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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
THE GCG TRUST
(Name of Registrant as Specified In Its Charter)
THE GCG TRUST
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] No Fee Required.
[ ] 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:
_____________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_____________________________________________________________
(5) Total fee paid:
_____________________________________________________________
[ ] 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:
___________________________________
PRELIMINARY PROXY
THE GCG TRUST
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
800-366-0066
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
April __, 1997
To the Shareholders of The GCG Trust:
A Special Meeting ("Meeting") of the Shareholders of The GCG Trust ("Trust")
(the "Meeting") will be held at 1001 Jefferson Street, Suite 400, Wilmington,
Delaware, 19801, on April __, 1997, at 10:00 a.m., local time. At the
Meeting, shareholders of each of the several series of the Trust will be asked
to approve certain proposals, as follows:
1. Shareholders of the Hard Assets Series (formerly, the "Natural Resources
Series"):
a. To permit the Series to concentrate (i.e. invest more than 25% of
its total assets) in any one of the industries that comprise the
"hard assets" group, including real estate investment trusts.
b. To approve a change in the Series' subclassification from
"diversified" to "non-diversified," as defined by the Investment
Company Act of 1940 ("1940 Act").
2. Shareholders of the All-Growth Series:
a. To approve a new Portfolio Management Agreement with Pilgrim, Baxter
& Associates, Inc.
b. To approve an increase in the advisory fee paid to Pilgrim Baxter by
the Trust's Manager, Directed Services, Inc. ("DSI") and not by the
Series.
3. Shareholders of the Emerging Markets Series:
a. To approve approve a new Portfolio Management Agreement with Putnam
Investment Management, Inc. ("Putnam")
b. (i) To approve the an amendment to Management Agreement between the
Trust and DSI Directed Services, Inc. ("DSI") as it relates to the
Series, which amendment would increase the advisory fee paid by the
Series to DSI; and
(ii) To approve an increase in the fee payable to Putnam by DSI
under the Portfolio Management Agreement with Putnam.
c. To approve a change in the statement of the Series' investment
objective from long-term growth of capital to long-term capital
appreciation. [to clarify that] [to be supplied].
4. Shareholders of the Managed Global Series:
a. To approve a new Portfolio Management Agreement with Putnam.
b. To approve an increase in the advisory fee paid to Putnam by DSI
(not the Series). Investment Management, Inc.
c. To approve a change in the Series' subclassification from "non-
diversified" to "diversified," as defined by the 1940 Act.
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5. Shareholders of the Market Manager Series:
To approve a new Portfolio Management Agreement with Equitable Investment
Services, Inc. ("EISI")
6. Shareholders of All Series:
a. To elect four Trustees to hold office until their successors are
duly elected and qualified.
b. To transact such other business as may properly come before the
Meeting.
The Board of Trustees has fixed the close of business on February 28, 1997, 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
__________________________________
_________, 1997 Myles R. Tashman, Secretary
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.
<PAGE>
THE GCG TRUST
1001 Jefferson Street, Suite 400
Wilmington, DE 19801
800-366-0066
PROXY STATEMENT
Special Meeting of Shareholders
April __, 1997
The enclosed proxy is solicited by the Board of Trustees (the "Board") of The
GCG Trust (the "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 April__, 1997, at 10:00 a.m. local time. The approximate
mailing date of this Proxy Statement and accompanying form of proxy is ______,
1997.
The Board has fixed the close of business on February 28, 1997, 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 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.
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 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 Trust is comprised of 16 operational portfolios or "Series" of the Trust.
Shares of each 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 interpretations of the Investment Company Act of 1940 (the "1940 Act"),
each insurance company ("Participating Insurance Company") issuing a Variable
Contract funded by a registered separate account for which the Trust serves as
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an investment medium is required to request voting instructions from the
owners of the Variable Contracts ("Variable Contract Owners") and to furnish a
copy of this Proxy Statement to Variable Contract Owners. Further, each such
insurance company will vote Shares or other voting interests in the separate
account in proportion to the voting 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
registered 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 April __, 1997, as the last day on which voting instructions will
be accepted.
The Trust knows of no items of business other than those mentioned in the
Notice of Meeting that accompanies this Proxy Statement to be presented for
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.
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INTRODUCTION
As described in the Trust's prospectus, investment management services are
provided to the Trust and to each of its several Series by Directed Services,
Inc. ("DSI" or the "Manager"). Subject to the supervision and approval of
the Board and of the shareholders of the respective Series, DSI is responsible
for engaging various investment advisory organizations (each, a "Portfolio
Manager") to provide portfolio management services to the respective Series.
DSI is also responsible for monitoring and evaluating the performance of the
various Portfolio Managers. DSI has formulated a portfolio management
strategy for the Trust that would encourage the Trust's growth and provide a
range of investment opportunities for the Participating Insurance Companies
and their Variable Contract Owners. DSI has come to believe that the Trust's
interests - and those of its shareholders -- would best be served by creating,
through the medium of the Trust' several series, a matrix of diverse but
complimentary investment portfolios. As the Trust's Manager, DSI believes
that the best way to accomplish this goal is to employ Portfolio Managers
whose differing styles cover the investment spectrum, from those that favor
value-oriented investing to aggressive growth. DSI believes that the
proposals set forth in this Proxy Statement represent several steps toward
making this goal a reality. Some of these proposals would, if approved by
shareholders, ratify certain investment advisory organizations recently
engaged to serve the Trust's Series. Others would modify the investment
policies, objectives and/or restrictions of certain of the Trust's Series, in
order to give the respective Portfolio Managers more investment flexibility to
invest effectively. Each proposal in this Proxy Statement was presented to a
meeting of the Trust's Board of Trustees ("Board") with the recommendation of
DSI, and each been considered and approved by the Board, including those Board
members ("Independent Trustees") who are not "interested persons" of the Trust
within the meaning of the Investment Company Act of 1940 ("1940 Act").
PROPOSALS RELATING TO INVESTMENT ADVISORY ARRANGEMENTS.
At the Meeting, shareholders of the All-Growth, Emerging Markets Series and
Managed Global Series are being asked to approve investment advisory contracts
with Pilgrim Baxter & Associates, Inc. in the case of the All-Growth Series
and Putnam Management Company, Inc. in the case of the Emerging Markets and
Managed Global Series. Although agreements with each of these organizations
are already effective (as permitted by Section 15(a) and rule 15a-4 of the
1940 Act) the shareholders of each affected Series must ratify the Portfolio
Manager selected by the Board within 120 days of the effective date of a new
Portfolio Manager's contract (each, a "Portfolio Management Agreement").
Information about each of the new Portfolio Managers, as well as the text of
the separate Portfolio Management Agreements, are included in the several
exhibits to this Proxy Statement. Approval of the respective Portfolio
Management Agreements requires the approval of " a majority of the outstanding
voting securities" of the Series to which it relates. Under the 1940 Act,
this term means (i) 67% of the outstanding securities of the Series involved
represented at a meeting at which more than 50% of the outstanding shares are
present in person or by proxy, or (ii) more than 50% of the outstanding
securities of such Series, whichever is less.
Proposals relating to Changes in Investment Policies. As noted above, DSI,
together with certain of the Portfolio Managers, have proposed that certain of
the fundamental investment policies of the Hard Asset Series (formerly, the
Natural Resources Series), the Emerging Growth Series and the Managed Global
Series be modified. These changes may not, however, be implemented unless and
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until shareholders of the affected Series have approved them. At the Meeting,
shareholders of the affected Series will be asked to do so. As is the case
with respect to the Portfolio Management Agreements, approval of the proposed
changes in investment policies also requires the approval of a majority of the
outstanding voting securities of the Series to which the proposed change
relates. Details regarding the scope of the changes proposed and their impact
appears as part of the discussion of each proposal, together with disclosure
of those non-fundamental policies that the Board has approved and for which
specific shareholder approval is not required.
Election of Trustees. Finally, all shareholders will be asked to elect four
new Trustees to the Trust's Board of Trustees. Election of the Trustees
requires the approval of the holders of a majority of the outstanding voting
securities of the Trust as a whole.
The table below summarizes the several proposals to be presented at the
Meeting and the Series to which each relates.
CHANGES IN INVESTMENT
CHANGE IN INVESTMENT POLICIES, RESTRICTION PAGE
SERIES ADVISORY ARRANGEMENTS OR OBJECTIVES REFERENCE
- ------ --------------------- --------------------- ---------
Hard Assets Proposal 1A
Proposal 1B
All Growth Proposal 2
Emerging Markets
Proposal 3A Proposal 3C
Proposal 3B(i)
Proposal 3B(ii)
Managed Global
Proposal 4A
Proposal 4B Proposal 4C
Market Manager Proposal 5
ALL SERIES E L E C T I O N O F T R U S T E E S
Annual Report. The Trust's 1996 Annual Report to Shareholders was mailed to
shareholders on or about February 26, 1997. IF YOU SHOULD DESIRE AN
ADDITIONAL COPY OF AN ANNUAL REPORT, IT CAN BE OBTAINED, WITHOUT CHARGE, FROM
DSI BY CALLING (800) 366-0066.
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PROPOSALS RELATING TO THE HARD ASSETS SERIES
SUMMARY OF PROPOSED CHANGES IN THE INVESTMENT POLICIES. The Hard Assets
Series (formerly known as the "Natural Resources Series") seeks long-term
capital appreciation. The Series seeks to achieve this objective by investing
at least 65% of its assets in equity and debt securities of companies engaged
in the exploration, development, production, management or distribution of
natural resources, which includes not only timber, mineral and water
resources, but also precious and strategic metals and certain real estate
related investments. At a meeting of the Trustees held earlier this year, DSI
recommended the adoption of several modifications in the Series investment
policies, including a change in the name of the Series from "Natural Resources
Series" to the "Hard Assets Series and an increase in the extent to which the
Series may invest in real estate investment trusts ("REITS"). These
modifications, each of which was approved by the Trustees, do not require
shareholder approval and have already been implemented. A description of
these changes is set forth below under the heading "Changes in the Non-
fundamental Investment Policies of the Hard Assets Series."
At the same meeting, DSI also recommended that the Trustees approve certain
changes in the Series' fundamental policies. Such changes must be approved by
the Series' shareholders before they may be implemented. First, it is
proposed that the Series be permitted to concentrate its investments in any
one of the several industries that comprise the hard assets sector, including
for this purpose, real estate investment trusts. Second, it is proposed that
the Series change its classification from "diversified" to "non-diversified."
Each of these proposed changes are described separately.
THE BOARD OF TRUSTEES HAS APPROVED EACH OF THESE PROPOSALS AND RECOMMENDS THAT
YOU VOTE "FOR" PROPOSALS 1A AND 1B.
DISCUSSION OF PROPOSAL 1A. If this proposal is approved by the shareholders
of the Hard Assets Series, the Series will be permitted to concentrate its
investments (i.e. invest more than 25% of its total assets) in any one of the
industries that comprise the hard assets group, including real estate related
investments and real estate investment trusts ("REITs".)
Under existing investment restrictions, a series of the Trust may not:
"invest in a security if more than 25% of its total assets (taken at
market value at the time of such investment) would be invested in the
securities of issuers in any particular industry, except that this
restriction does not apply . . . .to the [Hard Assets Series], which
will normally invest more than 25% of its total assets in the group of
industries engaged in natural resources activities, provided that such
concentration . . . is permitted under tax law requirements for regulated
investment companies that are investment vehicles for variable
contracts."
The Trustees recommend that shareholders of the Series modify this fundamental
investment limitation as it applies to the Hard Assets Series, as follows:
"[A series of the Trust The ] fund may not purchase may not "invest in a
security if more than 25% of its total assets (taken at market value at
the time of such investment) would be invested in the securities of
issuers in any particular industry, except that this restriction does not
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apply to the Hard Assets Series, which is permitted to concentrate its
investment in any individual industry within the "hard assets" sector,
provided that such concentration . . . is permitted under tax law
requirements for regulated investment companies that are investment
vehicles for variable contracts. For purposes of this restriction, the
"hard assets" sector includes securities issued by companies that are,
directly or indirectly, engaged through supplier relationships, servicing
agreements or otherwise) in the exploration, development, production,
management or distribution of one or more of the following: (i) forest
products, soil, water and other natural resources; (ii) strategic,
ferrous and non-ferrous metals; (iii) gas, petroleum, petrochemicals or
other hydrocarbons; (iv) real estate, including real estate investment
trusts; (v) gold, silver, platinum and other precious metals, including
bullion and coins; (vi) other basic non-agricultural commodities.
