commission (the
"SEC"), as from time to time amended, copies of which shall be sent to the
Portfolio Manager by the Manager upon filing with the SEC. The Portfolio
Manager further agrees as follows:
(a) The Portfolio Manager will (1) manage each Series so that no action
or omission on the part of the Portfolio Manager will cause a Series to
fail to meet the requirements to qualify as a regulated investment company
specified in Section 851 of the Internal Revenue Code (other than the
requirements for the Trust to register under the 1940 Act and to file with
its tax return an election to be a regulated investment company, both of
which shall not be the responsibility of the Portfolio Manager), (2) manage
each Series so that no action or omission on the part of the Portfolio
Manager shall cause a Series to fail to comply with the diversification
requirements of Section 817(h) of the Internal Revenue Code and regulations
issued thereunder, and (3) use reasonable efforts to manage the Series so
that no action or omission on the part of the Portfolio Manager shall cause
a Series to fail to comply with any other rules and regulations pertaining
to investment vehicles underlying variable annuity or variable life
insurance policies. The Manager will notify the Portfolio Manager promptly
if the Manager believes that a Series is in violation of any requirement
specified in the first sentence of this paragraph. The Manager or the Trust
will notify the Portfolio Manager of any pertinent changes, modifications
to, or interpretations of Section 817(h) of the Internal Revenue Code and
regulations issued thereunder and of rules or regulations pertaining to
investment vehicles underlying variable annuity or variable life insurance
policies.
(b) The Portfolio Manager will perform its duties hereunder pursuant to
the 1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations, with any applicable procedures
adopted by the Trust's Board of Trustees of which the Portfolio Manager has
been notified in writing, and the provisions of the Registration Statement
of the Trust under the Securities Act of 1933 (the "1933 Act") and the 1940
Act, as supplemented or amended, of which the Portfolio Manager has
received a copy ("Registration Statement"). The Manager or the Trust will
notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients, subject to
review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for a Series,
the Portfolio Manager will arrange for the transmission to the custodian
and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will assist the portfolio accounting agent for
the Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust,
C-2
<PAGE>
the value of any portfolio securities or other assets of the Series for
which the portfolio accounting agent seeks assistance from or identifies
for review by the Portfolio Manager, and the parties agree that the
Portfolio Manager shall not bear responsibility or liability for the
determination or accuracy of the valuation of any portfolio securities and
other assets of the Series except to the extent that the Portfolio Manager
exercises judgment with respect to any such valuation.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian and portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Advisers Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with
respect to the Series such periodic and special reports as the Trustees and
the Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the
C-3
<PAGE>
service, the difficulty of execution, and the execution capabilities and
operational facilities of the firms involved, and the firm's risk in
positioning a block of securities. Accordingly, the price to the Series in any
transaction may be less favorable than that available from another broker-
dealer if the difference is reasonably justified, in the judgment of the
Portfolio Manager in the exercise of its fiduciary obligations to the Trust,
by other aspects of the portfolio execution services offered. Subject to such
policies as the Board of Trustees may determine and consistent with Section
28(e) of the Securities Exchange Act of 1934, the Portfolio Manager shall not
be deemed to have acted unlawfully or to have breached any duty created by
this Agreement or otherwise solely by reason of its having caused the Series
to pay a broker-dealer 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 Portfolio Manager or its affiliate
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker-dealer, viewed in terms of either that particular transaction or the
Portfolio Manager's or its affiliate's overall responsibilities with respect
to the Series and to their other clients as to which they exercise investment
discretion. To the extent consistent with these standards, the Portfolio
Manager is further authorized to allocate the orders placed by it on behalf of
the Series to the Portfolio Manager if it is registered as a broker-dealer
with the SEC, to its affiliated broker-dealer, or to such brokers and dealers
who also provide research or statistical material, or other services to the
Series, the Portfolio Manager, or an affiliate of the Portfolio Manager. Such
allocation shall be in such amounts and proportions as the Portfolio Manager
shall determine consistent with the above standards, and the Portfolio Manager
will report on said allocation regularly to the Board of Trustees of the Trust
indicating the broker-dealers to which such allocations have been made and the
basis therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the post-effective amendment to the Registration Statement for the Trust filed
with the SEC that contains disclosure about the Portfolio Manager, and
represents and warrants that, with respect to the disclosure about or
information relating, directly or indirectly, to the Portfolio Manager, to the
Portfolio Manager's knowledge, such Registration Statement contains, as of the
date hereof, no untrue statement of any material fact and does not omit any
statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Advisers Act, or alternatively that it is not
required to be a registered investment adviser under the Advisers Act to
perform the duties described in this Agreement, and that it is a duly
registered investment adviser in all states in which the Portfolio Manager is
required to be registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of each
Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management Reports (as appropriate) for each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
C-4
<PAGE>
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
(q) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 14 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(r) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable as described in Schedule B.
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall promptly notify the
Manager and the Trust (1) in the event that the SEC or other governmental
authority has censured the Portfolio Manager; placed limitations upon its
activities, functions or operations; suspended or revoked its registration,
if any, as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that the Series has ceased to qualify or
might not qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code, or (3) upon having a reasonable basis for
believing that the Series has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the
regulations thereunder. The Portfolio Manager further agrees to notify the
Manager and the Trust promptly of any material fact known to the Portfolio
Manager respecting or relating to the Portfolio Manager that is not
contained in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, and is required to be stated therein or
necessary to make the statements therein not misleading, or of any
statement contained therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the
Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis
C-5
<PAGE>
for believing that the Series has ceased to qualify or might not qualify as
a regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section 817(h)
of the Internal Revenue Code or the Regulations thereunder.
9. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the SEC and state
insurance regulators) in connection with any investigation or inquiry relating
to this Agreement or the Trust.
11. Representations Respecting Portfolio Manager.
(a) During the term of this Agreement, the Trust and the Manager agree to
furnish to the Portfolio Manager at its principal offices prior to use
thereof copies of all Registration Statements and amendments thereto,
prospectuses, proxy statements, reports to shareholders, sales literature
or other material prepared for distribution to shareholders of the Trust or
any Series or to the public that refer or relate in any way to the
Portfolio Manager, Bankers Trust Company or any of its affiliates (other
than the Manager), or that use any derivative of the name Bankers Trust
Company or any logo associated therewith. The Trust and the Manager agree
that they will not use any such material without the prior consent of the
Portfolio Manager, which consent shall not be unreasonably withheld. In the
event of the termination of this Agreement, the Trust and the Manager will
furnish to the Portfolio Manager copies of any of the above-mentioned
materials that refer or relate in any way to the Portfolio Manager;
(b) the Trust and the Manager will furnish to the Portfolio Manager such
information relating to either of them or the business affairs of the Trust
as the Portfolio Manager shall from time to time reasonably request in
order to discharge its obligations hereunder;
(c) the Manager and the Trust agree that neither the Trust, the Manager,
nor affiliated persons of the Trust or the Manager shall give any
information or make any representations or statements in connection with
the sale of shares of the Series concerning the Portfolio Manager or the
Series other than the information or representations contained in the
Registration Statement, prospectus, or statement of additional information
for the Trust, as they may be amended or supplemented from time to time, or
in reports or proxy statements for the Trust, or in sales literature or
other promotional material approved in advance by the Portfolio Manager,
except with the prior permission of the Portfolio Manager.
12. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio
C-6
<PAGE>
Manager, and each person, if any, who, within the meaning of Section 15 of the
1933 Act, controls the Portfolio Manager shall not be liable for, or subject
to any damages, expenses, or losses in connection with, any act or omission
connected with or arising out of any services rendered under this Agreement,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
15. Indemnification.
(a) Notwithstanding Section 14 of this Agreement, the Manager agrees to
indemnify and hold harmless the Portfolio Manager, any affiliated person of
the Portfolio Manager (other than the Manager), and each person, if any,
who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Portfolio Manager Indemnified Person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Manager's responsibilities to the Trust which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Manager, any of
its employees or representatives or any affiliate of or any person acting
on behalf of the Manager or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact supplied by, or which is the
responsibility of, the Manager and contained in the Registration Statement
or prospectus covering shares of the Trust or a Series, or any amendment
thereof or any supplement thereto, or the omission or alleged omission to
state therein a material fact known or which should have been known to the
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon information furnished to the Manager or the Trust or
to any affiliated person of the Manager by a Portfolio Manager Indemnified
Person; provided however, that in no case shall the indemnity in favor of
the Portfolio Manager Indemnified Person be deemed to protect such person
against any liability to which any such person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager (other than the Portfolio Manager), and each person, if any,
who, within the meaning of Section 15 of the 1933 Act, controls
("controlling person") the Manager (all of such persons being referred to
as "Manager Indemnified Persons") against any and all losses, claims,
damages, liabilities, or litigation (including legal and other expenses) to
which a Manager Indemnified Person may become subject under the 1933 Act,
1940 Act, the Advisers Act, the Internal Revenue Code, under any other
statute, at common law or otherwise, arising out of the Portfolio Manager's
responsibilities as Portfolio Manager of the Series which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Portfolio Manager,
any of its employees or representatives, or any affiliate of or any person
acting on behalf of the Portfolio Manager, (2) may be based upon a failure
to comply with Section 2, Paragraph (a) of this Agreement, or (3) may be
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or prospectus covering the
shares of the Trust or a Series, or any amendment or supplement thereto, or
the omission or alleged omission to state therein a material fact known or
which should have been known to the Portfolio Manager and was required to
be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished to the Manager, the Trust, or any affiliated person
of the Manager or Trust by the Portfolio Manager or any affiliated person
of the Portfolio Manager; provided, however, that in no case shall the
indemnity in favor of a Manager Indemnified Person be deemed to protect
such person against any liability to which any such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence in
the performance of its duties, or by reason of its reckless disregard of
its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
15 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person
C-7
<PAGE>
shall have notified the Manager in writing within a reasonable time after
the summons, notice, or other first legal process or notice giving
information of the nature of the claim shall have been served upon such
Portfolio Manager Indemnified Person (or after such Portfolio Manager
Indemnified Person shall have received notice of such service on any
designated agent), but failure to notify the Manager of any such claim
shall not relieve the Manager from any liability which it may have to the
Portfolio Manager Indemnified Person against whom such action is brought
otherwise than on account of this Section 15. In case any such action is
brought against the Portfolio Manager Indemnified Person, the Manager will
be entitled to participate, at its own expense, in the defense thereof or,
after notice to the Portfolio Manager Indemnified Person, to assume the
defense thereof, with counsel satisfactory to the Portfolio Manager
Indemnified Person. If the Manager assumes the defense of any such action
and the selection of counsel by the Manager to represent both the Manager
and the Portfolio Manager Indemnified Person would result in a conflict of
interests and therefore, would not, in the reasonable judgment of the
Portfolio Manager Indemnified Person, adequately represent the interests of
the Portfolio Manager Indemnified Person, the Manager will, at its own
expense, assume the defense with counsel to the Manager and, also at its
own expense, with separate counsel to the Portfolio Manager Indemnified
Person, which counsel shall be satisfactory to the Manager and to the
Portfolio Manager Indemnified Person. The Portfolio Manager Indemnified
Person shall bear the fees and expenses of any additional counsel retained
by it, and the Manager shall not be liable to the Portfolio Manager
Indemnified Person under this Agreement for any legal or other expenses
subsequently incurred by the Portfolio Manager Indemnified Person
independently in connection with the defense thereof other than reasonable
costs of investigation. The Manager shall not have the right to compromise
on or settle the litigation without the prior written consent of the
Portfolio Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the
Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 15 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the
Portfolio Manager of any such claim shall not relieve the Portfolio Manager
from any liability which it may have to the Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Manager
Indemnified Person, the Portfolio Manager will be entitled to participate,
at its own expense, in the defense thereof or, after notice to the Manager
Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Manager Indemnified Person. If the Portfolio Manager
assumes the defense of any such action and the selection of counsel by the
Portfolio Manager to represent both the Portfolio Manager and the Manager
Indemnified Person would result in a conflict of interests and therefore,
would not, in the reasonable judgment of the Manager Indemnified Person,
adequately represent the interests of the Manager Indemnified Person, the
Portfolio Manager will, at its own expense, assume the defense with counsel
to the Portfolio Manager and, also at its own expense, with separate
counsel to the Manager Indemnified Person which counsel shall be
satisfactory to the Portfolio Manager and to the Manager Indemnified
Person. The Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Portfolio Manager shall not
be liable to the Manager Indemnified Person under this Agreement for any
legal or other expenses subsequently incurred by the Manager Indemnified
Person independently in connection with the defense thereof other than
reasonable costs of investigation. The Portfolio Manager shall not have the
right to compromise on or settle the litigation without the prior written
consent of the Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the
Manager Indemnified Person.
(e) The Manager shall not be liable under this Section 15 to indemnify
and hold harmless the Portfolio Manager and the Portfolio Manager shall not
be liable under this Section 15 to indemnify and hold harmless the Manager
with respect to any losses, claims, damages, liabilities, or litigation
that first become known to
C-8
<PAGE>
the party seeking indemnification during any period that the Portfolio
Manager is, within the meaning of Section 15 of the 1933 Act, a controlling
person of the Manager.
16. Duration and Termination. This Agreement shall become effective on the
date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to each Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for such Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
such Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding shares of any other Series or
(ii) that this agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio Manager and the Trust, (b) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of each Series,
upon sixty (60) day's written notice to the Manager and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days written notice to the Manager and the Trust. In addition, this Agreement
shall terminate with respect to a Series in the event that it is not initially
approved by the vote of a majority of the outstanding voting securities of
that Series at a meeting of shareholders at which approval of the Agreement
shall be considered by shareholders of the Series. In the event of termination
for any reason, all records of each Series for which the Agreement is
terminated shall promptly be returned to the Manager or the Trust, free from
any claim or retention of rights in such records by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. The Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 9, 10, 11, 14, 15, and 18 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 16.
17. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "Bankers Trust Company" or any
derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust
and/or the Series have the right to use such name (or derivative or logo)
in offering materials of the
C-9
<PAGE>
Trust with the approval of the Portfolio Manager and for so long as the
Portfolio Manager is a portfolio manager to the Trust and/or the Series.
Upon termination of this Agreement between the Trust, the Manager, and the
Portfolio Manager, the Trust shall forthwith cease to use such name (or
derivative or logo).
19. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
20. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
C-10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title
Title
DIRECTED SERVICES, INC.
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
BANKERS TRUST COMPANY
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
C-11
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Bankers Trust Company shall act as
Portfolio Manager are as follows:
Emerging Markets Series
Market Manager Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Bankers Trust Company ("Portfolio Manager") to
the following Series of The GCG Trust, pursuant to the attached Portfolio
Management Agreement, the Manager will pay the Portfolio Manager a fee,
payable monthly for all Series except the Market Manager Series, which will be
payable quarterly, based on the average daily net assets of the Series at the
following annual rates of the average daily net assets of the Series:
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<S> <C>
Emerging Markets Series 0.75% of average daily net assets of the Series.
Market Manager Series 0.50% of average daily net assets of the Series.
</TABLE>
C-12
<PAGE>
EXHIBIT N
OTHER INFORMATION REGARDING BANKERS TRUST COMPANY
The directors and principal executive officer of Bankers Trust Company and
their principal occupation and business address are as shown below.
<TABLE>
<CAPTION>
NAE AND POSITION WITHM
ORTFOLIO MANAGERP PRINCIPAL OCCUPATION
- ---------------------- --------------------
<S> <C>
George B. Beitzel Retired Senior Vice President and Director,
Old Orchard Road, International Business Machines Corporation.
Armonk, NY 10504
Director
Philip A. Griffiths Director, Institute for Advanced Study.
Olden Lane, Princeton,
NJ 08540 Director
William R. Howell Chairman of the Board, J.C. Penney Company, Inc.
P.O. Box 10001, Plano,
Texas 75301-0001
Director
Jon M. Huntsman Chairman of the Board and Chief Executive Officer,
2000 Eagle Gate Tower Huntsman Chemical Corporation; Chairman of the Board
Salt Lake City, UT 84111 and Chief Executive Officer, Huntsman Corporation
Director and Huntsman Petrochemical Corporation; and Chairman
of the Board, Huntsman Packaging Corporation.
Vernon E. Jordan, Jr. Senior Partner, Akin, Gump, Strauss, Hayer & Feld,
1333 New Hampshire Ave., LLP, Attorneys-at-law, Washington D.C. and Dallas,
NW Washington, DC 20036 Texas.
Director
Hamish Maxwell Retired Chairman and Chief Executive Officer,
100 Park Avenue, New Phillip Morris Companies, Inc.
York, NY 10017
Director
Frank H. Newman President and Chief Executive Officer of Bankers
280 Park Avenue, New Trust New York Corporation and Bankers Trust
York, NY 10017 Chief Company.
Executive Officer and
Director
N.J. Nicholas, Jr. Investor.
745 Fifth Avenue, New
York, NY 10020 Director
Russell E. Palmer Chairman and Chief Executive Officer, The Palmer
3600 Market Street, Group.
Suite 530, Philadelphia,
PA 19104
Director
Patricia Carry Stewart Former Vice President, The Edna McConnell Clark
280 Park Avenue, New Foundation (a charitable foundation).
York, NY 10017 Director
George J. Vojta Vice Chairman of the Bankers Trust New York
280 Park Avenue, New Corporation and Bankers Trust Company.
York, NY 10017 Director
</TABLE>
N-1
<PAGE>
Bankers Trust Company also acts as investment adviser to the following
registered investment companies having similar investment objectives and
policies to those of the Emerging Markets Series. The table below sets forth
the name of each such investment company, its approximate net assets as of the
date set forth below, and the annual advisory fee charged by Bankers Trust
Company (as a percentage of average daily net assets).
