<PAGE>
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:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as Permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Sec. 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 Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:_____________________________________________________
[ ] Fee paid previously with preliminary materials.__________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:_____________________________________________
(2) Form, Schedule or Registration Statement No.:_______________________
(3) Filing Party:_______________________________________________________
(4) Date Filed:_________________________________________________________
<PAGE>
September 11, 1997
Dear Shareholder of The GCG Trust:
I am writing to tell you about some very exciting changes
concerning The GCG Trust (the "Trust"), and to send you proxy
materials for an upcoming special meeting of shareholders of the
Trust that will be held on October 9, 1997. The Trust contains
the investment portfolios that serve as the investment vehicles
for your variable annuity or variable life insurance contract.
The Trustees of the Trust have approved the proposals in the
proxy materials and recommend that you vote "FOR" the proposals
on the enclosed proxy card. I urge you to review the attached
proxy statement, to cast your vote, and to return promptly the
enclosed proxy card in the envelope provided.
AGREEMENT AND PLAN OF MERGER AMONG EQUITABLE OF IOWA COMPANIES,
ING GROEP N.V. AND PFHI HOLDINGS, INC.
Equitable of Iowa Companies ("Equitable of Iowa"), the
parent company of Directed Services, Inc. ("DSI"), the Trust's
Manager, has entered into an Agreement and Plan of Merger with
ING Groep N.V. ("ING") and PFHI Holdings, Inc. ("PFHI") pursuant
to which Equitable of Iowa and PFHI have agreed to merge. This
Agreement is subject to several conditions, including approval of
the shareholders of Equitable of Iowa, certain state insurance
authorities, and the shareholders of each series of the Trust of
certain agreements, as described in the attached proxy materials.
Upon consummation of the Transaction, Equitable of Iowa will
become a wholly owned subsidiary of ING. ING operates in 58
countries worldwide and is one of the world's largest integrated
financial service providers, offering a comprehensive range of
life and non-life insurance, commercial and investment banking,
asset management and related products and services.
SPECIAL SHAREHOLDERS MEETING TO APPROVE CHANGES
A special meeting of shareholders of the Trust has been
called for purposes related to the merger described above. Upon
consummation of the merger, the existing Management Agreement
under which DSI serves as the Manager to the Trust will
terminate. Similarly, the Portfolio Management Agreements with
the Portfolio Managers of the Trust's operating series will also
terminate.
Accordingly, shareholders of GCG Trust will be asked to vote
for the following:
o Approval of a new Management Agreement between the Trust and
DSI; and
o Approval of new Portfolio Management Agreements among the
Trust, DSI and each of the Portfolio Managers of the Trust's
operating series.
The terms of the new Management Agreement and Portfolio
Management Agreements are identical in all material respects to
the terms of the Agreements they would replace. The proposals in
this proxy statement are intended to keep in place the current
management of the Trust after the consummation of the merger
transaction.
Shareholders of the All-Growth Series and Hard Assets Series
of the Trust are also being asked to vote for certain changes in
the investment limitations of those Series. All shareholders are
being asked to elect Ms. Elizabeth J. Newell as a Trustee of the
Trust.
TRUSTEES RECOMMEND APPROVAL
The Trustees of the Trust have approved the proposals in the
proxy materials and recommend that you vote "FOR" the proposals
on the enclosed proxy. We urge you to review the attached proxy
statement, to cast your vote, and to return promptly the enclosed
proxy in the envelope provided.
Sincerely,
/s/ Terry L. Kendall
Terry L. Kendall
President, The GCG Trust
<PAGE>
THE GCG TRUST
1001 Jefferson Street
Suite 400
Wilmington, DE 19801
(800-366-0066)
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
October 9, 1997
TO THE SHAREHOLDERS OF THE GCG TRUST:
Notice is hereby given to the holders of shares of beneficial interest (the
"Shares") of The GCG Trust (the "Trust"), a Massachusetts business trust, that
a Special Meeting of the Shareholders of the Trust (the "Meeting") will be
held at 1001 Jefferson Street, Suite 400, Wilmington, Delaware 19801, on
October 9, 1997, at 10:00 a.m., local time, for the following purposes:
1. To approve a new Management Agreement between the Trust and Directed
Services, Inc. ("DSI") to be effective upon the merger of Equitable of Iowa
Companies ("Equitable of Iowa") with PFHI Holdings, Inc. ("PFHI"), which new
Management Agreement would be substantively identical to the Management
Agreement that currently is in effect.
2. To approve the following new Portfolio Management Agreements among the
Trust, DSI and the respective portfolio managers listed below to be effective
upon the merger of Equitable of Iowa with PFHI, which new Portfolio Management
Agreements would be substantively identical to the Portfolio Management
Agreements that currently are in effect:
(A) A new Portfolio Management Agreement with respect to the All-Growth
Series among the Trust, DSI and Pilgrim Baxter & Associates, Ltd.
(B) A new Portfolio Management Agreement with respect to the Capital
Appreciation Series among Trust, the DSI and Chancellor LGT Asset Management,
Inc.
(C) A new Portfolio Management Agreement with respect to the Emerging
Markets Series and the Managed Global Series among the Trust, DSI and Putnam
Investment Management, Inc.
(D) A new Portfolio Management Agreement with respect to the Fully
Managed Series among the Trust, DSI and T. Rowe Price Associates, Inc.
(E) A new Portfolio Management Agreement with respect to the Hard
Assets Series among the Trust, DSI and Van Eck Associates Corporation.
(F) A new Portfolio Management Agreement with respect to the Limited
Maturity Bond Series, Liquid Asset Series, and Market Manager Series among the
Trust, DSI and Equitable Investment Services, Inc.
(G) A new Portfolio Management Agreement with respect to the Multiple
Allocation Series and Strategic Equity Series among the Trust, DSI and Zweig
Advisors Inc.
(H) A new Portfolio Management Agreement with respect to the Real
Estate Series among the Trust, DSI and E.I.I. Realty Securities, Inc.
(I) A new Portfolio Management Agreement with respect to the Rising
Dividends Series among the Trust, DSI and Kayne, Anderson Investment
Management, L.P.
<PAGE>
(J) A new Portfolio Management Agreement with respect to the Small Cap
Series among the Trust, DSI and Fred Alger Management, Inc.
(K) A new Portfolio Management Agreement with respect to the Value
Equity Series among the Trust, DSI and Eagle Asset Management, Inc.
3. To approve a change in a fundamental investment restriction with respect
to the All-Growth Series.
4. To approve a change in a fundamental investment limitation with respect
to the Hard Assets Series.
5. To elect a new Trustee to hold office until her successor is elected and
qualified.
6. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The Board of Trustees has fixed the close of business on August 29, 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
/s/ Myles R. Tashman
Myles R. Tashman,
Secretary
September 11, 1997.
MANAGEMENT OF THE TRUST RECOMMENDS THAT YOU CAST YOUR VOTE FOR THE APPROVAL
OF ALL PROPOSALS.
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
OCTOBER 9, 1997
This Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees (the "Board" or
"Trustees") of The GCG Trust (the "Trust"), a Massachusetts
business trust, of proxies to be voted at a Special Meeting
of the Shareholders of the Trust, and at any and all
adjournments thereof (the "Meeting"), to be held at 1001
Jefferson Street, Suite 400, Wilmington, Delaware 19801, on
October 9, 1997, at 10:00 a.m. local time. The approximate
mailing date of this Proxy Statement and accompanying form
of proxy is September 12, 1997.
The Board has fixed the close of business on August 29,
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 Board is soliciting shareholder votes on proposals
affecting more than one Series. The following tables
summarize the proposals and indicate which shareholders are
being requested to vote on each proposal:
SERIES
----------------------------------------
ALL- CAPITAL EMERGING FULLY HARD
GROWTH APPREC- MARKETS MANAGED ASSETS
IATION
------ ------- -------- ------- ------
Proposal 1 -- Approval of new X X X X X
Management Agreement
Proposal 2 -- Approval of new X X X X X
Portfolio Management Agreements 2(A) 2(B) 2(C) 2(D) 2(E)
Proposals 3 and 4 -- Changes in X X
Fundamental Investment Limitations (3) (4)
Proposal 5 -- Elect New Trustee X X X X X
LIMITED
MATURITY LIQUID MANAGED MARKET MULTIPLE
BOND ASSET GLOBAL MANAGER ALLOCATION
-------- ------ ------- ------- ----------
Proposal 1 -- Approval of New X X X X X
Management Agreement
Proposal 2 -- Approval of New X X X X X
Portfolio Management Agreements 2(F) 2(F) 2(C) 2(F) 2(G)
Proposals 3 and 4 -- Changes in
Fundamental Investment Limitations
Proposal 5 -- Elect New Trustee X X X X X
1
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REAL RISING SMALL STRATEGIC VALUE
ESTATE DIVIDENDS CAP EQUITY EQUITY
------ --------- ----- --------- ------
Proposal 1 -- Approval of New X X X X X
Management Agreement
Proposal 2 -- Approval of New X X X X X
Portfolio Management Agreements 2(H) 2(I) 2(J) 2(G) 2(K)
Proposals 3 and 4 -- Changes in
Fundamental Investment Limitations
Proposal 5 -- Elect New Trustee X X X X X
The Trust is comprised of sixteen operational portfolios
or "Series" of which this Proxy Statement deals with fifteen
Series. 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,
as amended (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 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 Participating Insurance Company will vote
Shares or other voting interests in the separate accounts in
proportion to the 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 signed instructions in
the same proportion as it votes Shares held by that separate
account for which it has received instructions. Shares held
by a Participating 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 October 8, 1997, as the last day on which
voting instructions will be accepted. A proxy may be revoked
at any time before it is voted by the furnishing of a
written revocation, properly executed, to the Trust's
Secretary before the Meeting or by attending the Meeting. In
addition to the solicitation of proxies by mail, proxies may
be solicited by officers and employees of the Trust or
Participating Insurance Companies or their agents or
affiliates personally or by telephone. All expenses in
connection with the solicitation of the proxies will be
borne by Equitable of Iowa Companies.
VOTING.
Shares which represent interests in a particular Series
of the Trust vote separately on those matters which pertain
only to that Series. These matters are Proposals 1, 2, 3, 4,
and as appropriate, any other business which may properly
come before the Meeting. With respect to such matters, a
vote of all Shareholders of the Trust may not be binding on
a Series whose Shareholders have not approved such matter.
The voting requirement for approval of each proposal
requires, a vote of the "majority of the outstanding voting
securities" of a Series which means the lesser of: (i) 67%
or more of the voting Shares of each Series present at the
Meeting, if the holders of more than 50% of the outstanding
voting Shares of the Series are present or represented by
proxy; or (ii) more than 50% of the outstanding voting
Shares of the Series. The election of a new Trustee under
Proposal 5 requires the approval of the holders of a
majority of the outstanding Shares of the Trust as a whole.
A Portfolio Management Agreement must be approved
separately by each Series to which the Portfolio Management
Agreement pertains. Approval of each Portfolio Management
Agreement is contingent upon approval of the New Management
Agreement (as defined below) by the shareholders of the
pertinent Series. If the New
2
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Management Agreement is
approved and the New Portfolio Management Agreements (as
defined below) are each approved by a majority vote of the
outstanding Shares of the applicable Series, the New
Portfolio Management Agreement will take effect concurrently
with the New Management Agreement. If the shareholders of a
Series should fail to approve either the New Management
Agreement or the New Portfolio Management Agreement, the
Board shall meet to consider appropriate action. If the
shareholders of a Series should fail to approve a New
Portfolio Management Agreement that pertains to more than
one Series, the Portfolio Manager may serve under the
Portfolio Management Agreement with respect to any Series
whose shareholders have approved the Portfolio Management
Agreement. In such event, the Board shall meet to consider
appropriate action.
In the event that a quorum is present at the Meeting but
sufficient votes to approve any of the proposals are not
received, the persons named as proxies may propose one or
more adjournments of the 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 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. Since the Participating
Insurance Companies are the legal owners of substantially
all of the Shares, attendance by the Participating Insurance
Companies at the Meeting will constitute a quorum under the
Trust's Amended and Restated Agreement and Declaration of
Trust. Shares beneficially held by Variable Contract Owners
present in person or represented by proxy at the Meeting
will be counted for the purpose of calculating the votes
cast on the issues before the Meeting.
The Trust knows of no items of business, other than those
mentioned in Proposals 1 through 5 of the Notice, which will
be presented for consideration at the Meeting. If any other
matters are properly presented, it is the intention of the
persons named as proxies to vote proxies in accordance with
their best judgment.
BACKGROUND INFORMATION.
Directed Services, Inc. ("DSI"), 1001 Jefferson Street,
Suite 400, Wilmington, Delaware 19801, is the Trust's
Manager and Distributor. See Attachment B for a list of the
directors and principal executive officer of DSI. DSI is a
wholly owned subsidiary of Equitable of Iowa Companies
("Equitable of Iowa"). Equitable of Iowa is a holding
company for the following companies: Equitable Life
Insurance Company of Iowa ("Equitable Life"), Golden
American Life Insurance Company, ("Golden American"), First
Golden American Life Insurance Company of New York ("First
Golden"), Equitable American Insurance Company ("Equitable
American"), USG Annuity & Life Company ("USG"), Locust
Street Securities, Inc., ("Locust Street") and Equitable
Investment Services, Inc. ("EISI"). EISI also serves as
portfolio manager to three Series of the Trust. Equitable of
Iowa's principal executive offices are located at 909 Locust
Street, Des Moines, Iowa 50306.
On July 7, 1997, Equitable of Iowa entered into an
Agreement and Plan of Merger with ING Groep N.V. ("ING") and
PFHI Holdings, Inc. ("PFHI") pursuant to which Equitable of
Iowa and PFHI have agreed to merge, subject to certain
conditions and regulatory approvals (the "Transaction").
Consummation of the Transaction is anticipated to occur
during the fourth quarter of 1997 and may constitute an
"assignment" (as defined in the 1940 Act) of the current
Management Agreement between the Trust and DSI ("Current
Management Agreement"). Additionally, consummation of the
Transaction may constitute an assignment of the current
Portfolio Management Agreements between the Trust, DSI and
the respective Portfolio Managers of the Series of the
Trust. None of the affiliates of Equitable of Iowa is
currently affiliated with ING.