Adoption of the proposed amended limitation would permit the Series to invest
more than 25% of its assets in the securities of individual industries within
the hard assets sector. In addition, the proposed amended limitation would
specifically include real estate related investments and REITs within the hard
assets sector and thus effectively permit the Series to invest more than 25%
of its assets in securities issued by real estate investment trusts. Under
the existing policies, the Series may not invest more than 25% in REITs.
If approved by the Series shareholders, the amended limitation will permit
more than 25% of the Series assets to be invested in a single industry. It
also makes plain that real estate investment trusts are within the hard assets
sector for purposes of the Series investments. Implementation of the proposal
may also increase the volatility associated with the Series investments in its
chosen sector. For example, because companies in a single industry are often
faced with the same economic cycles, obstacles, issues, or regulatory burdens,
and their securities may react similarly and move in unison with these or
other market conditions, a fund that concentrates in a single industry may be
more susceptible to economic changes affecting that industry than a fund that
does not similarly concentrate in a single industry. Under the Series'
current limitation, the Series may not invest more than 25% of its total
assets in any individual industry, although it is generally required to invest
at least 65% of its assets in the hard assets sector as a whole. Shareholders
should be aware that REITs are dependent upon the skill of their management
and, like all real estate related investments, are subject to the risk of
adverse business cycles, declines in the value of the underlying real estate,
increases in taxes and other operation expenses. REITS may also be subject to
heavy cash flow dependency, defaults by borrowers and self liquidation.
Special investment risk related to investments in other areas of the hard
assets sector, including investment in companies predominately engaged in gold
operations is included in that portion of the Trust's prospectus relating to
the Hard Assets Series.
DISCUSSION OF PROPOSAL 1B. If this proposal is approved by the shareholders
of the Hard Assets Series, the Series' subclassification under the 1940 Act
will be changed from "diversified" to "non-diversified," as defined in that
Act.
The Series is currently classified as a diversified company for purposes of
the 1940 Act. This means that, as a matter of fundamental policy, the Series
may not invest in a security if, with respect to 75% of its total assets, more
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than 5% of such assets would be invested in the securities of any one issuer,
or if the Series would, as a result, hold more than 10% of the outstanding
voting securities of any one issuer.
It is the view of management that the fundamental restriction described above
limits the Series' flexibility within its relatively narrow market sector.
For this reason, the Trustees recommend that shareholders approve its
elimination. The effect of such approval would be to change the Series'
classification to that of anon- non-diversified fund. If this Proposal 1B is
approved, it is anticipated that the Series will have additional investment
flexibility to invest within its relatively narrow investment universe. It
should be noted, however, that as a non-diversified fund, the Series' net
asset value per share could be more volatile. This is so because non-
diversified funds may have greater levels of investment s in a single issuer
than diversified funds, and thus, the performance of a single issuer can have
a more substantial impact on a non-diversified fund's share price than on the
share price of a non-diversified fund.
Although adoption of this Proposal 1B would eliminate the need for the Series
to comply with the 75% diversification test of the 1940 Act described above,
the Series would nevertheless be required to meet the diversification test
imposed by Subchapter M of the Internal Revenue Code. Subchapter M generally
requires the fund to invest no more than 25% of its total assets in securities
of any one issuer and to invest at least 50% of its total assets so that no
more than 5% of the Series' total assets are invested in securities of any
one issuer.
CHANGES IN THE NON-FUNDAMENTAL INVESTMENT POLICIES OF THE HARD ASSETS SERIES.
In addition to the modifications described above, the Trustees have approved
a policy that, under normal circumstances, the Series will invest at least 65%
of its total assets in securities issued by companies in the hard asset
sector, including structured notes, whose value is linked to the price of any
hard asset commodity or related commodity index. Such instruments are
considered derivatives in that their value is "derived" from an underlying
asset. Derivatives in which the Series may invest include futures contracts,
forward contracts, options, swaps and structured notes and other similar
securities as may become available in the market. These instruments offer
certain opportunities but are subject to certain risks, such as the potential
for periods of extreme volatility and illiquidity, exposure to the
creditworthiness of a counterparty to meet obligations, as well as resulting
difficulties in their valuation. The Series may also invest up to 10% of its
assets in asset-back securities, such as collateralized mortgage obligations
and other mortgage and non-mortgage asset-backed securities the value of which
may not be linked to any hard asset. A complete description of the investment
objectives and policies of the Hard Assets Series including the revised
policies adopted by the Board and reflecting the changes submitted for
shareholder approval, is in Appendix 1.
PROPOSALS RELATING TO THE ALL-GROWTH SERIES
SUMMARY OF NEW PORTFOLIO MANAGEMENT ARRANGEMENTS. The investment objective of
the All-Growth Series is capital appreciation. The Series seeks to achieve
its objective through investment in securities selected on the basis of
fundamental investment research for their long-term growth prospects. During
the period July 1, 1994 through February 2, 1997, Warburg Pincus Counsellors,
Inc. (hereinafter, "Warburg Pincus" or the "Prior Manager") served, pursuant
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to the terms of a separate agreement ("Prior Agreement"), as the portfolio
manager of the All-Growth Series. At a meeting of the Board held on January
23, 1997, the Board approved the termination of the Prior Agreement and the
engagement of Pilgrim, Baxter & Associates ("Pilgrim Baxter") pursuant to an
agreement among DSI, Pilgrim Baxter and the Trust ("Pilgrim Agreement"). The
Pilgrim Agreement first became effective on February 3, 1997, and the Prior
Agreement terminated on February 2, 1997. The terms and conditions of the
Pilgrim Agreement, including the portfolio management fee, are substantially
the same as those of the Prior Agreement. Under the 1940 Act, shareholder
ratification of the Pilgrim Agreement is required within 120 days of the date
on which the Pilgrim Agreement became effective.
At the March 4, 1997 meeting, the Board also considered and, subject to the
approval of the shareholders of the Series, approved a proposal to amend the
Pilgrim Agreement to increase from an annual rate of 0.50% of the average
daily net assets of the Series to 0.55% the fee to be paid by DSI (not the
Series) to Pilgrim Baxter. Although the proposed fee amendment will have no
effect upon the expenses borne paid by the Series, the amendment cannot become
effective unless and until approved by the shareholders of the Series. Both
the Pilgrim Agreement and the related fee amendment are discussed separately
below.
If both the Pilgrim Agreement and the related fee amendment are approved by
the shareholders of the All-Growth Series, the fee amendment to the Pilgrim
Agreement will become effective on the first day of the month following the
date of the shareholder approval and, unless sooner terminated, the Pilgrim
Agreement will remain in force, as amended, until February 3, 1999. The
Pilgrim Agreement will continue in effect from year to year thereafter in
accordance with its terms. If the Pilgrim Agreement (Proposal 2A) is approved
but the fee amendment (Proposal 2B) is not approved, the Pilgrim Agreement
will continue in effect as described and Pilgrim Baxter will be entitled to
compensation for its services at the rate currently specified in that
agreement.
THE BOARD OF TRUSTEES RECOMMENDS THE YOU VOTE
"FOR" PROPOSALS 2A AND 2B.
DISCUSSION OF PROPOSAL 2A. If this proposal is approved by shareholders of
the All-Growth Series, Pilgrim Baxter will continue to serve as the Portfolio
Manager of the Series in accordance with the Portfolio Management Agreement
currently in effect.
CONSIDERATIONS OF THE BOARD. At a meeting of the Board held on January 23,
1997, the Board, including a majority of the Independent Trustees, approved
the Pilgrim Agreement. The Board considered information provided to it
relating to the management style and past performance record of the Prior
Manager and Pilgrim Baxter. The Board was also presented with information
relating to the nature and quality of the services to be provided by Pilgrim
Baxter, the background and experience of those individuals who would be
responsible for making day-to-day investment decisions with respect to assets
of the Series and other registered investment companies to which Pilgrim
Baxter provides investment advisory services. The Board also considered the
fact that the terms and conditions pursuant to which Pilgrim Baxter would
provide its services were substantially the same as those contained in the
Prior Agreement.
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DESCRIPTION OF THE PILGRIM AGREEMENT. The terms and conditions set forth in
the Pilgrim Agreement are identical to those contained in the Prior Agreement
except for the description of the portfolio manager, the effective and
termination dates, and the modification of certain provisions relating to the
obligation of DSI to indemnify the Pilgrim under certain circumstances. Both
agreements require the portfolio manager, subject to the overall supervision
of the Board, to provide a continuous investment program for the assets of the
Portfolio, or that portion of such assets as may be, from time to time
allocated to it. Under both agreements, the named portfolio manager is
responsible, among other things, for the provision of investment research and
management of all investments and the selection of brokers and dealers through
which securities transactions are executed. The agreements each also provide
that the portfolio manager will not be liable to the Trust for any act or
omission connected with or arising out of any services rendered under the
agreement, except losses that may be sustained by reason of willful
misfeasance, reckless disregard of its duties, misfeasance, bad faith or gross
negligence on the part of the portfolio manager. Each of the agreements also
provides for its termination, at any time and without penalty, either by the
Trust, DSI or by the portfolio manager, in each case upon sixty days' written
notice, and for its termination in the event of an "assignment" as described
in the 1940 Act.
If approved at the Meeting, the Pilgrim Agreement will continue in effect for
two years from its effective date, unless sooner terminated. Thereafter,
unless sooner terminated, the Pilgrim Agreement shall continue in effect from
year to year for so long as its continuance is specifically approved, at least
annually, by (i) a majority of the Board or the vote of the holders of a
majority of the Series' outstanding voting securities; and (ii) the
affirmative vote, cast in person at a meeting called for the purpose of voting
on such continuance, of a majority of the Trust's Independent Trustees. The
Prior Agreement was last approved by the Board (including the Independent
Trustees) at a meeting of the Board held on June 10, 1996 and by the
shareholders of the Series on July 29, 1996. Had it not been terminated by
the Board as described above, the Prior Agreement would have continued in
effect thereafter from year to year so long as such continuation were approved
by the Trust's Board in accordance with the 1940 Act.
DISCUSSION OF PROPOSAL 2B. If this proposal is approved by shareholders of
the All-Growth Series, the advisory fee paid to Pilgrim Baxter by DSI (not the
Series) under the Pilgrim Agreement would increase from an annual rate of
0.50% of the average daily net assets of the Series to 0.55%.
The table below illustrates the impact that the proposed fee increase, if
approved by shareholders of the Series and implemented, would have had on the
Series and its shareholders if in effect for the Trust's fiscal year ended
December 31, 1996.
Actual Fees 1996 Hypothetical Fees for 1996 had
Proposed Fee Increase been in effect
Paid % change % change
by Series Paid to Prior Paid by Series Paid to Prior Fees paid Fees paid
to DSI Manager by DSI to DSI Manager by DSI by Series by DSI
- --------- -------------- -------------- -------------- --------- ---------
$910,039 $458,750 $910,039 $504,625 0.00% 0.10%
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CONSIDERATION BY THE BOARD. During the course of efforts to engage a new
portfolio manager for the Series, DSI apprised the Board of on-going
discussions with Pilgrim Baxter regarding the level of the advisory fee to be
paid to Pilgrim Baxter. DSI requested that, subject to the approval of the
Series shareholders, that the Board approve an amendment to the Pilgrim
Agreement that would permit DSI to increase the rate of the fee payable by DSI
to Pilgrim Baxter under the Pilgrim Agreement from 0.50% of the Series'
average daily net assets to 0.55% of such assets. The Trustees, including the
Independent Trustees, unanimously approved DSI's proposal. In doing so, the
Trustees determined that the proposed increased advisory fee rate was
reasonable in light of the nature and quality of the services to be provided
to the Series by Pilgrim Baxter. The Trustees also considered the fact that
the Series would not bear any additional expense as a result of the proposed
increase.