<TABLE>
<CAPTION>
ANNUAL INVESTMENT
NAME OF INVESTMENT COMPANY NET ASSETS ADVISORY FEE
-------------------------- ----------- -----------------
<S> <C> <C>
Hercules Latin American Value Fund $15,305,742 1.00%
(5-30-96)
Latin American Equity Portfolio $19,165,579 0.41%
(5-30-96)
Pacific Basin Equity Portfolio $31,563,207 0.74%
(6-5-96)
</TABLE>
N-2
<PAGE>
EXHIBIT D
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996 among The GCG Trust (the
"Trust"), a Massachusetts business trust, Directed Services, Inc. ("Manager"),
a New York corporation, and T. Rowe Price Associates, Inc. ("Portfolio
Manager"), a Maryland corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint the Portfolio
Manager to render investment advisory services to the Series designated on
Schedule A of this Agreement (the "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided. In the event the Trust designates one or more series other
than the Series with respect to which the Trust and the Manager wish to retain
the Portfolio Manager to render investment advisory services hereunder, they
shall notify the Portfolio Manager in writing. If the Portfolio Manager is
willing to render such services, it shall notify the Trust and Manager in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of the Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC"), as amended, and provided to the Portfolio Manager
by the Manager. The Portfolio Manager further agrees as follows:
D-1
<PAGE>
(a) The Portfolio Manager will (1) take all steps necessary to manage the
Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) take all steps necessary to
manage the Series so as to ensure compliance by the Series with the
diversification requirements of Section 817(h) of the Internal Revenue Code
and regulations issued thereunder, and (3) use reasonable efforts to manage
the Series so as to ensure compliance by the Series with any other rules
and regulations pertaining to investment vehicles underlying variable
annuity or variable life insurance policies. The Manager or the Trust will
notify the Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and
regulations issued thereunder. In managing the Series in accordance with
these requirements, the Portfolio Manager shall be entitled to act and rely
upon advice of counsel to the Trust, counsel to the Manager, or counsel to
the Portfolio Manager, such counsel to be reasonably acceptable to the
Manager.
(b) The Portfolio Manager will conform with the 1940 Act and all rules
and regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended,
of which the Portfolio Manager has received a copy. The Manager or the
Trust will notify the Portfolio Manager of pertinent provisions of
applicable state insurance law with which the Portfolio Manager must comply
under this Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of the Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients, subject to
reasonable review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis,
such confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will assist the custodian and portfolio
accounting agent for the Trust in determining or confirming, consistent
with the procedures and policies stated in the Registration Statement for
the Trust, the value of any portfolio securities or other assets of the
Series for which the custodian and portfolio accounting agent reasonably
seeks assistance from or identifies for review by the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Advisers Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested.
(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented
D-2
<PAGE>
in the Series' portfolio, and will furnish the Trust's Board of Trustees
with respect to the Series such periodic and special reports as shall be
agreed upon by the Trustees, the Manager, and the Portfolio Manager, which
agreement shall not be unreasonably withheld.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer 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 Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with these
standards, the Portfolio Manager is further authorized to allocate the orders
placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as
D-3
<PAGE>
the Portfolio Manager shall determine consistent with the above standards, and
the Portfolio Manager will report on said allocation regularly to the Board of
Trustees of the Trust indicating the broker-dealers to which such allocations
have been made and the basis therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed or
will review the post-effective amendment to the Registration Statement for the
Trust filed or to be filed with the Securities and Exchange Commission that
contains or will contain disclosure about the Portfolio Manager that has been
provided by the Portfolio Manager, and represents and warrants that, with
respect to the disclosure about the Portfolio Manager or information relating,
directly or indirectly, to the Portfolio Manager, such Registration Statement,
to the extent it contains information provided by or respecting the Portfolio
Manager, contains or will contain, as of the date of filing with the
Securities and Exchange Commission, no untrue statement of any material fact
and does not omit any statement of a material fact which was required to be
stated therein or necessary to make the statements contained therein not
misleading. The Portfolio Manager further represents and warrants that it is a
duly registered investment adviser under the Advisers Act and a duly
registered investment adviser in all states in which the Portfolio Manager is
required to be registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of the
Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management Reports (as appropriate) for the Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's fidelity bond required by Section 17(g) of the 1940 Act,
or other insurance premiums;
(p) Association membership dues;
D-4
<PAGE>
(q) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 14 or Section 15 of this Agreement), and the legal obligations of
the Trust to indemnify its Trustees, officers, employees, shareholders,
distributors, and agents with respect thereto; and
(r) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, as described on Schedule B.
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the capitalization of the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall immediately notify the
Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser;
or has commenced proceedings or an investigation that may result in any of
these actions, (2) upon having a reasonable basis for believing that the
Series has ceased to qualify or might not qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code, or (3) upon having
a reasonable basis for believing that the Series has ceased to comply or
might not comply with the diversification provisions of Section 817(h) of
the Internal Revenue Code or the Regulations thereunder. The Portfolio
Manager further agrees to notify the Manager and the Trust immediately of
any material fact known to the Portfolio Manager respecting or relating to
the Portfolio Manager that is not contained in the Registration Statement
or prospectus for the Trust, or any amendment or supplement thereto, or of
any statement contained therein that becomes untrue in any material respect
(provided such Registration Statement or a prospectus for the Trust is
provided to the Portfolio Manager).
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the
Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis for
believing that the Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section 817(h)
of the Internal Revenue Code or the Regulations thereunder.
9. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-1 under the 1940 Act.
10. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
11. Representations Respecting Portfolio Manager. The Manager and the Trust
agree that neither the Trust, the Manager, nor affiliated persons of the Trust
or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time
D-5
<PAGE>
to time, or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved in advance by the Portfolio
Manager, except with the prior permission of the Portfolio Manager. The
parties agree that in the event that the Manager or an affiliated person of
the Manager sends sales literature or other promotional material to the
Portfolio Manager for its approval, the Portfolio Manager will use its best
efforts to comment within 30 days.
12. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. Liability. The Portfolio Manager may rely upon information reasonably
believed by it to be accurate and reliable. Except as may otherwise be
required by the 1940 Act or the rules thereunder or other applicable law, the
Trust and the Manager agree that the Portfolio Manager, any affiliated person
of the Portfolio Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act controls the Portfolio Manager shall not be liable
for, or subject to any damages, expenses, or losses in connection with, any
act or omission connected with or arising out of any services rendered under
this Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Portfolio Manager's duties, or by reason
of reckless disregard of the Portfolio Manager's obligations and duties under
this Agreement.
15. Liability Respecting Tax Compliance. Notwithstanding Section 14, the
Portfolio Manager shall be liable for all losses, claims, damages,
liabilities, or litigation (including reasonable legal and other expenses)
incurred by the Trust or the Manager, any affiliated person of the Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933
Act, controls the Manager, arising out of the Portfolio Manager's
responsibilities as Portfolio Manager of the Series which are based upon a
failure to comply with Section 2, Paragraph (a)(1) or (2) of this Agreement.
16. Duration and Termination. This Agreement shall become effective on the
date first indicated above. Unless sooner terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from the
date first indicated above and continue on an annual basis thereafter with
respect to the Series; provided that such annual continuance is specifically
approved each year by (a) the vote of a majority of the entire Board of
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Series, and (b) the vote of a
majority of those Trustees who are not parties to this Agreement or interested
persons (as such term is defined in the 1940 Act) of any such party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval. The Portfolio Manager shall not provide any services for a Series or
receive any fees on account of such Series with respect to which this
Agreement is not approved as described in the preceding sentence. However, any
approval of this Agreement by the holders of a majority of the outstanding
shares (as defined in the 1940 Act) of a Series shall be effective to continue
this Agreement with respect to the Series notwithstanding (i) that this
Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (ii) that this agreement has not
been approved by the vote of a majority of the outstanding shares of the
Trust, unless such approval shall be required by any other applicable law or
otherwise. Notwithstanding the foregoing, this Agreement may be terminated for
each or any Series hereunder: (a) by the Manager at any time without penalty,
upon sixty (60) days' written notice to the Portfolio Manager and the Trust,
(b) at any time without payment of any penalty by the Trust, upon the vote of
a majority of the Trust's Board of Trustees or a majority of the outstanding
voting securities of each Series, upon sixty (60) days' written notice to the
Manager and the Portfolio Manager, or (c) by the Portfolio Manager at any time
without penalty, upon sixty (60) days' written notice to the Manager and the
Trust. In the event of termination for any reason, all records of each Series
for which the Agreement is terminated shall
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<PAGE>
promptly be returned to the Manager or the Trust, free from any claim or
retention of rights in such record by the Portfolio Manager, although the
Portfolio Manager may, at its own expense, make and retain a copy of such
records. The Agreement shall automatically terminate in the event of its
assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 9, 10, 11, 14, 15, and 18 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 16.
17. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "T. Rowe Price Associates, Inc." or
any derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust
and/or the Series have the right to use such name (or derivative or logo)
in offering materials of the Trust with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a portfolio manager to
the Trust and/or the Series. Upon termination of this Agreement between the
Trust, the Manager, and the Portfolio Manager, the Trust shall forthwith
cease to use such name (or derivative or logo).
19. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
20. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
_____________________________________ By:__________________________________
Attest
_____________________________________ _____________________________________
Title Title
DIRECTED SERVICES, INC.
_____________________________________ By:__________________________________
Attest
_____________________________________ _____________________________________
Title Title
T. ROWE PRICE ASSOCIATES, INC.
_____________________________________ By:__________________________________
Attest
_____________________________________ _____________________________________
Title Title
D-8
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which T. Rowe Price Associates, Inc. shall
act as Portfolio Manager is as follows:
Fully Managed Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by T. Rowe Price Associates, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rate of the average daily net assets of the Series:
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<S> <C>
Fully Managed Series 0.50%
</TABLE>
D-9
<PAGE>
EXHIBIT O
OTHER INFORMATION REGARDING T. ROWE PRICE ASSOCIATES, INC.
The directors and principal executive officer of T. Rowe Price Associates,
Inc. and their principal occupations are as shown below. The business address
of each such person, unless otherwise indicated, is 100 East Pratt Street,
Baltimore, Maryland 21202.
<TABLE>
<CAPTION>
NAME AND POSITION WITH PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------------------------- --------------------
<S> <C>
George J. Collins Vice President and Director of Rowe Price-Fleming
Chief Executive Officer and International, Inc. ("Price-Fleming").
Managing Director
James E. Halbkat President of U.S. Monitor Corporation.
Director
P.O. Box 23109, Hilton Head Island,
SC 29925
Richard L. Menchel Limited Partner of the Goldman Sachs Group L.P.
Director
85 Broad Street, 2nd Floor
New York, NY 10004
John W. Rosenblum Tayloe Murphy Professor at the University of
Director Virginia; Director of Chesapeake Corporation,
P.O. Box 6550, Charlottesville, VA Camdus Communications Corp., Comdial Corporation,
22906 and Cone Mills Corporation.
Robert L. Stickland Chairman of Loew's Companies, Inc.; Director of
Director Hannaford Bros., Co.
604 Two Piedmont Plaza Building
Winston-Salem, NC 27104
Philip C. Walsh Consultant to Cyprus Annex Minerals Company;
Director Director of Piedmont Mining Company, Inc.
200 East 66th Street, Apt. A-1005
New York, NY 10021
Anne Marie Whittemore Partner of the law firm of McGuire, Woods, Battle
Director & Boothe; Director of Owens and Minor, Inc., USF&G
One James Center, Richmond, VA Corporation, and the James River Corporation.
23219
George A. Roche Vice President and Director of Price-Fleming.
Chief Financial Officer and
Managing Director
M. David Testa Chairman of the Board of Price-Fleming.
Managing Director
Carter O. Hoffman Director of TRP Finance, Inc.
Managing Director
Henry H. Hopkins Vice President of Price-Fleming.
Managing Director
Charles P. Smith Vice President of Price-Fleming.
Managing Director
Peter Van Dyke Vice President of Price-Fleming.
Managing Director
Alvin M. Younger, Jr. Secretary and Treasurer of Price-Fleming.
Managing Director
Secretary and Treasurer
</TABLE>
O-1
<PAGE>
T. Rowe Price Associates, Inc. also acts as investment adviser to several
registered investment companies having similar investment objectives and
policies to those of the Fully Managed Series. For its services to each such
investment company, T. Rowe Price Associates, Inc. is paid a management fee
consisting of two elements: a "group" fee and an "individual" fund fee. The
"group" fee varies and is based on the combined net assets of certain funds
distributed by T. Rowe Price Investment Services, Inc., other than
institutional or "private label" products, and funds managed and sponsored by
T. Rowe Price Associates, Inc. (excluding T. Rowe Price Index Trust, Inc.) or
by Rowe Price-Fleming International, Inc. (excluding Institutional
International Funds, Inc.) (the "Combined Price Funds"). Each such investment
company pays, as its portion of the "group" fee, an amount equal to the ratio
of its daily net assets to the daily net assets of all the Combined Price
Funds. Each investment company pays a flat "individual" fund fee based on its
net assets. The table below sets forth the current "group" fee rate schedule
at various asset levels of the Combined Price Funds:
0.480% of the first $1 billion
0.450% of the next $1 billion
0.420% of the next $1 billion
0.390% of the next $1 billion
0.370% of the next $1 billion
0.360% of the next $2 billion
0.350% of the next $2 billion
0.340% of the next $5 billion
0.330% of the next $10 billion
0.320% of the next $10 billion
0.310% of the next $16 billion
0.305% thereafter
The table below sets forth the name of each investment company having
similar investment objectives and policies to The Fully Managed Series, its
approximate net assets, and the "individual" fee charged by T. Rowe Price
Associates, Inc. (as a percentage of average daily net assets). The table also
sets forth certain expense ratio limitations and the periods for which they
are effective. For each investment company, T. Rowe Price Associates, Inc. has
agreed to bear any fund expenses which would cause the fund's ratio of
expenses to average net assets to exceed the indicated percentage limitations.
The expenses borne by T. Rowe Price are subject to reimbursement by each fund
through the indicated reimbursement date, provided no reimbursement will be
made if it would result in the fund's expense ratio exceeding its applicable
limitation.
<TABLE>
<CAPTION>
NAME OF APPROXIMATE INDIVIDUAL LIMITATION REIMBURSEMENT
INVESTMENT COMPANY NET ASSETS FUND FEE PERIOD LIMITATION DATE
- ------------------ -------------- ---------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
T. Rowe Price Capital
Appreciation Fund $ 895,040,412 0.30%(1) 1/1/90-12/31/93 1.25% 12/31/95
T. Rowe Price New
America Growth Fund $1,184,869,292 0.35% 1/1/90-12/31/93 1.25% 12/31/95
T. Rowe Price Small-Cap
Value Fund $1,112,318,750 0.35% 1/1/92-12/31/93 1.25% 12/31/95
T. Rowe Price Mid-Cap
Growth Fund $ 419,323,081 0.35% 1/1/94-12/31/95 1.25% 12/31/97
</TABLE>
- --------
(1) The management fee for T. Rowe Price Capital Appreciation Fund is subject
to an upward or downward adjustment depending upon whether, and to what
extent, the investment performance of the Fund for a specified performance
period exceeds, or is exceeded by the investment performance of the
Standard & Poor's Index of 500 common stocks (S & P 500) over the same
period. The annual performance adjustment will equal .02% for each
percentage point the Fund's performance is above or below that of the S&P
500 during the measurement period up to a maximum annual adjustment of
plus or minus .30%.
One or more additional expense limitation periods may be implemented after
the expiration of the current expense limitation. With respect to any such
additional limitation period, the fund may reimburse T. Rowe Price Associates,
Inc., provided the reimbursement does not result in the fund's aggregate
expenses exceeding the additional expense limitation.
O-2
<PAGE>
EXHIBIT E
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996 among The GCG Trust (the "Trust"),
a Massachusetts business trust, Directed Services, Inc. ("Manager"), a New
York corporation, and Zweig Advisors Inc. ("Portfolio Manager"), a Delaware
corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint Zweig Advisors Inc.
to act as Portfolio Manager to the Series designed on Schedule A of this
Agreement (each a "Series") for the periods and on the terms set forth in this
Agreement. The Portfolio Manager accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided. In
the event the Trust designates one or more series other than the Series with
respect to which the Trust and the Manager wish to retain the Portfolio
Manager to render investment advisory services hereunder, they shall notify
the Portfolio Manager in writing. If the Portfolio Manager is willing to
render such services, it shall notify the Trust and Manager in writing,
whereupon such series shall become a Series hereunder, and be subject to this
Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for each Series' portfolio and determine the
composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of each Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for each Series, when these transactions should be
executed, and what portion of the assets of each Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of each Series. To the extent permitted by the investment policies of
each Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with each
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission
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<PAGE>
("SEC"), as amended, copies of which shall be sent to the Portfolio Manager by
the Manager. The Portfolio Manager further agrees as follows:
(a) The Portfolio Manager will (1) use reasonable efforts to manage each
Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) manage each Series so as to
ensure compliance by the Series with the diversification requirements of
Section 817(h) of the Internal Revenue Code and regulations issued
thereunder, and (3) use reasonable efforts to manage each Series so as to
ensure compliance by each Series with any other rules and regulations
pertaining to investment vehicles underlying variable annuity or variable
life insurance policies. The Manager or the Trust will notify the Portfolio
Manager of any pertinent changes, modifications to, or interpretations of
Section 817(h) of the Internal Revenue Code and regulations issued
thereunder. In managing each Series in accordance with these requirements,
the Portfolio Manager shall be entitled to receive and act upon advice of
counsel to the Trust, counsel to the Manager, or counsel to the Portfolio
Manager that is also acceptable to the Manager.
(b) The Portfolio Manager will conform with the 1940 Act and all rules
and regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended,
of which the Portfolio Manager has received a copy. The Manager or the
Trust will notify the Portfolio Manager of pertinent provisions of
applicable state insurance law with which the Portfolio Manager must comply
under this Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, including but not limited to Section 17(d)
of the 1940 Act, but shall not be obligated to, aggregate the securities to
be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the
Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Trust on a daily basis,
such confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of each Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the determination
by the custodian and portfolio accounting agent for the Trust of the
valuation of portfolio securities and other investments of the Series. The
Portfolio Manager will assist the custodian and portfolio accounting agent
for the Trust in determining or confirming, consistent with the procedures
and policies stated in the Registration Statement for the Trust, the value
of any portfolio securities or other assets of the Series for which the
custodian and portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of each Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Adviser Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in
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connection with such services which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner
consistent with applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for each Series and the issuers and securities represented in each
Series' portfolio, and will furnish the Trust's Board of Trustees with
respect to each Series such periodic and special reports as the Trustees
and the Manager may reasonably request.
(h) The Portfolio Manager will not disclose or use any records or
information obtained pursuant to this Agreement (excluding investment
research and investment advice) in any manner whatsoever except as
expressly authorized in this Agreement or in the ordinary course of
business in connection with placing orders for the purchase and sale of
securities, and will keep confidential any information obtained pursuant to
this Agreement, and disclose such information only if the Board of Trustees
of the Trust has authorized such disclosure, or if such disclosure is
required by applicable federal or state law or regulations or regulatory
authorities having the requisite authority. The Trust and the Manager will
not disclose or use any records or information respecting the Portfolio
Manager obtained pursuant to this Agreement in any manner whatsoever except
as expressly authorized in this Agreement, and will keep confidential any
information obtained pursuant to this Agreement, and disclose such
information only as expressly authorized in this Agreement, if the Board of
Trustees of the Trust has authorized such disclosure, or if such disclosure
is required by applicable federal or state law or regulations or regulatory
authorities having the requisite authority.