ING operates in 58 countries worldwide and is one of the
world's largest integrated financial service providers,
offering a comprehensive range of life and non-life
insurance, commercial and investment banking, asset
management and related products and services. ING has
extensive operations in Europe, North America, South
America, Africa, Asia and Australia. In 1996, ING had gross
written premiums of NLG 24,332 million, making it the
largest insurer in the Netherlands. Management believes that
at December 31, 1995, ING was the 11th largest insurer in
Europe and the 32nd largest insurer in the world, based on
gross written premiums. At the end
3
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of 1996, ING Bank had
total assets of NLG 311.4 billion, making it the third
largest bank in the Netherlands. Management believes that at
December 31, 1995, ING Bank was the 32nd largest bank in
Europe and the 51st largest bank in the world based on total
assets. Management also believes that, based on consolidated
total assets at December 31, 1995, ING was the 33rd largest
financial institution in the world. ING's products and
services are marketed under a variety of well recognized and
strong brand names, including Nationale-Nederlanden, ING
Bank and ING Barings worldwide; Postbank in the Netherlands;
Mercantile Mutual in Australia; NN Financial, Commerce
Group, Belair, Halifax and Western Union in Canada; and Life
of Georgia, Southland Life, Security Life, Indiana
Insurance, Peerless Insurance, and Excelsior Insurance in
the United States. For the year ended December 31, 1996
ING's total income was NLG 47,551 million ($24,220 million)
and its net profit was NLG 3,321 million ($1,691.80
million). ING had consolidated total assets of NLG 483.9
billion ($246.51 billion) at the end of 1996. The
translations of Dutch guilders ("NLG") into U.S. dollars
have been made at the rate of NLG 1.9630 to $1.00, the noon
buying rate in New York City for cable transfers in guilders
as certified for customs purposes by the Federal Reserve
Bank of New York on June 30, 1997. ING's principal executive
offices are located at Strawinskylaan 2631, 1077 ZZ
Amsterdam, P.O. Box 810, 1000 AV Amsterdam, the Netherlands.
PFHI is a Delaware corporation and a wholly owned
subsidiary of ING. Equitable of Iowa will be merged with and
into PFHI, with PFHI as the surviving entity. PFHI will
succeed to the business of Equitable of Iowa and will take
Equitable of Iowa's name upon the consummation of the
Transaction. PFHI's principal executive offices are located
at 5780 Powers Ferry Road, Atlanta, Georgia 30327.
Section 15(f) of the 1940 Act permits the sale of
controlling interests in an investment adviser to an
investment company to occur, including receipt by the
investment adviser or any of its affiliated persons of an
amount or benefit in connection with such sale, as long as
two conditions are satisfied. First, an "unfair burden" must
not be imposed on the investment company for which the
investment adviser acts in such capacity as a result of the
sale of such interests, or any express or implied terms,
conditions or understandings applicable thereto. The term
"unfair burden," as defined in the 1940 Act, includes any
arrangement during the two-year period after any such
transaction whereby the investment adviser (or predecessor
or successor adviser) or any interested person of any such
adviser, receives or is entitled to receive any
compensation, directly or indirectly, from the investment
company or its security holders (other than fees for bona
fide investment advisory and any other services) or from any
person in connection with the purchase or sale of securities
or other property to, from or on behalf of the investment
company (other than ordinary fees for bona fide principal
underwriting services). Management of the Trust is aware of
no circumstances arising from the Transaction that might
result in the imposition of an "unfair burden" on the Trust.
The second condition of Section 15(f) is that during the
three-year period immediately following consummation of a
transaction to which Section 15(f) is applicable, at least
75% of the investment company's board of trustees must not
be "interested persons" (as defined in the 1940 Act) of such
investment company's investment adviser or predecessor
adviser. The Board of Trustees currently consists of eight
Trustees, one of whom, Mr. Terry L. Kendall, is an
interested person of DSI and another of whom, Mr. Paul R.
Schlaack, is an interested person of EISI. Ms. Elizabeth J.
Newell, who is not an "interested person" of the Trust, DSI
or EISI, is proposed to be elected as a Trustee. (See
Proposal 5.)
It is anticipated that in the near future a process will
be undertaken by the Trust to add several new series to the
Trust. The shares of these new series would be available for
the substitution of shares from selected series of the Equi-
Select Series Trust by the Participating Insurance
Companies. Other existing series of the Trust may also be
effected by the substitution process. This process will be
subject to the review and approval of the Securities and
Exchange Commission. The purpose of undertaking this process
is primarily to provide increased efficiencies for the Trust
and over time to eliminate the Equi-Select Series Trust,
which will indirectly be beneficial to the Variable Contract
Owners. The process is not effected by the Transaction, and
none of the Proposals to be considered at the Meeting
pertains to this process.
4
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PROPOSAL 1
APPROVAL OF A NEW MANAGEMENT AGREEMENT
BETWEEN THE TRUST AND DIRECTED SERVICES, INC.
As stated above, consummation of the Transaction may
constitute an "assignment" of the Current Management
Agreement. As required by the 1940 Act, the Current
Management Agreement provides for automatic termination in
the event of an assignment. In anticipation of the
consummation of the Transaction, and in order for DSI to
continue to serve as Manager to the Trust afterwards, a new
Management Agreement between DSI and the Trust ("New
Management Agreement") must be approved (i) by a majority
vote of the Board, including a majority of the non-
interested Trustees of the Trust, and (ii) as to each
Series, by holders of a majority of the outstanding voting
securities of each such Series of the Trust. The New
Management Agreement is included as Attachment A.
At the Board meeting held on August 19, 1997, the
Trustees, including all of the non-interested Trustees,
concluded that, if the Transaction occurs, entry by the
Trust into the New Management Agreement would be in the best
interests of the Trust and the Trust's shareholders. The
Board unanimously approved the New Management Agreement and
recommended such New Management Agreement for approval by
the shareholders of the Trust at the meeting. The New
Management Agreement would take effect upon the later to
occur of (i) the obtaining of shareholder approval, or
(ii) the closing of the Transaction. The New Management
Agreement, if approved by shareholders, will continue in
effect until two years after its effective date and
thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act.
In the event that shareholders of the Trust do not
approve the New Management Agreement, ING and PFHI have
reserved the right to determine whether to consummate the
Transaction. If the Transaction is not consummated, DSI
would continue to serve as Manager of all Series of the
Trust under the Current Management Agreement.
The Current Management Agreement, dated August 13, 1996,
and amended on May 1, 1997, provides, among other things,
that DSI is appointed as manager of the activities of the
Trust, subject to the direction of the Board of Trustees. As
such, DSI has agreed to provide advisory, management,
administrative, and other services with respect to each
Series of the Trust. Further, DSI in fulfilling its
obligations has agreed to provide general, overall advice
and guidance with respect to each Series and provide advice
and guidance to the Trustees, and oversee the management of
the investments of each Series and the composition of each
Series' portfolio of securities and investments, including
cash, and the purchase, retention and disposition of such
securities and cash, all in accordance with each Series'
investment objectives and policies as stated in the Trust's
current registration statement. Additionally, DSI has agreed
to select and recommend for consideration by the Trust's
Board of Trustees investment advisory firms to provide
investment advice to one or more of the Series, and, at the
expense of DSI, to engage such investment advisory firms
("the Portfolio Managers") to render investment advice and
management of the investments of such Series. DSI has agreed
to monitor and evaluate the performance of the Portfolio
Managers with respect to the investment objectives and
policies of the Series and to monitor their activities to
ensure compliance with the 1940 Act and all applicable
federal and state laws and regulations. DSI also has agreed
to provide or procure on behalf of the Trust, at DSI's
expense, custodian, portfolio accounting and transfer
agency, dividend disbursing and other services necessary for
the ordinary operation of the Trust. Under the New
Management Agreement, all services provided by DSI would
continue.
Pursuant to the Current Management Agreement, neither DSI
nor its stockholders, officers, directors, employees, or
agents shall be subject to, and the Trust will indemnify
such persons from and against, any liability for, or any
damages, expenses, or losses incurred in connection with any
act or omission connected with or arising out of any
services rendered under the Current Management Agreement,
except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of DSI's duties, or by reason
or reckless disregard of DSI's obligations and duties under
the Current Management Agreement.
The Current Management Agreement also provides that,
except as otherwise may be required by the 1940 Act, neither
DSI nor its stockholders, officers, directors, employees, or
agents shall be subject to, and the Trust will indemnify
such persons from any liability for, or any damages,
expenses, or losses incurred in connection with, any act or
omission by a Portfolio Manager or any of the Portfolio
Managers' stockholders or partners, officers, directors,
employees, or agents connected with or arising out of any
services rendered under a Portfolio
5
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Management Agreement,
except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of DSI's duties under the
Current Management Agreement, or by reason of reckless
disregard of DSI's obligations and duties under the Current
Management Agreement. Under the New Management Agreement,
the same rights will be granted to and the same
responsibilities will be imposed on DSI.
The Current Management Agreement was last submitted to
and approved by shareholders of the Trust on July 29, 1996,
as required under the 1940 Act pending an assignment of the
previous management agreement due to occur with the change
of ownership of DSI in connection with the acquisition of
DSI and its affiliates by Equitable of Iowa (the "previous
DSI change of ownership"). Additionally, on April 29, 1997
the shareholders of the Emerging Market Series amended the
Current Management Agreement to increase the fee paid to DSI
with respect to that Series only. The Current Management
Agreement provides that it may be terminated at any time
without payment of any penalty, by DSI or the Board, or by a
vote of a majority of the outstanding voting shares of each
Series. Additionally, the Current Management Agreement
automatically and immediately terminates in the event of its
assignment.
As compensation for the actions of DSI, under the Current
Management Agreement, the Trust pays DSI the following fee
at an annual rate equal to a percentage of the average daily
net assets of each Series (based on combined assets of the
indicated groups of Series) which fee is computed and
accrued daily and paid monthly (except for the Market
Manager Series which is paid quarterly):
SERIES RATE
------ ----
All-Growth, Capital
Appreciation, 1.00% of first $750 million;
Fully Managed, Multiple Allocation, 0.95% of next $1.25 billion;
Hard Assets, Real Estate, 0.90% of next $1.5 billion; and
Rising Dividends, Small Cap, 0.85% of amount in excess of $3.5
Strategic Equity and Value Equity billion.
Limited Maturity Bond 0.60% of first $200 million;
and Liquid Asset 0.55% of next $300 million; and
0.50% of amount in excess of $500
million.
Emerging Markets 1.75%
Market Manager 1.00%
Managed Global 1.25% of first $500 million; and
1.05% of amount in excess of $500
million.
Under the New Management Agreement, the schedule of
compensation payable to DSI will not change. During 1996,
the Trust paid DSI pursuant to the scheduled compensation
described above the following fee amounts:
SERIES AGGREGATE FEE
------ -------------
All-Growth $ 910,039
Capital Appreciation $1,335,410
Emerging Markets $ 791,005
Fully Managed $1,266,104
Hard Assets $ 362,600
Limited Maturity Bond $ 497,345
Liquid Asset $ 240,479
Managed Global $ 580,653
Market Manager $ 57,847
Multiple Allocation $2,892,936
Real Estate $ 371,844
Rising Dividends $ 989,772
6
<PAGE>
SERIES (CONTINUED) AGGREGATE FEE
------------------ -------------
Small Cap $180,699
Strategic Equity $195,979
Value Equity $379,126
There were no other material payments made by any Series
to DSI, or any affiliated person of DSI, during 1996.
The Trust has entered into a Distribution Agreement with
DSI to serve as the Distributor of Shares of the Trust. DSI
is a registered broker-dealer and a member of the National
Association of Securities Dealers, Inc. ("NASD"), and acts
as Distributor, without remuneration from the Trust. DSI
also serves as the Distributor for the Variable Contracts
issued by Golden American. After an initial two-year term,
the Distribution Agreement continues in effect from year to
year provided such continuance is approved at least annually
with respect to the Trust by the Board (or by the
Shareholders of the Trust) and by the non-interested
Trustees. As required by the 1940 Act, the Distribution
Agreement provides for its automatic termination in the
event of an assignment. As noted above, consummation of the
Transaction may constitute an assignment under the 1940 Act.
The Board, including the non-interested Trustees, has
approved a new Distribution Agreement between the Trust and
DSI, on the same terms and conditions as the current
Distribution Agreement (except for dates of execution,
effectiveness and termination), which new Distribution
Agreement will take effect in the event the Transaction is
consummated.
See Attachment B for a list of the directors and
principal executive officer of DSI.
BOARD OF TRUSTEES' EVALUATION. The Board, including the non-
interested Trustees, has determined that, by approving the
New Management Agreement on behalf of the Trust, the Trust
can best assure itself that the services currently provided
by DSI will continue after the Transaction without
interruption. The Board has determined that, as with the
Current Management Agreement, the New Management Agreement
will enable the Trust to obtain services of high quality at
costs deemed appropriate, reasonable and in the best
interests of the Trust and its Shareholders.
IN EVALUATING THE NEW MANAGEMENT AGREEMENT, THE BOARD
TOOK INTO ACCOUNT THAT, EXCEPT FOR THE DATES OF EXECUTION,
EFFECTIVENESS AND TERMINATION, THERE ARE NO DIFFERENCES
BETWEEN THE TERMS AND CONDITIONS OF THE TRUST'S CURRENT
MANAGEMENT AGREEMENT AND THE NEW MANAGEMENT AGREEMENT,
INCLUDING THE TERMS RELATING TO THE SERVICES TO BE PROVIDED
THEREUNDER BY DSI AND THE FEES AND EXPENSES PAYABLE BY THE
TRUST.
The Board also considered the terms of the New Management
Agreement, and the possible effects of the Transaction upon
the Trust and DSI's organization, and upon the ability of
DSI to provide advisory and other services to the Trust. The
Board also considered the qualifications of DSI to provide
an appropriate range of management and administrative
services, the performance record of DSI, the financial
condition of DSI and the anticipated working relationship
between DSI and ING. In light of the circumstances, the
Trustees concluded that the terms of the New Management
Agreement are fair and reasonable.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW MANAGEMENT AGREEMENT, RECOMMENDS APPROVAL OF THE NEW
MANAGEMENT AGREEMENT BETWEEN THE TRUST AND DSI.