PROPOSALS RELATING TO THE EMERGING MARKETS SERIES
SUMMARY OF NEW PORTFOLIO MANAGEMENT ARRANGEMENTS. The Emerging Markets Series
seeks to achieve long-term growth of capital by investing primarily in equity
securities of companies that are considered to be in emerging market
countries. During the period October 4, 1993 through February 28, 1997,
Bankers Trust Company (hereinafter, "Bankers Trust" or the "Prior Manager")
served, pursuant to the terms of a separate agreement ("Prior Agreement"), as
the portfolio manager of the Emerging Markets Series. At a meeting of the
Board held earlier this year, the Board approved a proposal ("Putnam
engagement") to engage Putnam Investment Management, Inc. ("Putnam") on
behalf of the Series pursuant to an agreement among DSI, Putnam and the Trust
("Putnam Agreement"). Under the Putnam Agreement, which first became
effective on March 1, 1997, Putnam is entitled to receive a portfolio
management fee calculated at the annual rate of .75% of the Series average
daily net assets from DSI (not the Series). This fee is the same as the fee
received by the Prior Manager under the Prior Agreement. The Putnam
engagement must be approved by the Series' shareholders within 120 days of the
effective date of the Putnam Agreement in order for the Putnam Agreement to
continue after such 120 day period.
At the ___________ meeting, the Board also approved two additional and related
proposals. The first would, if approved by the series shareholders, increase
the fee payable to Putnam by DSI under the Putnam Agreement. The second would
amend the Management Agreement between the Trust and DSI ("DSI Management
Agreement") to increase the fee paid by the Series to DSI in an amount that
generally corresponds to the increased fee that DSI would be required to pay
to Putnam if the fee increase sought by Putnam becomes effective. Both the
Putnam fee increase and the amendment to the DSI Management Agreement must be
approved by shareholders in order for either proposal to be implemented.
SUMMARY OF PROPOSED CHANGES IN THE INVESTMENT POLICIES OF THE EMERGING MARKETS
SERIES. As noted above, the Series current objective emphasizes growth of
capital, and generally implies a focus on issuers whose securities are
undervalued. It is proposed that this objective be modified to emphasize
capital appreciation, which generally implies that investments may include
securities issued by smaller capitalization companies.
Each of the above proposals are discussed separately below.
10
<PAGE>
THE BOARD OF TRUSTEES RECOMMENDS THE YOU VOTE
"FOR" PROPOSALS 3A, 3B(i) 3B(ii), and 3C.
DISCUSSION OF PROPOSAL 3A. If this proposal is approved by shareholders of
the Emerging Markets Series, Putnam will continue to serve as the Portfolio
Manager of the Series in accordance with the Putnam Agreement as currently in
effect and at the same portfolio management fee rate as was paid under the
Prior Agreement.
CONSIDERATION BY THE BOARD OF THE PUTNAM ENGAGEMENT. At meetings of the Board
held earlier this year the Board, including a majority of the Independent
Trustees, approved the Putnam Agreement. In approving the Putnam engagement,
the Board was aware of the particular investment style favored by Putnam and
in accordance with which Putnam is expected to manage the Series' portfolio.
The Board also considered information relating to the nature and quality of
the services to be provided by Putnam, the depth and resources of the Putnam
organization, and the background and experience of those individuals who would
be responsible for making day-to-day investment decisions with respect to
assets of the Series and other registered investment companies to which Putnam
provides investment advisory services.
COMPARISON OF THE PUTNAM AGREEMENT AND THE PRIOR AGREEMENT. The Putnam
Agreement provides for the provision by Putnam of substantially similar
services as those provided by the Prior Manager. Both the Prior Agreement and
the Putnam Agreement require the portfolio manager, subject to the overall
supervision of the Board, to provide a continuous investment program for the
assets of the Series. Under both agreements, the named portfolio manager is
responsible, among other things, for the provision of investment research and
management of all investments and the selection of brokers and dealers through
which securities transactions are executed. The agreements each also provide
that the portfolio manager will not be liable to the Trust for any error of
judgment or mistake of law, except losses that may be sustained as a result of
willful misfeasance, reckless disregard of its duties, bad faith or gross
negligence on the part of the portfolio manager. Each of the agreements
provides for its termination, at any time and without penalty, either by the
Trust, DSI, or by the portfolio manager, in each case upon sixty days' written
notice; the agreements also provide for termination in the event of an
"assignment" as defined in the 1940 Act.
The Prior Agreement provided that the Prior Manager would receive an annual
fee of .75% of the Series' average daily net assets. The Putnam Agreement
provides for the payment to Putnam of an identical fee, but further provides
for an increase in that fee, if such increase is approved by shareholders of
the Series. (As noted above, such fee increase may not be implemented unless
and until the shareholders of the Series approve the increase; Proposal 3B
below, requests the approval of the shareholders of the Emerging Markets
Series for the proposed increase.)
The structure of the Putnam Agreement also differs from the Prior Agreement in
that the Putnam Agreement is designed to cover portfolio management services
provided by Putnam to the Trust's Managed Global Series. (A proposal
requesting that shareholders of the Managed Global Series approve the Putnam
Agreement with respect to the Managed Global Series is included later in this
proxy statement.) The Prior Agreement was last approved by the Board
(including the Independent Trustees) at a meeting of the Board held on June
10, 1996, and by the shareholders of the Series on July 29, 1996. Had it not
11
<PAGE>
been terminated by the Board as described above, the Prior Agreement would
have continued in effect thereafter from year to year so long as such
continuation were approved by the Trust's Board in accordance with the 1940
Act.
DISCUSSION OF PROPOSALS 3B(I) AND 3B(II). If both of these proposals are
approved, the portfolio management fee payable by DSI to Putnam under the
Putnam Agreement, and the fee payable by the Series to DSI, would be
increased.
CONSIDERATION BY THE BOARD. During the course of efforts to engage a new
portfolio manager for the Series, DSI apprised the Board of on-going
discussions with Putnam regarding the level of the advisory portfolio
management fee paid to the Prior Manager and those provisions of the Putnam
Agreement that contemplate, subject to shareholder approval, an increase in
such portfolio management fee.. In particular, DSI expressed its view that
Putnam would likely be willing to assume the role of Portfolio Manager for the
Series at the current rate of compensation only temporarily. In light of
this, DSI requested that the Putnam Agreement be amended to permit DSI to
increase the advisory fee payable to Putnam from an annual fee of .75% of the
Series average daily net assets to the following fee schedule: for the first
$150 million of assets, 1.00% of the Series average daily net assets; for the
next $150 million in assets, .95% of such assets; and for assets over $300
million, .85% of such assets.
To cover the cost to DSI of paying such increased advisory fee to Putnam, DSI
also requested that the Trustees approve an increase in the management fee
payable by the Series to DSI to 1.75% of the Series average daily net assets.
Under DSI's existing contract, which was last approved by the Trustees on June
10, 1996 and by the shareholders on July 29, 1996, DSI is entitled to receive
from the Series a fee of 1.50% of the Series average daily net assets. That
contract further provides that DSI will be responsible for providing or
procuring at its own expense, in addition to investment advisory services, all
administrative and other services reasonably necessary for the ordinary
operation of the Series. Because DSI is responsible for paying Putnam, DSI
retains the difference between the fee payable to Putnam and the total fee
paid to it by the Series. As proposed, the DSI fee does not include "break
points" as does the proposed Putnam fee schedule. At such time as the break
points in the Putnam are reached, the percentage of DSI's management fee
payable to Putnam would decrease, and DSI's retention would increase
correspondingly.
In approving the proposed fee increase and concluding that such increase was
reasonable, the Trustees considered representations made by officers of DSI to
the effect that, at the Series' current asset levels, fees received by DSI
from the Series were insufficient to cover expenses incurred by DSI in
managing the Series. The Trustees also considered the investment style
favored by Putnam, the nature and quality of the services historically
provided by that firm and its depth and resources.
The table below illustrates the impact that the proposed fee increase, if
approved by shareholders of the Series and implemented, would have had on the
Series and its shareholders if in effect for the Trust's fiscal year ended
December 31, 1996.
12
<PAGE>
Actual Fees 1996 Hypothetical Fees for 1996 had
Proposed Fee Increase been in effect
Paid % change % change
by Series Paid to Prior Paid by Series Paid to Prior Fees paid Fees paid
to DSI Manager by DSI to DSI Manager by DSI by Series by DSI
- --------- -------------- -------------- -------------- --------- ---------
$791,005 $395,503 $922,987 $527,337 0.167% 0.33%
If Proposal 3A, 3B(i) and 3B(ii) are approved by the Series' shareholders, the
portfolio management fee payable to Putnam by DSI with respect to Putnam's
services to the Series will begin being calculated in accordance with the new
(higher) fee schedule on the first day of the month following the date of the
shareholder approval, and, unless sooner terminated, the Putnam Agreement will
remain in force, as amended, until March 1, 1999. Thereafter, the Putnam
Agreement shall continue in effect from year to year for so long as its
continuance is specifically approved, at least annually, by (i) a majority of
the Board or the vote of the holders of a majority of the Series' outstanding
voting securities; and (ii) the affirmative vote, cast in person at a meeting
called for the purpose of voting on such continuance, of a majority of the
Trust's Independent Trustees.
If Proposal 3A is approved by the Series' shareholders and either Proposal
3B(i) or 3B(ii) are not approved, both the Putnam Agreement and the Management
Agreement will continue in effect in the manner noted above, except that the
proposed fee increase will not take effect.
DISCUSSION OF PROPOSAL 3C. If this proposal is approved by shareholder of the
Emerging Markets Series, the investment objective of the Series will be
modified so as to permit more flexibility to invest in small capitalization
companies.
As currently in effect, the Series investment objective is long-term growth of
capital. DSI and Putnam recommended to the Board that the Series objective be
restated as "long-term capital appreciation." During the course of its
deliberations, the Board of Trustees considered the views expressed by DSI and
Putnam, to the effect that the recommended investment objective may more
clearly afford Putnam sufficient flexibility to invest in small capitalization
companies and would presumably permit Putnam to manage in a fashion believed
to be consistent with its investment approach. In light of this, the Trustees
approved, subject to the approval of the shareholders of the Series, that the
current objective be modified to substitute the words "capital growth" with
the words "capital appreciation."
Investments in securities issued by smaller capitalization companies, which
includes companies with market capitalizations of $1 billion or less may
involve special risks. Issuers of such securities may have limited product
lines, markets or financial resources and may be dependent on a limited
management group. These securities may also trade less frequently and in
smaller volume than more widely held issues, and their value may fluctuate
more sharply in response to general market movements or other factors.
Finally, there may be less information available about such companies and it
may take a longer period of time for the prices of such securities to reflect
the full value of their issuers' underlying earnings potential or assets.
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<PAGE>
PROPOSALS RELATING TO THE MANAGED GLOBAL SERIES
SUMMARY OF NEW PORTFOLIO MANAGEMENT ARRANGEMENTS. The investment objective of
the Managed Global Series is to seek high total investment return consistent
with a prudent regard for capital preservation. In seeking this objective,
the Series policy is to employ an asset allocation strategy involving a wide
range of investment and market sectors throughout the world. During the
period July 1, 1994 through February 28, 1997, Warburg Pincus Counsellors,
Inc. (hereinafter, "Warburg Pincus" or the "Prior Manager") served, pursuant
to the terms of a separate agreement ("Prior Agreement"), as the portfolio
manager of the Managed Global Series. At a meeting of the Board held on March
4, 1997, the Board approved the termination of the Prior Agreement and the
engagement of Putnam Investment Management, Inc. ("Putnam") pursuant to an
agreement among DSI, Putnam and the Trust ("Putnam Agreement"). Under the
Putnam Agreement, which first became effective on March 1, 1997, Putnam is
entitled to receive from DSI (not the Series) a portfolio management fee
calculated at the annual rate of 0.60% of the Series average daily net assets
with respect to the first $500 million of the Series average daily net assets,
and 0.50% of such assets above $500 million. This fee is the same as the fee
received by the Prior Manager under the Prior Agreement. The Putnam
engagement must be approved by the Series' shareholders within 120 days of the
effective date of the Putnam Agreement in order for the Putnam Agreement to
continue after such 120 day period.