(i) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for a Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the
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difficulty of execution, and the execution capabilities and operational
facilities of the firm involved, and the firm's risk in positioning a block of
securities. Accordingly, the price to a Series in any transaction may be less
favorable than that available from another broker-dealer if the difference is
reasonably justified, in the judgment of the Portfolio Manager in the exercise
of its fiduciary obligations to the Trust, by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees
may determine and consistent with Section 28(e) of the Securities Exchange Act
of 1934, the Portfolio Manager shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused a Series to pay a broker-dealer 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
Portfolio Manager or its affiliate determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed in terms of either
that particular transaction or the Portfolio Manager's or its affiliate's
overall responsibilities with respect to the Series and to their other clients
as to which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the initial Registration Statement for the Trust filed with the Securities and
Exchange Commission and represents and warrants that, with respect to the
disclosure about the Portfolio Manager or information relating, directly or
indirectly, to the Portfolio Manager, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not omit
any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") and a duly registered investment adviser in all states in
which the Portfolio Manager is required to be registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management under this Agreement. The Manager or
the Trust shall be responsible for all the expenses of the Trust's operations
including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Trust's transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Trust's custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of maintaining the Trust's tax records;
(e) Salaries and other compensation of any of the trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(f) Taxes levied against the Trust;
(g) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(h) Costs, including the interest expense, of borrowing money;
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(i) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(j) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(k) Costs of printing stock certificates representing shares of the
Trust;
(l) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(m) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(n) Association membership dues;
(o) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 15 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(p) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, as described in Schedule B.
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Trust or
the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall immediately notify the
Manager and the Trust (1) in the event that the Securities and Exchange
Commission has censured the Portfolio Manager; placed limitations upon its
activities, functions or operations; suspended or revoked its registration
as an investment adviser; or has commenced proceedings or an investigation
that may result in any of these actions, (2) upon having a reasonable basis
for believing that a Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that a Series has
ceased to comply with the diversification provisions of Section 817(h) of
the Internal Revenue Code or the Regulations thereunder. The Portfolio
Manager further agrees to notify the Manager and the Trust immediately of
any material fact known to the Portfolio Manager respecting or relating to
the Portfolio Manager that is not contained in the Registration Statement
or prospectus for the Trust, or any amendment or supplement thereto, or of
any statement contained therein that becomes untrue in any material
respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the Securities and Exchange Commission has
censured the Manager or the Trust; placed limitations upon either of their
activities, functions, or operations; suspended or revoked the Manager's
registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that a Series has ceased to qualify or might
not qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, or (3) upon having a reasonable basis for believing
that a Series has ceased to comply with the diversification provisions of
Section 817(h) of the Internal Revenue Code or the Regulations thereunder.
9. Insurance Company Offerees. All parties acknowledge that the Trust will
offer its shares so that it may serve as an investment vehicle for variable
annuity contracts and variable life insurance policies issued by insurance
companies. The Trust and the Manager agree that shares of the Series may be
offered only to the separate accounts and general account of insurance
companies that are approved in writing by the Portfolio
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Manager. The Portfolio Manager agrees that shares of the Series may be offered
to separate accounts and the general account of Golden American Life Insurance
Company and to separate accounts and the general accounts of any insurance
companies that are affiliated with Golden American Life Insurance Company. The
Manager and Trust agree that the Portfolio Manager shall be under no
obligation to investigate insurance companies to which the Trust offers or
proposes to offer its shares.
10. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
11. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
12. Representations respecting Portfolio Manager. The Manager and the Trust
agree that neither the Trust, the Manager, nor affiliated persons of the Trust
or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
writing in advance by the Portfolio Manager, except with the prior written
permission of the Portfolio Manager. The parties agree that in the event that
the Manager or an affiliated person of the Manager sends sales literature or
other promotional material to the Portfolio Manager for its written approval
and the Portfolio Manager has not commented within 30 days, the Manager and
its affiliated persons may use and distribute such sales literature or other
promotional material, although, in such event, the Portfolio Manager shall not
be deemed to have consented to such use and distribution.
13. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
14. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of a Series) or
from engaging in other activities.
15. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
16. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person,
if any, who, within the meaning of Section 15 of the 1933 Act
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controls ("controlling person") the Portfolio Manager (all of such persons
being referred to as "Portfolio Manager Indemnified Persons") against any
and all losses, claims, damages, liabilities, or litigation (including
legal and other expenses) to which a Portfolio Manager Indemnified Person
may become subject under the 1933 Act, the 1940 Act, the Advisers Act,
under any other statute, at common law or otherwise, arising out of the
Manager's responsibilities to the Trust which (1) may be based upon any
misfeasance, malfeasance, or nonfeasance by the Manager, any of its
employees or representatives or any affiliate of the Manager, any portfolio
manager of any other series of the Trust, or person acting on behalf of the
Manager or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact supplied by, or which is the responsibility
of, the Manager and contained in the Registration Statement or prospectus
covering shares of the Trust or any Series, or any amendment thereof or any
supplement thereto, or the omission or alleged omission to state therein a
material fact known or which should have been known to the Manager and was
required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon
information furnished to the Manager or the Trust or to any affiliated
person of the Manager by a Portfolio Manager Indemnified Person; provided
however, that in no case shall the indemnity in favor of the Portfolio
Manager Indemnified Person be deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of
its duties, or by reason of its reckless disregard of obligations and
duties under this Agreement.
(b) Notwithstanding Section 15 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager, and each person, if any, who, within the meaning of Section 15
of the 1933 Act, controls ("controlling person") the Manager (all of such
persons being referred to as "Manager Indemnified Persons") against any and
all losses, claims, damages, liabilities, or litigation (including legal
and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, under any other
statute, at common law or otherwise, arising out of the Portfolio Manager's
responsibilities as Portfolio Manager of the Series which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Portfolio Manager,
any of its employees or representatives, or any affiliate of or any person
acting on behalf of the Portfolio Manager, or (2) may be based upon any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or prospectus covering the shares of the
Trust or any Series, or any amendment or supplement thereto, or the
omission or alleged omission to state therein a material fact known or
which should have been known to the Portfolio Manager and was required to
be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished to the Manager, the Trust, or any affiliated person
of the Manager or Trust by the Portfolio Manager or any affiliated person
of the Portfolio Manager; provided, however, that in no case shall the
indemnity in favor of a Manager Indemnified Person be deemed to protect
such person against any liability to which any such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence in
the performance of its duties, or by reason of its reckless disregard of
its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
16 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person shall have notified
the Manager in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon such Portfolio Manager Indemnified Person (or after
such Portfolio Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Manager of
any such claim shall not relieve the Manager from any liability which it
may have to the Portfolio Manager Indemnified Person against whom such
action is brought otherwise than on account of this Section 16. In case any
such action is brought against the Portfolio Manager Indemnified Person,
the Manager will be entitled to participate, at its own expense, in the
defense thereof or, after notice to the Portfolio Manager Indemnified
Person, to assume the defense thereof, with counsel satisfactory to the
Portfolio Manager Indemnified Person. If the Manager assumes the defense
and the selection of counsel by the Manager to represent both the Manager
and the Portfolio Manager Indemnified Person would result in a conflict of
interests and therefore, would not, in the
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reasonable judgment of the Portfolio Manager Indemnified Person, adequately
represent the interests of the Portfolio Manager Indemnified Person, the
Manager will, at its own expense, assume the defense with counsel to the
Manager and, also at its own expense, with separate counsel to the
Portfolio Manager Indemnified Person which counsel shall be satisfactory to
the Manager and to the Portfolio Manager Indemnified Person. The Portfolio
Manager Indemnified Person shall bear the fees and expenses of any
additional counsel retained by it, and the Manager shall not be liable to
the Portfolio Manager Indemnified Person under this Agreement for any legal
or other expenses subsequently incurred by the Portfolio Manager
Indemnified Person independently in connection with the defense thereof
other than reasonable costs of investigation. The Manager shall not have
the right to compromise on or settle the litigation without the prior
written consent of the Portfolio Manager Indemnified Person if the
compromise or settlement results, or may result in a finding of wrongdoing
on the part of the Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 16 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim
shall have been served upon such Manager Indemnified Person (or after such
Manager Indemnified Person shall have received notice of such service on
any designated agent), but failure to notify the Portfolio Manager of any
such claim shall not relieve the Portfolio Manager from any liability which
it may have to the Manager Indemnified Person against whom such action is
brought otherwise than on account of this Section 16. In case any such
action is brought against the Manager Indemnified Person, the Portfolio
Manager will be entitled to participate, at its own expense, in the defense
thereof or, after notice to the Manager Indemnified Person, to assume the
defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Portfolio Manager assumes the defense and the selection of
counsel by the Portfolio Manager to represent both the Portfolio Manager
and the Manager Indemnified Person would result in a conflict of interests
and therefore, would not, in the reasonable judgment of the Manager
Indemnified Person, adequately represent the interests of the Manager
Indemnified Person, the Portfolio Manager will, at its own expense, assume
the defense with counsel to the Portfolio Manager and, also at its own
expense, with separate counsel to the Manager Indemnified Person which
counsel shall be satisfactory to the Portfolio Manager and to the Manager
Indemnified Person. The Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Portfolio
Manager shall not be liable to the Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the
Manager Indemnified Person independently in connection with the defense
thereof other than reasonable costs of investigation. The Portfolio Manager
shall not have the right to compromise on or settle the litigation without
the prior written consent of the Manager Indemnified Person if the
compromise or settlement results, or may result in a finding of wrongdoing
on the part of the Manager Indemnified Person.
17. Duration and Termination. This Agreement shall become effective on the
date of its execution. Unless terminated as provided herein, the Agreement
shall remain in full force and effect for two (2) years from such date and
continue on an annual basis with respect to each Series unless terminated as
provided in this Section; provided that such annual continuance is
specifically approved each year by (a) the vote of a majority of the entire
Board of Trustees of the Trust, or by the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of each Series, and
(b) the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons (as such term is defined in the 1940 Act) of
any such party to this Agreement cast in person at a meeting called for the
purpose of voting on such approval. The Portfolio Manager shall not provide
any services for such Series or receive any fees on account of such Series
with respect to which this Agreement is not approved as described in the
preceding sentence. Notwithstanding the foregoing, this Agreement may be
terminated: (a) by the Manager at any time without penalty, upon sixty (60)
days' written notice to the Portfolio Manager and the Trust, (b) at any time
without payment of any penalty by the Trust, upon the vote of a majority of
the Trust's Board of Trustees or a majority of the outstanding voting
securities of each Series, upon sixty (60) days' written notice to the Manager
and the Portfolio Manager, or (c) by the Portfolio Manager at any time without
penalty, upon sixty (60) days' written notice to the Manager and the Trust. In
the
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event of termination for any reason, all records of each Series for which the
Agreement is terminated shall promptly be returned to the Manager or the
Trust, free from any claim or retention of rights in such record by the
Portfolio Manager, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Agreement shall automatically
terminate in the event of its assignment (as such term is defined in the 1940
Act). In the event this Agreement is terminated or is not approved in the
manner described above, the Sections or Paragraphs numbered 2(f), 2(h), 10,
11, 12, 15, 16, and 19 of this Agreement as well as any applicable provision
of this Paragraph numbered 17 shall remain in effect.
18. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
19. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and its affiliates, and that the Portfolio Manager
has the right to use such name (or derivative or logo) only with the
approval of the Manager and only so long as the Manager is Manager to the
Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the word Zweig or any derivative thereof or
logo associated with that word is the property right of Martin E. Zweig,
and that the Trust and/or the Series have the right to use such word (or
derivative or logo) in offering materials of the Trust only with the
approval of the Portfolio Manager and only so long as the Portfolio Manager
is a portfolio manager to the Trust and/or the Series. Upon termination of
this Agreement between the Trust, the Manager, and the Portfolio Manager,
the Trust shall forthwith cease to use such word (or derivative or logo).
20. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
21. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 17 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
E-9
<PAGE>
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
DIRECTED SERVICES, INC.
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
ZWEIG ADVISORS INC.
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
Martin E. Zweig hereby consents and agrees to the use of the word "Zweig"
upon the terms and conditions set forth in Section 19 of the foregoing
Agreement.
_____________________________________
Martin E. Zweig
E-10
<PAGE>
SCHEDULE A
The Series of the GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Zweig Advisors Inc. shall act as
Portfolio Manager are as follows:
Multiple Allocation Series
Strategic Equity Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Zweig Advisors Inc. ("Portfolio Manager") to
the following Series of The GCG Trust, pursuant to the attached Portfolio
Management Agreement, the Manager will pay the Portfolio Manager a fee,
payable monthly, based on the average daily net assets of the Series at the
following annual rates of the average daily net assets of the Series:
<TABLE>
<CAPTION>
SERIES RATE
------ -----
<S> <C>
Multiple Allocation Series 0.50%
Strategic Equity Series 0.50%
</TABLE>
E-11
<PAGE>
EXHIBIT P
OTHER INFORMATION REGARDING ZWEIG ADVISORS INC.
The directors and principal executive officers of Zweig Advisors Inc. and
their principal occupations are as shown below. The business address of each
such person is 900 Third Avenue, New York, New York 10022.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
---------------------- --------------------
<C> <S>
Martin E. Zweig Chairman of the Board and President of The
President and Director Zweig Fund, Inc.; Chairman of the Board and
President of The Zweig Total Return Fund,
Inc.; President and Director of Zweig Total
Return Advisors, Inc.; President and
Director of Zweig Securities Advisory
Service, Inc.; Co-Chairman of Research of
Avatar Investors Associates Corp.; Managing
Director of the Managing General Partner of
Zweig-DiMenna Partners, L.P. and Zweig-
DiMenna Special Opportunities, L.P.;
President and Director of Zweig-DiMenna
International Managers, Inc.; Chairman of
Zweig/Glaser Advisers; President of Zweig
Series Trust; President and Director of
Gotham Advisors, Inc. and Euclid Advisors,
Inc.
Jeffrey Lazar Vice President and Treasurer of The Zweig
Vice President, Treasurer Fund, Inc. and The Zweig Total Return Fund,
and Secretary Inc.; Vice President, Treasurer and
Secretary of Zweig Total Return Advisors,
Inc.; Vice President of Zweig Series Trust.
David Katzen Senior Vice President of Zweig/Glaser
Vice President Advisers and Zweig Series Trust; Executive
Vice President of Euclid Advisors, Inc.
</TABLE>
Zweig Advisors Inc. does not act as investment adviser to any other
registered investment companies with investment objectives and policies
similar to those of the Multiple Allocation Series or the Strategic Equity
Series.
P-1
<PAGE>
EXHIBIT F
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996 among The GCG Trust (the "Trust"), a
Massachusetts business trust, Directed Services, Inc. ("Manager"), a New York
corporation, and Van Eck Associates Corporation ("Portfolio Manager"), a
Delaware corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint Van Eck Associates
Corporation to act as Portfolio Manager to the Natural Resources Series (the
"Series") for the periods and on the terms set forth in this Agreement. The
Portfolio Manager accepts such appointment and agrees to furnish the services
herein set forth for the compensation herein provided. In the event the Trust
designates one or more series other than the Series with respect to which the
Trust and the Manager wish to retain the Portfolio Manager to render
investment advisory services hereunder, they shall notify the Portfolio
Manager in writing. If the Portfolio Manager is willing to render such
services, it shall notify the Trust and Manager in writing, whereupon such
series shall become a Series hereunder, and be subject to this Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of the Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC"), as
F-1
<PAGE>
amended, copies of which shall be sent to the Portfolio Manager by the
Manager. The Portfolio Manager further agrees as follows:
(a) The Portfolio Manager will (1) use reasonable efforts to manage the
Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) manage the Series so as to
ensure compliance by the Series with the diversification requirements of
Section 817(h) of the Internal Revenue Code and regulations issued
thereunder, and (3) use reasonable efforts to manage the Series so as to
ensure compliance by the Series with any other rules and regulations
pertaining to investment vehicles underlying variable annuity or variable
life insurance policies. The Manager or the Trust will notify the Portfolio
Manager of any pertinent changes, modifications to, or interpretations of
Section 817(h) of the Internal Revenue Code and regulations issued
thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all rules
and regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended,
of which the Portfolio Manager has received a copy. The Manager or the
Trust will notify the Portfolio Manager of pertinent provisions of
applicable state insurance law with which the Portfolio Manager must comply
under this Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of the Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, including but not limited to Section 17(d)
of the 1940 Act, but shall not be obligated to, aggregate the securities to
be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the
Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Trust on a daily basis,
such confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the determination
by the custodian and portfolio accounting agent for the Trust of the
valuation of portfolio securities and other investments of the Series. The
Portfolio Manager will assist the custodian and portfolio accounting agent
for the Trust in determining or confirming, consistent with the procedures
and policies stated in the Registration Statement for the Trust, the value
of any portfolio securities or other assets of the Series for which the
custodian and portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Advisers Act), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
F-2
<PAGE>
(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with
respect to the Series such periodic and special reports as the Trustees and
the Manager may reasonably request.
(h) The Portfolio Manager will not disclose or use any records or
information obtained pursuant to this Agreement (excluding investment
research and investment advice) in any manner whatsoever except as
expressly authorized in this Agreement or in the ordinary course of
business in connection with placing orders for the purchase and sale of
securities, and will keep confidential any information obtained pursuant to
this Agreement, and disclose such information only if the Board of Trustees
of the Trust has authorized such disclosure, or if such disclosure is
required by applicable federal or state law or regulations or regulatory
authorities having the requisite authority. The Trust and the Manager will
not disclose or use any records or information respecting the Portfolio
Manager obtained pursuant to this Agreement in any manner whatsoever except
as expressly authorized in this Agreement, and will keep confidential any
information obtained pursuant to this Agreement, and disclose such
information only as expressly authorized in this Agreement, if the Board of
Trustees of the Trust has authorized such disclosure, or if such disclosure
is required by applicable federal or state law or regulations or regulatory
authorities having the requisite authority.