PROPOSALS 2(A)-2(K)
APPROVAL OF NEW PORTFOLIO MANAGEMENT AGREEMENTS FOR THE ALL-
GROWTH SERIES, CAPITAL APPRECIATION SERIES, EMERGING MARKETS
SERIES, MANAGED GLOBAL SERIES, FULLY MANAGED SERIES, HARD
ASSETS SERIES, LIMITED MATURITY BOND SERIES, LIQUID ASSET
SERIES, MARKET MANAGER SERIES, MULTIPLE ALLOCATION SERIES,
STRATEGIC EQUITY SERIES, REAL ESTATE SERIES, RISING
DIVIDENDS SERIES,
SMALL CAP SERIES AND VALUE EQUITY SERIES.
As stated above, the Transaction will result in a change
of control of DSI and may operate to terminate automatically
the Portfolio Management Agreements currently applicable to
each of the previously identified
7
<PAGE>
Series (collectively, the
"Current Portfolio Management Agreements"). In order for the
management of each Series to continue uninterrupted after
the Transaction, shareholder approval of "New Portfolio
Management Agreements" is being sought.
Each of the Current Portfolio Management Agreements
requires the Portfolio Manager to provide, subject to
supervision of the Trust's Board of Trustees and DSI, a
continuous investment program for the Series' portfolio and
to determine the composition of the assets of the Series'
portfolio, including determination of the purchase,
retention, or sale of the securities, cash, and other
investments contained in the portfolio. Generally, the
Current Portfolio Management Agreements state that the
Portfolio Manager will provide investment research and
conduct a continuous program of evaluation, investment,
sales, and reinvestment of the Series' assets by determining
the securities and other investments that shall be
purchased, sold, closed or exchanged for the Series, when
these transactions should be executed, and what portion of
the assets of the Series should be held in the various
securities and other investments in which it may invest, all
in accordance with the Series' investment objectives and
policies. Under the New Portfolio Management Agreements, all
services and responsibilities of the Portfolio Managers
would continue.
Pursuant to each of the Current Portfolio Management
Agreements, a Portfolio Manager is not subject to liability
for, or subject to any damages, expenses, or losses in
connection with, any act or omission connected with or
arising out of any services rendered under the applicable
agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and
duties under the agreement. Under the New Portfolio
Management Agreements, the same responsibilities will be
imposed on the Portfolio Managers.
Each of the Current Portfolio Management Agreements
provides that it will terminate automatically in the event
of its "assignment," as that term is defined in the 1940
Act. In addition, each such agreement may be terminated by
DSI or by the Portfolio Manager upon 60 days' written notice
to the other parties, and by the Trust upon the vote of a
majority of the Board or a majority of the outstanding
Shares of the applicable Series, upon 60 days' written
notice to DSI and the Portfolio Manager.
For the services provided by the Portfolio Managers
pursuant to each of the Current Portfolio Management
Agreements, DSI, and not the Trust, pays a monthly fee
(except for the Market Manager Series which is paid
quarterly) at the following annual rates, which are
expressed as percentages of the value of the average daily
net assets of each Series:
<TABLE>
<CAPTION>
PORTFOLIO MANAGER SERIES RATE
- ----------------- ------ ----
<S> <C> <C>
Pilgrim Baxter & Associates, Ltd. All-Growth 0.55%
("Pilgrim")
Chancellor LGT Asset Management, Inc. Capital Appreciation 0.50%
("Chancellor")
Putnam Investment Management, Inc. Emerging Markets 1.00% of first $150 million;
("Putnam") 0.95% of next $150 million; and
0.85% of over $300 million.
T. Rowe Price Associates, Inc. Fully Managed 0.50%
("T. Rowe Price")
Van Eck Associates Corporation Hard Assets 0.50%
("Van Eck")
Equitable Investment Services, Inc. Limited Maturity 0.30% of first $25 million;
("EISI") Bond 0.25% of the next $50 million;
0.20% of the next $25 million; and
0.15% of over $150 million;
subject to a minimum annual
fee of $35,000
8
<PAGE>
<CAPTION>
PORTFOLIO MANAGER (CONTINUED) SERIES RATE
- ----------------------------- ------ ----
<S> <C> <C>
EISI Liquid Assets 0.20% of first $25 million;
0.15% of the next $50 million; and
0.10% of over $75 million;
subject to a minimum annual
fee of $35,000
Putnam Managed Global 0.70% of first $300 million; and
0.60% of over $300 million
EISI Market Manager 0.50%
Zweig Advisors Inc. Multiple Allocation 0.50%
("Zweig")
E.I.I. Realty Securities,Inc. Real Estate 0.50%
("E.I.I. Realty")
Kayne, Anderson Investment Rising Dividends 0.50%
Management, L.P.
("Kayne Anderson")
Fred Alger Management, Inc. Small Cap 0.50%
("Fred Alger")
Zweig Strategic Equity 0.50%
Eagle Asset Management, Inc. Value Equity 0.50%
("Eagle Asset")
</TABLE>
Under the New Portfolio Management Agreements, the
schedule of compensation payable to the Portfolio Managers
will not change.
Fees paid by DSI to the Portfolio Managers for their
services under the Old Portfolio Management Agreements for
the year ended December 31, 1996, were as follows:
Chancellor - $673,180 for the Capital Appreciation Series;
T. Rowe Price - $638,243 for the Fully Managed Series;
Van Eck - $182,786 for the Hard Assets Series; EISI -
$79,768 for the Limited Maturity Bond Series and $28,206 for
the Liquid Asset Series; Zweig - $1,458,329 for the Multiple
Allocation Series and $98,793 for the Strategic Equity
Series; E.I.I. Realty - $187,447 for the Real Estate Series;
Kayne Anderson - $498,776 for the Rising Dividends Series;
Fred Alger - $91,090 for the Small Cap Series and Eagle
Asset - $191,117 for the Value Equity Series. Pilgrim became
portfolio manager of the All-Growth Series on February 3,
1997. Putnam became portfolio manager of the Emerging
Markets Series and the Managed Global Series on March 1,
1997. EISI became portfolio manager of the Market Manager
Series on May 1, 1997.
THE NEW PORTFOLIO MANAGEMENT AGREEMENTS. At the August 19,
1997 meeting of the Board, each of the New Portfolio
Management Agreements was approved by the Board of Trustees,
including a majority of the Trustees who are not interested
parties to the New Portfolio Management Agreements or
interested persons of such parties. The New Portfolio
Management Agreements with Pilgrim, Chancellor, Putnam, T.
Rowe Price, Van Eck, EISI, Zweig, E.I.I. Realty, Kayne
Anderson, Fred Alger, and Eagle Asset, are included as
Exhibits A, B, C, D, E, F, G, H, I, J and K, respectively.
The New Portfolio Management Agreement for each Series as
approved by the Board is submitted for approval by the
shareholders of the Series to which the New Portfolio
Management Agreement applies. The New Portfolio Management
Agreements must be voted upon separately by the Series to
which a New Portfolio Management Agreement pertains. If the
New Portfolio Management Agreement is approved by the vote
of a majority of the outstanding voting shares of the
applicable Series, it will take effect upon the closing of
the Transaction and will continue in effect for two years
and thereafter for successive annual periods as long as such
continuance is approved in accordance with the 1940 Act. For
this purpose, the vote of the holders of a majority
of the
9
<PAGE>
Series' outstanding shares means the lesser of: (i) 67% or
more of the voting shares of each Series present at the
Meeting, if the holders of more than 50% of the outstanding
voting shares of the Series are present or represented by
proxy; or (ii) more than 50% of the outstanding voting
shares of the Series. If the shareholders of a Series should
fail to approve the New Portfolio Management Agreement that
pertains to that Series, the Portfolio Manager may continue
to serve in that capacity with respect to any other Series
whose shareholders approve the New Portfolio Management
Agreement. In such an event, the Trustees shall meet to
consider appropriate action. If the shareholders of any
Series should fail to approve any of the New Portfolio
Management Agreements, ING and PFHI have reserved the right
to determine whether to consummate the Transaction. If the
Transaction is not consummated, the Portfolio Managers will
continue to service all Series of the Trust under the
Current Portfolio Management Agreements.
The terms of each of the New Portfolio Management
Agreements are identical in all material respects, including
the fees payable to the Portfolio Managers, to the terms of
the Current Portfolio Management Agreements. Except as noted
in the following sections for EISI with respect to the
Market Manager Series and for Pilgrim, Chancellor, and
Putnam for the Series they manage, each of the Current
Portfolio Management Agreements was approved by the Board on
June 10, 1996 and was last submitted to and approved by
shareholders of the respective Series at a meeting held on
Jule 29, 1996, pending the previous DSI change of ownership.
PROPOSAL 2(A)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH PILGRIM
FOR THE ALL-GROWTH SERIES
INFORMATION ABOUT PILGRIM
Pilgrim, with offices at 1255 Drummers Lane, Suite 300,
Wayne, Pennsylvania 19087, together with its predecessor
corporations was founded in 1982. Pilgrim, a Delaware
corporation, is a wholly owned subsidiary of United Asset
Management Corporation, a publicly traded company. Pilgrim
is a professional investment management firm which provides
advisory services to pension and profit sharing plans,
charitable institutions, corporations, trust and estates,
and other investment companies. As of December 31, 1996,
Pilgrim managed approximately $14.7 billion of assets,
including approximately $10 billion of investment company
assets.
Pilgrim assumed portfolio management of the All-Growth
Series pursuant to a Portfolio Management Agreement dated
February 3, 1997, among the Trust, DSI, and Pilgrim. The
Portfolio Management Agreement was approved by the Board on
January 23, 1997 and was approved by shareholders of the All-
Growth Series at a meeting held on April 29, 1997, where the
shareholders also approved a fee increase from 0.50% to the
current rate of 0.55% of the average daily net assets of the
Series.
The New Portfolio Management Agreement is included as
Exhibit A. See Exhibit L for a list of the directors and the
principal executive officer of Pilgrim and a table setting
forth the other investment companies with similar investment
objectives to those of the All-Growth Series for which
Pilgrim serves as investment adviser, including the fees
payable by such investment companies and their approximate
net assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(A).
In determining whether to approve the New Portfolio
Management Agreement for the All-Growth Series and to
recommend approval to shareholders, the Board, including the
Trustees who are not interested persons of DSI or Pilgrim,
considered various matters and materials provided by DSI and
Pilgrim. Information considered by the Trustees included,
among other things, the following: (1) the compensation to
be received by Pilgrim for its investment advisory services
and the fairness and reasonableness of such compensation,
and that the fee under the New Portfolio Management
Agreement is the same as that under the Current Portfolio
Management Agreement; (2) the nature and the quality of the
investment advisory services expected to be rendered under
the New Portfolio Management Agreement; (3) the possible
effects of the Transaction on the services to be rendered
under the New Portfolio Management Agreement; (4) the
background and prior experience of Pilgrim; and (5) the
financial condition of Pilgrim.
10
<PAGE>
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND PILGRIM.
PROPOSAL 2(B)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH CHANCELLOR
FOR THE CAPITAL APPRECIATION SERIES
INFORMATION ABOUT CHANCELLOR
Chancellor, with offices at 1166 Avenue of the Americas,
New York, New York 10036, is a New York State chartered
limited purpose trust company. Chancellor is a wholly owned
subsidiary of Liechtenstein Global Trust, AG ("LGT"). Prior
to October 31, 1996 the Capital Appreciation Series was
managed by Chancellor's predecessor, Chancellor Trust
Company.
LGT and its worldwide affiliates provide global asset
management and private banking products, and as of December
31, 1996 were entrusted with approximately $84 billion in
institutional and individual client assets. LGT is
controlled by the Prince of Liechtenstein Foundation, which
serves as the parent organization for various business
enterprises of the Princely Family of Liechtenstein.
The individuals responsible for the management of the
Capital Appreciation Series, since May 1, 1992 (the
commencement of Chancellor's and its predecessors'
management of the Series), are Warren Shaw and Ted
Ujazdowski. Mr. Shaw, Chief Executive Officer and Chief
Investment Officer of Chancellor since 1994, previously
served as President since 1994 and Managing Director since
1988. Mr. Shaw is currently acting in a transitional
capacity and will resign from his responsibilities with
Chancellor effective no later than December 31, 1997. It is
anticipated that Ellen Adams will assume Mr. Shaw's
portfolio management responsibilities with the Series. Ms.
Adams has served as a director of Equity Research from 1993
to 1995, as a Portfolio Manager and Analyst from 1992 to
1993. Mr. Ujazdowski has served as Managing Director of
Chancellor LGT since 1989.
Prior to July 27, 1993, Chancellor Capital Management,
Inc. served as Portfolio Manager to the Capital Appreciation
Series. Chancellor became the Portfolio Manager on July 27,
1993 pursuant to an assignment agreement. This assignment
did not result in any change in the personnel managing the
assets of the Capital Appreciation Series.
Chancellor manages the assets of the Capital Appreciation
Series pursuant to a Portfolio Management Agreement dated
October 31, 1996 among the Trust, DSI, and Chancellor. The
Portfolio Management Agreement was approved by the Board on
September 17, 1996. The Portfolio Management Agreement was
approved by shareholders of the Capital Appreciation Series
at a meeting held on October 29, 1996. Approval was sought
under the requirements of the 1940 Act pending the
acquisition Chancellor by LGT.
The New Portfolio Management Agreement is included as
Exhibit B. See Exhibit M for a list of the directors and the
principal executive officer of Chancellor and a table
setting forth the other investment companies with similar
investment objectives to those of the Capital Appreciation
Series including the fees payable by such investment
companies and their approximate net assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(B).