At the same meeting, the Board also approved an increase in the annual fee
payable to Putnam by DSI (and not the Series) under the Putnam Agreement, as
follows: for the first $500 million of the Series average daily net assets,
.70%, and .60% of such assets above $500 million. Although the fee increase
would not affect the Series, as DSI and not the Series is responsible for fees
payable to a portfolio manager, the proposed fee must be approved by the
Series' shareholders in order for either proposal to be implemented.
SUMMARY OF PROPOSED CHANGES IN THE INVESTMENT POLICIES OF THE MANAGED GLOBAL
SERIES. It is proposed that the Series replace its existing investment
objective, which emphasizes total return and generally includes an income
component, with an objective of seeking capital appreciation, with income as
only an incidental consideration in selecting investments. The changes were
proposed by DSI as a means of assuring that Putnam would be better able to
take advantage of opportunities in the international equity markets than might
otherwise be the case, and to presumably permit Putnam manage in a fashion
believed to be consistent with its investment approach.
THE BOARD OF TRUSTEES RECOMMENDS THE YOU VOTE
"FOR" PROPOSALS 4A, 4B and 4C.
DISCUSSION OF PROPOSAL 4A. If this proposal is approved by shareholders of
the Managed Global Series, Putnam will continue to serve as the Portfolio
Manager of the Series in accordance with the Putnam Agreement as currently in
effect and at the same portfolio management fee rate as was paid under the
Prior Agreement.
CONSIDERATION BY THE BOARD OF THE PUTNAM ENGAGEMENT. At a meeting of the
Board held ____________, the Board, including a majority of the Independent
Trustees, approved the Putnam Agreement. In approving the Putnam engagement,
the Board was aware of the particular investment style favored by Putnam and
in accordance with which Putnam is expected to manage the Series' portfolio.
14
<PAGE>
The Board also considered information relating to the nature and quality of
the services to be provided by Putnam, the depth and resources of the Putnam
organization, and the background and experience of those individuals who would
be responsible for making day-to-day investment decisions with respect to
assets of the Series and other registered investment companies to which Putnam
provides investment advisory services.
COMPARISON OF THE PUTNAM AGREEMENT AND THE PRIOR AGREEMENT. The Putnam
Agreement provides for the provision by Putnam of substantially similar
services as those provided by the Prior Manager. Both the Prior Agreement and
the Putnam Agreement require the portfolio manager, subject to the overall
supervision of the Board, to provide a continuous investment program for the
assets of the Series. Under both agreements, the named portfolio manager is
responsible, among other things, for the provision of investment research and
management of all investments and the selection of brokers and dealers through
which securities transactions are executed. The agreements each also provide
that the portfolio manager will not be liable to the Trust for any error of
judgment or mistake of law, except losses that may be sustained as a result of
willful misfeasance, reckless disregard of its duties, misfeasance, bad faith
or gross negligence on the part of the portfolio manager. Each of the
agreements provides for its termination, at any time and without penalty,
either by the Trust or DSI, or by the portfolio manager, in each case upon
sixty days' written notice; the agreements also provide for termination in the
event of an "assignment" as defined in the 1940 Act.
The Prior Agreement provided that the Prior Manager would receive a portfolio
management fee calculated at the annual rate of 0.60% of the Series average
daily net assets with respect to the first $500 million of the Series average
daily net assets, and 0.50% of such assets above $500 million. The Putnam
Agreement provides for the payment to Putnam of an identical fee, but further
provides for an increase in that fee, if such increase is approved by
shareholders of the Series. (As noted above, such fee increase may not be
implemented unless and until the shareholders of the Series approve the
increase; Proposal 3B, below, requests the approval of the shareholders of the
Emerging Markets Series for the proposed increase.)
The structure of the Putnam Agreement also differs from the Prior Agreement in
that the Putnam Agreement is designed to cover portfolio management services
provided by Putnam to the Trust's Managed Global Series. (A proposal
requesting that shareholders of the Emerging Market Series approve the Putnam
Agreement with respect to that Series is included earlier in this Proxy
Statement.) The Prior Agreement was last approved by the Board (including the
Independent Trustees) at a meeting of the Board held on June 10, 1996, and by
the shareholders of the Series on July 29, 1996. Had it not been terminated
by the Board as described above, the Prior Agreement would have continued in
effect thereafter from year to year so long as such continuation were
approved by the Trust's Board in accordance with the 1940 Act.
DISCUSSION OF PROPOSAL 4B. If this proposal is approved, the portfolio
management fee payable by DSI to Putnam under the Putnam Agreement, would be
increased. The Series (and its shareholders) would not bear these higher
expenses.
CONSIDERATION BY THE BOARD. During the course of the Board efforts to engage a
new portfolio manager for the Series, DSI apprised the Board of on-going
discussions with Putnam regarding the level of the portfolio management fee
15
<PAGE>
paid to the Prior Manager and those provisions of the Putnam Agreement that
contemplate, subject to shareholder approval, an increase in such portfolio
management fee. In particular, DSI expressed its view that Putnam would
likely be willing to assume the role of Portfolio Manager for the Series at
the current rate of compensation only temporarily.
The table below illustrates the impact that the proposed fee increase, if
approved by shareholders of the Series and implemented, would have had on the
Series and its shareholders if in effect for the Trust's fiscal year ended
December 31, 1996.
Actual Fees 1996 Hypothetical Fees for 1996 had
Proposed Fee Increase been in effect
Paid % change % change
by Series Paid to Prior Paid by Series Paid to Prior Fees paid Fees paid
to DSI Manager by DSI to DSI Manager by DSI by Series by DSI
- --------- -------------- -------------- -------------- --------- ---------
$878,077 $487,434 $878,077 $568,673 0.00% 0.167%
If both the Putnam Agreement and the related fee amendment are approved by the
shareholders of the Managed Global Series, the fee amendment to the Putnam
Agreement will become effective on the first day of the month following the
date of the shareholder approval and the Putnam Agreement will remain in
force, as amended, until February 28, 1999. The Putnam Agreement will
continue in effect from year to year thereafter in accordance with its terms.
If the Putnam Agreement (Proposal 4A) is approved but the fee amendment
(Proposal 4B) is not approved, the Putnam Agreement will continue in effect
and Putnam will be entitled to compensation for its services at the rate
currently specified in that agreement.
If approved at the Meeting, the Putnam Agreement will continue in effect for
two years from its effective date, unless sooner terminated. Thereafter, the
Putnam Agreement shall continue in effect from year to year for so long as its
continuance is specifically approved, at least annually, by (i) a majority of
the Board or the vote of the holders of a majority of the Series' outstanding
voting securities; and (ii) the affirmative vote, cast in person at a meeting
called for the purpose of voting on such continuance, of a majority of the
Trust's Independent Trustees. The Prior Agreement was last approved by the
Board (including the Independent Trustees) at a meeting of the Board held on
June 10, 1996, and by the shareholders of the Series on July 29, 1996. Had
it not been terminated by the Board as described above, the Prior Agreement
would have continued in effect thereafter from year to year so long as such
continuation were approved by the Trust's Board in accordance with the 1940
Act. The Prior Agreement also provided a standard of care to the Trust that
is substantially the same as that set forth in the Putnam Agreement
DISCUSSION OF PROPOSAL 4C: If this proposal is approved, the Series current
total return objective will be replaced with the investment objective of
achieving capital appreciation, with income as an incidental factor in
selecting investments
At a meeting of the Board held on _____, DSI recommended that the Trustees
approve a change in the Series investment objective. Because the Series'
objective is a fundamental policy, the change must be approved by the Series'
shareholders before it may be implemented.
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The current investment objective of the Series is to seek high total
investment return consistent with a prudent regard for capital preservation.
If approved by the Series shareholders, the proposal would make it a
fundamental policy of the Series to seek capital appreciation in the selection
of investments. In seeking capital appreciation, it is anticipated that the
Series will continue to employ a global investment strategy currently
permitted under the Series existing investment policies, and the Series will
continue, under normal market conditions, to invest at least 65% of its assets
in at least three different countries, one of which may be the United States.
In selecting investments, the Series will not limit its investments to any
particular type of company. It may invest, as it is currently permitted to
do, in companies, large or small, whose earnings are believed to be in a
relatively strong growth trend, or in companies in which significant further
growth is not anticipated but whose securities are thought to be undervalued.
It may invest in small and relatively well-known companies. Investing in
securities of smaller, less well-known companies may present greater
opportunities for capital appreciation, but may also involve greater risks.
It is also anticipated that, if this change is approved by the Series'
shareholders, that the Series' existing asset allocation strategy, which
involves a wide range of investments and market sectors throughout the world,
will be de-emphasized in favor of a greater focus on equity investments.
Equity securities includes common and preferred stock and rights and warrants
to purchase other equity securities. In general, investments in equity
securities are subject to market risks that may cause their prices to
fluctuate over time, and may be more suitable for long term investors who can
bear the risk of short-term principal fluctuation.
The Board approved the proposed new investment objective, subject to
shareholder approval. A complete description of the investment objectives and
policies of the Managed Global Series, including the revised policies in
investment objective adopted by the Board and reflecting the changes submitted
to for shareholder approval, is in Appendix 2.
PROPOSAL RELATED TO THE MARKET MANAGER SERIES
SUMMARY OF NEW PORTFOLIO MANAGEMENT ARRANGEMENT. During the period __________
through _________, Bankers Trust Company (hereinafter, " Bankers Trust" or
the "Prior Manager") served, pursuant to the terms of a separate agreement
("Prior Agreement"), as the portfolio manager of the Market Manager Series.
At a meeting of the Board held on ________ , the Board approved the
termination of the Prior Agreement and the engagement of Equitable Investment
Services, Inc. ("EISI") pursuant to the terms and conditions of an agreement
(which agreement is already in place with respect to Limited Maturity Bond
Series and Liquid Asset Series) among DSI, EISI and the Trust (" EISI
Agreement"). The terms and conditions, including the portfolio management
fee, set forth in the EISI Agreement, are substantially the same as those of
the Prior Agreement. Under the 1940 Act, if shareholder ratification of the
EISI Agreement is not obtained within 120 days of the date on which the EISI
Agreement became effective, the EISI Agreement will terminate.
THE BOARD OF TRUSTEES RECOMMENDS THE YOU VOTE
"FOR" PROPOSAL 5.
DISCUSSION OF PROPOSAL 5. If this proposal is approved by shareholders of
Market Manager Series, EISI will continue to serve as the Portfolio Manager of
the Series in accordance with the EISI Agreement as currently in effect and
17
<PAGE>
at the same portfolio management fee rate as was paid under the Prior
Agreement.
Consideration by the Board. At a meeting of the Board held on _______,
the Board, including a majority of the Independent Trustees, approved the EISI
Agreement. The Board was presented with information relating to the nature
and quality of the services to be provided by EISI, and the nature of the
services necessary for the management of the Series'. It was noted that
Market Manager Series' is a very small fund. The Board also considered the
fact that the terms and conditions pursuant to which EISI would provide its
services were substantially the same as those contained in the Prior
Agreement, and in particular, that the advisory fee to be paid to EISI by DSI
was the same as the advisory fee paid by DSI to the Prior Manager.
Description of the EISI Agreement. The terms and conditions set forth in
the EISI Agreement are substantially the same as those contained in the Prior
Agreement. Both agreements require the portfolio manager, subject to the
overall supervision of the Board, to provide a continuous investment program
for the assets of the Portfolio. Under both agreements, the named portfolio
manager is responsible, among other things, for the provision of investment
research and management of all investments and the selection of brokers and
dealers through which securities transactions are executed. The agreements
each also provide that the portfolio manager will not be liable to the Trust
for any act or omission connected with or arising out of the services rendered
under the agreement, except losses that may be sustained as a result of
willful misfeasance, reckless disregard of its duties, bad faith or gross
negligence on the part of the portfolio manager. Each of the agreements also
provides for its termination, at any time and without penalty, either by the
Trust, DSI or by the portfolio manager, in each case upon sixty days' written
notice, and its termination in the event of an "assignment" as described in
the 1940 Act.