(i) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable
F-3
<PAGE>
than that available from another broker-dealer if the difference is reasonably
justified, in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust, by other aspects of the portfolio
execution services offered. Subject to such policies as the Board of Trustees
may determine and consistent with Section 28(e) of the Securities Exchange Act
of 1934, the Portfolio Manager shall not be deemed to have acted unlawfully or
to have breached any duty created by this Agreement or otherwise solely by
reason of its having caused the Series to pay a broker-dealer 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
Portfolio Manager or its affiliate determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker-dealer, viewed in terms of either
that particular transaction or the Portfolio Manager's or its affiliate's
overall responsibilities with respect to the Series and to their other clients
as to which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the initial Registration Statement for the Trust filed with the Securities and
Exchange Commission and represents and warrants that, with respect to the
disclosure about the Portfolio Manager or information relating, directly or
indirectly, to the Portfolio Manager, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not omit
any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Investment Advisers Act of 1940, as amended
("Advisers Act") and a duly registered investment adviser in all states in
which the Portfolio Manager is required to be registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management under this Agreement. The Manager or
the Trust shall be responsible for all the expenses of the Trust's operations
including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Trust's transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Trust's custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of maintaining the Trust's tax records;
(e) Salaries and other compensation of any of the trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(f) Taxes levied against the Trust;
(g) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(h) Costs, including the interest expense, of borrowing money;
(i) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
F-4
<PAGE>
(j) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(k) Costs of printing stock certificates representing shares of the
Trust;
(l) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(m) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(n) Association membership dues;
(o) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 15 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(p) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, based on the average daily net
assets of the Series at the annual rate of .50% of the average daily net
assets of the Series.
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Trust or
the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall immediately notify the
Manager and the Trust (1) in the event that the Securities and Exchange
Commission has censured the Portfolio Manager; placed limitations upon its
activities, functions or operations; suspended or revoked its registration
as an investment adviser; or has commenced proceedings or an investigation
that may result in any of these actions, (2) upon having a reasonable basis
for believing that the Series has ceased to qualify or might not qualify as
a regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section 817(h)
of the Internal Revenue Code or the Regulations thereunder. The Portfolio
Manager further agrees to notify the Manager and the Trust immediately of
any material fact known to the Portfolio Manager respecting or relating to
the Portfolio Manager that is not contained in the Registration Statement
or prospectus for the Trust, or any amendment or supplement thereto, or of
any statement contained therein that becomes untrue in any material
respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the Securities and Exchange Commission has
censured the Manager or the Trust; placed limitations upon either of their
activities, functions, or operations; suspended or revoked the Manager's
registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that the Series has ceased to qualify or
might not qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code, or (3) upon having a reasonable basis for
believing that the Series has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the
Regulations thereunder.
9. Insurance Company Offerees. All parties acknowledge that the Trust will
offer its shares so that it may serve as an investment vehicle for variable
annuity contracts and variable life insurance policies issued by insurance
companies. The Trust and the Manager agree that shares of the Series may be
offered only to the separate accounts and general account of insurance
companies that are approved in writing by the Portfolio Manager. The Portfolio
Manager agrees that shares of this Series may be offered to separate accounts
and the general account of Golden American Life Insurance Company and to
separate accounts and the general accounts of any insurance companies that are
affiliated with Golden American Life Insurance Company. The Manager
F-5
<PAGE>
and Trust agree that the Portfolio Manager shall be under no obligation to
investigate insurance companies to which the Trust offers or proposes to offer
its shares.
10. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
11. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
12. Representations respecting Portfolio Manager. The Manager and the Trust
agree that neither the Trust, the Manager, nor affiliated persons of the Trust
or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
writing in advance by the Portfolio Manager, except with the prior written
permission of the Portfolio Manager. The parties agree that in the event that
the Manager or an affiliated person of the Manager sends sales literature or
other promotional material to the Portfolio Manager for its written approval
and the Portfolio Manager has not commented within 30 days, the Manager and
its affiliated persons may use and distribute such sales literature or other
promotional material, although, in such event, the Portfolio Manager shall not
be deemed to have consented to such use and distribution.
13. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
14. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
15. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
16. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person,
if any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Portfolio Manager Indemnified Person may become
subject
F-6
<PAGE>
under the 1933 Act, the 1940 Act, the Advisers Act, under any other
statute, at common law or otherwise, arising out of the Manager's
responsibilities to the Trust which (1) may be based upon any misfeasance,
malfeasance, or nonfeasance by the Manager, any of its employees or
representatives or any affiliate of or any person acting on behalf of the
Manager or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact supplied by, or which is the responsibility
of, the Manager and contained in the Registration Statement or prospectus
covering shares of the Trust or any Series, or any amendment thereof or any
supplement thereto, or the omission or alleged omission to state therein a
material fact known or which should have been known to the Manager and was
required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon
information furnished to the Manager or the Trust or to any affiliated
person of the Manager by a Portfolio Manager Indemnified Person; provided
however, that in no case shall the indemnity in favor of the Portfolio
Manager Indemnified Person be deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of
its duties, or by reason of its reckless disregard of obligations and
duties under this Agreement.
(b) Notwithstanding Section 15 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager, and each person, if any, who, within the meaning of Section 15
of the 1933 Act, controls ("controlling person") the Manager (all of such
persons being referred to as "Manager Indemnified Persons") against any and
all losses, claims, damages, liabilities, or litigation (including legal
and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, under any other
statute, at common law or otherwise, arising out of the Portfolio Manager's
responsibilities as Portfolio Manager of the Series which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Portfolio Manager,
any of its employees or representatives, or any affiliate of or any person
acting on behalf of the Portfolio Manager, (2) may be based upon a failure
to comply with Section 2, Paragraph (a) of this Agreement, or (3) may be
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or prospectus covering the
shares of the Trust or any Series, or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact known
or which should have been known to the Portfolio Manager and was required
to be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished to the Manager, the Trust, or any affiliated person
of the Manager or Trust by the Portfolio Manager or any affiliated person
of the Portfolio Manager; provided, however, that in no case shall the
indemnity in favor of a Manager Indemnified Person be deemed to protect
such person against any liability to which any such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence in
the performance of its duties, or by reason of its reckless disregard of
its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
16 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person shall have notified
the Manager in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon such Portfolio Manager Indemnified Person (or after
such Portfolio Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Manager of
any such claim shall not relieve the Manager from any liability which it
may have to the Portfolio Manager Indemnified Person against whom such
action is brought otherwise than on account of this Section 16. In case any
such action is brought against the Portfolio Manager Indemnified Person,
the Manager will be entitled to participate, at its own expense, in the
defense thereof or, after notice to the Portfolio Manager Indemnified
Person, to assume the defense thereof, with counsel satisfactory to the
Portfolio Manager Indemnified Person. If the Manager assumes the defense
and the selection of counsel by the Manager to represent both the Manager
and the Portfolio Manager Indemnified Person would result in a conflict of
interests and therefore, would not, in the reasonable judgment of the
Portfolio Manager Indemnified Person, adequately represent the interests of
the Portfolio Manager Indemnified Person, the Manager will, at its own
expense, assume the defense with
F-7
<PAGE>
counsel to the Manager and, also at its own expense, with separate counsel
to the Portfolio Manager Indemnified Person which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall
not be liable to the Portfolio Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the
Portfolio Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Manager
shall not have the right to compromise on or settle the litigation without
the prior written consent of the Portfolio Manager Indemnified Person if
the compromise or settlement results, or may result in a finding of
wrongdoing on the part of the Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 16 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim
shall have been served upon such Manager Indemnified Person (or after such
Manager Indemnified Person shall have received notice of such service on
any designated agent), but failure to notify the Portfolio Manager of any
such claim shall not relieve the Portfolio Manager from any liability which
it may have to the Manager Indemnified Person against whom such action is
brought otherwise than on account of this Section 16. In case any such
action is brought against the Manager Indemnified Person, the Portfolio
Manager will be entitled to participate, at its own expense, in the defense
thereof or, after notice to the Manager Indemnified Person, to assume the
defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Portfolio Manager assumes the defense and the selection of
counsel by the Portfolio Manager to represent both the Portfolio Manager
and the Manager Indemnified Person would result in a conflict of interest
and therefore, would not, in the reasonable judgment of the Manager
Indemnified Person, adequately represent the interests of the Manager
Indemnified Person, the Portfolio Manager will, at its own expense, assume
the defense with counsel to the Portfolio Manager and, also at its own
expense, with separate counsel to the Manager Indemnified Person which
counsel shall be satisfactory to the Portfolio Manager and to the Manager
Indemnified Person. The Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Portfolio
Manager shall not be liable to the Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the
Manager Indemnified Person independently in connection with the defense
thereof other than reasonable costs of investigation. The Portfolio Manager
shall not have the right to compromise on or settle the litigation without
the prior written consent of the Manager Indemnified Person if the
compromise or settlement results, or may result in a finding of wrongdoing
on the part of the Manager Indemnified Person.
17. Duration and Termination. This Agreement shall become effective on the
date of its execution. Unless terminated as provided herein, the Agreement
shall remain in full force and effect for two (2) years from such date and
continue on an annual basis with respect to each Series unless terminated as
provided in this Section; provided that such annual continuance is
specifically approved each year by (a) the vote of a majority of the entire
Board of Trustees of the Trust, or by the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of each Series, and
(b) the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons (as such term is defined in the 1940 Act) of
any such party to this Agreement cast in person at a meeting called for the
purpose of voting on such approval. The Portfolio Manager shall not provide
any services for such Series or receive any fees on account of such Series
with respect to which this Agreement is not approved as described in the
preceding sentence. Notwithstanding the foregoing, this Agreement may be
terminated: (a) by the Manager at any time without penalty, upon sixty (60)
days' written notice to the Portfolio Manager and the Trust, (b) at any time
without payment of any penalty by the Trust, upon the vote of a majority of
the Trust's Board of Trustees or a majority of the outstanding voting
securities of each Series, upon sixty (60) days' written notice to the Manager
and the Portfolio Manager, or (c) by the Portfolio Manager at any time without
penalty, upon sixty (60) days' written notice to the Manager and the Trust. In
the event of termination for any reason, all records of each Series for which
the Agreement is terminated shall promptly be returned to the Manager or the
Trust, free from any claim or retention of rights in such record by the
Portfolio Manager, although the Portfolio Manager may, at its own expense,
make and retain a copy of such
F-8
<PAGE>
records. The Agreement shall automatically terminate in the event of its
assignment (as such term is defined in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 2(h), 10, 11, 12, 15, 16, and 19 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 17.
18. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
19. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and its affiliates, and that the Portfolio Manager
has the right to use such name (or derivative or logo) only with the
approval of the Manager and only so long as the Manager is Manager to the
Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name Van Eck or any derivative thereof or
logo associated with that name is the valuable property of the Portfolio
Manager and its affiliates and that the Trust and/or the Series have the
right to use such name (or derivative or logo) in offering materials of the
Trust with the approval of the Portfolio Manager and for so long as the
Portfolio Manager is a portfolio manager to the Trust and/or the Series.
Upon termination of this Agreement between the Trust, the Manager, and the
Portfolio Manager, the Trust shall forthwith cease to use such name (or
derivative or logo).
20. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
21. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 17 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
F-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
DIRECTED SERVICES, INC.
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
VAN ECK ASSOCIATES CORPORATION
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
F-10
<PAGE>
EXHIBIT Q
OTHER INFORMATION REGARDING VAN ECK ASSOCIATES CORPORATION
The directors and principal executive officer of Van Eck Associates
Corporation and their principal occupations are as shown below. The business
address of each such person is 99 Park Avenue, New York, New York 10016.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
<S> <C>
John C. van Eck, CFA Chairman of the Board and President, Van
President, Chief Eck Funds and Van Eck Worldwide Insurance
Executive Officer, Trust; President, Chief Executive Officer,
Chairman of the Board Chairman of the Board and Director, Van Eck
and Director Securities Corporation.
Fred M. van Eck Trustee, Van Eck Funds and Van Eck
Director Worldwide Insurance Trust; Director, Van
Eck Securities Corporation; Private
Investor.
Sigrid S. van Eck Vice President, Assistant Treasurer and
Director, Vice President Director, Van Eck Securities Corporation.
and
Assistant Treasurer
Derek S. van Eck, CFA Director, Van Eck Securities Corporation;
Director, Executive Vice Executive Vice President of Van Eck Funds;
President President of Global Hard Assets Fund series
and Director of Global of Van Eck Funds and Worldwide Hard Assets
Investments Fund series of Van Eck Worldwide Insurance
Trust; Vice President of Global Balanced
Fund, Gold Opportunity Fund and Asia
Infrastructure Fund series of Van Eck
Funds.
Jan F. van Eck Director and Executive Vice President, Van
Director Eck Securities Corporation.
Henry J. Bingham Executive Vice President, Van Eck Funds and
Executive Managing Van Eck Worldwide Insurance Trust;
Director President, International Investors Gold
Fund series of Van Eck Funds.
Bruce J. Smith Senior Managing Director, Portfolio
Senior Managing Accounting, Van Eck Securities Corporation;
Director, Portfolio Vice President and Treasurer, Van Eck Funds
Accounting and Van Eck Worldwide Insurance Trust.
</TABLE>
Van Eck Associates Corporation also acts as investment adviser or sub-
adviser (in the case of PIMCO) to the following registered investment
companies having similar investment objectives and policies to those of the
Natural Resources Series. The table below sets forth the name of each such
investment company, its approximate net assets as of May 29, 1996 and the
annual advisory fee charged by Van Eck Associates Corporation (as a percentage
of average daily net assets).
Q-1
<PAGE>
<TABLE>
<CAPTION>
ANNUAL INVESTMENT
NAME OF INVESTMENT COMPANY NET ASSETS ADVISORY FEE
- -------------------------- ---------- -----------------
<S> <C> <C>
Van Eck Funds:
Gold/Resources Fund $175,235,000 0.75% on first $500 million;
0.65% on next $250 million and
0.50% on assets above $750 million.
Gold Opportunity Fund $ 9,854,000 1.00% of average daily net assets.
Van Eck Worldwide Insurance
Trust:
Gold and Natural Resources $183,177,000 1.00% on first $500 million;
Fund 0.90% on next $250 million and
0.70% on assets above $750 million.
PIMCO Precious Metals Fund $ 60,363,000 0.375% on first $200 million and
0.35% on assets above $200 million.
</TABLE>
Q-2
<PAGE>
EXHIBIT G
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996 among The GCG Trust (the
"Trust"), a Massachusetts business trust, Directed Services, Inc. ("Manager"),
a New York corporation, and E.I.I. Realty Securities, Inc. ("Portfolio
Manager"), a New York corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint E.I.I. Realty
Securities, Inc. to act as Portfolio Manager to the Series designated on
Schedule A of this Agreement (the "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided. In the event the Trust designates one or more series other
than the Series with respect to which the Trust and the Manager wish to retain
the Portfolio Manager to render investment advisory services hereunder, they
shall notify the Portfolio Manager in writing. If the Portfolio Manager is
willing to render such services, it shall notify the Trust and Manager in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of the Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC"), as
G-1
<PAGE>
amended, copies of which shall be sent to the Portfolio Manager by the
Manager. The Portfolio Manager further agrees as follows:
(a) The Portfolio Manager will (1) take all steps necessary to manage the
Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) take all steps necessary to
manage the Series so as to ensure compliance by the Series with the
diversification requirements of Section 817(h) of the Internal Revenue Code
and regulations issued thereunder, and (3) use reasonable efforts to manage
the Series so as to ensure compliance by the Series with any other rules
and regulations pertaining to investment vehicles underlying variable
annuity or variable life insurance policies. The Manager or the Trust will
notify the Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and
regulations issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all rules
and regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended,
of which the Portfolio Manager has received a copy. The Manager or the
Trust will notify the Portfolio Manager of pertinent provisions of
applicable state insurance law with which the Portfolio Manager must comply
under this Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of the Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients, subject to
review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis,
such confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the determination
by the portfolio accounting agent for the Trust of the valuation of
portfolio securities and other investments of the Series. The Portfolio
Manager will assist the custodian and portfolio accounting agent for the
Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value of
any portfolio securities or other assets of the Series for which the
custodian and portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Advisers Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
G-2
<PAGE>
(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with
respect to the Series such periodic and special reports as the Trustees and
the Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer 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 Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with these
standards, the Portfolio Manager is further authorized to allocate the orders
placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio
G-3
<PAGE>
Manager, or an affiliate of the Portfolio Manager. Such allocation shall be in
such amounts and proportions as the Portfolio Manager shall determine
consistent with the above standards, and the Portfolio Manager will report on
said allocation regularly to the Board of Trustees of the Trust indicating the
broker-dealers to which such allocations have been made and the basis
therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the post-effective amendment to the Registration Statement for the Trust filed
with the Securities and Exchange Commission that contains disclosure about the
Portfolio Manager, and represents and warrants that, with respect to the
disclosure about the Portfolio Manager or information relating, directly or
indirectly, to the Portfolio Manager, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not omit
any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Advisers Act and a duly registered investment
adviser in all states in which the Portfolio Manager is required to be
registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of the
Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management Reports (as appropriate) for the Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
G-4
<PAGE>
(q) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 14 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(r) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, as described on Schedule B.
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall immediately notify the
Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser;
or has commenced proceedings or an investigation that may result in any of
these actions, (2) upon having a reasonable basis for believing that the
Series has ceased to qualify or might not qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code, or (3) upon having
a reasonable basis for believing that the Series has ceased to comply with
the diversification provisions of Section 817(h) of the Internal Revenue
Code or the Regulations thereunder. The Portfolio Manager further agrees to
notify the Manager and the Trust immediately of any material fact known to
the Portfolio Manager respecting or relating to the Portfolio Manager that
is not contained in the Registration Statement or prospectus for the Trust,
or any amendment or supplement thereto, or of any statement contained
therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the
Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis for
believing that the Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section 817(h)
of the Internal Revenue Code or the Regulations thereunder.
9. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
11. Representations Respecting Portfolio Manager. The Manager and the Trust
agree that neither the Trust, the Manager, nor affiliated persons of the Trust
or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material
G-5
<PAGE>
approved in advance by the Portfolio Manager, except with the prior permission
of the Portfolio Manager. The parties agree that in the event that the Manager
or an affiliated person of the Manager sends sales literature or other
promotional material to the Portfolio Manager for its approval and the
Portfolio Manager has not commented within 30 days, the Manager and its
affiliated persons may use and distribute such sales literature or other
promotional material, although, in such event, the Portfolio Manager shall not
be deemed to have approved of the contents of such sales literature or other
promotional material.
12. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
15. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person,
if any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Portfolio Manager Indemnified Person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Manager's responsibilities to the Trust which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Manager, any of
its employees or representatives or any affiliate of or any person acting
on behalf of the Manager or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact supplied by, or which is the
responsibility of, the Manager and contained in the Registration Statement
or prospectus covering shares of the Trust or a Series, or any amendment
thereof or any supplement thereto, or the omission or alleged omission to
state therein a material fact known or which should have been known to the
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon information furnished to the Manager or the Trust or
to any affiliated person of the Manager by a Portfolio Manager Indemnified
Person; provided however, that in no case shall the indemnity in favor of
the Portfolio Manager Indemnified Person be deemed to protect such person
against any liability to which any such person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager, and each person, if any, who, within the meaning of Section 15
of the 1933 Act, controls ("controlling person") the Manager (all of such
persons being referred to as "Manager Indemnified Persons") against any and
all losses, claims, damages, liabilities, or litigation (including legal
and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal
Revenue Code, under any
G-6
<PAGE>
other statute, at common law or otherwise, arising out of the Portfolio
Manager's responsibilities as Portfolio Manager of the Series which (1) may
be based upon any misfeasance, malfeasance, or nonfeasance by the Portfolio
Manager, any of its employees or representatives, or any affiliate of or
any person acting on behalf of the Portfolio Manager, (2) may be based upon
a failure to comply with Section 2, Paragraph (a) of this Agreement, or (3)
may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or prospectus
covering the shares of the Trust or a Series, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact known or which should have been known to the Portfolio
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, if such a statement or omission was made
in reliance upon information furnished to the Manager, the Trust, or any
affiliated person of the Manager or Trust by the Portfolio Manager or any
affiliated person of the Portfolio Manager; provided, however, that in no
case shall the indemnity in favor of a Manager Indemnified Person be deemed
to protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
15 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person shall have notified
the Manager in writing within a reasonable time after the summons, notice,
or other first legal process or notice giving information of the nature of
the claim shall have been served upon such Portfolio Manager Indemnified
Person (or after such Portfolio Manager Indemnified Person shall have
received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Portfolio
Manager Indemnified Person, the Manager will be entitled to participate, at
its own expense, in the defense thereof or, after notice to the Portfolio
Manager Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Portfolio Manager Indemnified Person. If the Manager
assumes the defense of any such action and the selection of counsel by the
Manager to represent both the Manager and the Portfolio Manager Indemnified
Person would result in a conflict of interests and therefore, would not, in
the reasonable judgment of the Portfolio Manager Indemnified Person,
adequately represent the interests of the Portfolio Manager Indemnified
Person, the Manager will, at its own expense, assume the defense with
counsel to the Manager and, also at its own expense, with separate counsel
to the Portfolio Manager Indemnified Person, which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall
not be liable to the Portfolio Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the
Portfolio Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Manager
shall not have the right to compromise on or settle the litigation without
the prior written consent of the Portfolio Manager Indemnified Person if
the compromise or settlement results, or may result in a finding of
wrongdoing on the part of the Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 15 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the
Portfolio Manager of any such claim shall not relieve the Portfolio Manager
from any liability which it may have to the Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Manager
Indemnified Person, the Portfolio Manager will be entitled to participate,
at its own expense, in the defense thereof or, after notice to the Manager
Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Manager Indemnified Person. If the Portfolio Manager
G-7
<PAGE>
assumes the defense of any such action and the selection of counsel by the
Portfolio Manager to represent both the Portfolio Manager and the Manager
Indemnified Person would result in a conflict of interests and therefore,
would not, in the reasonable judgment of the Manager Indemnified Person,
adequately represent the interests of the Manager Indemnified Person, the
Portfolio Manager will, at its own expense, assume the defense with counsel
to the Portfolio Manager and, also at its own expense, with separate
counsel to the Manager Indemnified Person which counsel shall be
satisfactory to the Portfolio Manager and to the Manager Indemnified
Person. The Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Portfolio Manager shall not
be liable to the Manager Indemnified Person under this Agreement for any
legal or other expenses subsequently incurred by the Manager Indemnified
Person independently in connection with the defense thereof other than
reasonable costs of investigation. The Portfolio Manager shall not have the
right to compromise on or settle the litigation without the prior written
consent of the Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the
Manager Indemnified Person.
16. Duration and Termination. This Agreement shall become effective on the
date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to the Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for a Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
the Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding shares of any other Series or
(ii) that this agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio Manager and the Trust, (b) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of each Series,
upon sixty (60) days' written notice to the Manager and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust. In the event of termination
for any reason, all records of each Series for which the Agreement is
terminated shall promptly be returned to the Manager or the Trust, free from
any claim or retention of rights in such record by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. The Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 9, 10, 11, 14, 15, and 18 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 16.
17. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
G-8
<PAGE>
Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "E.I.I. Realty Securities, Inc." or
any derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust
and/or the Series have the right to use such name (or derivative or logo)
in offering materials of the Trust with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a portfolio manager to
the Trust and/or the Series. Upon termination of this Agreement between the
Trust, the Manager, and the Portfolio Manager, the Trust shall forthwith
cease to use such name (or derivative or logo).
19. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
20. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
G-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
_____________________________________ By:__________________________________
Attest
_____________________________________
_____________________________________ Title
Title
DIRECTED SERVICES, INC.
_____________________________________ By:__________________________________
Attest
_____________________________________
_____________________________________ Title
Title
E.I.I. REALTY SECURITIES, INC.
_____________________________________ By:__________________________________
Attest
_____________________________________
_____________________________________ Title
Title
G-10
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which E.I.I. Realty Securities, Inc. shall
act as Portfolio Manager is as follows:
Real Estate Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by E.I.I. Realty Securities, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rate of the average daily net assets of the Series:
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<S> <C>
Real Estate Series 0.50% of net assets
</TABLE>
G-11
<PAGE>
EXHIBIT R
OTHER INFORMATION REGARDING E.I.I. REALTY SECURITIES, INC.
The principal executive officer of E.I.I. Realty Securities, Inc. and the
directors of European Investors Holding Company, Inc., the parent of European
Investors Incorporated, and their principal occupations are as shown below.
The business address of each such person, unless otherwise indicated, is 667
Madison Avenue, New York, New York 10021.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
---------------------- --------------------
<S> <C>
Christian Andre Lange President, European Investors, Inc. and
President, Director affiliated companies.
Cydney Collier Donnell Managing Director, E.I.I. Realty Securities,
Vice President, Director Inc.
and Vice President, E.I.I. Realty Corp.
Richard John Adler Vice President, European Investors Inc. and
Vice President, Director Managing Director of E.I.I. Realty Securities,
Inc.
David John Strupp Partner, Davis Polk & Wardwell.
Director
450 Lexington Avenue
New York, NY 10017
Horace Corbin Day Director, American Heritage Life, Blount, Inc.,
Director Altec Industries, Jenison Investment Company.
85 Broad Street New York,
NY 10004
Hanns Arnt Vogels President, European Environmental Systems
Director Corporation, Thuringer Roheisen GmbH, and
Officia I, 2nd Floor Trading International GmbH; partner,
De Boelelaan 7 Rohstoffgewinnungs und Aufbereltungs GmbH & Co.
1083 HJ Amsterdam KG; Chairman of the Board, Stahlwerk Thuringen
GmbH; Deputy Chairman of the Board, Spezial
Technik Dresden; Member of the Board, Daimier-
Benz Aerospace AG, DALURA AG and Interturbine
Group of Companies; Member of the Supervisory
Board, MAAG Holding AG Zurich; Member of the
Advisory Board, Thuringer Industriebeteiligungs
GmbH; Proudfoot Europe; President, Forum fur
Zukunftsenergien e.V.; Member of the Executive
Board, Association of Industrial Energy-
Economy.
J. Stuart Mackintosh Vice President, European Investors Corporate
Director Finance, Inc.
</TABLE>
E.I.I. Realty Securities, Inc. does not act as investment adviser to any
other investment companies with investment objectives and policies similar to
those of the Real Estate Series.
R-1
<PAGE>
EXHIBIT H
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996 among The GCG Trust (the "Trust"), a
Massachusetts business trust, Directed Services, Inc. ("Manager"), a New York
corporation, and Kayne, Anderson Investment Management, L.P. ("Portfolio
Manager"), a California limited partnership.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint Kayne, Anderson
Investment Management, L.P. to act as Portfolio Manager to the Rising
Dividends Series (the "Series") for the periods and on the terms set forth in
this Agreement. The Portfolio Manager accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided. In
the event the Trust designates one or more series other than the Series with
respect to which the Trust and the Manager wish to retain the Portfolio
Manager to render investment advisory services hereunder, they shall notify
the Portfolio Manager in writing. If the Portfolio Manager is willing to
render such services, it shall notify the Trust and Manager in writing,
whereupon such series shall become a Series hereunder, and be subject to this
Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for each Series' portfolio and determine the
composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of each Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of each Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of each Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC"), as amended, copies of which shall be sent to the
Portfolio Manager by the Manager. The Portfolio Manager further agrees as
follows:
H-1
<PAGE>
(a) The Portfolio Manager will (1) take all steps necessary to manage
each Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) take all steps necessary to
manage each Series so as to ensure compliance by the Series with the
diversification requirements of Section 817(h) of the Internal Revenue Code
and regulations issued thereunder, and (3) use reasonable efforts to manage
the Series so as to ensure compliance by each Series with any other rules
and regulations pertaining to investment vehicles underlying variable
annuity or variable life insurance policies. The Manager or the Trust will
notify the Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and
regulations issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all rules
and regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended,
of which the Portfolio Manager has received a copy. The Manager or the
Trust will notify the Portfolio Manager of pertinent provisions of
applicable state insurance law with which the Portfolio Manager must comply
under this Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients, subject to
review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for a Series,
the Portfolio Manager will arrange for the transmission to the custodian
and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the determination
by the portfolio accounting agent for the Trust of the valuation of
portfolio securities and other investments of the Series. The Portfolio
Manager will assist the custodian and portfolio accounting agent for the
Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value of
any portfolio securities or other assets of the Series for which the
custodian and portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Advisers Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented
H-2
<PAGE>
in the Series' portfolio, and will furnish the Trust's Board of Trustees
with respect to the Series such periodic and special reports as the
Trustees and the Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer 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 Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with these
standards, the Portfolio Manager is further authorized to allocate the orders
placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
H-3
<PAGE>
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the post-effective amendment to the Registration Statement for the Trust filed
with the Securities and Exchange Commission that contains disclosure about the
Portfolio Manager, and represents and warrants that, with respect to the
disclosure about the Portfolio Manager or information relating, directly or
indirectly, to the Portfolio Manager, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not omit
any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Advisers Act and a duly registered investment
adviser in all states in which the Portfolio Manager is required to be
registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of each
Series's net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management Reports (as appropriate) for each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
H-4
<PAGE>
(q) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 15 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(r) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, based on the average daily net
assets of the Series at the annual rate of 0.50% of the average daily net
assets of the Series.
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall immediately notify the
Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser;
or has commenced proceedings or an investigation that may result in any of
these actions, (2) upon having a reasonable basis for believing that the
Series has ceased to qualify or might not qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code, or (3) upon having
a reasonable basis for believing that the Series has ceased to comply with
the diversification provisions of Section 817(h) of the Internal Revenue
Code or the Regulations thereunder. The Portfolio Manager further agrees to
notify the Manager and the Trust immediately of any material fact known to
the Portfolio Manager respecting or relating to the Portfolio Manager that
is not contained in the Registration Statement or prospectus for the Trust,
or any amendment or supplement thereto, or of any statement contained
therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the
Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis for
believing that the Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section 817(h)
of the Internal Revenue Code or the Regulations thereunder.
9. Insurance Company Offerees. All parties acknowledge that the Trust will
offer its shares so that it may serve as an investment vehicle for variable
annuity contracts and variable life insurance policies issued by insurance
companies. The Trust and the Manager agree that shares of the Series may be
offered only to the separate accounts and general account of insurance
companies that are approved in writing by the Portfolio Manager. The Portfolio
Manager agrees that shares of this Series may be offered to separate accounts
and the general account of Golden American Life Insurance Company and to the
general and separate accounts of any insurance companies that are or become
affiliated with Golden American Life Insurance Company. The Manager and Trust
agree that the Portfolio Manager shall be under no obligation to investigate
insurance companies to which the Trust offers or proposes to offer its shares.
10. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
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<PAGE>
11. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
12. Representations Respecting Portfolio Manager. The Manager and the Trust
agree that neither the Trust, the Manager, nor affiliated persons of the Trust
or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
advance by the Portfolio Manager, except with the prior permission of the
Portfolio Manager. The parties agree that in the event that the Manager or an
affiliated person of the Manager sends sales literature or other promotional
material to the Portfolio Manager for its approval and the Portfolio Manager
has not commented within 30 days, the Manager and its affiliated persons may
use and distribute such sales literature or other promotional material,
although, in such event, the Portfolio Manager shall not be deemed to have
approved of the contents of such sales literature or other promotional
material.
13. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
14. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
15. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
16. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person,
if any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Portfolio Manager Indemnified Person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Manager's responsibilities to the Trust which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Manager, any of
its employees or representatives or any affiliate of or any person acting
on behalf of the Manager or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact supplied by, or which is the
responsibility of, the Manager and contained in the Registration Statement
or prospectus covering shares of the Trust or a Series, or any amendment
thereof or any supplement thereto, or the omission or alleged omission to
state therein a material fact known or which should have been known to the
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon information furnished to the Manager or the Trust or
to any affiliated person of the Manager
H-6
<PAGE>
by a Portfolio Manager Indemnified Person; provided however, that in no
case shall the indemnity in favor of the Portfolio Manager Indemnified
Person be deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance of its duties, or by
reason of its reckless disregard of obligations and duties under this
Agreement.
(b) Notwithstanding Section 15 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager, and each person, if any, who, within the meaning of Section 15
of the 1933 Act, controls ("controlling person") the Manager (all of such
persons being referred to as "Manager Indemnified Persons") against any and
all losses, claims, damages, liabilities, or litigation (including legal
and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Portfolio Manager's responsibilities as Portfolio Manager of the
Series which (1) may be based upon any misfeasance, malfeasance, or
nonfeasance by the Portfolio Manager, any of its employees or
representatives, or any affiliate of or any person acting on behalf of the
Portfolio Manager, (2) may be based upon a failure to comply with Section
2, Paragraph (a) of this Agreement, or (3) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or prospectus covering the shares of the Trust or a
Series, or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact known or which should have been
known to the Portfolio Manager and was required to be stated therein or
necessary to make the statements therein not misleading, if such a
statement or omission was made in reliance upon information furnished to
the Manager, the Trust, or any affiliated person of the Manager or Trust by
the Portfolio Manager or any affiliated person of the Portfolio Manager;
provided, however, that in no case shall the indemnity in favor of a
Manager Indemnified Person be deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
16 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person shall have notified
the Manager in writing within a reasonable time after the summons, notice,
or other first legal process or notice giving information of the nature of
the claim shall have been served upon such Portfolio Manager Indemnified
Person (or after such Portfolio Manager Indemnified Person shall have
received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 16. In case any such action is brought against the Portfolio
Manager Indemnified Person, the Manager will be entitled to participate, at
its own expense, in the defense thereof or, after notice to the Portfolio
Manager Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Portfolio Manager Indemnified Person. If the Manager
assumes the defense of any such action and the selection of counsel by the
Manager to represent both the Manager and the Portfolio Manager Indemnified
Person would result in a conflict of interests and therefore, would not, in
the reasonable judgment of the Portfolio Manager Indemnified Person,
adequately represent the interests of the Portfolio Manager Indemnified
Person, the Manager will, at its own expense, assume the defense with
counsel to the Manager and, also at its own expense, with separate counsel
to the Portfolio Manager Indemnified Person, which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall
not be liable to the Portfolio Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the
Portfolio Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Manager
shall not have the right to compromise on or settle the litigation without
the prior written consent of the Portfolio Manager Indemnified Person if
the compromise or settlement results, or may result in a finding of
wrongdoing on the part of the Portfolio Manager Indemnified Person.
H-7
<PAGE>
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 16 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the
Portfolio Manager of any such claim shall not relieve the Portfolio Manager
from any liability which it may have to the Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 16. In case any such action is brought against the Manager
Indemnified Person, the Portfolio Manager will be entitled to participate,
at its own expense, in the defense thereof or, after notice to the Manager
Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Manager Indemnified Person. If the Portfolio Manager
assumes the defense of any such action and the selection of counsel by the
Portfolio Manager to represent both the Portfolio Manager and the Manager
Indemnified Person would result in a conflict of interests and therefore,
would not, in the reasonable judgment of the Manager Indemnified Person,
adequately represent the interests of the Manager Indemnified Person, the
Portfolio Manager will, at its own expense, assume the defense with counsel
to the Portfolio Manager and, also at its own expense, with separate
counsel to the Manager Indemnified Person which counsel shall be
satisfactory to the Portfolio Manager and to the Manager Indemnified
Person. The Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Portfolio Manager shall not
be liable to the Manager Indemnified Person under this Agreement for any
legal or other expenses subsequently incurred by the Manager Indemnified
Person independently in connection with the defense thereof other than
reasonable costs of investigation. The Portfolio Manager shall not have the
right to compromise on or settle the litigation without the prior written
consent of the Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the
Manager Indemnified Person.
17. Duration and Termination. This Agreement shall become effective on the
date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to each Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for such Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
such Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding shares of any other Series or
(ii) that this agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio Manager and the Trust, (b) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of each Series,
upon sixty (60) days' written notice to the Manager and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust. In the event of termination
for any reason, all records of each Series for which the Agreement is
terminated shall promptly be returned to the Manager or the Trust, free from
any claim or retention of rights in such record by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. The Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 10, 11, 12, 15, 16, and 19 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 17.
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<PAGE>
18. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
19. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "Kayne, Anderson Investment
Management, L.P." or any derivative thereof or logo associated with that
name is the valuable property of the Portfolio Manager and its affiliates
and that the Trust and/or the Series have the right to use such name (or
derivative or logo) in offering materials of the Trust with the approval of
the Portfolio Manager and for so long as the Portfolio Manager is a
portfolio manager to the Trust and/or the Series. Upon termination of this
Agreement between the Trust, the Manager, and the Portfolio Manager, the
Trust shall forthwith cease to use such name (or derivative or logo).
20. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
21. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 17 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
DIRECTED SERVICES, INC.
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
KAYNE, ANDERSON INVESTMENT
MANAGEMENT, L.P.
_____________________________________ By: _________________________________
Attest
_____________________________________ _____________________________________
Title Title
H-10
<PAGE>
EXHIBIT S
OTHER INFORMATION REGARDING KAYNE, ANDERSON INVESTMENT MANAGEMENT, L.P.