In determining whether to approve the New Portfolio
Management Agreement for the Capital Appreciation Series and
to recommend approval to shareholders, the Board, including
the Trustees who are not interested persons of DSI or
Chancellor, considered various matters and materials
provided by DSI and Chancellor. Information considered by
the Trustees included, among other things, the following:
(1) the compensation to be received by Chancellor for its
investment advisory services and the fairness and
reasonableness of such compensation, and that the fee under
the New Portfolio Management Agreement is the same as that
under the Current Portfolio Management Agreement; (2) the
nature and the quality of the investment advisory services
expected to be rendered under the New Portfolio Management
Agreement; (3) the possible effects of the Transaction on
the services to be rendered under the New Portfolio
Management Agreement; (4) the background and prior
experience of Chancellor; and (5) the financial condition of
Chancellor.
11
<PAGE>
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND CHANCELLOR.
PROPOSAL 2(C)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH PUTNAM FOR
THE EMERGING MARKETS SERIES AND MANAGED GLOBAL SERIES
INFORMATION ABOUT PUTNAM
Putnam, with offices at One Post Office Square, Boston,
Massachusetts 02109, has been managing mutual funds since
1937. Putnam is wholly owned by 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 June 30, 1997, Putnam and its
affiliates managed approximately $207 billion of assets.
Putnam assumed portfolio management of the Emerging Markets
Series and Managed Global Series on March 1, 1997.
Putnam manages the assets of the Emerging Markets Series
and Managed Global Series pursuant to a Portfolio Management
Agreement dated March 1, 1997, among the Trust, DSI, and
Putnam. The Portfolio Management Agreement was approved by
the Board on January 23, 1997 and was approved by
shareholders of the Emerging Market Series and Managed
Global Series on April 29, 1997, at which time an increase
in the fees payable to Putnam was authorized.
The New Portfolio Management Agreement, which is titled
Sub-Advisory Agreement, is included as Exhibit C. See
Exhibit N for a list of the directors and the principal
executive officer of Putnam and a table setting forth the
other investment companies managed by Putnam with similar
investment objectives to those of the Emerging Markets
Series and Managed Global Series, including the fees payable
by such investment companies and their approximate net
assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(C).
In determining whether to approve the New Portfolio
Management Agreement for the Emerging Markets Series and
Managed Global Series and to recommend approval to
shareholders, the Board of Trustees, including the Trustees
who are not interested persons of DSI or Putnam, considered
various matters and materials provided by DSI and Putnam.
Information considered by the Trustees included, among other
things, the following: (1) the compensation to be received
by Putnam for its investment advisory services and the
fairness and reasonableness of such compensation, and that
the fee under the New Portfolio Management Agreement is the
same as that under the Current Portfolio Management
Agreement; (2) the nature and the quality of the investment
advisory services expected to be rendered under the New
Portfolio Management Agreement; (3) the possible effects of
the Transaction on the services to be rendered under the New
Portfolio Management Agreement; (4) the background and prior
experience of Putnam; and (5) the financial condition of
Putnam.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND PUTNAM.
PROPOSAL 2(D)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH T. ROWE
PRICE
FOR THE FULLY MANAGED SERIES
INFORMATION ABOUT T. ROWE PRICE
T. Rowe Price manages the assets of the Fully Managed
Series pursuant to a Portfolio Management Agreement dated
August 13, 1996. T. Rowe Price, with offices at 100 East
Pratt St., Baltimore, Maryland 21202, was founded in 1937
by the late Thomas Rowe Price, Jr. and currently serves as
investment adviser to the Fully Managed Series. As of
December 31, 1996, T. Rowe Price and its affiliates managed
over $99.4 billion in assets.
12
<PAGE>
The New Portfolio Management Agreement is included as
Exhibit D. See Exhibit O for a list of the directors and the
principal executive officer of T. Rowe Price and a table
setting forth the other investment companies with similar
investment objectives to those of the Fully Managed Series,
including the fees payable by such investment companies and
their approximate net assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(D).
In determining whether to approve the New Portfolio
Management Agreement for the Fully Managed Series and to
recommend approval to shareholders, the Board, including the
Trustees who are not interested persons of DSI or T. Rowe
Price, considered various matters and materials provided by
DSI and T. Rowe Price. Information considered by the
Trustees included, among other things, the following:
(1) the compensation to be received by T. Rowe Price for its
investment advisory services and the fairness and
reasonableness of such compensation, and that the fee under
the New Portfolio Management Agreement is the same as that
under the Current Portfolio Management Agreement; (2) the
nature and the quality of the investment advisory services
expected to be rendered under the New Portfolio Management
Agreement; (3) the possible effects of the Transaction on
the services to be rendered under the New Portfolio
Management Agreement; (4) the background and prior
experience of T. Rowe Price; and (5) the financial condition
of T. Rowe Price.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND T. ROWE PRICE.
PROPOSAL 2(E)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH VAN ECK
FOR THE HARD ASSETS SERIES
INFORMATION ABOUT VAN ECK
Van Eck manages the assets of the Hard Assets Series
pursuant to a Portfolio Management Agreement dated August
13, 1996. Van Eck, with offices at 99 Park Avenue, New York,
New York 10016, serves as investment adviser to ten other
mutual funds and portfolios of pension plans with similar
investment objectives to the Hard Assets Series. In
addition, Van Eck acts as an adviser to nine other mutual
funds with investment objectives different from the Hard
Assets Series. Total aggregate assets under management of
Van Eck as of December 31, 1996 were approximately $1.7
billion. John C. van Eck and members of his family own 100%
of the stock of Van Eck.
The New Portfolio Management Agreement is included as
Exhibit E. See Exhibit P for a list of the directors and the
principal executive officers of Van Eck and a table setting
forth the other investment companies with similar investment
objectives to those of the Hard Assets Series for which Van
Eck serves as investment adviser, including the fees payable
by such investment companies and their approximate net
assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(E).
In determining whether to approve the New Portfolio
Management Agreement for the Hard Assets Series and to
recommend approval to shareholders, the Board, including the
Trustees who are not interested persons of DSI or Van Eck,
considered various matters and materials provided by DSI and
Van Eck. Information considered by the Trustees included,
among other things, the following: (1) the compensation to
be received by Van Eck for its investment advisory services
and the fairness and reasonableness of such compensation,
and that the fee under the New Portfolio Management
Agreement is the same as that under the Current Portfolio
Management Agreement; (2) the nature and the quality of the
investment advisory services expected to be rendered under
the New Portfolio Agreement; (3) the possible effects of the
Transaction on the services to be rendered under the New
Portfolio Management Agreement; (4) the background and prior
experience of Van Eck; and (5) the financial condition of
Van Eck.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND VAN ECK.
13
<PAGE>
PROPOSAL 2(F)
APPROVAL OF A NEW PORTFOLIO MANAGEMENT AGREEMENT
WITH EISI FOR THE LIMITED MATURITY BOND SERIES,
LIQUID ASSET SERIES AND MARKET MANAGER SERIES
INFORMATION ABOUT EISI
EISI, with offices at 909 Locust Street, Des Moines, Iowa
50309, is an Iowa corporation. EISI is a wholly owned
subsidiary of Equitable of Iowa and an affiliate of
Equitable Life, Equitable American, First Golden, Golden
American, USG, DSI and Locust Street. Upon consummation of
the Transaction all of these entities will be deemed to be
controlled by ING. EISI is the investment adviser to, and
administrator of, the Equi-Select Series Trust. The Equi-
Select Series Trust is the investment medium for variable
annuities issued by Equitable Life. As of June 30, 1997 the
Equi-Select Series Trust had assets of approximately $522
million. In addition to its responsibility for the overall
management of the investment strategies and policies of the
nine portfolios of the Equi-Select Series Trust, EISI
directly manages the Money Market Portfolio, Mortgage-Backed
Securities Portfolio, and Advantage Portfolio of the Equi-
Select Series Trust. Additionally, EISI serves as the
investment adviser to Equitable American, Equitable Life,
Golden American and USG, and in such capacity EISI manages
over $9.9 billion of their general account assets, comprised
primarily investment grade corporate bonds, mortgage backed
securities, non-investment grade corporate bonds, and
commercial mortgages.
EISI manages the assets of the Limited Maturity Bond
Series and Liquid Asset Series pursuant to a Portfolio
Management Agreement which was approved by the Board of
Trustees on June 10, 1996, and by the shareholders of the
Limited Maturity Bond Series and the Liquid Asset Series on
July 29, 1996 to approve EISI as the portfolio manager. EISI
manages the Market Manager Series pursuant to an amendment
to the Portfolio Management Agreement which was approved by
the Board on January 23, 1997 and by the shareholders of the
Market Manager Series on April 29, 1997.
The New Portfolio Management Agreement is included as
Exhibit F. See Exhibit Q for a list of the directors and the
principal executive officer of EISI and a table setting
forth the other investment companies with similar investment
objectives to those of the Limited Maturity Bond Series,
Liquid Asset Series or Market Managing Series for which EISI
serves as investment adviser, including the fees payable by
such investment companies and their approximate net assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(F).
In determining whether to approve the New Portfolio
Management Agreement for Limited Maturity Bond Series,
Liquid Asset Series and Market Manager Series and to
recommend approval to the Shareholders, the Board, including
the Trustees who are not interested persons of the Trust,
DSI or EISI, considered several factors, including: (1) the
compensation to be received by EISI for its investment
advisory services and the fairness and reasonableness of the
compensation and that the fee under the New Portfolio
Management Agreement is the same as that under the Current
Portfolio Management Agreement; (2) the nature and quality
of the portfolio management services expected to be rendered
under the New Portfolio Management Agreement; (3) the
possible effects of the transaction on the services to be
rendered under the New Portfolio Management Agreement; (4)
the background and prior experience of EISI; (5) the
financial condition of EISI; and (6) the anticipated working
relationship among DSI and EISI and ING.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI AND EISI.
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PROPOSAL 2(G)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH ZWEIG
FOR THE MULTIPLE ALLOCATION SERIES AND STRATEGIC EQUITY
SERIES
INFORMATION ABOUT ZWEIG
Zweig manages the assets of the Multiple Allocation
Series and Strategic Equity Series pursuant to a Portfolio
Management Agreement dated August 13, 1996. Zweig, with
offices at 900 Third Avenue, New York, New York 10022, was
organized on May 7, 1986. Dr. Martin E. Zweig, the President
of Zweig, has been engaged in the business of providing
investment advisory and portfolio management services for
over 25 years. He is the President and/or Chairman of
investment advisory firms which, as of June 30, 1997,
managed in excess of $6 billion in total assets. Zweig
currently serves as investment adviser to The Zweig Fund,
Inc., a closed-end, diversified management investment
company. Dr. Zweig owns approximately 64% of the outstanding
shares of Zweig.
Zweig Securities Corp. is a registered broker-dealer
which is affiliated with Zweig. During the fiscal year ended
December 31, 1996, the Multiple Allocation Series paid
$42,834 (9.07% of total brokerage commissions) to Zweig
Securities Corp.
The New Portfolio Management Agreement is included as
Exhibit G. See Exhibit R identifying the director and the
principal executive officer of Zweig and a table setting
forth the other investment companies with similar investment
objectives to those of the Multiple Allocation Series and
Strategic Equity Series for which Zweig serves as investment
adviser, including the fees payable by such investment
companies and their approximate net assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(G).
In determining whether to approve the New Portfolio
Management Agreement for the Multiple Allocation Series and
Strategic Equity Series and to recommend approval to
shareholders, the Board, including the Trustees who are not
interested persons of DSI or Zweig, considered various
matters and materials provided by DSI and Zweig. Information
considered by the Trustees included, among other things, the
following: (1) the compensation to be received by Zweig for
its investment advisory services and the fairness and
reasonableness of such compensation, and that the fee under
the New Portfolio Management Agreement is the same as that
under the Current Portfolio Management Agreement; (2) the
nature and the quality of the investment advisory services
expected to be rendered under the New Portfolio Management
Agreement; (3) the possible effects of the Transaction on
the services to be rendered under the New Portfolio
Management Agreement; (4) the background and prior
experience of Zweig; and (5) the financial condition of
Zweig.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND ZWEIG.
PROPOSAL 2(H)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH
E.I.I. REALTY FOR THE REAL ESTATE SERIES
INFORMATION ABOUT E.I.I. REALTY
E.I.I. Realty manages the assets of the Real Estate
Series pursuant to a Portfolio Management Agreement dated
August 13, 1996. E.I.I. Realty, with offices at 667 Madison
Avenue, 16th Floor, New York, New York 10021, serves as
investment adviser to the Real Estate Series. E.I.I. Realty
is a professional investment adviser which, with its
affiliates, has been providing services to employee benefit
plans, corporations, and high net worth individuals, both
foreign and domestic, since 1983. As of December 31, 1996,
E.I.I. Realty and/or its affiliates had investment
management authority with respect to approximately $965
million of real estate securities assets. E.I.I. Realty is a
wholly owned subsidiary of European Investors Incorporated.
The New Portfolio Management Agreement is included as
Exhibit H. See Exhibit S for a list of the directors and the
principal executive officer of E.I.I. Realty and a table
setting forth the other investment companies with
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similar
investment objectives to those of the Real Estate Series for
which E.I.I. Realty serves as investment adviser, including
the fees payable by such investment companies and their
approximate net assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(H).
In determining whether to approve the New Portfolio
Management Agreement for the Real Estate Series and to
recommend approval to shareholders, the Board, including the
Trustees who are not interested persons of DSI or E.I.I.
Realty, considered various matters and materials provided by
DSI and E.I.I. Realty. Information considered by the
Trustees included, among other things, the following:
(1) the compensation to be received by E.I.I. Realty for its
investment advisory services and the fairness and
reasonableness of such compensation, and that the fee under
the New Portfolio Management Agreement is the same as that
under the Current Portfolio Management Agreement; (2) the
nature and the quality of the investment advisory services
expected to be rendered; (3) the possible effects of the
Transaction on the services to be rendered under the New
Portfolio Management Agreement; (4) the background and prior
experience of E.I.I. Realty; and (5) the financial condition
of E.I.I. Realty.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND E.I.I. REALTY.