If approved at the Meeting, the EISI Agreement will continue in effect for two
years from its effective date, unless sooner terminated. Thereafter, the EISI
Agreement shall continue in effect from year to year for so long as its
continuance is specifically approved, at least annually, by (i) a majority of
the Board or the vote of the holders of a majority of the Series' outstanding
voting securities; and (ii) the affirmative vote, cast in person at a meeting
called for the purpose of voting on such continuance, of a majority of the
Trust's Independent Trustees. The Prior Agreement was last approved by the
Board (including the Independent Trustees) at a meeting of the Board held on
_______, and by the shareholders of the Series on _________. Had it not been
terminated by the Board as described above, the Prior Agreement would have
continued in effect thereafter from year to year so long as such continuation
were approved by the Trust's Board in accordance with the 1940 Act. The Prior
Agreement also provided a standard of care for the indemnification of the
Trust that is substantially the same as that set forth in the EISI Agreement.
PROPOSAL 6: ELECTION OF TRUSTEES.
It is proposed that four additional Trustees be elected, each to hold office
until a successor is duly elected and qualified. The Board of Trustees does
not contemplate that any nominee will be unable to serve as Trustee for any
reason, but if that should occur prior to the meeting, the proxy holders
reserve the right to substitute another person or persons of their choice as
nominee or nominees.
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Ordinarily, after this meeting takes place no other shareholders' meetings
will be held for the purpose of electing trustees unless and until such time
as less than a majority of the trustees holding office have been elected by
shareholders, at which time the trustees then in office will call a
shareholders' meeting for election of trustees. Under the 1940 Act,
shareholders of record of not less than two-thirds of the outstanding shares
of the Trust may remove a trustee through a declaration in writing or by vote
cast in person or by proxy at a meeting called for that purpose. Under the
Trust's Agreement and Declaration of Trust, the trustees are required to call
a meeting of shareholders for the purpose of voting upon the question of
removal of any such trustee when requested in writing to do so by shareholders
of record of not less than 10% of the Fund's outstanding shares.
Each person listed in the table below has consented to being named in this
proxy statement and has agreed to serve as a Trustee if elected
NAME AND OCCUPATION AGE
- ------------------- ---
J. Michael Earley
President and Chief Executive Officer of Bankers Trust Company, 51
Des Moines, Iowa since July, 1992; President and Chief Executive
Officer of Mid-America Savings Bank, Waterloo, Iowa from April,
1987 to June, 1992.
Barbara Gitenstein
Provost, Drake University since July, 1992; Assistant Provost of 49
State University of New York from August, 1991 to June, 1992;
Assistant Provost of State University of New York - Oswego from
January, 1989 to August, 1991.
Stanley B. Seidler
President of Iowa Periodicals, Inc., a distributor of books, 68
periodicals and video cassettes.
Paul R. Schlaack*
President, Chief Executive Officer and Director of Equitable 50
Investment Services, Inc. since 1984.
* indicates a person who is an "interested person" of the Trust
+ indicates an incumbent
Remuneration Of Trustees, Officers And Others. Officers and Trustees of the
Trust who are affiliated with Equitable of Iowa Companies, or any of their
affiliates, as the case may be, receive no remuneration from the Trust. Each
other Trustee receives an annual fee of $24,000 and for each Board meeting
attended is reimbursed for expenses. There were four Board of Trustee
meetings held during 1996 fiscal year and such Trustees received fees and
expenses, as a group, totaling $_______ during such period. The Fund has no
bonus, pension, profit-sharing or retirement plan.
ADDITIONAL INFORMATION ABOUT THE TRUST
Outstanding Shares. As of the Record Date, there were the following number of
Shares outstanding for each Series of the Trust:
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Series Shares Outstanding
--------------------- ------------------
All-Growth 5,594,997.151
Emerging Markets 5,367,357.864
Multiple Allocation 21,279,900.537
Fully Managed 9,378,821.304
Limited Maturity Bond 7,745,944.912
Hard Assets 2,495,505.767
Real Estate 3,407,716.299
Capital Appreciation 9,943,509.628
Rising Dividends 8,581,046.543
Value Equity 3,362,328.497
Strategic Equity 2,862,193.433
Small Cap 3,152,200.432
Managed Global 7,852,702.848
Liquid Asset 41,353,722.540
Market Manager 422,420.477
Fund for Life 26,386.030
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:
Name and Address Shares %
of Beneficial Owner Series Held of Shares
------------------- ------ ------ ---------
Officers of the Trust. The principal executive officers of the Trust and
their ages and principal occupations are set forth following. The executive
officers of the Trust are elected annually and each serves until his or her
successor shall have been duly elected and qualified.
Terry L. Kendall, age 50, serves as Chairman of the Board and President of the
Trust. Additionally, Mr. Kendall is Director, President, and Chief Executive
Officer, Golden American Life Insurance Company ("Golden American") since
1993; President, Director, and Chief Executive Officer, EIC Variable, Inc.
since 1993; Chairman of the Board and President of Separate Account D of
Golden American ("Separate Account D") since 1993; Executive Vice President,
Equitable Life Insurance Company of Iowa ("Equitable Life"); formerly Managing
Director, Bankers Trust Company (1993-1996); formerly, President and Chief
Executive Officer, United Pacific Life Insurance Company (1983-1993).
Barnett Chernow, age 46, serves as Vice President of Trust. Additionally, Mr.
Chernow is Executive Vice President, Golden American, October 1993 to present;
Executive Vice President, Directed Services, Inc. ("DSI"), October 1993 to
present; Vice President, Equitable Life: 1993 to present; Executive Vice
President, EIC Variable, Inc., October 1993 to present; Senior Vice President
and Chief Financial Officer, Reliance Insurance Company, August 1977 to July
1993.
20
<PAGE>
Myles R. Tashman, age 53, serves as Secretary of Trust. Additionally, he is
Executive Vice President and Secretary, Golden American since 1993 and General
Counsel since July, 1996; Executive Vice President and Secretary, DSI since
1993 and General Counsel since July, 1996; Executive Vice President, EIC
Variable; Secretary of Separate Account D; Assistant Secretary, Equitable
Life; formerly, Senior Vice President and General Counsel, United Pacific Life
Insurance Company (1986-1993).
Mary Bea Wilkinson, age 40, serves as Treasurer of Trust. Additionally, she
was Senior Vice President, Golden American, November 1993 to _________;
President, DSI, January 1995 to _________; Senior Vice President, EIC
Variable, November 1993 to _________; 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.
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 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 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. 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.
Costs of Solicitation. The costs associated with the Meeting will be paid by
DSI. Neither the Trust nor its Shareholders will bear any costs associated
with the Meeting, any additional proxy solicitation or any adjourned session.
Other Business and Shareholder Proposals. 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.
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
21
<PAGE>
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
_________________________________
Myles R. Tashman
Secretary
April ______, 1997
Wilmington, Delaware
22
<PAGE>
APPENDIX AND EXHIBIT INDEX
Appendix Appendix Description
1 Description of Investment Objectives and Policies of Hard
Assets Series
2 Description of Investment Objectives and Policies of Managed
Global Series
Exhibit Exhibit Description
A Information about Portfolio Managers
B Proposed Fee Amendment to the Management Agreement between the
Trust and Directed Services, Inc. (Emerging Markets Series
Only)
C Portfolio Management Agreement relating to the All-Growth
Series
D Portfolio Management Agreement relating to the Emerging Markets
Series
D Portfolio Management Agreement relating to the Managed Global
Series
E Portfolio Management Agreement relating to the Market Manager
Series
23
<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 shares of
the named 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 April __,
1997, at 10:00 a.m., EST, 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 voting instruction 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 Directed Services, Inc. ("DSI") Neither the Trust nor its
Shareholders will bear any costs associated with this Meeting.
HARD ASSETS SERIES
1.a. To permit the Hard Assets Series For Against Abstain
to concentrate in any one of the [ ] [ ] [ ]
industries that compromise the "hard
assets" group, including real estate
investment trusts:
1.b. To approve a change in the Hard Assets For Against Abstain
Series' subclassification from [ ] [ ] [ ]
"diversified" to "non-diversified," as
defined by the Investment Company Act
of 1940 ("1940 Act"):
ALL-GROWTH SERIES
2.a. To approve a new Portfolio Management For Against Abstain
Agreement with Pilgrim, Baxter & [ ] [ ] [ ]
Associates, Inc. ("Pilgrim Baxter"):
2.b. To approve an increase in the advisory For Against Abstain
fee paid to Pilgrim Baxter by DSI and not [ ] [ ] [ ]
the Series:
EMERGING MARKETS SERIES
3.a. To approve a new Portfolio Management For Against Abstain
Agreement with Putnam Investment [ ] [ ] [ ]
Management,Inc. ("Putnam"):
3.b. (i) To approve an increase in the For Against Abstain
advisory fee paid to DSI by the Series: [ ] [ ] [ ]
3.b. (ii) To approve an increase in the For Against Abstain
advisory fee paid to Putnam by DSI: [ ] [ ] [ ]
<PAGE>
3.c. To approve a change in the statement For Against Abstain
of the Series' investment objective from [ ] [ ] [ ]
long-term growth of capital to long-term
capital appreciation:
MANAGED GLOBAL SERIES
4.a. To approve a new Portfolio Management For Against Abstain
Agreement with Putnam: [ ] [ ] [ ]
4.b. To approve an increase in the advisory For Against Abstain
fee paid to Putnam by DSI (not the Series): [ ] [ ] [ ]
MARKET MANAGER SERIES
5. To approve a new Portfolio Management For Against Abstain
Agreement with EISI: [ ] [ ] [ ]
ALL SERIES
6.a. To elect Trustees to hold office until For Against Abstain
their successors are duly elected and [ ] [ ] [ ]
qualified:
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 that separate account for which it has
received instructions from contract owners participating in the above-listed
Series.] *
PLEASE VOTE, SIGN EXACTLY AS LISTED ABOVE 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 so indicate.
Date:______________________, 1997
_________________________________
_________________________________
<PAGE>
Appendix 1 Relating to the Hard Asset Series
The following information, which is drawn from the Trust's Prospectus,
summarizes the investment policies of the Hard Assets Series, as they will
be in effect if Proposal 1A is approved by the Series' shareholders.
The Hard Assets Series, formerly the Natural Resources Series, seeks long-term
capital appreciation. The Series seeks this objective by investing primarily
in equity and debt securities of companies engaged in the exploration,
development, production, management, and distribution of hard assets such as
gold and other precious metals,strategic metals, minerals, oil, natural gas,
coal and real estate investment trusts. The Series may also invest in equity
and debt securities of companies which themselves invest in companies engaged
in these activities. Although current income may be realized, it is not an
investment objective; it is anticipated that the Series will realize only a
nominal amount of current income. The Series' Portfolio Manager is Van Eck
Associates Corporation.
The Series' Portfolio Manager believes securities of some natural resources
companies, sometimes referred to as "hard asset" companies, offer an opportu-
nity to protect wealth against eroding monetary values. The Portfolio Manager
believes that recent history indicates that the policies of many governments,
particularly persistent budget deficits and high rates of money supply growth,
have, at times, had long-term inflationary consequences. Generally, during pe-
riods of accelerating inflation, the prices of many natural resources equity
securities sometimes have risen faster than the rate of inflation; and the
Portfolio Manager believes that they will continue to do so in the future.
During such periods, interest rates and yields on industrial shares have ris-
en, causing the prices of fixed income and industrial equity securities to de-
cline. The Portfolio Manager anticipates that inflation and the price of cer-
tain natural resources will continue on a long-term upward trend with alter-
nating cycles as credit is overexpanded and subsequently tightened. Since the
market action of shares of companies engaged in certain natural resources ac-
tivities may move against or independently of the market trend of industrial
shares, the addition of such shares to an overall portfolio may increase the
return and reduce the fluctuations of such portfolio. There can be no assur-
ance that an increased rate of return or reduced fluctuation of a portfolio
will be achieved. Thus, an investment in the Series' shares should be consid-
ered part of an overall investment program rather than a complete investment
program.
The Series may invest in securities of foreign issuers, including securities
of South African issuers. The relative amount of the Series' investment in
foreign issuers will change from time to time, and the Series is subject to
certain guidelines for diversification of foreign security investments. In-
vestments by the Series in securities of foreign issuers may involve particu-
lar investment risks. Political and social conditions in South Africa,
due to former segregation policies of the South African government and unset-
tled political conditions prevailing in South Africa and neighboring coun-
tries, may pose certain risks to the Series' investments. If aggravated by lo-
cal or international developments, such risks could have an adverse effect on
investments in South Africa, including the Series' investments and, under cer-
tain conditions, on the liquidity of the Series' portfolio and its ability to
meet shareholder redemption requests.