The principal executive officers and members of KAIM Traditional, LLC, the
general partner of Kayne, Anderson Investment Management, L.P., and their
principal occupations are as shown below. The business address of each such
person is 1800 Avenue of the Stars, Suite 200, Los Angeles, California 90067.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
---------------------- --------------------
<S> <C>
Allan Rudnick Chief Investment Officer, Kayne,
Chief Investment Officer, Anderson Investment Management, L.P.
Manager and Member
Richard Kayne Chief Executive Officer, Kayne,
Manager and Member Anderson Investment Management, L.P.
John Anderson Chairman, TOPA Equities.
Member
Robert Schwarzkopf Senior Portfolio Manager and Equity Analyst,
Member Kayne, Anderson Investment Management, L.P.
Susan Frank Senior Portfolio Manager and Equity Analyst,
Member Kayne, Anderson Investment Management, L.P.
</TABLE>
Kayne, Anderson Investment Management, L.P. does not presently act as
investment adviser to any other registered investment companies with
investment objectives and policies similar to those of the Rising Dividends
Series.
S-1
<PAGE>
EXHIBIT I
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this of , 1996 among The GCG Trust (the "Trust"), a
Massachusetts business trust, Directed Services, Inc. ("Manager"), a New York
corporation, and Fred Alger Management, Inc. ("Portfolio Manager"), a New York
corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series; and
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint Fred Alger
Management, Inc. to act as Portfolio Manager to the Series designated on
Schedule A of this Agreement (the "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of the Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC"), as amended, copies of which shall be sent to the
Portfolio Manager by the Manager. The Portfolio Manager further agrees as
follows:
(a) The Portfolio Manager will (1) take all steps necessary to manage the
Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) take all steps necessary to
manage the Series so that the Series will comply with the diversification
requirements of
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<PAGE>
Section 817(h) of the Internal Revenue Code and regulations issued
thereunder, and (3) use reasonable efforts to manage the Series so that the
Series will comply with any other rules and regulations pertaining to
investment vehicles underlying variable annuity or variable life insurance
policies. The Manager or the Trust will notify the Portfolio Manager of any
pertinent changes, modifications to, or interpretations of Section 817(h)
of the Internal Revenue Code and regulations issued thereunder.
(b) In performing its services hereunder, the Portfolio Manager will
conform with the 1940 Act and all rules and regulations thereunder, all
other applicable federal and state laws and regulations, with any
applicable procedures adopted by the Trust's Board of Trustees of which the
Portfolio Manager has been sent a copy, and all applicable provisions of
the Registration Statement of the Trust under the Securities Act of 1933
(the "1933 Act") and the 1940 Act, as supplemented or amended, of which the
Portfolio Manager has received a copy. The Manager or the Trust will notify
the Portfolio Manager of pertinent provisions of applicable state insurance
law with which the Portfolio Manager must comply under this Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of the Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients, subject to
review by the Manager, who will be promptly notified, and the Board of
Trustees.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis,
such confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the determination
by the portfolio accounting agent for the Trust of the valuation of
portfolio securities and other investments of the Series. The Portfolio
Manager will assist the Manager, custodian and portfolio accounting agent
for the Trust in determining or confirming, consistent with the procedures
and policies stated in the Registration Statement for the Trust, the value
and liquidity of any portfolio securities or other assets of the Series for
which the custodian and portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager. The Portfolio Manager will
be responsible for monitoring and maintaining industry classifications for
purposes of compliance with investment concentration requirements under the
1940 Act.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Advisers Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, will furnish the Trust's Board of Trustees with respect
to the Series such periodic
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and special reports as the Trustees and the Manager may reasonably request,
and will attend Board meetings upon the request of the Board of Trustees.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer 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 Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with these
standards, the Portfolio Manager is further authorized to allocate the orders
placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as
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the Portfolio Manager shall determine consistent with the above standards, and
the Portfolio Manager will report on said allocation regularly to the Board of
Trustees of the Trust indicating the broker-dealers to which such allocations
have been made and the basis therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the post-effective amendment to the Registration Statement for the Trust filed
with the Securities and Exchange Commission and provided to the Portfolio
Manager that contains disclosure about the Portfolio Manager, and represents
and warrants that, with respect to the disclosure about the Portfolio Manager
or information relating, directly or indirectly, to the Portfolio Manager,
such Registration Statement contains, as of the date hereof, no untrue
statement of any material fact and does not omit any statement of a material
fact which was required to be stated therein or necessary to make the
statements contained therein not misleading. The Portfolio Manager further
represents and warrants that it is a duly registered investment adviser under
the Advisers Act and a duly registered investment adviser in all states in
which the Portfolio Manager is required to be registered for purposes of this
Agreement.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of the
Series' net assets;
(e) Expenses of obtaining daily pricing reports (as appropriate) for the
Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
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(q) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 14 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(r) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable as described on Schedule B.
7. Seed Money. The Trust and the Manager agree that the Portfolio Manager
shall not be responsible for providing money for the initial capitalization of
the Series.
8. Compliance. The Portfolio Manager agrees that it shall immediately notify
the Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser; or
has commenced proceedings or an investigation that may result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (3) upon having a reasonable basis
for believing that the Series has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the Regulations
thereunder, or (4) upon discovery of any error in the pricing, trading, or
maintenance of the Series. The Portfolio Manager further agrees to notify the
Manager and the Trust immediately of any material fact known to the Portfolio
Manager respecting or relating to the Portfolio Manager that is not contained
in the Registration Statement or prospectus for the Trust provided to the
Portfolio Manager by the Manager, or any amendment or supplement thereto, or
of any statement contained therein that becomes untrue in any material
respect. The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the Trust;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Manager's registration as an investment adviser; or
has commenced proceedings or an investigation that may result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (3) upon having a reasonable basis
for believing that the Series has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the Regulations
thereunder, or (4) upon discovery of any error in the pricing, trading, or
maintenance of the Series.
9. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained with respect to the management of the
Series' portfolio by Rule 31a-l(b) and (f) under the 1940 Act and to preserve
the records with respect to the management of the Series' portfolio required
by Rule 204-2 under the Advisers Act for the period specified in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
11. Representations Respecting Portfolio Manager. The Manager and the Trust
agree that neither the Trust, the Manager, nor affiliated persons of the Trust
or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager, its affiliates, or the Series other than the information or
representations contained in the Registration Statement, prospectus, or
statement of additional information for the Trust shares, as they may be
amended or supplemented from time to time, or in reports or proxy statements
for the Trust (which information and
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representations, insofar as they pertain to the Portfolio Manager and its
affiliates, shall have been made only in reliance on and in conformity with
information supplied by the Portfolio Manager or an affiliate), or in sales
literature or other promotional material approved in advance by the Portfolio
Manager, except with the prior permission of the Portfolio Manager. The
parties agree that in the event that the Manager or an affiliated person of
the Manager sends sales literature or other promotional material to the
Portfolio Manager for its approval and the Portfolio Manager has not commented
within 7 days, the Manager and its affiliated persons may use and distribute
such sales literature or other promotional material, and the Portfolio Manager
shall be deemed to have approved of the contents of such sales literature or
other promotional material.
12. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of the Portfolio Manager's negligent performance of its duties, or by
reason of any violation of the Portfolio Manager's obligations and duties
under this Agreement.
15. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person,
if any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Portfolio Manager Indemnified Person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Manager's responsibilities to the Trust which (1) may be based
upon any willful misfeasance, bad faith, or gross negligence in the
performance of duties under this Agreement or reckless disregard of
obligations and duties under this Agreement by the Manager, any of its
employees or representatives or any affiliate of or any person acting on
behalf of the Manager or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact supplied by, or which is the
responsibility of, the Manager or the Trust and contained in the
Registration Statement or prospectus covering shares of the Trust or the
Series, or any amendment thereof or any supplement thereto, or the omission
or alleged omission to state therein a material fact known or which should
have been known to the Manager or the Trust and was required to be stated
therein or necessary to make the statements therein not misleading, unless
such statement or omission was made in reliance upon information furnished
to the Manager or the Trust or to any affiliated person of the Manager by a
Portfolio Manager Indemnified Person; provided however, that in no case
shall the indemnity in favor of the Portfolio Manager Indemnified Person be
deemed to protect such person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason
of its reckless disregard of obligations and duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager, and each person, if any, who, within the meaning of Section 15
of the 1933 Act, controls ("controlling person") the Manager (all of such
persons
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being referred to as "Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Manager Indemnified Person may become subject
under the 1933 Act, 1940 Act, the Advisers Act, the Internal Revenue Code,
under any other statute, at common law or otherwise, arising out of the
Portfolio Manager's responsibilities under this Agreement which (1) may be
based upon any willful misfeasance, bad faith, or gross negligence in the
performance of duties under this Agreement or reckless disregard of
obligations and duties under this Agreement by the Portfolio Manager, any
of its employees or representatives, or any affiliate of or any person
acting on behalf of the Portfolio Manager, (2) may be based upon any
negligence in the performance of its obligations under Section 2, Paragraph
(a) of this Agreement, or (3) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or prospectus covering the shares of the Trust or a Series, or
any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact known or which should have been known to the
Portfolio Manager and was required to be stated therein or necessary to
make the statements therein not misleading, if such a statement or omission
was made in reliance upon information furnished to the Manager, the Trust,
or any affiliated person of the Manager or Trust by the Portfolio Manager
or any affiliated person of the Portfolio Manager; provided, however, that
in no case shall the indemnity in favor of a Manager Indemnified Person be
deemed to protect such person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence in the performance of its duties, or by reason of
its reckless disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
15 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person shall have notified
the Manager in writing within a reasonable time after the summons, notice,
or other first legal process or notice giving information of the nature of
the claim shall have been served upon such Portfolio Manager Indemnified
Person (or after such Portfolio Manager Indemnified Person shall have
received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Portfolio
Manager Indemnified Person, the Manager will be entitled to participate, at
its own expense, in the defense thereof or, after notice to the Portfolio
Manager Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Portfolio Manager Indemnified Person. If the Manager
assumes the defense of any such action and the selection of counsel by the
Manager to represent both the Manager and the Portfolio Manager Indemnified
Person would result in a conflict of interests and therefore, would not, in
the reasonable judgment of the Portfolio Manager Indemnified Person,
adequately represent the interests of the Portfolio Manager Indemnified
Person, the Manager will, at its own expense, assume the defense with
counsel to the Manager and, also at its own expense, with separate counsel
to the Portfolio Manager Indemnified Person, which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall
not be liable to the Portfolio Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the
Portfolio Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Manager
shall not have the right to compromise on or settle the litigation without
the prior written consent of the Portfolio Manager Indemnified Person if
the compromise or settlement results, or may result in a finding of
wrongdoing on the part of the Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 15 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the
Portfolio Manager of any such claim shall not
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relieve the Portfolio Manager from any liability which it may have to the
Manager Indemnified Person against whom such action is brought otherwise
than on account of this Section 15. In case any such action is brought
against the Manager Indemnified Person, the Portfolio Manager will be
entitled to participate, at its own expense, in the defense thereof or,
after notice to the Manager Indemnified Person, to assume the defense
thereof, with counsel satisfactory to the Manager Indemnified Person. If
the Portfolio Manager assumes the defense of any such action and the
selection of counsel by the Portfolio Manager to represent both the
Portfolio Manager and the Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment
of the Manager Indemnified Person, adequately represent the interests of
the Manager Indemnified Person, the Portfolio Manager will, at its own
expense, assume the defense with counsel to the Portfolio Manager and, also
at its own expense, with separate counsel to the Manager Indemnified Person
which counsel shall be satisfactory to the Portfolio Manager and to the
Manager Indemnified Person. The Manager Indemnified Person shall bear the
fees and expenses of any additional counsel retained by it, and the
Portfolio Manager shall not be liable to the Manager Indemnified Person
under this Agreement for any legal or other expenses subsequently incurred
by the Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Portfolio
Manager shall not have the right to compromise on or settle the litigation
without the prior written consent of the Manager Indemnified Person if the
compromise or settlement results, or may result in a finding of wrongdoing
on the part of the Manager Indemnified Person.
16. Duration and Termination. This Agreement shall become effective on the
date first indicated above, unless terminated as provided herein, and the
Agreement shall remain in full force and effect for two (2) years from the
date first indicated above and continue on an annual basis thereafter with
respect to the Series; provided that such annual continuance is specifically
approved each year by (a) the vote of a majority of the entire Board of
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Series, and (b) the vote of a
majority of those Trustees who are not parties to this Agreement or interested
persons (as such term is defined in the 1940 Act) of any such party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval. Any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of the Series shall be
effective to continue this Agreement with respect to the Series
notwithstanding (i) that this Agreement has not been approved by the holders
of a majority of the outstanding shares of any other Series or (ii) that this
agreement has not been approved by the vote of a majority of the outstanding
shares of the Trust, unless such approval shall be required by any other
applicable law or otherwise. Notwithstanding the foregoing, this Agreement may
be terminated: (a) by the Manager at any time without penalty, upon sixty (60)
days' written notice to the Portfolio Manager and the Trust, (b) at any time
without payment of any penalty by the Trust, upon the vote of a majority of
the Trust's Board of Trustees or a majority of the outstanding voting
securities of the Series, upon sixty (60) days' written notice to the Manager
and the Portfolio Manager, or (c) by the Portfolio Manager at any time without
penalty, upon sixty (60) days' written notice to the Manager and the Trust. In
the event of termination for any reason, all records of the Series for which
the Agreement is terminated shall promptly be returned to the Manager or the
Trust, free from any claim or retention of rights in such record by the
Portfolio Manager, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. This Agreement shall automatically
terminate in the event of its assignment (as such term is described in the
1940 Act). In the event this Agreement is terminated or is not approved in the
manner described above, the Sections or Paragraphs numbered 2(f), 9, 10, 11,
14, 15, and 18 of this Agreement shall remain in effect, as well as any
applicable provision of this Paragraph numbered 16.
17. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
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18. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "Fred Alger Management, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust
and/or the Series have the right to use such name (or derivative or logo)
in offering materials of the Trust only with the approval of the Portfolio
Manager and only for so long as the Portfolio Manager is a portfolio
manager to the Trust and/or the Series. Upon termination of this Agreement
between the Trust, the Manager, and the Portfolio Manager, the Trust shall
forthwith cease to use such name (or derivative or logo).
19. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
20. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, without giving effect to any provisions relating to conflict of
laws, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
I-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
By:
- ------------------------------------- ---------------------------------
Attest
- ------------------------------------- -------------------------------------
Title Title
DIRECTED SERVICES, INC.
By:
- ------------------------------------- ---------------------------------
Attest
- ------------------------------------- -------------------------------------
Title Title
FRED ALGER MANAGEMENT, INC.
By:
- ------------------------------------- ---------------------------------
Attest
- ------------------------------------- -------------------------------------
Title Title
I-10
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement to which Fred Alger Management, Inc. shall act
as Portfolio Manager are as follows:
Small Cap Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Fred Alger Management, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rates of the average daily net assets of the Series:
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<S> <C>
Small Cap Series 0.50% of net assets
</TABLE>
I-11
<PAGE>
EXHIBIT T
OTHER INFORMATION REGARDING FRED ALGER MANAGEMENT, INC.
The directors and principal executive officer of Fred Alger Management, Inc.
and their principal occupations are as shown below. The business address of
each such person is 75 Maiden Lane, New York, New York 10038.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
---------------------- --------------------
<S> <C>
David D. Alger President and Director of Fred Alger Management, Inc.
President and Director
Fred M. Alger Chairman of the Board of Fred Alger Management, Inc.
Chairman of the Board
Gregory S. Duch Treasurer and Director of Fred Alger Management, Inc.
Treasurer and Director
</TABLE>
Fred Alger Management, Inc. also acts as adviser or sub-advisor to several
registered investment companies having similar investment objectives and
policies to those of the Small Cap Series. The table below sets forth the name
of each such investment company, its approximate net assets, and the annual
advisory fee (as a percentage of average daily net assets).
<TABLE>
<CAPTION>
NAME OF INVESTMENT COMPANY NET ASSETS ADVISORY FEE
-------------------------- ---------- ------------
<S> <C> <C>
As Sub-advisor:
Provident Mutual Growth Fund $ 21 million 0.50%
Mutual of America All-American Fund $ 62 million 0.45%
As Advisor:
The Alger Fund-Alger Small Capitalization
Portfolio $590 million 0.85%
The Alger American Fund-Alger American Small
Capitalization Portfolio $1.3 billion 0.85%
The Alger Retirement Fund-Alger Small
Cap Retirement Portfolio $ 30 million 0.85%
</TABLE>
T-1
<PAGE>
EXHIBIT J
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996 among The GCG Trust (the "Trust"),
a Massachusetts business trust, Directed Services, Inc. ("Manager"), a New
York corporation, and Eagle Asset Management, Inc. ("Portfolio Manager"), a
Florida corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a copy
of which has been provided to the Portfolio Manager, the Trust has retained
the Manager to render advisory, management, and administrative services to
many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint Eagle Asset
Management, Inc. to act as Portfolio Manager to the Series designated on
Schedule A of this Agreement (the "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided. In the event the Trust designates one or more series other
than the Series with respect to which the Trust and the Manager wish to retain
the Portfolio Manager to render investment advisory services hereunder, they
shall notify the Portfolio Manager in writing. If the Portfolio Manager is
willing to render such services, it shall notify the Trust and Manager in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of the Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions
J-1
<PAGE>
as stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC"), as amended, copies of which shall be sent to the
Portfolio Manager by the Manager. The Portfolio Manager further agrees as
follows:
(a) The Portfolio Manager will (1) take all steps necessary to manage the
Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) take all steps necessary to
manage the Series so as to ensure compliance by the Series with the
diversification requirements of Section 817(h) of the Internal Revenue Code
and regulations issued thereunder, and (3) use reasonable efforts to manage
the Series so as to ensure compliance by the Series with any other rules
and regulations pertaining to investment vehicles underlying variable
annuity or variable life insurance policies. The Manager or the Trust will
notify the Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and
regulations issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all rules
and regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities
Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended,
of which the Portfolio Manager has received a copy. The Manager or the
Trust will notify the Portfolio Manager of pertinent provisions of
applicable state insurance law with which the Portfolio Manager must comply
under this Paragraph 2(b).
(c) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis,
such confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(d) The Portfolio Manager will monitor on a daily basis the determination
by the portfolio accounting agent for the Trust of the valuation of
portfolio securities and other investments of the Series. The Portfolio
Manager will assist the custodian and portfolio accounting agent for the
Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value of
any portfolio securities or other assets of the Series for which the
custodian and portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager.