PROPOSAL 2(I)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH
KAYNE ANDERSON FOR THE RISING DIVIDENDS SERIES
INFORMATION ABOUT KAYNE ANDERSON
Kayne Anderson manages the assets of the Rising Dividends
Series pursuant to a Portfolio Management Agreement dated
August 13, 1996. Kayne Anderson, with offices at 1800 Avenue
of the Stars, Suite 200, Los Angeles, California 90067, is
a registered investment adviser organized on June 24, 1994
as a California limited partnership succeeding to the
investment advisory business of Kayne Anderson Investment
Management, Inc., which was formed in 1984. Kayne Anderson
is in the business of furnishing investment advice to
institutional and private clients. The General Partner of
Kayne Anderson is KAIM Traditional LLC (the "LLC"), a
California limited liability company. Messrs. Kayne,
Anderson and Rudnick in the aggregate own 80% of the LLC. As
of December 31, 1996, Kayne Anderson managed portfolios
which, in the aggregate, amounted to approximately
$2.1 billion.
The New Portfolio Management Agreement is included as
Exhibit I. See Exhibit T for a list of the principal
executive officer of Kayne Anderson and the members of the
LLC and a table setting forth the other investment companies
with similar investment objectives to those of the Rising
Dividends Series for which Kayne Anderson serves as
investment adviser, including the fees payable by such
investment companies and their approximate net assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(I).
In determining whether to approve the New Portfolio
Management Agreement for the Rising Dividends Series and to
recommend approval to shareholders, the Board, including the
Trustees who are not interested persons of DSI or Kayne
Anderson, considered various matters and materials provided
by DSI and Kayne Anderson. Information considered by the
Trustees included, among other things, the following:
(1) the compensation to be received by Kayne Anderson for
its investment advisory services and the fairness and
reasonableness of such compensation, and that the fee under
the New Portfolio Management Agreement is the same as that
under the Current Portfolio Management Agreement; (2) the
nature and the quality of the investment advisory services
expected to be rendered; (3) the possible effects of the
Transaction on the services to be rendered under the New
Portfolio Management Agreement under the New Portfolio
Management Agreement; (4) the background and prior
experience of Kayne Anderson; and (5) the financial
condition of Kayne Anderson.
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ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND KAYNE ANDERSON.
PROPOSAL 2(J)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH
FRED ALGER FOR THE SMALL CAP SERIES
INFORMATION ABOUT FRED ALGER
Fred Alger manages the assets of the Small Cap Series
pursuant to a Portfolio Management Agreement dated August
13, 1996. Fred Alger, with offices at 75 Maiden Lane, New
York, New York 10038, serves as investment adviser to the
Small Cap Series. Fred Alger has been in the business of
providing investment advisory services since 1964 and, as of
June 30, 1997, had approximately $7.8 billion under
management: $5.7 billion in mutual fund accounts and $2.1
billion in other advisory accounts. Fred Alger is owned by
Fred Alger & Company, Incorporated, which in turn is owned
by Alger Associates, Inc., a financial services holding
company. Fred M. Alger III and his brother, David D. Alger,
are the majority shareholders of Alger Associates, Inc. and
may be deemed to control that company and its subsidiaries.
Fred Alger & Company, Incorporated is a registered broker-
dealer which is affiliated with Fred Alger. During the
fiscal year ended December 31, 1996, the Small Cap Series
paid $333,058 (78.34% of total brokerage commissions) to
Fred Alger & Company, Incorporated.
The New Portfolio Management Agreement is included as
Exhibit J. See Exhibit U for a list of the directors and the
principal executive officers of Fred Alger and a table
setting forth the other investment companies with similar
investment objectives to those of the Small Cap for which
Fred Alger serves as investment adviser, including the fees
payable by such investment companies and their approximate
net assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(J).
In determining whether to approve the New Portfolio
Management Agreement for the Small Cap Series and to
recommend approval to shareholders, the Board, including the
Trustees who are not interested persons of DSI or Fred
Alger, considered various matters and materials provided by
DSI and Fred Alger. Information considered by the Trustees
included, among other things, the following: (1) the
compensation to be received by Fred Alger for its investment
advisory services and the fairness and reasonableness of
such compensation, and that the fee under the New Portfolio
Management Agreement is the same as that under the Current
Portfolio Management Agreement; (2) the nature and the
quality of the investment advisory services expected to be
rendered; (3) the possible effects of the Transaction on the
services to be rendered under the New Portfolio Management
Agreement; (4) the background and prior experience of Fred
Alger; and (5) the financial condition of Fred Alger.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND FRED ALGER.
PROPOSAL 2(K)
APPROVAL OF PORTFOLIO MANAGEMENT AGREEMENT WITH
EAGLE ASSET FOR THE VALUE EQUITY SERIES
INFORMATION ABOUT EAGLE ASSET
Eagle Asset manages the assets of the Value Equity Series
pursuant to a Portfolio Management Agreement dated August
13, 1996. Eagle Asset, with offices at 880 Carillon Parkway,
St. Petersburg, Florida 33716, is a registered investment
adviser organized on February 8, 1984 as a Florida
corporation. Eagle Asset is in the business of managing
institutional accounts and individual accounts on a
discretionary basis. Eagle Asset is a wholly owned
subsidiary of Raymond James Financial, Inc., a publicly
traded company whose shares are listed
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on the New York Stock
Exchange. Thomas A. James is the principal shareholder of
Raymond James Financial, Inc.
Raymond James & Associates, Inc. is a registered broker-
dealer which is affiliated with Eagle Asset. During the
fiscal year ended December 31, 1996, the Value Equity Series
paid $2,550 (2.04% of total brokerage commissions) to
Raymond James & Associates, Inc.
The New Portfolio Management Agreement is included as
Exhibit K. See Exhibit V for a list of the directors and the
principal executive officer of Eagle Asset and a table
setting forth the other investment companies with similar
investment objectives to those of the Value Equity Series
for which Eagle Asset serves as investment adviser,
including the fees payable by such investment companies and
their approximate net assets.
THE TRUSTEES' RECOMMENDATION - PROPOSAL 2(K).
In determining whether to approve the New Portfolio
Management Agreement for the Value Equity Series and to
recommend approval to shareholders, the Board, including the
Trustees who are not interested persons of DSI or Eagle
Asset, considered various matters and materials provided by
DSI and Eagle Asset. Information considered by the Trustees
included, among other things, the following: (1) the
compensation to be received by Eagle Asset for its
investment advisory services and the fairness and
reasonableness of such compensation, and that the fee under
the New Portfolio Management Agreement is the same as that
under the Current Portfolio Management Agreement; (2) the
nature and the quality of the investment advisory services
expected to be rendered under the New Portfolio Management
Agreement; (3) the possible effects of the Transaction on
the services to be rendered under the New Portfolio
Management Agreement; (4) the background and prior
experience of Eagle Asset; and (5) the financial condition
of Eagle Asset.
ACCORDINGLY, THE BOARD OF TRUSTEES, INCLUDING THE
TRUSTEES WHO ARE NOT INTERESTED PERSONS OF ANY PARTY TO THE
NEW PORTFOLIO MANAGEMENT AGREEMENT, RECOMMENDS THE APPROVAL
OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT AMONG THE TRUST,
DSI, AND EAGLE ASSET.
PROPOSAL 3
TO APPROVE A CHANGE IN A FUNDAMENTAL INVESTMENT LIMITATION
WITH RESPECT TO THE ALL-GROWTH SERIES
The All-Growth Series seeks capital appreciation. In
seeking this objective, the Series must comply with certain
fundamental investment limitations which may not be changed
without the approval of a majority of the outstanding voting
shares of the Series. It is proposed that the current
limitation on the total assets of the Series which may be
invested in securities that are illiquid because they are
subject to legal or contractual restrictions on resale, or
are repurchase agreements maturing in more than seven days,
or are other securities which in the determination of
Pilgrim Baxter, as the Portfolio Manager, are illiquid be
changed from no more than 10% of the total assets of the
Series to no more than 15% of the net assets of the Series.
Raising the limitation to 15% would enable the Series to
take advantage of investment opportunities from which it
otherwise may not be able to benefit.
There are several risks associated with investing in
illiquid securities. The ability of the Series to dispose of
such securities may be greatly limited, and a Series may
have to continue to hold such securities during periods when
the Portfolio Manager would otherwise have sold the
security. It is possible that the Portfolio Manager or its
affiliates or clients may hold securities issued by the same
issuers, and may in some cases have acquired the securities
at different times, on more favorable terms, or at more
favorable prices, than a Series which it manages.
At the August 19, 1997 meeting of the Board DSI, as the
Trust's Manager, recommended that the Trustees approve a
change in the Series' fundamental limitation. The Trustees
adopted the recommended change.
ACCORDINGLY, THE BOARD OF TRUSTEES RECOMMENDS THE
APPROVAL OF THE CHANGE IN THIS FUNDAMENTAL INVESTMENT
LIMITATION OF THE ALL-GROWTH SERIES.
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PROPOSAL 4
APPROVE A CHANGE IN A FUNDAMENTAL INVESTMENT LIMITATION
WITH RESPECT TO THE HARD ASSETS SERIES
The Hard Assets Series seeks long-term capital
appreciation. In seeking this objective, the Series must
comply with certain fundamental investment limitations which
may not be changed without the approval of a majority of the
outstanding voting shares of the Series. It is proposed that
the current limitation against the Series investing in gold
bullion and coins and other precious metals bullion and
engaging in futures contracts with respect to such
commodities be changed so as to enable the Series to invest
in all commodities and commodities contracts.
The Hard Assets Series has a fundamental policy of
concentrating in hard asset sector industries and up to 50%
of the Series' assets may be invested in any one of the hard
asset sectors. As a result, the Series may be subject to
greater risks and market fluctuations than other investment
companies with more diversified portfolios. 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
hazards 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 risk hard asset prices, such securities
may rise at a faster rate, and, conversely, in time of
falling hard asset prices, such securities may suffer a
greater price decline. Permitting the Series to invest more
broadly in commodities futures contracts is intended to give
the Series more investment options to take advantage of
market opportunities and to hedge other investments. This
proposal may increase the risks associated with the Hard
Assets Series.
The transactions in which the Series proposes to invest
are commodities futures contracts and must constitute bona
fide hedging or other strategies under regulations
promulgated by the Commodities Futures Trading Commission
(the "CFTC"), under which the Series would not be a
"commodity pool." At the time the Series purchases a futures
contract, an amount of cash and/or securities equal to the
fair market value less initial and variation margin of the
futures contract will be deposited in a segregated account
with the Trust's custodian to collateralize the position and
thereby ensure that such futures contract is covered. In
addition, the Series will comply with certain regulations of
the CFTC to qualify for an exclusion from being a "commodity
pool," which require a Series to set aside cash and short-
term obligations with respect to long positions in a futures
contract or a futures option.
There are several risks associated with the use of
futures contracts and futures options. The value of a
futures contract may decline. While a Series' transactions
in futures may protect the Series against adverse movements
in the general level of interest rates or other economic
conditions, such transactions could also preclude the Series
from the opportunity to benefit from favorable movements in
the level of interest rates or other economic conditions.
With respect to transactions for hedging, there can be no
guarantee that there will be correlation between price
movements in the hedging vehicle and in the portfolio
securities being hedged. An incorrect correlation could
result in a loss on both the hedged securities in a Series
and the hedging vehicle so that the Series' return might
have been better if hedging had not been attempted. The
degree of imperfection of correlation depends on
circumstances such as variations in speculative market
demand for futures and futures options on securities,
including technical influences in futures trading and
futures options, and differences between the financial
instruments being hedged and the instruments underlying the
standard contracts available for trading in such respects as
interest rate levels, maturities, and creditworthiness of
issuers. A decision as to whether, when, and how to hedge
involves the exercise of skill and judgment and even a well-
conceived hedge may be unsuccessful to some degree because
of market behavior or unexpected interest rate trends.
There can be no assurance that a liquid market will exist
at a time when a Series seeks to close out a commodities
futures contract or a futures option position. Most futures
exchanges and boards of trade limit the
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amount of
fluctuation permitted in futures contract prices during a
single day; once the daily limit has been reached on a
particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these
instruments are relatively new and without a significant
trading history. As a result, there is no assurance that an
active secondary market will develop or continue to exist.
The daily limit governs only price movements during a
particular trading day and therefore does not limit
potential losses because the limit may work to prevent the
liquidation of unfavorable positions. For example, futures
prices have occasionally moved to the daily limit for
several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of positions and
subjecting some holders of futures contracts to substantial
losses. Lack of a liquid market for any reason may prevent
the Series from liquidating an unfavorable position and the
Series would remain obligated to meet margin requirements
and continue to incur losses until the position is closed.
Foreign markets may offer advantages such as trading in
indices that are not currently traded in the United States.
Foreign markets, however, may have greater risk potential
than domestic markets. Unlike trading on domestic commodity
exchanges, trading on foreign commodity markets is not
regulated by the CFTC and may be subject to greater risk
than trading on domestic exchanges. For example, some
foreign exchanges are principal markets so that no common
clearing facility exists and a trader may look only to the
broker for performance of the contract. Trading in foreign
futures or foreign options contracts may not be afforded
certain of the protective measures provided by the Commodity
Exchange Act, the CFTC's regulations, and the rules of the
National Futures Association and any domestic exchange,
including the right to use reparations proceedings before
the CFTC and arbitration proceedings provided by the
National Futures Association or any domestic futures
exchange. Amounts received for foreign futures or foreign
options transactions may not be provided the same
protections as funds received in respect of transactions on
United States futures exchanges. A Series could incur losses
or lose any profits that had been realized in trading by
adverse changes in the exchange rate of the currency in
which the transaction is denominated. Transactions on
foreign exchanges may include both commodities that are
traded on domestic exchanges and boards of trade and those
that are not.
At the August 19, 1997 meeting of the Board DSI, as the
Trust's Manager, recommended that the Trustees approve a
change in the Series' fundamental limitation. The Trustees
adopted the recommended change.
ACCORDINGLY, THE BOARD OF TRUSTEES RECOMMENDS THE
APPROVAL OF THE CHANGE IN THIS FUNDAMENTAL INVESTMENT
LIMITATION OF THE HARD ASSETS SERIES.