<PAGE>
The Series will normally invest at least 65% of its total assets in Hard Asset
Securities. Hard Asset Securities include equity securities of "Hard Asset
Companies" and securities, including structured notes, whose value is linked
to the price of a Hard Asset commodity or a commodity index. The term "Hard
Asset Companies" includes companies that are directly or indirectly (whether
through supplier relationships, servicing agreements or otherwise)engaged to a
significant extent in the exploration, development, production or distribution
of one or more of the following (together "Hard Assets"): (a) precious metals,
(b) ferrous and non-ferrous metals, (c) gas, petroleum, petrochemicals or other
hydrocarbons, (d) forest products, (e) real estate and (f) other basic
non-agricultural commodities which, historically, have been produced and
marketed profitably during periods of significant inflation. Under normal
market conditions, the Series will invest at least 5% of its assets in each of
the first five sectors listed previously.
The Series has a fundamental policy of concentrating in such industries and up
to 50% of the Series' assets may be invested in any one of the above sectors.
Since the Series may so concentrate, it may be subject to greater risks and
market fluctionations than other investment companies with more diversified
protfolios. The production and marketing of Hard Assets may be affected by
actions and changes in governments. In addition, Hard Asset Companies and
securities of hard asset companies may be cyclical in nature. During periods
of economic or financial instability, the securities of some Hard Asset
Companies may be subject to broad price fluctuations, reflecting volatility
of energy and basic materials prices and possible instability of supply of
various Hard Assets. In addition, some Hard Asset Companies may also be
subject to the risks generally associated with extraction of natural
resources, such as the risks of mining and oil drilling, and the risks of the
hazzards associated with natural resources, such as fire, drought, increased
regulatory and environmental costs, and others. Securities of Hard Asset
Companies may also experience greater price fluctuations than the relevant
Hard Asset. In periods of rising Hard Asset prices, such securities may rise
at a faster rate, and, conversely, intime of falling Hard Asset prices, such
securities may suffer a greater price decline.
The Portfolio Manager believes the Series may offer a hedge against inflation,
particularly commodity price driven inflation. However, there is no assurance
that rising commodity (or other hard asset) prices will result in higher
earnings or share prices for the Hard Asset Companies in the Series. Hard
Asset Company equities are affected by many factors, including movements in the
overall stock market. Inflation may cause a decline in the overall stock
market, including the stocks of Hard Asset Companies.
The Series seeks investment opportunities in the world's major stock, bond and
commodity markets. The Series may invest in securities issued anywhere in the
world, including the United States. There is no limitation or restriction on
the amount of assets to be invested in any one country. There is no
limitation on the amount the Series can invest in emerging markets. The
Series may purchase securities in any foreign country, developed or
underdeveloped. Investors should consider carefully the substantial risks
involved in investing in securities issued by companies and governments of
foreign nations, which are in addition to the usual risks inherent in domestic
investments. Global investing involves economic and political considerations
not typically applicable to the U.S. markets. See "Description of Securities
and Investment Techniques."
<PAGE>
The equity securities in which the Series may invest include common stocks;
preferred stocks (either convertible or non-convertible); rights; warrants;
direct equity interests in trusts, partnerships, joint ventures and other
incorporated entities or enterprises; and special classes of shares available
only to foreign persons in those markets that restrict ownership of certain
classes of equity to nationals or residents of that country. These securities
may be listed on the U.S. or foreign securities exchanges or traded
over-the-counter. Direct investments are generally considered illiquid and
will be aggregated with other illiquid investments for purposes of the
limitation on illiquid investments. The Series may, as described below in
"Risk Factors," invest in derivatives. Derivatives are instruments
whose value is "derived" from an underlying asset. Derivatives in which the
Series may invest include futures contracts, forward contracts, options, swaps
and structured notes and other similar securities as may become available in
the market. These instruments offer certain opportunities and are subject to
additional risks that are described below. The Series may invest up to 10% of
its net assets, taken at market value at the time of investment, in precious
metals, whether in bullion or coins. In addition, the Series may invest in
futures and forward contracts and options on precious metals and other Hard
Assets.
The Series may invest up to 10% of its assets in asset-backed securities such
as collateralized mortgage obligations and other mortgage and non-mortgage
asset-backed securities. Asset-backed securities backed by Hard Assets and
whose value is expected to be linked to the underlying Hard Asset are excluded
from the 10% limitation.
The Series may invest up to 5% of its net assets in premiums for options on
equity securities and equity indexes and up to 5% of its net assets in
warrants, including options and warrants traded in over-the-counter markets.
Warrants received as dividends on securities held by the Series and warrants
acquired in units or attached to securities are not included in this
restriction. The Series may buy and sell financial futures contracts and
options in financial futures contracts. The Series may purchase or sell puts
and calls on foreign currencies and securities; invest in "when-issued"
securities, "partly paid" securities (securities paid for over a period of
time) and securities of foreign issuers. The Series may engage in short
sales, and may lend portfolio securities. The Series may also invest up to 5%
of its assets at the time of purchase in warrants, and may purchase or sell
put or call options on securities and foreign currencies. The Series may
engage in futures contracts and options on those contracts. These
techniques are described in "Description of Securities and Investment
Techniques."
Although the Series will not invest in real estate directly, it may invest up
to 50% of its assets in equity securities of real estate investments trusts
("REITs") and other real estate industry companies or companies with
substantial real estate investments, and therefore, the Series may be subject
to certain risks associated with direct ownership of real estate and with the
real estate industry in general. These risks include,
among others: possible declines in the value of real estate; possible lack of
availability of mortgage funds; extended vacancies of properties; risks
related to general and local economic conditions; overbuilding; increases in
competition, property taxes and operating expenses; changes in zoning laws;
costs resulting from the clean-up of, and liability to third parties for
damages resulting from, environmental problems; casualty or condemnation
losses; uninsured damages from floods, earthquakes or other natural disasters;
limitations on and variations in rents; and changes in interest rates.
<PAGE>
The Series reserves the right to invest up to 10% of its net assets, taken at
market value at the time of investment, in gold bullion and coins and other
precious metal (silver and platinum) bullion. The Series may invest over 25%
of its assets in securities of companies predominantly engaged in gold
operations, although the Series will not invest in any such security or in
gold bullion and coins if, after such acquisition, more than 50% of the
Series' assets (taken at market value at the time of such investment) would
be invested in securities of companies predominantly engaged in gold
operations and in gold bullion and coins. The Series may also invest up to
25% of the value of its total assets in real estate investment trusts. The
Series may also invest directly in other commodities including petroleum
and strategic metals. The Series may invest up to 35% of the value of its
total assets in: (a) common stock of companies not engaged in natural
resources activities, (b) investment-grade corporate debt securities, (c)
obligations issued or guaranteed by U.S. or foreign governments, (d) money
market instruments, and (e) repurchase agreements.
Investors should be aware that some of the securities in which the Series may
invest, such as structured or indexed notes, swaps and foreign securities,
pose additional risks. These instruments may be subject to periods of extreme
volatility and illiquidity and may be difficult to value. Despite these
risks, these instruments may offer unique investment opportunities.
At the present time, many major producers of gold bullion are located in
foreign countries, and the production and marketing of gold, precious metals,
and other natural resources may be affected by the risks of investing in
foreign countries, including actions of and changes in governments.
During periods of less favorable economic and/or market conditions, the Series
may make substantial investments for temporary defensive purposes in obliga-
tions of the U.S. Government, certificates of deposit, bankers' acceptances,
investment grade commercial paper, and repurchase agreements.
<PAGE>
Appendix 2 Relating to the Managed Global Series
The following information, which is drawn from the Trust's Prospectus,
summarizes the investment policies of the Managed Global Series, as they
will be in effect if Proposal 5C is approved by the Series' shareholders.
The Managed Global Series' investment objective is to seek capital
appreciation. Current income is only an incidental consideration in selecting
investments for the Series.
In seeking capital appreciation, the Series employs a global investment
strategy of investing primarily in common stocks traded in securities markets
throughout the world. The Series may at times invest up to 100% of its assets
in securities principally traded in securities markets outside the United
States, and will under normal market conditions, invest at least 65% of its
assets in at least three different countries, one of which may be the United
States. In unusual market circumstances where the Portfolio Manager believes
that foreign investing may involve undue risks, 100% of the Series's assets may
be invested in the United States. The Series may hold a portion of its assets
in cash or money market instruments.
In considering equity securities, the Series will not limit its investments to
any particular type of company. It may invest in companies, large or small,
whose earnings are believed to be in a relatively strong growth trend, or in
companies in which significant further growth is not anticipated but whose
securities are thought to be undervalued. It may invest in samll and
relatively well-known companies. Investing in securities of smaller, less
well-known companies may present greater opportunities for capital
appreciation, but may also involve greater risks.
At times the Portfolio Manager may judge that conditions in the international
securities markets make pursuing the Series' basic investment strategy incon-
sistent with the best interests of shareholders. The Portfolio Manager may
temporarily use use alternative strategies, prinmarily designed to reduce fluc-
tuations in the value of the Series' assets. In implementing these "defensive"
strategies the Series may invest in some of the following securities.
The Series may invest solely in equity securities traded primarily in U.S.
markets. Also the Series may add preferred stocks to the portfolio.
The Series may invest in debt instruments. The Series may invest in:
(1) fixed-in-come instruments issued or guaranteed by the U.S. Government,
its agencies, or instrumentalities ("U.S. Government Securities"); (2) obliga-
tions issued or guaranteed by a foreign government or any of its political sub-
divisions, authorities, agencies, or instrumentalities, or by supranational
entities ("foreign government securities");and (3) debt securities of domestic
or foreign issuers.
Debt securities purchased by the Series may be of any maturity. It is at the
discretion of the Portfolio Manager.
<PAGE>
The Series may invest in money market instruments. These include the following:
1) short-term U.S. Government securities; (2) short-term foreign government
securities (3) certificates of deposit, time deposits, bankers'acceptances,
and short-term obligations of banks and other depository institutions, both
U.S. and foreign, that have total assets of at least $10 billion (U.S.); and
(4) commercial paper and other short-term corporate obligations. The Series may
employ various investment strategies involving currencies, including entering
into forward currency contracts, foreign exchange futures
contracts, and options on currencies.
The Portfolio Manager may invest in the above or any other securities that it
considers consistent with the defensive startegies of the Series. It is im-
possible to predict when or for how long the Series will use such alternative
strategies.
<PAGE>
EXHIBIT A
INFORMATION ABOUT PORTFOLIO MANAGERS
DIRECTED SERVICES, INC.
Directed Services, Inc., with offices at 1001 Jefferson Street, Suite 400,
Wilmington, DE 19801 is currently Manager for all 16 operational Series of The
GCG Trust. For a list of the series and the management fee structure of the
Series please refer to Exhibit B below.
Directors and Executive Officers
Edward Wilson, President
PILGRIM BAXTER & ASSOCIATES, LTD.,
Pilgrim Baxter & Associates, Ltd., with offices at 1255 Drummers Lane,
Suite 300, Wayne, Pennsylvania 19807, together with its predecessor
corporations was founded in 1982. Pilgrim Baxter, a Delaware corporation is a
wholly owned subsidiary of United Asset Management Corporation, a publicly
traded company. Pilgrim Baxter is a professional investment management firm
which provides advisory services to pension and profit sharing plans,
charitable institutions, corporations, individual investors, trust and
estates, and other investment companies. As of December 31, 1996, Pilgrim
Baxter managed approximately $14.7 billion of assets, including approximately
$10 billion of investment company assets. Pilgrim Baxter assumed portfolio
management of the All-Growth Series on February 3, 1997.
Bruce J. Muzina is responsible for management of the All-Growth Series.
Mr. Muzina has been an investment professional with Pilgrim Baxter since 1985.