(e) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers Act
of 1940 (the "Advisers Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
(f) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with
respect to the Series such periodic and special reports as the Trustees and
the Manager may reasonably request.
(g) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority
J-2
<PAGE>
of Trustees who are not parties to any agreement or contract with such
company and who are not "interested persons," as defined in the 1940 Act,
of the Trust, the Manager, or the Portfolio Manager, or any such company
that is retained as subadviser, and is approved by the vote of a majority
of the outstanding voting securities of the applicable Series of the Trust
to the extent required by the 1940 Act. The Portfolio Manager shall be
responsible for making reasonable inquiries and for reasonably ensuring
that any employee of the Portfolio Manager, any subadviser that the
Portfolio Manager has employed or with which it has associated with respect
to the Series, or any employee thereof has not, to the best of the
Portfolio Manager's knowledge, in any material connection with the handling
of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer 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 Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker- dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with these
standards, the Portfolio Manager is further authorized to allocate the orders
placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the post-effective amendment to the Registration Statement for the Trust filed
with the Securities and Exchange Commission that contains disclosure about the
Portfolio Manager, and represents and warrants that, with respect to the
disclosure about the Portfolio Manager or information relating, directly or
indirectly, to the Portfolio Manager, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not
J-3
<PAGE>
omit any statement of a material fact which was required to be stated therein
or necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Advisers Act and a duly registered investment
adviser in all states in which the Portfolio Manager is required to be
registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of the
Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management Reports (as appropriate) for the Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
(q) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 14 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(r) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, as described on Schedule B. Such fee
shall be paid without regard to any reduction in the fee paid to the Manager
as a result of any statutory or regulatory limitation on investment company
expenses.
J-4
<PAGE>
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall immediately notify the
Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser;
or has commenced proceedings or an investigation that may result in any of
these actions, (2) upon having a reasonable basis for believing that the
Series has ceased to qualify or might not qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code, or (3) upon having
a reasonable basis for believing that the Series has ceased to comply with
the diversification provisions of Section 817(h) of the Internal Revenue
Code or the Regulations thereunder. The Portfolio Manager further agrees to
notify the Manager and the Trust immediately of any material fact known to
the Portfolio Manager respecting or relating to the Portfolio Manager that
is not contained in the Registration Statement or prospectus for the Trust,
or any amendment or supplement thereto, or of any statement contained
therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the
Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis for
believing that the Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section 817(h)
of the Internal Revenue Code or the Regulations thereunder.
9. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
11. Representations Respecting Portfolio Manager. The Manager and the Trust
agree that neither the Trust, the Manager, nor affiliated persons of the Trust
or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
advance by the Portfolio Manager, except with the prior permission of the
Portfolio Manager. The parties agree that in the event that the Manager or an
affiliated person of the Manager sends sales literature or other promotional
material to the Portfolio Manager for its approval and the Portfolio Manager
has not commented within 30 days, the Manager and its affiliated persons may
use and distribute such sales literature or other promotional material,
although, in such event, the Portfolio Manager shall not be deemed to have
approved of the contents of such sales literature or other promotional
material.
12. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
J-5
<PAGE>
13. Other Activities of Portfolio Manager. The Manager agrees that the
Portfolio Manager and any of its officers, directors 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 Series, and the Portfolio Manager 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 Series. On occasions when the Portfolio
Manager deems the purchase or sale of a security to be in the best interests
of the Series, as well as other clients of the Portfolio Manager, the
Portfolio Manager, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to be sold
or purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Portfolio Manager in the manner the Portfolio
Manager considers to be most equitable and consistent with its fiduciary
obligations to the Series and to such other clients. Nothing in this agreement
shall impose upon the Portfolio Manager any obligation to purchase or sell or
recommend for purchase or sale, for the Series any security which it, its
officers, directors, affiliates or employees may purchase or sell for the
Portfolio Manager or such partner's, affiliate's or employee's own accounts or
for the account of any other client, advisory or otherwise.
14. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable to the Trust or its
shareholders for, or subject to any damages, expenses, or losses in connection
with, any act or omission connected with or arising out of any services
rendered under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of the Portfolio Manager's
duties, or by reason of reckless disregard of the Portfolio Manager's
obligations and duties under this Agreement.
15. Indemnification.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person,
if any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Portfolio Manager Indemnified Person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Manager's responsibilities to the Trust which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Manager, any of
its employees or representatives or any affiliate of or any person acting
on behalf of the Manager or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact supplied by, or which is the
responsibility of, the Manager and contained in the Registration Statement
or prospectus covering shares of the Trust or a Series, or any amendment
thereof or any supplement thereto, or the omission or alleged omission to
state therein a material fact known or which should have been known to the
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or omission was
made in reliance upon information furnished to the Manager or the Trust or
to any affiliated person of the Manager by a Portfolio Manager Indemnified
Person; provided however, that in no case shall the indemnity in favor of
the Portfolio Manager Indemnified Person be deemed to protect such person
against any liability to which any such person would otherwise be subject
by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager, and each person, if any, who, within the meaning of Section 15
of the 1933 Act, controls ("controlling person") the Manager (all of such
persons
J-6
<PAGE>
being referred to as "Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Manager Indemnified Person may become subject
under the 1933 Act, 1940 Act, the Advisers Act, the Internal Revenue Code,
under any other statute, at common law or otherwise, arising out of the
Portfolio Manager's responsibilities as Portfolio Manager of the Series
which (1) may be based upon any misfeasance, malfeasance, or nonfeasance by
the Portfolio Manager, any of its employees or representatives, or any
affiliate of or any person acting on behalf of the Portfolio Manager, (2)
may be based upon a failure to comply with Section 2, Paragraph (a) of this
Agreement, or (3) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
prospectus covering the shares of the Trust or a Series, or any amendment
or supplement thereto, or the omission or alleged omission to state therein
a material fact known or which should have been known to the Portfolio
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, if such a statement or omission was made
in reliance upon information furnished to the Manager, the Trust, or any
affiliated person of the Manager or Trust by the Portfolio Manager or any
affiliated person of the Portfolio Manager; provided, however, that in no
case shall the indemnity in favor of a Manager Indemnified Person be deemed
to protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
15 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person shall have notified
the Manager in writing within a reasonable time after the summons, notice,
or other first legal process or notice giving information of the nature of
the claim shall have been served upon such Portfolio Manager Indemnified
Person (or after such Portfolio Manager Indemnified Person shall have
received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Portfolio
Manager Indemnified Person, the Manager will be entitled to participate, at
its own expense, in the defense thereof or, after notice to the Portfolio
Manager Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Portfolio Manager Indemnified Person. If the Manager
assumes the defense of any such action and the selection of counsel by the
Manager to represent both the Manager and the Portfolio Manager Indemnified
Person would result in a conflict of interests and therefore, would not, in
the reasonable judgment of the Portfolio Manager Indemnified Person,
adequately represent the interests of the Portfolio Manager Indemnified
Person, the Manager will, at its own expense, assume the defense with
counsel to the Manager and, also at its own expense, with separate counsel
to the Portfolio Manager Indemnified Person, which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall
not be liable to the Portfolio Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the
Portfolio Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Manager
shall not have the right to compromise on or settle the litigation without
the prior written consent of the Portfolio Manager Indemnified Person if
the compromise or settlement results, or may result in a finding of
wrongdoing on the part of the Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 15 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the
Portfolio Manager of any such claim shall not relieve the Portfolio Manager
from any liability which it may have to the Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action
J-7
<PAGE>
is brought against the Manager Indemnified Person, the Portfolio Manager
will be entitled to participate, at its own expense, in the defense thereof
or, after notice to the Manager Indemnified Person, to assume the defense
thereof, with counsel satisfactory to the Manager Indemnified Person. If
the Portfolio Manager assumes the defense of any such action and the
selection of counsel by the Portfolio Manager to represent both the
Portfolio Manager and the Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment
of the Manager Indemnified Person, adequately represent the interests of
the Manager Indemnified Person, the Portfolio Manager will, at its own
expense, assume the defense with counsel to the Portfolio Manager and, also
at its own expense, with separate counsel to the Manager Indemnified Person
which counsel shall be satisfactory to the Portfolio Manager and to the
Manager Indemnified Person. The Manager Indemnified Person shall bear the
fees and expenses of any additional counsel retained by it, and the
Portfolio Manager shall not be liable to the Manager Indemnified Person
under this Agreement for any legal or other expenses subsequently incurred
by the Manager Indemnified Person independently in connection with the
defense thereof other than reasonable costs of investigation. The Portfolio
Manager shall not have the right to compromise on or settle the litigation
without the prior written consent of the Manager Indemnified Person if the
compromise or settlement results, or may result in a finding of wrongdoing
on the part of the Manager Indemnified Person.
16. Duration and Termination. This Agreement shall become effective on the
date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to the Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for a Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
the Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding shares of any other Series or
(ii) that this agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio Manager and the Trust, (b) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of each Series,
upon sixty (60) days' written notice to the Manager and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust. In the event of termination
for any reason, all records of each Series for which the Agreement is
terminated shall promptly be returned to the Manager or the Trust, free from
any claim or retention of rights in such record by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. The Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(e), 9, 10, 11, 14, 15, and 18 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 16.
17. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
J-8
<PAGE>
18. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "Eagle Asset Management, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust
and/or the Series have the right to use such name (or derivative or logo)
in offering materials of the Trust with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a portfolio manager to
the Trust and/or the Series. Upon termination of this Agreement between the
Trust, the Manager, and the Portfolio Manager, the Trust shall forthwith
cease to use such name (or derivative or logo).
19. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
20. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
J-9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
_____________________________________ By: _________________________________
Attest
_____________________________________
_____________________________________ Title
Title
DIRECTED SERVICES, INC.
_____________________________________ By: _________________________________
Attest
_____________________________________
_____________________________________ Title
Title
EAGLE ASSET MANAGEMENT, INC.
_____________________________________ By: _________________________________
Attest
_____________________________________
_____________________________________ Title
Title
J-10
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Eagle Asset Management, Inc. shall
act as Portfolio Manager is as follows:
Value Equity Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Eagle Asset Management, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rate of the average daily net assets of the Series:
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<S> <C>
Value Equity Series 0.50% of net assets
</TABLE>
J-11
<PAGE>
EXHIBIT U
OTHER INFORMATION REGARDING EAGLE ASSET MANAGEMENT, INC.
The directors and the principal executive officer of Eagle Asset Management,
Inc., and their principal occupations are as shown below. The business address
of each such person is 880 Carillon Parkway, St. Petersburg, Florida 33716.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
---------------------- --------------------
<C> <S>
Thomas A. James Chairman and Chief Executive Officer of Raymond
Chief Executive Officer and James Financial, Inc.; Chief Executive Officer
Chairman of the Board of Eagle Asset Management, Inc.; and Chairman of
the Board of Trustees of the Heritage Family of
Mutual Funds.
Richard K. Riess Director, President and Chief Operating Officer
President, Chief Operating of Eagle Asset Management, Inc.; Director of
Officer, and Director Heritage Asset Management, Inc.; and Trustee for
the Heritage Capital Appreciation Trust,
Heritage Cash Trust, Heritage Income-Growth
Trust, Heritage Income Trust, Heritage Series
Trust, and Heritage U.S. Government Income Fund.
Stephen G. Hill President, Heritage Asset Management, Inc.;
Director President of the Heritage Family of Mutual
Funds.
</TABLE>
Eagle Asset Management, Inc. does not presently act as investment adviser to
any other registered investment companies with investment objectives and
policies similar to those of the Value Equity Series.
U-1
<PAGE>
EXHIBIT K
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this day of , 1996, among The GCG Trust (the
"Trust"), a Massachusetts business trust, Directed Services, Inc. (the
"Manager"), a New York corporation, and Equitable Investment Services, Inc.
("Portfolio Manager"), an Iowa corporation.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end, management investment company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of , 1996, a
copy of which has been provided to the Portfolio Manager, the Trust has
retained the Manager to render advisory, management, and administrative
services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager to
furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Trust, the Manager, and
the Portfolio Manager as follows:
1. Appointment. The Trust and the Manager hereby appoint Equitable
Investment Services, Inc. to act as Portfolio Manager to the Series designated
on Schedule A of this Agreement (each a "Series") for the periods and on the
terms set forth in this Agreement. The Portfolio Manager accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided. In the event the Trust designates one or more
series other than the Series with respect to which the Trust and the Manager
wish to retain the Portfolio Manager to render investment advisory services
hereunder, they shall promptly notify the Portfolio Manager in writing. If the
Portfolio Manager is willing to render such services, it shall so notify the
Trust and Manager in writing, whereupon such series shall become a Series
hereunder, and be subject to this Agreement.
2. Portfolio Management Duties. Subject to the supervision of the Trust's
Board of Trustees and the Manager, the Portfolio Manager will provide a
continuous investment program for each Series' portfolio and determine the
composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of each Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of each Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of each Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission (the "SEC"), as from time to time amended, copies of which
shall be sent to the Portfolio Manager by the Manager upon filing with the
SEC. The Portfolio Manager further agrees as follows:
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<PAGE>
(a) The Portfolio Manager will (1) manage each Series so that no action
or omission on the part of the Portfolio Manager will cause a Series to
fail to meet the requirements to qualify as a regulated investment company
specified in Section 851 of the Internal Revenue Code (other than the
requirements for the Trust to register under the 1940 Act and to file with
its tax return an election to be a regulated investment company, both of
which shall not be the responsibility of the Portfolio Manager), (2) manage
each Series so that no action or omission on the part of the Portfolio
Manager shall cause a Series to fail to comply with the diversification
requirements of Section 817(h) of the Internal Revenue Code and regulations
issued thereunder, and (3) use reasonable efforts to manage the Series so
that no action or omission on the part of the Portfolio Manager shall cause
a Series to fail to comply with any other rules and regulations pertaining
to investment vehicles underlying variable annuity or variable life
insurance policies. The Manager will notify the Portfolio Manager promptly
if the Manager believes that a Series is in violation of any requirement
specified in the first sentence of this paragraph. The Manager or the Trust
will notify the Portfolio Manager of any pertinent changes, modifications
to, or interpretations of Section 817(h) of the Internal Revenue Code and
regulations issued thereunder and of rules or regulations pertaining to
investment vehicles underlying variable annuity or variable life insurance
policies.
(b) The Portfolio Manager will perform its duties hereunder pursuant to
the 1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations, with any applicable procedures
adopted by the Trust's Board of Trustees of which the Portfolio Manager has
been notified in writing, and the provisions of the Registration Statement
of the Trust under the Securities Act of 1933 (the "1933 Act") and the 1940
Act, as supplemented or amended, of which the Portfolio Manager has
received a copy ("Registration Statement"). The Manager or the Trust will
notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or sale of
a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients, subject to
review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for a Series,
the Portfolio Manager will arrange for the transmission to the custodian
and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information,
including, but not limited to, CUSIP, SEDOL, or other numbers that identify
securities to be purchased or sold on behalf of the Series, as may be
reasonably necessary to enable the custodian and portfolio accounting agent
to perform its administrative and recordkeeping responsibilities with
respect to the Series. With respect to portfolio securities to be purchased
or sold through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such trades
to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will assist the portfolio accounting agent for
the Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value of
any portfolio securities or other assets of the Series for which the
portfolio accounting agent seeks assistance from or identifies for review
by the Portfolio Manager, and the parties agree that the Portfolio Manager
shall not bear responsibility or liability for the determination or
accuracy of the valuation of any portfolio securities and other assets of
the Series except to the extent that the Portfolio Manager exercises
judgment with respect to any such valuation.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not
K-2
<PAGE>
include the records and ledgers maintained by the custodian and portfolio
accounting agent for the Trust) as are necessary to assist the Trust and
the Manager to comply with requirements of the 1940 Act and the Investment
Advisers Act of 1940 (the "Advisers Act"), as well as other applicable
laws. The Portfolio Manager will furnish to regulatory authorities having
the requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board of
Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with
respect to the Series such periodic and special reports as the Trustees and
the Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless the
contract with such company is approved by a majority of the Trust's Board
of Trustees and a majority of Trustees who are not parties to any agreement
or contract with such company and who are not "interested persons," as
defined in the 1940 Act, of the Trust, the Manager, or the Portfolio
Manager, or any such company that is retained as subadviser, and is
approved by the vote of a majority of the outstanding voting securities of
the applicable Series of the Trust to the extent required by the 1940 Act.
The Portfolio Manager shall be responsible for making reasonable inquiries
and for reasonably ensuring that any employee of the Portfolio Manager, any
subadviser that the Portfolio Manager has employed or with which it has
associated with respect to the Series, or any employee thereof has not, to
the best of the Portfolio Manager's knowledge, in any material connection
with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code, or involving the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation of
any provision of any state insurance law involving fraud, deceit, or
knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities
laws involving fraud, deceit, or knowing misrepresentation.
3. Broker-Dealer Selection. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firms involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer 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
K-3
<PAGE>
Portfolio Manager or its affiliate determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker- dealer, viewed in terms of either
that particular transaction or the Portfolio Manager's or its affiliate's
overall responsibilities with respect to the Series and to their other clients
as to which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
the post-effective amendment to the Registration Statement for the Trust filed
with the SEC that contains disclosure about the Portfolio Manager, and
represents and warrants that, with respect to the disclosure about or
information relating, directly or indirectly, to the Portfolio Manager, to the
Portfolio Manager's knowledge, such Registration Statement contains, as of the
date hereof, no untrue statement of any material fact and does not omit any
statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading. The
Portfolio Manager further represents and warrants that it is a duly registered
investment adviser under the Advisers Act, or alternatively that it is not
required to be a registered investment adviser under the Advisers Act to
perform the duties described in this Agreement, and that it is a duly
registered investment adviser in all states in which the Portfolio Manager is
required to be registered.
5. Expenses. During the term of this Agreement, the Portfolio Manager will
pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of each
Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses of
International Management Reports (as appropriate) for each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of the
Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's shareholders,
the preparation and mailings of prospectuses and reports of the Trust to
its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
K-4
<PAGE>
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
(q) Extraordinary expenses of the Trust as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under
Section 14 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors,
and agents with respect thereto; and
(r) Organizational and offering expenses.
6. Compensation. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly as described in Schedule B.
7. Seed Money. The Manager agrees that the Portfolio Manager shall not be
responsible for providing money for the initial capitalization of the Series.