PROPOSAL 5
ELECTION OF TRUSTEE
It is proposed that Ms. Elizabeth J. Newell be elected as
a Trustee, to hold office until her successor is duly
elected and qualified. The Board of Trustees does not
contemplate that Ms. Newell 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 of their choice as a nominee.
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 Amended and Restated 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.
Ms. Newell has consented to being named in this proxy
statement and has agreed to serve as a Trustee if elected.
Ms. Newell (age 50) is President and Chief Executive Officer
of Kragie/Newell, Inc., an integrated marketing and
communications company providing a broad range of services
including advertising, public relations, sales promotions
and database marketing. Ms. Newell serves on the Board of
Directors of Bankers Trust Company, Des Moines, Iowa. If Ms.
Newell is elected, she will be considered not an "interested
person" of the Trust, as defined in the 1940 Act.
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INFORMATION REGARDING THE BOARD OF TRUSTEES.
The Trust has a standing Audit Committee and Nominating
Committee and does not have a standing Compensation
Committee. The Audit Committee and Nominating Committee are
composed of Messrs. Robert A. Grayson and Roger B. Vincent
and Dr. M. Norvel Young. The Audit Committee met once in
1996 to select the Trust's independent auditors and to
review their report, the internal financial controls of the
Trust, the principles and practices of financial reporting
of the Trust and the adequacy of the Trust's disclosures.
The Nominating Committee did not meet 1996. The Nominating
Committee will consider nominees recommended by shareholders
when such a request is presented in compliance with the
Trust's Amended and Restated Agreement and Declaration of
Trust and the By-Laws of the Trust.
REMUNERATION OF TRUSTEES, OFFICERS AND OTHERS. Officers and
Trustees of the Trust who are otherwise affiliated with the
Trust, Equitable of Iowa Companies, or any of their
affiliates, as the case may be, receive no remuneration from
the Trust. Each non-interested Trustee receives an annual
fee of $24,000 and for each Board meeting attended is
reimbursed for expenses. There were four Board meetings held
during 1996 fiscal year and the non-interested Trustees
received fees and expenses, as a group, totaling $85,025
during such period. The Fund has no bonus, pension, profit-
sharing or retirement plan.
THE BOARD RECOMMENDS THE ELECTION OF MS. NEWELL AS A
TRUSTEE OF THE TRUST.
ADDITIONAL INFORMATION
OUTSTANDING SHARES.
As of the Record Date, there were the following number of
Shares outstanding for each Series of the Trust:
SERIES SHARES OUTSTANDING
------ ------------------
All-Growth 5,228,558
Capital Appreciation 9,582,353
Emerging Markets 4,514,384
Fully Managed 9,602,151
Hard Assets 2,438,654
Limited Maturity Bond 7,239,459
Liquid Asset 54,814,479
Managed Global 8,303,894
Market Manager 397,698
Multiple Allocation 19,331,811
Real Estate 3,688,214
Rising Dividends 10,522,989
Small Cap 4,006,268
Strategic Equity 3,199,001
Value Equity 3,833,131
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 the Trust:
NAME
OF BENEFICIAL OWNER SERIES SHARES HELD % OF SHARES
- ------------------- ------ ----------- -----------
Sanford Luger Market Manager 21,556.18 5.42
Darald Libbys
Charitable Remainder
Unitrust Market Manager 30,048.09 7.56
George Berman
Charitable Remainder Trust Market Manager 26,775.06 6.73
David & Anita Swann
Charitable Remainder Trust Market Manager 48,144.53 12.11
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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
serve until their successor shall have been duly elected and
qualified.
Terry L. Kendall, Age 51, serves as President and Trustee
of the Trust. Additionally, Mr. Kendall is Director,
President and Chief Executive Officer, Golden American,
since 1993 and First Golden, since August, 1996; Executive
Vice President, Equitable Life, since August, 1996; formerly
Managing Director, Bankers Trust Company (1993-1996);
formerly, President and Chief Executive Officer, United
Pacific Life Insurance Company (1983-1993).
Barnett Chernow, Age 47, serves as Vice President of the
Trust. Additionally, Mr. Chernow is Executive Vice
President, Golden American, since October, 1993 and First
Golden, since August, 1996; Executive Vice President, DSI,
since October, 1993 to present; Vice President, Equitable
Life, since August, 1996; Senior Vice President and Chief
Financial Officer, Reliance Insurance Company (1977-1993).
Myles R. Tashman, Age 54, serves as Secretary of the
Trust. Additionally, Mr. Tashman is Executive Vice President
and Secretary, Golden American since 1993 and First Golden,
since August, 1996 and General Counsel of Golden American
since July, 1996 and First Golden since August, 1996;
Executive Vice President and Secretary, DSI since 1993;
Assistant Secretary, Equitable Life, since August, 1996;
formerly, Senior Vice President and General Counsel, United
Pacific Life Insurance Company (1986-1993).
Mary Bea Wilkinson, Age 40, serves as Treasurer of the
Trust. Additionally, Ms. Wilkinson serves as Senior Vice
President, First Golden, since August, 1996 to present;
Senior Vice President, Golden American (1993-1996);
Assistant Vice President, CIGNA Insurance Companies, August,
1993 to October, 1993; various positions with United Pacific
Life Insurance Company (1987-1993), 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,
Delaware 19801. The Distributor is a registered broker-
dealer and a member of the National Association of
Securities Dealers, Inc. 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.
ANNUAL REPORT.
The Trust's 1996 Annual Report to Shareholders was mailed
to shareholders on or about February 28, 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.
22
<PAGE>
COSTS OF SOLICITATION.
The costs associated with the Meeting will be paid by
Equitable of Iowa. Neither the Trust nor its shareholders
will bear any costs associated with 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 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 1998 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 voting instruction
authorization and return it promptly in the enclosed self-
addressed postage-paid envelope. You may revoke your proxy
at any time prior to the meeting by written notice to the
Trust or by submitting an authorization card bearing a later
date.
By Order of the Board of Trustees
/s/ Myles R. Tashman
Myles R. Tashman
Secretary
September 11, 1997
Wilmington, Delaware
23
<PAGE>
ATTACHMENT AND EXHIBIT INDEX
ATTACHMENT ATTACHMENT DESCRIPTION
- ---------- ----------------------
A New Management Agreement between The GCG
Trust and Directed Services, Inc.
B Other information regarding Directed
Services, Inc.
EXHIBIT EXHIBIT DESCRIPTION
------- -------------------
A New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and
Pilgrim Baxter & Associates, Ltd.
B New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and
Chancellor LGT Asset Management, Inc.
C New Sub-Advisory Agreement among The GCG
Trust, Directed Services, Inc. and Putnam
Investment Management, Inc.
D New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and T.
Rowe Price Associates, Inc.
E New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and
Van Eck Associates Corporation
F New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and
Equitable Investment Services, Inc.
G New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and
Zweig Advisors Inc.
H New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and
E.I.I. Realty Securities, Inc.
I New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and
Kayne, Anderson Investment Management, L.P.
J New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and
Fred Alger Management, Inc.
K New Portfolio Management Agreement among
The GCG Trust, Directed Services, Inc. and
Eagle Asset Management, Inc.
L Other information regarding Pilgrim Baxter &
Associates, Ltd.
M Other information regarding Chancellor LGT
Asset Management, Inc.
N Other information regarding Putnam Investment
Management, Inc.
O Other information regarding T. Rowe Price
Associates, Inc.
P Other information regarding Van Eck
Associates Corporation.
Q Other information regarding Equitable
Investment Services, Inc.
R Other information regarding Zweig Advisors
Inc.
S Other information regarding E.I.I. Realty
Securities, Inc.
T Other information regarding Kayne, Anderson
Investment Management L.P.
U Other information regarding Fred Alger
Management, Inc.
V Other information regarding Eagle Asset
Management, Inc.
24
<PAGE>
VOTING INSTRUCTION/PROXY
THE GCG TRUST
This voting instruction is solicited on behalf of the Board of Trustees
of The GCG Trust (the "Trust"). The Board of Trustees of the Trust recommends
that you vote FOR all of the following proposals. Equitable of Iowa Companies
("Equitable of Iowa") will pay for the costs of the Meeting of Shareholders of
the Trust (the "Meeting"). Neither the Trust nor its Shareholders will bear
any costs associated with this Meeting.
[variable name] [variable contract]
[variable joint name] [variable units and shares]
[variable address line 1]
[variable address line 2] PLEASE VOTE BY MARKING ONE BOX
[variable address line 3] NEXT TO EACH PROPOSAL. SIGN BELOW
[variable city, state & zip] EXACTLY AS LISTED HERE AND DATE
THIS VOTING INSTRUCTION. THEN
RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
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 instructs that the shares of
the Series of the Trust attributable to his or her Contract be voted at
the Meeting to be held on October 9, 1997, at 10:00 a.m., local time,
1001 Jefferson Street, Suite 400, Wilmington, Delaware, and at any
adjournment thereof, as directed below with respect to the matters
referred to in the Proxy Statement for the Meeting, receipt of which is
acknowledged, and in Golden American's (or in such participating
insurance company's) discretion, upon such other matters as may
properly come before the Meeting and any adjournment thereof.
The Agreements, proposed below, if approved, will be substantively
identical to existing agreements, including the Management and Portfolio
Management Agreements, and each will become effective upon the merger of
Equitable of Iowa Companies with PFHI Holdings, Inc., a subsidiary of
ING Groep, N.V.
UNITS PROPOSAL FOR AGAINST ABSTAIN
aaaa 1. ALL SERIES - To approve a new Management [ ] [ ] [ ]
Agreement between the Trust and
Directed Services, Inc. ("DSI").
PROPOSALS 2(A) to 2(K) - To approve NEW
PORTFOLIO MANAGEMENT AGREEMENTS among the
Trust, DSI and each of the folloing
Portfolio Managers:
bbbb 2.(A) Pilgrim Baxter Associates, Ltd. for [ ] [ ] [ ]
ALL-GROWTH SERIES
cccc (B) Chancellor LGT Asset Management, Inc. [ ] [ ] [ ]
for CAPITAL APPRECIATION SERIES
(C) Putnam Investment Management,Inc. for:
dddd (i) EMERGING MARKETS SERIES [ ] [ ] [ ]
eeee (ii) MANAGED GLOBAL SERIES [ ] [ ] [ ]
ffff (D) T. Rowe Price Associates, Inc. for [ ] [ ] [ ]
FULLY MANAGED SERIES
gggg (E) Van Eck Associates Corporation for [ ] [ ] [ ]
HARD ASSETS SERIES
(F) Equitable Investment Services, Inc. for:
hhhh (i) LIMITED MATURITY BOND SERIES [ ] [ ] [ ]
iiii (ii) LIQUID ASSET SERIES [ ] [ ] [ ]
jjjj (iii) MARKET MANAGER SERIES [ ] [ ] [ ]
(G) Zweig Advisors Inc. for:
kkkk (i) MULTIPLE ALLOCATION SERIES [ ] [ ] [ ]
llll (ii) STRATEGIC EQUITY SERIES [ ] [ ] [ ]
mmmm (H) E.I.I. Realty Securities, Inc. for [ ] [ ] [ ]
REAL ESTATE SERIES
nnnn (I) Kayne, Anderson Investment Management, [ ] [ ] [ ]
Inc. for RISING DIVIDENDS SERIES
oooo (J) Fred Alger Management, Inc. for [ ] [ ] [ ]
SMALL CAP SERIES
pppp (K) Eagle Asset Management, Inc. for [ ] [ ] [ ]
VALUE EQUITY SERIES
PROPOSALS 3 AND 4 - FUNDAMENTAL
INVESTMENT CHANGE
qqqq 3. ALL-GROWTH SERIES-To permit the Series [ ] [ ] [ ]
to invest upto 15% of Series' assets
in illiquid securities. The limitation
presently is investment of upto 10%
of Series assets in illiquid securities.
rrrr 4. HARD ASSETS SERIES-To permit the Series [ ] [ ] [ ]
to invest in all comodities and
futures contracts on commodities within
the limitations of Investment Company
Act of 1940. Presently, the Series may
only invest in selective commoditites and
futures contracts on commodities.
ssss 5. ALL SERIES [ ] [ ] [ ]
To elect Elizabeth J. Newell as a Trustee
until her successor is elected and
qualified.
This voting instruction will be voted as specified. If this voting
instruction is signed, but 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 or a
participating insurance company 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 BY MARKING ONE BOX NEXT TO EACH PROPOSAL. SIGN EXACTLY AS LISTED
ABOVE, AND DATE THIS VOTING INSTRUCTION, THEN 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 ________________________ ________________________
Contract Owner Joint Owner (If Any)
<PAGE>
ATTACHMENT A
MANAGEMENT AGREEMENT
Agreement made this ____ day of __________, 1997 between The GCG Trust
("Trust"), a Massachusetts business trust, and Directed Services, Inc.
("Manager"), a New York corporation (the "Agreement").
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future; and
WHEREAS, the Trust desires to avail itself of the services of the Manager
for the provision of advisory, management, administrative, and other services
for the Trust; and
WHEREAS, the Manager is willing to render such services to the Trust.
Therefore, in consideration of the premises, the promises and mutual
covenants herein contained, it is agreed between the parties as follows:
1. APPOINTMENT. The Trust hereby appoints the Manager, subject to the
direction of the Board of Trustees, for the period and on the terms set forth
in this Agreement, to provide advisory, management, administrative, and other
services, as described herein, with respect to the Series identified on
Schedule A, such series together with all other series subsequently
established by the Trust with respect to which the Trust desires to retain the
Manager to render advisory, management, administrative, and other services
hereunder and with respect to which the Manager is willing to do so being
herein collectively referred to as the "Series." The Manager accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided. In the event the Trust establishes one or more
series other than the Series with respect to which it desires to retain the
Manager to render advisory, management, administrative, and other services
hereunder, it shall notify the Manager in writing. If the Manager is willing
to render such services it shall notify the Trust in writing, whereupon such
series shall become a Series hereunder.