DIRECTORS AND EXECUTIVE OFFICERS
Harold J. Baxter; Chairman and Chief Executive Officer
Gary L. Pilgrim; Director, President and Chief Investment Officer
Eric C. Schneider; Chief Financial Officer
John M. Zerr; General Counsel and Secretary
Steven Wellman; Director of Operations
Larry R. Lynch; Director of Institutional Marketing
David W. Jennings; Director of Client Services
SIMILARLY MANAGED REGISTERED INVESTMENT COMPANIES
THE PBHG FUND, INC. ASSETS AS OF 2/28/97 FEE
STRUCTURE
- ------------------- -------------------- ---------
----
PBHG Core Growth Fund $ 352,600,000 0.85% of
average daily net assets
OHIO NATIONAL FUND,
INC. ASSETS AS OF 2/28/97 FEE
STRUCTURE
- ------------------- -------------------- ---------
----
Core Growth Portfolio $ 4,000,000 0.75% on 1st
$50 million of average daily net
assets;
0.70% on the next $100
million of average daily net
assets;
0.50% on average daily net
assets over $150 million.
ONE FUND, INC. ASSETS AS OF 1/31/96 FEE
STRUCTURE
- ------------------- -------------------- ---------
----
Core Growth Portfolio $ 4,500,000 0.75% on 1st
$50 million of average daily net
assets;
0.70% on the next $100
million of average daily net
assets;
0.50% on average daily net
assets over $150 million.
PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam with offices at One Post Office Square, Boston, Massachusetts
02109, has been managing mutual funds since 1937. Putnam is wholly owned by
24
<PAGE>
Putnam Investments, Inc., which is in turn wholly owned by Marsh & McLennan
Companies, Inc., whose principal businesses are international insurance and
reinsurance brokerage, employee benefit consulting and investment management.
As of December 31, 1996, Putnam and its affiliates managed approximately $173
billion of assets. Putnam assumed portfolio management of the Managed Global
Series and the Emerging Markets Series on March 1, 1997.
The Managed Global Series is managed by Robert Swift and C. Kim Goodwin.
Mr. Swift is Senior Vice President and has been employed as an investment
professional at Putnam since August, 1995. Prior to August, 1995, Mr. Swift
was Far East Team Leader and Portfolio Manager at IAI International/Hill
Samuel Investment Advisors. Ms. Goodwin is Senior Vice President of Putnam
and has been employed as an investment professional at Putnam since May, 1996.
From February, 1993 to May, 1996, Ms. Goodwin was Vice President at Prudential
Mutual Fund Investment Management. From June, 1990 to February, 1993, Ms.
Goodwin was an Assistant Vice President at Mellon Bank Corp.
The Emerging Markets Series is managed by Thomas Haslett and J. Peter
Grant. Mr. Haslett is Managing Director and Chief Investment Officer,
Emerging Markets Equity, and has been employed as an investment professional
at Putnam since December, 1996. Prior to December, 1996, Mr. Haslett was
Managing Director and Senior Portfolio Manager at Montgomery Asset Management.
Mr. Grant is Senior Vice President and has been an investment professional at
Putnam since 1973.
EXECUTIVE OFFICERS POSITION WITH PUTNAM AND PRINCIPAL OCCUPATION
Lawrence J. Lasser President and Director; Chief Executive Officer of
Putnam Investments, Inc. and its subsidiaries.
George Putnam Director; Chairman and President of Putnam Funds
Gordan H. Silver Director; Senior Managing Director of Putnam
Investments
SIMILARLY MANAGED REGISTERED INVESTMENT COMPANIES
ASSETS AS
PUTNAM FUNDS* OF 1/31/96 FEE STRUCTURE
- ------------- ---------- -------------
Putnam Asia Pacific Growth Fund $ 509,855,000 0.80% on 1st $500 million
Putnam Europe Growth Fund $ 371,247,000 0.70% on next $500 million
Putnam International Growth Fund $ 751,195,000 0.65% on
next $500 million
Putnam International Growth and
Income Fund $ 124,918,000 0.60% on assets over $1.5
billion
Putnam Global Growth $3,910,007,000
Putnam International Voyager
Fund $ 25,835,000 1.20% on 1st $500 million
Putnam International New
Opportunities Fund $1,504,940,000 1.10% on next $500 million
Putnam Emerging Markets Fund $ 25,560,000 1.05% on next $500 million
1.00% on assets over $1.5
billion
25
<PAGE>
As Putnam provides a full range of administrative services to the funds noted
above in addition to portfolio management. Putnam does not consider the fees
set forth above to be directly comparable to the fees it will receive as sub-
advisor of the Emerging Markets and Managed Global Series.
NON-PUTNAM FUNDS ASSETS AS OF 1/31/96
FEE STRUCTURE
- ---------------- --------------------
-------------
American Skandia Trust - AST Putnam
International Equity Portfolio $ 345,400,000
0.65% on 1st $150
million
0.55% on next
$150 million
0.45% on assets
over 300 million
EQUITABLE INVESTMENT SERVICES, INC.
Equitable Investment Services currently serves as portfolio manager to
the Liquid Asset Series and the Limited Maturity Bond Series of the Trust and
will assume portfolio management of the Market Manager Series on March 1,
1997.
Bryan L. Borchert, Managing Director of Equitable Investment Services,
will be responsible for management of the Market Manager Series. Mr. Borchert
has been an investment professional with Equitable Investment Services since
1987.
26
<PAGE>
EXHIBIT D
SCHEDULE A
The Series of The GCG Trust, as described in the Management Agreement
dated August 13, 1996, to which Directed Services, Inc. shall act as Manager
are as follows:
Multiple Allocation Series
Fully Managed Series
Limited Maturity Bond Series
Hard Assets 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
Global Equity Series
Mid-Cap Growth Series
THE GCG TRUST
_______________________________________ By: _________________________
Attest
_______________________________________ ______________________________
Title Title
DIRECTED SERVICES, INC.
_______________________________________ By: _________________________
Attest
_______________________________________ ______________________________
Title Title
27
<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
Management Agreement dated August 13, 1996, 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.
SERIES RATE
- ------ ----
Multiple Allocation, Fully Managed, 1.00% of first $750 million;
Hard Assets, Real Estate, All-Growth, 0.95% of next $1.25 billion;
Capital Appreciation, Rising Dividends, 0.90% of next $1.5 billion; and
Value Equity, Strategic Equity, and
Small Cap Series: 0.85% of amount in excess of $3.5
billion
Limited Maturity Bond and Liquid Asset
Series: 0.60% of first $200 million;
0.55% of next $300 million; and
0.50% of amount in excess of $500
million
Emerging Markets Series: 1.75%
Market Manager Series: 1.00%
Global Equity Series: 1.35% of first $500 million;
1.15% of amount in excess of $500
million
THE GCG TRUST
_______________________________________ By: _________________________
Attest
_______________________________________ ______________________________
Title Title
DIRECTED SERVICES, INC.
_______________________________________ By: _________________________
Attest
_______________________________________ ______________________________
Title Title
28
<PAGE>
EXHIBIT B
THE GCG TRUST
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 3rd day of February, 1997 among The GCG Trust (the
"Trust"), a Massachusetts business trust, Directed Services, Inc. ("Manager"),
a New York corporation, and Pilgrim Baxter & Associates, Ltd. ("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 August 13,
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 Pilgrim
Baxter & Associates, Ltd. 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 conduct a
29
<PAGE>
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 it will 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
it 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) The Portfolio Manager will comply with all applicable
provisions of 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. 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 but not the approval of the Manager and the Board of
Trustees. In the event the Trust adopts any policy with respect to
aggregation, upon notice, the Portfolio Manager will comply such that any
aggregation will not be inconsistent with the policies set forth in the
Registration Statement.
30
<PAGE>
(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 monthly 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 provide reasonable assistance to 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 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
31
<PAGE>
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,
32
<PAGE>
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 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;
33
<PAGE>
(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.
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 reasonably be expected
to 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, and must be disclosed
pursuant to the requirements of Form N-1A or of any statement contained
therein that becomes untrue in any material respect.
34
<PAGE>
(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 it maintains for the Series 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.
35
<PAGE>
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, provided, however,
Portfolio Manager Indemnified Persons shall not be indemnified against losses,
damages, liabilities or litigation (including legal and other expenses)
arising out of (1) Portfolio Manager's, including without limitation any of
its employees or representatives or any affiliate of or any person acting on
behalf of the Portfolio Manager, 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, or (2) which are based upon any untrue statement or alleged
untrue statement of a material fact supplied by, or which is the
responsibility of, the Portfolio 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 Portfolio 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 Portfolio
Manager or the Trust or to any affiliated person of the Portfolio Manager by
the Manager.
(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
36
<PAGE>
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 (1)
the Portfolio Manager's 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 this Agreement, or (2) which are
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, providing that
such statement or omission was not 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.
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<PAGE>
(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.
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
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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 or discharged orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver or discharge 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 "Pilgrim Baxter & Associates,
Ltd." 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
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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.
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
Attest:____________________ By:____________________
Title:____________________ Title:____________________
DIRECTED SERVICES, INC.
Attest:____________________ By:____________________
Title:____________________ Title:____________________
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PILGRIM BAXTER & ASSOCIATES, LTD.
Attest:____________________ By:____________________
Title:____________________ Title:____________________
41
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THE GCG TRUST
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Pilgrim Baxter & Associates, Ltd.
shall act as Portfolio Manager are as follows:
All-Growth Series
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THE GCG TRUST
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Pilgrim Baxter & Associates, Ltd.("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:
SERIES RATE
------ ----
All-Growth Series 0.50%
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EXHIBIT C
SUB-ADVISORY AGREEMENT
The GCG Trust
March 1, 1997
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
Dear Sirs:
Directed Services, Inc. (the "Manager") and The GCG Trust (the "Fund")
confirm their agreement with Putnam Investment Management, Inc. (the "Sub-
Adviser') with respect to the Managed Global Series and the Emerging Markets
Series (each a "Portfolio" of the Fund) as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Fund employs the Manager as the manager of the Portfolios pursuant to
a management agreement, dated August 13, 1996 (the "Management Agreement"),
and the Fund and the Manager desire to employ and hereby appoint the Sub-
Adviser to act as the sub-investment adviser to the Portfolios. The
investment objectives(s), policies and limitations governing each Portfolio
are specified in the prospectus (the "Prospectus") and the statement of
additional information (the "Statement") of the Fund filed with the Securities
and Exchange Commission ("SEC') as part of the Fund's Registration Statement
on Form N-1A, as amended or supplemented from time to time, and in the manner
and to the extent as may from time to time be approved by the Board of
Trustees of the Fund (the "Board"). Copies of the Prospectus and the
Statement have been or will be submitted to the Sub-Adviser. The Manager
agrees promptly to provide copies of all amendments and supplements to the
current Prospectus and the Statement to the Sub-Adviser on an on-going basis.
Until the Manager delivers any such amendment or supplement to the Sub-
Adviser, the Sub-Adviser shall be fully protected in relying on the Prospectus
and Statement of Additional Information as previously furnished to the Sub-
Adviser. The Sub-Adviser accepts the appointment and agrees to furnish the
services for the compensation, as set forth below.
2. SERVICES AS SUB-ADVISER
(a) Subject to the supervision, direction and approval of the Board and
the Manager, the Sub-Adviser shall conduct a continual program of investment,
evaluation and, if appropriate in the view of the Sub-Adviser, sale and
reinvestment of each Portfolio's assets. The Sub-Adviser is authorized, in
its sole discretion and without prior consultation with the Manager, to: (i)
manage each Portfolio's assets in accordance with the Portfolio's investment
objective(s) and policies as stated in the Prospectus and the Statement; (ii)
make investment decisions for each Portfolio; (iii) place purchase and sale
orders for portfolio transactions on behalf of each Portfolio; and (iv) employ
professional portfolio managers and securities analysts who provide research
services to each Portfolio. The Sub-Adviser shall not be responsible for the
administrative affairs of the Fund, including, but not limited to, accounting
for and pricing of the Portfolios.
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The Sub-Adviser shall furnish the custodian and portfolio accounting
agent with daily information as reasonably necessary to enable the custodian
and portfolio accounting agent to perform administrative and recordkeeping
responsibilities. In addition, the Sub-Adviser shall furnish the Manager with
quarterly and annual reports concerning transactions and performance of each
Portfolio in such form as may be mutually agreed upon, and the Sub-Adviser
agrees to review each Portfolio and discuss the management of it from time to
time with the Manager and the Board.