8. Compliance.
(a) The Portfolio Manager agrees that it shall promptly notify the
Manager and the Trust (1) in the event that the SEC or other governmental
authority has censured the Portfolio Manager; placed limitations upon its
activities, functions or operations; suspended or revoked its registration,
if any, as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that the Series has ceased to qualify or
might not qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code, or (3) upon having a reasonable basis for
believing that the Series has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the
regulations thereunder. The Portfolio Manager further agrees to notify the
Manager and the Trust promptly of any material fact known to the Portfolio
Manager respecting or relating to the Portfolio Manager that is not
contained in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, and is required to be stated therein or
necessary to make the statements therein not misleading, or of any
statement contained therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the
Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an
investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis for
believing that the Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue
Code, or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section 817(h)
of the Internal Revenue Code or the Regulations thereunder.
9. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Trust and further agrees
to surrender promptly to the Trust any of such records upon the Trust's or the
Manager's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the SEC and state
insurance regulators) in connection with any investigation or inquiry relating
to this Agreement or the Trust.
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<PAGE>
11. Representations Respecting Portfolio Manager.
(a) During the term of this Agreement, the Trust and the Manager agree to
furnish to the Portfolio Manager at its principal offices prior to use
thereof copies of all Registration Statements and amendments thereto,
prospectuses, proxy statements, reports to shareholders, sales literature
or other material prepared for distribution to shareholders of the Trust or
any Series or to the public that refer or relate in any way to the
Portfolio Manager, Equitable Investment Services, Inc. or any of its
affiliates (other than the Manager), or that use any derivative of the name
Equitable Investment Services, Inc. or any logo associated therewith. The
Trust and the Manager agree that they will not use any such material
without the prior consent of the Portfolio Manager, which consent shall not
be unreasonably withheld. In the event of the termination of this
Agreement, the Trust and the Manager will furnish to the Portfolio Manager
copies of any of the above-mentioned materials that refer or relate in any
way to the Portfolio Manager;
(b) the Trust and the Manager will furnish to the Portfolio Manager such
information relating to either of them or the business affairs of the Trust
as the Portfolio Manager shall from time to time reasonably request in
order to discharge its obligations hereunder;
(c) the Manager and the Trust agree that neither the Trust, the Manager,
nor affiliated persons of the Trust or the Manager shall give any
information or make any representations or statements in connection with
the sale of shares of the Series concerning the Portfolio Manager or the
Series other than the information or representations contained in the
Registration Statement, prospectus, or statement of additional information
for the Trust, as they may be amended or supplemented from time to time, or
in reports or proxy statements for the Trust, or in sales literature or
other promotional material approved in advance by the Portfolio Manager,
except with the prior permission of the Portfolio Manager.
12. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. Services Not Exclusive. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. Liability. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other applicable law, the Trust and the Manager agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act,
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
15. Indemnification.
(a) Notwithstanding Section 14 of this Agreement, the Manager agrees to
indemnify and hold harmless the Portfolio Manager, any affiliated person of
the Portfolio Manager (other than the Manager), and each person, if any,
who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Portfolio Manager Indemnified Person may become
subject under the 1933 Act, the 1940 Act, the Advisers Act, the Internal
Revenue Code, under any other statute, at common law or otherwise, arising
out of the Manager's responsibilities to the Trust which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Manager, any of
its employees or representatives or any affiliate of or any person acting
on behalf of the Manager or (2) may be based upon any untrue statement or
alleged untrue statement
K-6
<PAGE>
of a material fact supplied by, or which is the responsibility of, the
Manager and contained in the Registration Statement or prospectus covering
shares of the Trust or a Series, or any amendment thereof or any supplement
thereto, or the omission or alleged omission to state therein a material
fact known or which should have been known to the Manager and was required
to be stated therein or necessary to make the statements therein not
misleading, unless such statement or omission was made in reliance upon
information furnished to the Manager or the Trust or to any affiliated
person of the Manager by a Portfolio Manager Indemnified Person; provided
however, that in no case shall the indemnity in favor of the Portfolio
Manager Indemnified Person be deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of
its duties, or by reason of its reckless disregard of obligations and
duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio Manager
agrees to indemnify and hold harmless the Manager, any affiliated person of
the Manager (other than the Portfolio Manager), and each person, if any,
who, within the meaning of Section 15 of the 1933 Act, controls
("controlling person") the Manager (all of such persons being referred to
as "Manager Indemnified Persons") against any and all losses, claims,
damages, liabilities, or litigation (including legal and other expenses) to
which a Manager Indemnified Person may become subject under the 1933 Act,
1940 Act, the Advisers Act, the Internal Revenue Code, under any other
statute, at common law or otherwise, arising out of the Portfolio Manager's
responsibilities as Portfolio Manager of the Series which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Portfolio Manager,
any of its employees or representatives, or any affiliate of or any person
acting on behalf of the Portfolio Manager, (2) may be based upon a failure
to comply with Section 2, Paragraph (a) of this Agreement, or (3) may be
based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement or prospectus covering the
shares of the Trust or a Series, or any amendment or supplement thereto, or
the omission or alleged omission to state therein a material fact known or
which should have been known to the Portfolio Manager and was required to
be stated therein or necessary to make the statements therein not
misleading, if such a statement or omission was made in reliance upon
information furnished to the Manager, the Trust, or any affiliated person
of the Manager or Trust by the Portfolio Manager or any affiliated person
of the Portfolio Manager; provided, however, that in no case shall the
indemnity in favor of a Manager Indemnified Person be deemed to protect
such person against any liability to which any such person would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence in
the performance of its duties, or by reason of its reckless disregard of
its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this Section
15 with respect to any claim made against a Portfolio Manager Indemnified
Person unless such Portfolio Manager Indemnified Person shall have notified
the Manager in writing within a reasonable time after the summons, notice,
or other first legal process or notice giving information of the nature of
the claim shall have been served upon such Portfolio Manager Indemnified
Person (or after such Portfolio Manager Indemnified Person shall have
received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Portfolio
Manager Indemnified Person, the Manager will be entitled to participate, at
its own expense, in the defense thereof or, after notice to the Portfolio
Manager Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Portfolio Manager Indemnified Person. If the Manager
assumes the defense of any such action and the selection of counsel by the
Manager to represent both the Manager and the Portfolio Manager Indemnified
Person would result in a conflict of interests and therefore, would not, in
the reasonable judgment of the Portfolio Manager Indemnified Person,
adequately represent the interests of the Portfolio Manager Indemnified
Person, the Manager will, at its own expense, assume the defense with
counsel to the Manager and, also at its own expense, with separate counsel
to the Portfolio Manager Indemnified Person, which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall
not be liable to the Portfolio Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently
K-7
<PAGE>
incurred by the Portfolio Manager Indemnified Person independently in
connection with the defense thereof other than reasonable costs of
investigation. The Manager shall not have the right to compromise on or
settle the litigation without the prior written consent of the Portfolio
Manager Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Portfolio Manager
Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b) of this
Section 15 with respect to any claim made against a Manager Indemnified
Person unless such Manager Indemnified Person shall have notified the
Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the
Portfolio Manager of any such claim shall not relieve the Portfolio Manager
from any liability which it may have to the Manager Indemnified Person
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Manager
Indemnified Person, the Portfolio Manager will be entitled to participate,
at its own expense, in the defense thereof or, after notice to the Manager
Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Manager Indemnified Person. If the Portfolio Manager
assumes the defense of any such action and the selection of counsel by the
Portfolio Manager to represent both the Portfolio Manager and the Manager
Indemnified Person would result in a conflict of interests and therefore,
would not, in the reasonable judgment of the Manager Indemnified Person,
adequately represent the interests of the Manager Indemnified Person, the
Portfolio Manager will, at its own expense, assume the defense with counsel
to the Portfolio Manager and, also at its own expense, with separate
counsel to the Manager Indemnified Person which counsel shall be
satisfactory to the Portfolio Manager and to the Manager Indemnified
Person. The Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Portfolio Manager shall not
be liable to the Manager Indemnified Person under this Agreement for any
legal or other expenses subsequently incurred by the Manager Indemnified
Person independently in connection with the defense thereof other than
reasonable costs of investigation. The Portfolio Manager shall not have the
right to compromise on or settle the litigation without the prior written
consent of the Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the
Manager Indemnified Person.
(e) The Manager shall not be liable under this Section 15 to indemnify
and hold harmless the Portfolio Manager and the Portfolio Manager shall not
be liable under this Section 15 to indemnify and hold harmless the Manager
with respect to any losses, claims, damages, liabilities, or litigation
that first become known to the party seeking indemnification during any
period that the Portfolio Manager is, within the meaning of Section 15 of
the 1933 Act, a controlling person of the Manager.
16. Duration and Termination. This Agreement shall become effective on the
date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to each Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for such Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
such Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding shares of any other Series or
(ii) that this agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio
K-8
<PAGE>
Manager and the Trust, (b) at any time without payment of any penalty by the
Trust, upon the vote of a majority of the Trust's Board of Trustees or a
majority of the outstanding voting securities of each Series, upon sixty (60)
day's written notice to the Manager and the Portfolio Manager, or (c) by the
Portfolio Manager at any time without penalty, upon sixty (60) days written
notice to the Manager and the Trust. In addition, this Agreement shall
terminate with respect to a Series in the event that it is not initially
approved by the vote of a majority of the outstanding voting securities of
that Series at a meeting of shareholders at which approval of the Agreement
shall be considered by shareholders of the Series. In the event of termination
for any reason, all records of each Series for which the Agreement is
terminated shall promptly be returned to the Manager or the Trust, free from
any claim or retention of rights in such records by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. The Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 9, 10, 11, 14, 15, and 18 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 16.
17. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. Use of Name.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management Agreement
between the Trust and the Manager, the Portfolio Manager shall forthwith
cease to use such name (or derivative or logo).
(b) It is understood that the name "Equitable Investment Services, Inc."
or any derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust
and/or the Series have the right to use such name (or derivative or logo)
in offering materials of the Trust with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a portfolio manager to
the Trust and/or the Series. Upon termination of this Agreement between the
Trust, the Manager, and the Portfolio Manager, the Trust shall forthwith
cease to use such name (or derivative or logo).
19. Amended and Restated Agreement and Declaration of Trust. A copy of the
Amended and Restated Agreement and Declaration of Trust for the Trust is on
file with the Secretary of the Commonwealth of Massachusetts. The Amended and
Restated Agreement and Declaration of Trust has been executed on behalf of the
Trust by Trustees of the Trust in their capacity as Trustees of the Trust and
not individually. The obligations of this Agreement shall be binding upon the
assets and property of the Trust and shall not be binding upon any Trustee,
officer, or shareholder of the Trust individually.
20. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the
SEC thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
K-9
<PAGE>
(c) To the extent permitted under Section 16 of this Agreement, this
Agreement may only be assigned by any party with the prior written consent
of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent
of the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
_____________________________________ By:__________________________________
Attest
_____________________________________
_____________________________________ Title
Title
DIRECTED SERVICES, INC.
_____________________________________ By:__________________________________
Attest
_____________________________________
_____________________________________ Title
Title
EQUITABLE INVESTMENT SERVICES, INC.
_____________________________________ By:__________________________________
Attest
_____________________________________
_____________________________________ Title
Title
K-10
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Equitable Investment Services, Inc.
shall act as Portfolio Manager are as follows:
Limited Maturity Bond Series
Liquid Asset Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Equitable Investment Services, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rates of the average daily net assets of the Series:
<TABLE>
<CAPTION>
SERIES RATE
------ ----
<C> <S>
Limited Maturity Bond Series 0.30% of the first $25 million
0.25% of the next $50 million
0.20% of the next $75 million
0.15% of the amount over $150 million;
subject to a minimum annual fee of $35,000
(payable at the end of each calendar year)
starting from the time that the Portfolio Manager
renders investment management services for the
assets of the Series, and this amount shall be
pro-rated for any portion of a year in which the
Portfolio Management Agreement is not in effect
or during which the obligation to pay this
minimum fee has not commenced.
Liquid Asset Series 0.20% of the first $25 million
0.15% of the next $50 million
0.10% of the amount over $75 million;
subject to a minimum annual fee of $35,000
(payable at the end of each calendar year)
starting from the time that the Portfolio Manager
renders active investment management services for
the assets of the Series, and this amount shall
be pro-rated for any portion of a year in which
the Portfolio Management Agreement is not in
effect or during which the obligation to pay this
minimum fee has not commenced.
</TABLE>
K-11
<PAGE>
EXHIBIT V
OTHER INFORMATION REGARDING EQUITABLE INVESTMENT SERVICES, INC.
The directors and principal executive officer of Equitable Investment
Services, Inc. and their principal occupations are as shown below. The
business address of each such person is 699 Walnut Street, Des Moines, Iowa
50309.
<TABLE>
<CAPTION>
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
---------------------- --------------------
<S> <C>
Lawrence V. Durland, Jr. Senior Vice President of Equitable of Iowa
Director Companies and affiliates.
Susan M. Jordan Vice President and Chief Information Officer of
Director Equitable of Iowa Companies and affiliates.
Paul E. Larson Executive Vice President, Treasurer and Chief
Director Financial Officer of Equitable of Iowa Companies
and affiliates.
Thomas L. May Senior Vice President of Equitable Life
Insurance Company of Iowa and USG Annuity & Life
Company.
John A. Merriman Secretary and General Counsel of Equitable of
Director Iowa Companies.
Beth B. Neppl Vice President--Human Resources of Equitable of
Director Iowa Companies and affiliates.
Paul R. Schlaack President, Chief Executive of Officer and
President, Chief Executive Equitable Investment Services, Inc.
Officer and Director
Frederick S. Hubbell Chairman, President and Chief Executive Officer
Director and Chairman of of Equitable of Iowa Companies; Chairman and
the Board of Directors President of Equitable Life Insurance Co. of
Iowa; and Chairman of USG Annuity & Life
Company.
</TABLE>
Equitable Investment Services, Inc. also acts as investment adviser to the
following registered investment companies having investment objectives and
policies similar to those of the Limited Maturity Bond Series and Liquid Asset
Series. The following table sets forth the name of each such investment
company, its approximate net assets as of May 31, 1996, and the annual
advisory fee charged by Equitable Investment Services, Inc. (as a percentage
of average daily net assets).
<TABLE>
<CAPTION>
NAME OF INVESTMENT COMPANY NET ASSETS ADVISORY FEE
-------------------------- ---------- ------------
<S> <C> <C>
Equi-Select Series Trust
--Money Market Portfolio $10.0 Million 0.375% of first $50 million;
0.35% of amount over $50 million
--Advantage Portfolio $ 7.7 Million 0.50% of first $100 million
0.35% of amount over $100 million
</TABLE>
V-1
<PAGE>
VOTING INSTRUCTION/PROXY
THE GCG TRUST
The Undersigned Contract Owner of a variable annuity contract or
variable life insurance policy (each referred to as "Contract") issued by Golden
American Life Insurance Company ("Golden American") or a participating insurance
company and funded by a separate account of Golden American or a participating
insurance company hereby instructs Golden American on behalf of the pertinent
separate account to vote the sharer of each noted Series of The GCG Trust (the
"Trust") attributable to his or her Contract at the Meeting of Shareholders of
the Trust to be held on July 29, 1996, at 10:00 a.m., EDT, at 1001 Jefferson
Street, Suite 400, Wilmington, Delaware, and at any adjournment thereof, in the
manner directed below with respect to the matters referred to in the Proxy
Statement for the Meeting, receipt of which is hereby acknowledged, and in
Golden American's discretion, upon such other matters as may properly come
before the Meeting or any adjournment thereof.
This proxy is solicited on behalf of the Board of Trustees of the Trust.
The Board of Trustees of the Trust recommends that you vote FOR all of the
following proposals. The costs associated with the Meeting will be paid by
Equitable of Iowa Companies ("Equitable of Iowa"). Neither the Trust nor its
Shareholders will bear any costs associated with this Meeting.
<TABLE>
<CAPTION>
For Against Abstain
<S> <C> <C> <C> <C>
1. To approve a new Management Agreement between the Trust and [_] [_] [_]
Directed Services, Inc. ("DSI"), to be effective upon the
acquisition of BT Variable, Inc. ("BTV") by Equitable of
Iowa.
2. To approve a new separate Portfolio Management Agreement
among the Trust on behalf of each Series listed below, DSI
and each Portfolio Manager listed below, to be effective
upon the acquisition of BTV by Equitable of Iowa:
</TABLE>
<TABLE>
<CAPTION>
Shares Held Series Portfolio Manager For Against Abstain
<S> <C> <C> <C> <C> <C>
2(A) All-Growth Warburg, Pincus Counsellors, Inc. [_] [_] [_]
2(B) Capital Appreciation Chancellor Trust Company [_] [_] [_]
2(C) Market Manager Bankers Trust Company [_] [_] [_]
Emerging Markets Bankers Trust Company [_] [_] [_]
2(D) Fully Managed T. Rowe Price Associates, Inc. [_] [_] [_]
2(E) Multiple Allocation Zweig Advisors, Inc. [_] [_] [_]
Strategic Equity Zweig Advisors, Inc. [_] [_] [_]
2(F) Natural Resources Van Eck Associates Corporation [_] [_] [_]
2(G) Real Estate E.I.I. Realty Securities, Inc. [_] [_] [_]
2(H) Rising Dividends Kayne, Anderson Investment Management, L.P. [_] [_] [_]
2(I) Small Cap Fred Alger Management, Inc. [_] [_] [_]
2(J) Value Equity Eagle Asset Management, Inc. [_] [_] [_]
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
3. To approve a new separate Portfolio Management Agreement among
the Trust on behalf of each Series listed below, DSI and Equitable
Investment Services, Inc. as designated in the Proxy Statement, to
be effective upon the acquisition of BTV by Equitable of Iowa:
Series For Against Abstain
Limited Maturity Bond [_] [_] [_]
Liquid Asset [_] [_] [_]
</TABLE>
This voting instruction will be voted as specified. If NO SPECIFICATION
IS MADE, THIS VOTING INSTRUCTION WILL BE VOTED FOR ALL PROPOSALS. If this voting
instruction is not returned properly executed, such votes will be cast by Golden
American on behalf of the pertinent separate account in the same proportion as
it votes shares held by the separate account for which it has received
instructions from contract owners participating in the above-listed Series.
PLEASE VOTE. SIGN EXACTLY AS LISTED BELOW AND DATE THIS VOTING INSTRUCTION AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
IMPORTANT:
Joint Owners must EACH sign. Trustees and others signing in a representative
capacity should indicate.
Dated: 1996
-----------------------,
----------------------------------
----------------------------------
Signature(s) of Contract Owners(s)