2. SERVICES OF THE MANAGER. The Manager represents and warrants that
it is registered as an investment adviser under the Investment Advisers Act of
1940 and in all states where required, and will maintain such registration for
so long as required by applicable law. Subject to the general supervision of
the Board of Trustees of the Trust, the Manager shall provide the following
advisory, management, administrative, and other services with respect to the
Series:
(a) Provide general, overall advice and guidance with respect to
the Series and provide advice and guidance to the Trust's Trustees, and
oversee the management of the investments of the Series and the composition of
each Series' portfolio of securities and investments, including cash, and the
purchase, retention and disposition thereof, in accordance with each
Series' investment
objective or objectives and policies as stated in the Trust's current
registration statement, which management shall be provided by others selected
by the Manager and approved by the Board of Trustees as provided below or
directly by the Manager as provided in Section 3 of this Agreement;
(b) Analyze, select and recommend for consideration by the Trust's
Board of Trustees investment advisory firms (however organized) to provide
investment advice to one or more of the Series,
Attachment A-1
<PAGE>
and, at the expense of the
Manager, engage (which engagement may also be by the Trust) such investment
advisory firms to render investment advice and manage the investments of such
Series and the composition of each such Series' portfolio of securities and
investments, including cash, and the purchase, retention and disposition
thereof, in accordance with the Series' investment objective or objectives and
policies as stated in the Trust's current registration statement (any such
firms approved by the Board of Trustees and engaged by the Trust and/or the
Manager are referred to herein as "Portfolio Managers");
(c) Periodically monitor and evaluate the performance of the
Portfolio Managers with respect to the investment objectives and policies of
the Series;
(d) Monitor the Portfolio Managers for compliance with the
investment objective or objectives, policies and restrictions of each Series,
the 1940 Act, Subchapter M of the Internal Revenue Code, Section 817(h) of the
Internal Revenue Code, and if applicable, regulations under such provisions,
and other applicable law;
(e) If appropriate, analyze and recommend for consideration by the
Trust's Board of Trustees termination of a contract with a Portfolio Manager
under which the Portfolio Manager provided investment advisory services to one
or more of the Series;
(f) Supervise Portfolio Managers with respect to the services that
such Portfolio Managers provide under respective portfolio management
agreements ("Portfolio Management Agreements"), although the Manager is not
authorized, except as provided in Section 3 of the Agreement, directly to make
determinations with respect to the investment of a Series' assets or the
purchase or sale of portfolio securities or other investments for a Series;
(g) Provide all supervisory, management, and administrative
services reasonably necessary for the operation of the Series other than the
investment advisory services performed by the Portfolio Managers, including
but not limited to, (i) coordinating all matters relating to the operation of
the Series, including any necessary coordination among the Portfolio Managers,
custodian, transfer agent, dividend disbursing agent, and portfolio accounting
agent (including pricing and valuation of the Series' portfolios),
accountants, attorneys, and other parties performing services or operational
functions for the Trust, (ii) providing the Trust and the Series, at the
Manager's expense, with the services of a sufficient number of persons
competent to perform such administrative and clerical functions as are
necessary to ensure compliance with federal securities laws and to provide
effective supervision and administration of the Series; (iii) maintaining or
supervising the maintenance by third parties selected by the Manager of such
books and records of the Trust and the Series as may be required by applicable
federal or state law; (iv) preparing or supervising the preparation by third
parties selected by the Manager of all federal, state, and local tax returns
and reports relating to the Series required by applicable
law; (v) preparing and filing and arranging for the distribution of proxy
materials and periodic reports to shareholders of the Series as required by
applicable law; (vi) preparing and arranging for the filing of registration
statements and other documents with the Securities and Exchange Commission
(the "SEC") and other federal and state regulatory authorities as may be
required by applicable law; (vii) taking such other action with respect to the
Trust as may be required by applicable law in connection with the Series,
including without limitation the rules and regulations of the SEC and other
regulatory agencies; and (viii) providing the Trust, at the Manager's expense,
with adequate personnel, office space, communications facilities, and other
facilities necessary for operation of the Series as contemplated in this
Agreement;
(h) Provide or procure on behalf of the Trust and the Series, and
at the expense of the Manager, the following services for the Series: (i)
custodian services to provide for the safekeeping of the Series' assets; (ii)
portfolio accounting services to maintain the portfolio accounting records for
the Series; (iii) transfer agency services for the Series; (iv) dividend
disbursing services for the Series, and (v) other services necessary for the
ordinary operation of the Series. The Trust may, but is not required to, be a
Attachment A-2
<PAGE>
party to any agreement with any third person contracted to provide the
services referred to in this Section 2(h);
(i) Render to the Board of Trustees of the Trust such periodic and
special reports as the Board may reasonably request; and
(j) Make available its officers and employees to the Board of
Trustees and officers of the Trust for consultation and discussions regarding
the administration and management of the Series and services provided to the
Trust under this Agreement.
3. INVESTMENT MANAGEMENT AUTHORITY. In the event that a Portfolio
Management Agreement pertaining to a Series is terminated or if, at any time,
no Portfolio Manager is engaged to manage the assets of a Series of the Trust,
then with respect to any such Series, the Manager, subject to the supervision
of the Trust's Board of Trustees, will provide a continuous investment program
for the Series' portfolio and determine the composition of the assets of the
Series' portfolio, including determination of the purchase, retention, or sale
of the securities, cash, and other investments contained in the portfolio.
The Manager will provide investment research and conduct a continuous program
of evaluation, investment, sales, and reinvestment of the Series' assets by
determining the securities and other investments that shall be purchased,
entered into, sold, closed, or exchanged for the Series, when these
transactions should be executed, and what portion of the assets of the Series
should be held in the various securities and other investments in which it may
invest, and the Manager is hereby authorized to execute and perform such
services on behalf of the Series. To the extent permitted by the investment
policies of the Series, the Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to, and execute and
perform, foreign currency exchange contracts on behalf of the Series. The
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the SEC, as amended.
Furthermore:
(a) The Manager will (1) take all steps necessary to manage the
Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) take all steps necessary to
manage the Series so as to ensure compliance by the Series with the
diversification requirements of
Section 817(h) of the Internal Revenue Code and regulations issued thereunder,
and (3) use reasonable efforts to manage the Series so as to ensure compliance
by the Series with any other rules and regulations pertaining to investment
vehicles underlying variable annuity or variable life insurance policies. In
managing the Series in accordance with these requirements, the Manager shall
be entitled to receive and act upon advice of counsel to the Trust or counsel
to the Manager.
(b) The Manager will conform with the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board of
Trustees, and the provisions of the Registration Statement of the Trust under
the Securities Act of 1933 and the 1940 Act, as supplemented or amended.
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of the Series as well as any other
investment advisory clients, the Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate the
securities to be so sold or purchased with those of its other clients where
such aggregation is not inconsistent with the policies set forth in the
Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Manager in a manner that is fair and equitable in the judgment
of the Manager in the exercise of its fiduciary obligations to the Trust and
to such other clients.
(d) In connection with the purchase and sale of securities of the
Series, the Manager will arrange for the transmission to the custodian for the
Trust on a daily basis, of such confirmation, trade tickets, and other
documents and information, including, but not limited to, Cusip, Sedol, or
other numbers
Attachment A-3
<PAGE>
that identify securities to be purchased or sold on behalf of
the Series, as may be reasonably necessary to enable the custodian to perform
its administrative and record keeping responsibilities with respect to the
Series. With respect to portfolio securities to be purchased or sold through
the Depository Trust Company, the Manager will arrange for the automatic
transmission of the confirmation of such trades to the Trust's custodian.
(e) The Manager will assist the custodian or portfolio accounting
agent for the Trust in determining, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value of any
portfolio securities or other assets of the Series for which the custodian or
portfolio accounting agent seeks assistance or review from the Manager. The
Manager will monitor on a daily basis the determination by the custodian or
portfolio accounting agent for the Trust of the value of portfolio securities
and other assets of the Series and the determination of net asset value of the
Series.
(f) The Manager will make available to the Trust, promptly upon
request, all of the Series' investment records and ledgers as are necessary to
assist the Trust to comply with requirements of the 1940 Act and the
Investment Advisers Act of 1940, as well as other applicable laws. The
Manager will furnish to regulatory authorities having the requisite authority
any information or reports in connection with such services which may be
requested in order to ascertain whether the operations of the Trust are being
conducted in a manner consistent with applicable laws and regulations.
(g) The Manager will regularly report to the Trust's Board of
Trustees on the investment program for the Series and the issuers and
securities represented in the Series' portfolio, and will furnish the Trust's
Board of Trustees with respect to the Series such periodic and special reports
as the Trustees may reasonably request.
(h) The Manager will not disclose or use any records or information
obtained pursuant to this Agreement (excluding investment research and
investment advice) in any manner whatsoever except as required to carry out
its duties as investment manager and administrator pursuant to this Section 3
or in the ordinary course of business in connection with placing orders for
the purchase and sale of securities, and will keep confidential any
information obtained pursuant to this Agreement, and disclose such information
only if the Board of Trustees of the Trust has authorized such disclosure, or
if such disclosure is expressly required by applicable federal or state law or
regulations or regulatory authorities having the requisite authority.
(i) In rendering the services required under this Section of this
Agreement, the Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying out
its obligations under this Agreement. The Manager shall be responsible for
making reasonable inquires and for reasonably ensuring that any employee of
the Manager, any person or firm that the Manager has employed or with which it
has associated, or any employee thereof has not, to the best of the Manager's
knowledge, in any material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, or involving
violations of Sections 1341, 1342, or 1343 of Title 18, United States Code; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
Attachment A-4
<PAGE>
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provisions of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
(j) In connection with its responsibilities under this Section 3,
the Manager is responsible for decisions to buy and sell securities and other
investments for the Series' portfolio, broker-dealer selection, and
negotiation of brokerage commission rates. The Manager's primary
consideration in effecting a security transaction will be to obtain the best
execution for the Series, taking into account the factors specified in the
Prospectus and/or Statement of Additional Information for the Trust, which
include price (including the applicable brokerage commission or dollar
spread), the size of the order, the nature of the market for the security, the
timing of the transaction, the reputation, experience and financial stability
of the broker- dealer involved, the quality of the service, the difficulty of
execution, execution capabilities and operational facilities of the firms
involved, and the firm's risk in positioning a block of securities.
Accordingly, the price to the Series in any transaction may be less favorable
than that available from another broker-dealer if the difference is reasonably
justified, in the judgment of the Manager in the exercise of its fiduciary
obligations to the Trust, by other aspects of the portfolio execution services
offered. Subject to such policies as the Board of Trustees may determine and
consistent with Section 28(e) of the Securities Exchange Act of 1934, the
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer for effecting a portfolio
investment transaction in excess of the amount of commission another broker-
dealer would have charged for effecting that transaction, if the Manager or
its affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Manager's or its affiliate's overall responsibilities with
respect to the Series and to their other clients as to which they exercise
investment discretion. To the extent consistent with these standards and in
accordance with Section 11(a) of the Securities and Exchange Act of 1934 and
Rule 11a2-2(T) thereunder, the Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Manager if it is registered
as a broker-dealer with the SEC, to its affiliated broker-dealer, or to such
brokers and dealers who also provide research or statistical material or other
services to the Series, the Manager or an affiliate of the Manager. Such
allocation shall be in such amounts and proportions as the Manager shall
determine consistent with the above standards, and the Manager will report on
said allocation regularly to the Board of Trustees of the Trust indicating the
broker-dealers to which such allocations have been made and the basis
therefor.
4. CONFORMITY WITH APPLICABLE LAW. The Manager, in the performance of
its duties and obligations under this Agreement, shall act in conformity with
the Registration Statement of the Trust and with the instructions and
directions of the Board of Trustees of the Trust and will conform to, and
comply with, the requirements of the 1940 Act and all other applicable federal
and state laws and regulations.
5. EXCLUSIVITY. The services of the Manager to the Trust under this
Agreement are not to be deemed exclusive, and the Manager, or any affiliate
thereof, shall be free to render similar services to other investment
companies and other clients (whether or not their investment objectives and
policies are similar to those of any of the Series) and to engage in other
activities, so long as its services hereunder are not impaired thereby.
6. DOCUMENTS. The Trust has delivered properly certified or
authenticated copies of each of the following documents to the Manager and
will deliver to it all future amendments and supplements thereto, if any:
(a) certified resolution of the Board of Trustees of the Trust
authorizing the appointment of the Manager and approving the form of this
Agreement;
(b) the Registration Statement as filed with the SEC and any
amendments thereto; and
Attachment A-5
<PAGE>
(c) exhibits, powers of attorney, certificates and any and all
other documents relating to or filed in connection with the Registration
Statement described above.
7. RECORDS. The Manager agrees to maintain and to preserve for the
periods prescribed under the 1940 Act any such records as are required to be
maintained by the Manager with respect to the Series by the 1940 Act. The
Manager further agrees that all records which it maintains for the Series are
the property of the Trust and it will promptly surrender any of such records
upon request.
8. EXPENSES. During the term of this Agreement, the Manager will pay
all expenses incurred by it in connection with its activities under this
Agreement, except such expenses as are assumed by the Trust under this
Agreement and such expenses as are assumed by a Portfolio Manager under its
Portfolio Management Agreement. The Manager further agrees to pay all
salaries, fees and expenses of any officer or trustee of the Trust who is an
officer, director or employee of the Manager or any of its affiliates. The
Manager shall be responsible for all of the expenses of its operations and for
the following expenses:
(a) Expenses of all audits by the Trust's independent public
accountants;
(b) Expenses of the Trust's transfer agent, registrar, dividend
disbursing agent, and shareholder record keeping services;
(c) Expenses of the Trust's custodial services, including
recordkeeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of
each Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses
of International Management reports (as appropriate) for each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence and qualification to do business, and the
registration of shares with federal and state securities or insurance
authorities;
(h) The Trust's ordinary legal fees, including the legal fees
related to the registration and continued qualification of the Trust's shares
for sale;
(i) Costs of printing stock certificates representing shares of the
Trust;
(j) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(k) Association membership dues; and
(l) Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
Commencing with the date of this Agreement, the Manager is responsible for any
remaining unamortized organizational expenses of the Series as of the date of
this Agreement.