(b) Unless the Manager gives the Sub-Adviser written instructions to the
contrary, the Sub-Adviser shall use its good faith judgment in a manner which
it reasonably believes best serves the interests of the Portfolio shareholders
to vote or abstain from voting all proxies solicited by or with respect to the
issuers of securities in which assets of a Portfolio may be invested
(c) The Sub-Adviser shall maintain and preserve such records related to
each Portfolio's transactions as are required of a Sub-Adviser under the
Investment Advisers Act of 1940, as amended. The Sub-Adviser shall timely
furnish to the Manager all information relating to the Sub-Adviser's services
hereunder reasonably requested by the Manager to keep and preserve the books
and records of each Portfolio. The request Sub-Adviser will promptly supply
to the Manager copies of any of such records upon request.
(d) The Sub-Adviser shall (1) use its best efforts to manage each
Portfolio so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) use its best efforts to manage
each Portfolio so as to ensure compliance with the diversification
requirements of Section 817 (h) of the Internal Revenue Code and regulations
thereunder, (3) comply with applicable federal and state laws, rules and
regulations applicable to it as Sub-Adviser of the Portfolio, and (4) comply
with any procedure adopted by the Board, notice of which is delivered in
writing to the Manager. The Manager acknowledges and agrees that the Sub-
Adviser's compliance with its obligations under Sections 2(d) (1) and (2) will
be based on information supplied by the Manager as to each Portfolio,
including but not limited to, portfolio security lot allocation. Manager
agrees to supply all such information on a timely basis.
(e) The Sub-Adviser shall, upon request of the Manager, provide
reasonable assistance in enabling the Manager, the custodian or portfolio
accounting agent to determine the value of any portfolio securities or other
assets of a Portfolio.
3. BROKERAGE
In selecting brokers or dealers to execute transactions on behalf of a
Portfolio, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-
Adviser will consider factors it deems relevant, including, but not limited
to, the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Sub-
Adviser is authorized to consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended) provided to a Portfolio and/or other accounts over which the
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Sub-Adviser or its affiliates exercise investment discretion. Nothing in this
paragraph shall be deemed to prohibit the Sub-Adviser from paying an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker, or dealer would have charged
for effecting that transaction, if the Sub-Adviser determined in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member, broker, or dealer,
viewed in terms of either that particular transaction or its overall
responsibilities with respect to a Portfolio and/or other accounts over which
the Sub-Adviser or its affiliates exercise investment discretion.
4. COMPENSATION
In consideration of the services rendered pursuant to this Agreement, the
Manager will pay the Sub-Adviser an annual fee calculated at the rates set
forth in Exhibit A hereto of each Portfolio's average daily net assets; the
fee is calculated daily and paid monthly. The fee for the period from the
Effective Date (defined below) of the Agreement for a Portfolio to the end of
the month during which the Effective Date occurs shall be prorated according
to the proportion that such period bears to the full monthly period. Upon any
termination of this Agreement with respect to a Portfolio before the end of a
month, the fee for such part of that month for that Portfolio shall be
prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement . For the purpose of determining fees payable to the Sub-Adviser,
the value of a Portfolio's net assets shall be computed at the times and in
the manner specified in the Prospectus and/or the Statement.
5. EXPENSES
The Sub-Adviser shall bear all expenses (excluding brokerage costs,
custodian fees, auditors fees or other expense to be borne by the Portfolios)
in connection with the performance of its services under this Agreement. Each
Portfolio or the Manager will bear certain other expenses to be incurred in
its operation, including, but not limited to, investment advisory fees, sub-
advisory fees (other than sub-advisory fees paid pursuant to this Agreement)
and administration fees, fees for necessary professional and brokerage
services, costs relating to local administration of securities, fees for any
pricing service, the costs of regulatory compliance; and pro rata costs
associated with maintaining the Fund's legal existence and shareholder
relations. The Sub-Adviser shall only bear the expenses it has expressly
agreed to assume under this Agreement.
6. COMPLIANCE
The Sub-Adviser shall promptly notify the Manager and the Fund if (1) the
SEC has censured the Sub-Adviser; (2) it has reason to believe a Portfolio may
fail to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code; (3) it has reason to believe a Portfolio may cease to
comply with the diversification requirements of Section 817(h) of the Internal
Revenue Code; or (4) there is an untrue fact relating to the Sub-Adviser in
material in the Prospectus or Statement previously supplied for use by the
Sub-Adviser.
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The Manager shall promptly notify the Sub-Adviser if (1) the SEC has
censured the Manager; (2) it has reason to believe a Portfolio may fail to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code; and (3) it has reason to believe a Portfolio may cease to comply
with the diversification requirements of Section 817(h) of the Internal
Revenue Code.
7. STANDARD OF CARE AND INDEMNIFICATION
(a) The Sub-Adviser shall exercise its best judgment and shall act in
good faith in rendering the services listed in paragraphs 2 and 3 above. The
Sub-Adviser shall not be liable for any error of judgment or mistake of law or
for any loss suffered by a Portfolio or the Manager in connection with the
matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Sub-Adviser
against any liability to the Manager, the Fund or to the shareholders of a
Portfolio to which the Sub-Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Sub-Adviser's reckless disregard
of its obligations and duties under this Agreement ("Disabling Conduct").
(b) Except for Disabling Conduct, the Manager shall indemnify and hold
the Sub-Adviser (and its officers, directors, employees, controlling persons,
shareholders and affiliates ("Indemnified Persons")) harmless from any
liability arising from the Sub-Adviser's conduct under this Agreement. The
Sub-Adviser shall indemnify and hold the Manager (and the Manager's
Indemnified Persons) harmless from any liability resulting from the Sub-
Adviser's Disabling Conduct or breach of the terms of this Agreement. The
Manager shall not be liable under this paragraph (b) with respect to any claim
made against the Sub-Adviser (and the Sub-Adviser's Indemnified Persons)
unless it received notice within a reasonable period of time after the Sub-
Adviser first received notice of the claim. The Sub-Adviser shall not be
liable under this paragraph (b) with respect to any claim made against the
Manager (and the Manager's Indemnified Persons) unless it received notice
within a reasonable period of time after the Manager first received notice of
the claim.
8. TERM OF AGREEMENT
This Agreement shall become effective for each Portfolio on March 1, 1997
(the "Effective Date") and shall continue for an initial two-year term and
shall continue thereafter so long as such continuance is specifically approved
at least annually as required by the 1940 Act. This Agreement is terminable,
with respect to a Portfolio without penalty, on 60 days' written notice, by
the Manager, the Board or by vote of holders of a majority (as defined in the
1940 Act and the rules hereunder) of the outstanding voting securities of
such Portfolio, or upon 60 days' written notice, by the Sub-Adviser. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act and the rules thereunder).
9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Manager understands that the Sub-Adviser now acts, will continue to
act and may act in the future as investment manager or adviser to fiduciary
and other managed accounts, and as investment manager or adviser to other
investment companies, including any offshore entitled, or accounts, and the
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Manager has no objection to the Sub-Adviser's so acting, provided that
whenever a Portfolio and one or more other investment companies or accounts
managed or advised by the Sub-Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to equitable to each company and account. The
Manager recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for a Portfolio. In addition, the Manager
understands that the persons employed by the Sub-Adviser to assist in the
performance of the Sub-Adviser's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement shall
be deemed to limit or restrict the right of the Sub-Adviser or any affiliate
of the Sub-Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
10. REPRESENTATION
Each of the parties hereto represents that the Agreement has been duly
authorized, executed and delivered by all required corporate action.
11. USE OF NAME
(a) The Manager may use (and shall cause any of its affiliates including
the Fund to use) the name "Putnam Investment Management, Inc.", "Putnam
Investment Management", "Putnam Management" or "Putnam" only for so long as
this Agreement or any extension, renewal, or amendment hereof remains in
effect. At such times as this agreement shall no longer be in effect, the
Manager shall cease (and shall cause its affiliate to cease using) to use such
a name or any other name indicating that it is advised by or otherwise
connected with the Sub-Advisor and shall promptly change its name accordingly.
(b) The Manager will not, and will cause its affiliates to not, refer to
the Sub-Adviser or any affiliate in any prospectus, proxy statement or sales
literature except with the written permission of the Sub-Adviser.
(c) It will permit the Portfolio to be used as a funding vehicle only
for Policies issued by Golden American Life or any of its affiliates, except
with the permission of the Sub-Adviser.
(d) It will not (and will cause its affiliates to not) engage in
marketing programs (written or otherwise) directed toward Putnam Capital
Manager annuity contract ("PCM") which solicit transfers from PCM to the
Manager's products or those of its affiliates. The Manager will not (and will
cause its affiliates to not) create or use marketing materials which provide
direct comparisons between PCM and the Manager's products or those of any of
its affiliates. The Manager will not (and will cause its affiliates to not)
reimburse voluntarily, or enter into any contract or policy after the date
hereof providing for the reimbursement of, any deferred sales charges to
encourage the transfer of assets from PCM to the Manager's products or those
of any affiliate.
12. DECLARATION OF TRUST
A copy of the Amended and Restated Agreement and Declaration of Trust for
the Fund 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 Fund by the Trustees of the Fund in their capacity as
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Trustees of the Fund and not individually. The obligations of this Agreement
shall be binding upon the assets and property of the Fund and shall not be
binding upon any Trustee, officer, or shareholder of the Fund individually.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
DIRECTED SERVICES, INC.
By:___________________________
THE GCG TRUST
By:___________________________
Accepted:
PUTNAM INVESTMENT MANAGEMENT, INC.
By:___________________________
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EXHIBIT A
SUB-ADVISORY FEES
For the period from the commencement of the Sub-Adviser's services under this
Sub-Advisory Agreement until such time as different fees are approved by the
shareholders of the Managed Global Series and the Emerging Markets Series at a
Special Meeting of Shareholders, the Sub-Advisory fees shall be the following
fees, payable monthly, based on the average daily net assets of each Portfolio
(Manager undertakes to use its best efforts to cause such fees to be approved
in a timely fashion):
PORTFOLIO ANNUAL RATE
- --------- -----------
Managed Global Series 1st $500m 0.60%
over $500m 0.50%
Emerging Markets Series all assets 0.75%
Upon approval by shareholders of the Managed Global Series and the Emerging
Markets Series, the Sub-Advisory fees shall be as follows:
PORTFOLIO ANNUAL RATE
- --------- -----------
Managed Global Series 1st $300m 0.70%
over $300m 0.60%
Emerging Market Series 1st $150m 1.00%
next $150m 0.95%
over $300m 0.85%
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EXHIBIT E
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 13th day of August, 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 August 13,
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
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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:
(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
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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 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
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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 Portfolio Manager or its
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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;
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(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 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,
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(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.
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
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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
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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.
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(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 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
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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 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
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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.
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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.
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
_________________________ By:_________________________________
Title Title
DIRECTED SERVICES, INC.
_________________________ By:_________________________________
Attest
_________________________ By:_________________________________
Title Title
EQUITABLE INVESTMENT SERVICES, INC.
_________________________ By:_________________________________
Attest
_________________________ By:_________________________________
Title Title
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AMENDED SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the Portfolio
Management Agreement dated August 13, 1996, to which Equitable Investment
Services, Inc. shall act as Portfolio Manager are as follows:
Limited Maturity Bond Series
Liquid Asset Series
Market Manager Series
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of this 28th day of February, 1997.
THE GCG TRUST
_________________________ By:_________________________________
Attest
_________________________ By:_________________________________
Title Title
DIRECTED SERVICES, INC.
_________________________ By:_________________________________
Attest
_________________________ By:_________________________________
Title Title
EQUITABLE INVESTMENT SERVICES, INC.
_________________________ By:_________________________________
Attest
_________________________ By:_________________________________
Title Title
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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 Portfolio Management Agreement dated August 13, 1996, 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:
SERIES RATE
------ ----
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,(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.
Market Manager Series 0.50% (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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of this 28th day of February, 1997.
THE GCG TRUST
_________________________ By:_________________________________
Attest
_________________________ By:_________________________________
Title Title
DIRECTED SERVICES, INC.
_________________________ By:_________________________________
Attest
_________________________ By:_________________________________
Title Title
EQUITABLE INVESTMENT SERVICES, INC.
_________________________ By:_________________________________
Attest
_________________________ By:_________________________________
Title Title