Attachment A-6
<PAGE>
The Trust shall be responsible for the following expenses:
(a) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Manager or an affiliate of the Manager;
(b) Taxes levied against the Trust;
(c) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Trust;
(d) Costs, including the interest expense, of borrowing money;
(e) Trustees' fees and expenses to Trustees who are not officers,
employees, or stockholders of the Manager, any Portfolio Manager, or any
affiliates of either; and
(f) Extraordinary expenses as may arise, including extraordinary
consulting expenses and extraordinary legal expenses incurred in connection
with litigation, proceedings, other claims (unless the Manager is responsible
for such expenses under Section 10 of this Agreement or a Portfolio Manager is
responsible for such expenses under the Section entitled "Liability" of a
Portfolio Management Agreement), and the legal obligations of the Trust to
indemnify its trustees, officers, employees, shareholders, distributors, and
agents with respect thereto.
9. COMPENSATION. For the services provided by the Manager pursuant to
this Agreement, the Trust will pay to the Manager a fee at an annual rate
equal to a percentage of the average daily net assets of each Series as shown
on Schedule B to this Agreement. This fee shall be computed and accrued daily
and payable as shown on Schedule B.
10. LIABILITY OF THE MANAGER. The Manager may rely on information
reasonably believed by it to be accurate and reliable. Except as may
otherwise be required by the 1940 Act or the rules thereunder, neither the
Manager nor its stockholders, officers, directors, employees, or agents shall
be subject to, and the Trust will indemnify such persons from and against, any
liability for, or any damages, expenses, or losses incurred in connection
with, any act or omission connected with or arising out of any services
rendered under this Agreement, except by reason of willful misfeasance, bad
faith, or gross negligence in the performance of the Manager's duties, or by
reason of reckless disregard of the Manager's obligations and duties under
this Agreement. Except as may otherwise be required by the 1940 Act or the
rules thereunder, neither the Manager nor its stockholders, officers,
directors, employees, or agents shall be subject to, and the Trust will
indemnify such persons from and against, any liability for, or any damages,
expenses, or losses incurred in connection with, any act or omission by a
Portfolio Manager or any of the Portfolio Manager's stockholders or partners,
officers, directors, employees, or agents connected with or arising out of any
services rendered under a Portfolio Management Agreement, except by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Manager's duties under this Agreement, or by reason of reckless disregard of
the Manager's obligations and duties under this Agreement.
11. CONTINUATION AND TERMINATION. This Agreement shall become effective
on the date first written above. Unless terminated as provided herein, the
Agreement shall continue in full force and effect for two (2) years from the
effective date of this Agreement, and shall continue from year to year
thereafter with respect to each Series so long as such continuance is
specifically approved at least annually (i) by the vote of a majority of the
Board of Trustees of the Trust, or (ii) by vote of a majority of the
outstanding voting shares of the Trust, and provided continuance is also
approved by the vote of a majority of the Board of Trustees of the Trust who
are not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of the Trust or the Manager, cast in person at a meeting called for
the purpose of voting on such approval. This Agreement may not be amended in
any material respect without a majority vote
of the outstanding voting shares (as defined in the 1940 Act). However, any
Attachment A-7
<PAGE>
approval of this Agreement by the holders of a majority of the outstanding
shares (as defined in the 1940 Act) of a Series shall be effective to continue
this Agreement with respect to such Series notwithstanding (i) that this
Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (ii) that this Agreement has not
been approved by the vote of a majority of the outstanding shares of the
Trust, unless such approval shall be required by any other applicable law or
otherwise. This Agreement may be terminated by the Trust at any time, without
the payment of any penalty, by vote of a majority of the entire Board of
Trustees of the Trust or by a vote of a majority of the outstanding voting
shares of the Trust, or with respect to a Series, by vote of a majority of the
outstanding voting shares of such Series, on sixty (60) days' written notice
to the Manager, or by the Manager at any time, without the payment of any
penalty, on sixty (60) days' written notice to the Trust. This Agreement will
automatically and immediately terminate in the event of its "assignment" (as
described in the 1940 Act).
12. USE OF NAME. It is understood that the name or any derivative
thereof or logo associated with the name Directed Services, Inc. is the
valuable property of the Manager, and that the Trust and/or the Series have
the right to use such name (or derivative or logo) only so long as this
Agreement shall continue with respect to such Trust and/or Series. Upon
termination of this Agreement, the Trust (or Series) shall forthwith cease to
use such name (or derivative or logo) and, in the case of the Trust, shall
promptly amend its Agreement and Declaration of Trust to change its name (if
such name is included therein).
13. NOTICE. Notices of any kind to be given to the Manager by the Trust
shall be in writing and shall be duly given if mailed or delivered to the
Manager at 1001 Jefferson Street, Suite 400, Wilmington, Delaware 19801, or at
such other address or to such individual as shall be specified by the Manager
to the Trust. Notices of any kind to be given to the Trust by the Manager
shall be in writing and shall be duly given if mailed or delivered to 1001
Jefferson Street, Suite 400, Wilmington, Delaware 19801, or at such other
address or to such individual as shall be specified by the Trust to the
Manager.
14. TRUST OBLIGATION. A copy of the Trust's Amended and Restated
Agreement and Declaration of Trust is on file with the Secretary of the
Commonwealth of Massachusetts and notice is hereby given that the Agreement
has been executed on behalf of the Trust by the Trustees of the Trust in their
capacity as trustees and not individually. The obligations of this Agreement
shall only be binding upon the assets and property of the Trust and shall not
be binding upon any trustee, officer, or shareholder of the Trust
individually.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original.
16. APPLICABLE LAW.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, or any
rules or order of the SEC thereunder.
(b) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.
(c) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
Attachment A-8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE GCG TRUST
__________________________________ By:____________________________________
Attest
__________________________________ _______________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:____________________________________
Attest
__________________________________ _______________________________________
Title Title
Attachment A-9
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in the attached Management
Agreement, to which Directed Services, Inc. shall act as Manager are as
follows:
Multiple Allocation Series
Fully Managed Series
Limited Maturity Bond Series
Hard Assets Series
Real Estate Series
All-Growth Series
Liquid Assets Series
Capital Appreciation Series
Rising Dividends Series
Emerging Markets Series
Market Manager Series
Value Equity Series
Strategic Equity Series
Small Cap Series
Managed Global Series
Attachment A-10
<PAGE>
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Directed Services, Inc. (the "Manager") to
the following Series of The GCG Trust (the "Trust"), pursuant to the attached
Management Agreement, the Trust will pay the Manager a fee, payable monthly
for each Series except the Market Manager Series, which will be payable
quarterly, based on the average daily net assets of the Series at the
following annual rates of the average daily net assets of the Series.
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;
Value Equity, Strategic Equity, and 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%
Managed Global Series: 1.35% of first $500 million;
1.15% of amount in excess of $500
million
Attachment A-11
<PAGE>
ATTACHMENT B
OTHER INFORMATION ABOUT
DIRECTED SERVICES, INC.
The directors and principal executive officer of Directed Services, Inc.
and their principal occupations are as shown below. Unless otherwise
indicated the business address of each such person is 909 Locust Street, Des
Moines, Iowa 50309.
NAME AND POSITION
WITH PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
Lawrence V. Durland, Jr. Senior Vice President of Equitable of Iowa
Director Companies and affiliates.
Frederick S. Hubbell Chairman, President and Chief Executive Officer of
Director and Chairman of Equitable of Iowa Companies, Equitable Life
the Board of Directors Insurance Company of Iowa and USG Annuity & Life
Company and Chairman of Golden American Life
Insurance Company.
Terry L. Kendall President and Chief Executive Officer of Golden
Chairman, President American Life Insurance Company; Chairman,
Chief Executive Officer President and Chief Executive
and Director Officer of First Golden American
1001 Jefferson Street, Life Insurance Company of New York; Executive Vice
Suite 400 President Equitable Life Insurance Company of Iowa
Wilmington, DE 19801 and USG Annuity & Life Company.
Paul E. Larson Executive Vice President, Chief Financial Officer
Director of Equitable of Iowa Companies and affiliates.
Thomas L. May Senior Vice President of Equitable Life Insurance
Director Company of Iowa and USG Annuity & Life Company.
John A. Merriman Secretary and General Counsel of Equitable of Iowa
Director Companies.
Beth B. Neppl Vice President--Human Resources of Equitable of
Director Iowa Companies and affiliates.
Paul R. Schlaack President and Chief Executive Officer of Equitable
Investment Services, Inc.
Jerome L. Sychowski Senior Vice President and Chief Information Officer
Director of Equitable of Iowa Companies and affiliates.
Directed Services, Inc. does not act as an investment adviser to any
other registered investment companies with investment objectives and policies
similar to those of any Series of the Trust.
Attachment B-1
<PAGE>
<PAGE>
EXHIBIT A
THE GCG TRUST
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this ___ day of _______________, 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
_____________, 1997, 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
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,
A-1
<PAGE>
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.
(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 record keeping 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
A-2
<PAGE>
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
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
A-3
<PAGE>
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer for effecting a portfolio investment
transaction in excess of the amount of commission another broker-dealer would
have charged for effecting that transaction, if the Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. The Portfolio Manager has
reviewed the post-effective amendment to the Registration Statement for the
Trust filed with the Securities and Exchange Commission that contains
disclosure about the Portfolio Manager, and represents and warrants that, with
respect to the disclosure about the Portfolio Manager or information relating
directly 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 record keeping services;
(c) Expenses of the Series' custodial services including record
keeping 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;
A-4
<PAGE>
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to Trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate thereof;
(o) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
(q) Extraordinary expenses of the Trust as may arise including
expenses incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under Section
14 of this Agreement), and the legal obligations of the Trust to indemnify its
Trustees, officers, employees, shareholders, distributors, and agents with
respect thereto; and
(r) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, as described on Schedule B.
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.
(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
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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.
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.
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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
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, 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
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Indemnified Person, to assume the defense
thereof, with counsel satisfactory to the Portfolio Manager Indemnified
Person. If the Manager assumes the defense of any such action and the
selection of counsel by the Manager to represent both the Manager and the
Portfolio Manager Indemnified Person would result in a conflict of interests
and therefore, would not, in the reasonable judgment of the Portfolio Manager
Indemnified Person, adequately represent the interests of the Portfolio
Manager Indemnified Person, the Manager will, at its own expense, assume the
defense with counsel to the Manager and, also at its own expense, with
separate counsel to the Portfolio Manager Indemnified Person, which counsel
shall be satisfactory to the Manager and to the Portfolio Manager Indemnified
Person. The Portfolio Manager Indemnified Person shall bear the fees and
expenses of any additional counsel retained by it, and the Manager shall not
be liable to the Portfolio Manager Indemnified Person under this Agreement for
any legal or other expenses subsequently incurred by the Portfolio Manager
Indemnified Person independently in connection with the defense thereof other
than reasonable costs of investigation. The Manager shall not have the right
to compromise on or settle the litigation without the prior written consent of
the Portfolio Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the Portfolio
Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b)
of this Section 15 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Portfolio
Manager of any such claim shall not relieve the Portfolio Manager from any
liability which it may have to the Manager Indemnified Person against whom
such action is brought otherwise than on account of this Section 15. In case
any such action is brought against the Manager Indemnified Person, the
Portfolio Manager will be entitled to participate, at its own expense, in the
defense thereof or, after notice to the Manager Indemnified Person, to assume
the defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Portfolio Manager assumes the defense of any such action and
the selection of counsel by the Portfolio Manager to represent both the
Portfolio Manager and the Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment of
the Manager Indemnified Person, adequately represent the interests of the
Manager Indemnified Person, the Portfolio Manager will, at its own expense,
assume the defense with counsel to the Portfolio Manager and, also at its own
expense, with separate counsel to the Manager Indemnified Person which counsel
shall be satisfactory to the Portfolio Manager and to the Manager Indemnified
Person. The Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Portfolio Manager shall not be
liable to the Manager Indemnified Person under this Agreement for any legal or
other expenses subsequently incurred by the Manager Indemnified Person
independently in connection with the defense thereof other than reasonable
costs of investigation. The Portfolio Manager shall not have the right to
compromise on or settle the litigation without the prior written consent of
the Manager Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Manager Indemnified
Person.
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
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Series notwithstanding (i) that this
Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (ii) that this Agreement has not
been approved by the vote of a majority of the outstanding shares of the
Trust, unless such approval shall be required by any other applicable law or
otherwise. Notwithstanding the foregoing, this Agreement may be terminated
for each or any Series hereunder: (a) by the Manager at any time without
penalty, upon sixty (60) days' written notice to the Portfolio Manager and the
Trust, (b) at any time without payment of any penalty by the Trust, upon the
vote of a majority of the Trust's Board of Trustees or a majority of the
outstanding voting securities of each Series, upon sixty (60) days' written
notice to the Manager and the Portfolio Manager, or (c) by the Portfolio
Manager at any time without penalty, upon sixty (60) days' written notice to
the Manager and the Trust. In the event of termination for any reason, all
records of each Series for which the Agreement is terminated shall promptly be
returned to the Manager or the Trust, free from any claim or retention of
rights in such record by the Portfolio Manager, although the Portfolio Manager
may, at its own expense, make and retain a copy of such records. The
Agreement shall automatically terminate in the event of its assignment (as
such term is described in the 1940 Act). In the event this Agreement is
terminated or is not approved in the manner described above, the Sections or
Paragraphs numbered 2(f), 9, 10, 11, 14, 15, and 18 of this Agreement shall
remain in effect, as well as any applicable provision of this Paragraph
numbered 16.
17. AMENDMENTS. No provision of this Agreement may be changed, waived
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 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
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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
__________________________________ ____________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
PILGRIM BAXTER & ASSOCIATES, LTD.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
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<PAGE>
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
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 0.55%
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EXHIBIT B
THE GCG TRUST
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made as of the ____ day of ______________, 1997 among The GCG
Trust (the "Trust"), a Massachusetts business trust, Directed Services, Inc.
("Manager"), a New York corporation, and Chancellor LGT Asset Management, Inc.
("Portfolio Manager"), a Delaware corporation.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of
_____________, 1997, a copy of which has been provided to the Portfolio
Manager, the Trust has retained the Manager to render advisory, management,
and administrative services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint Chancellor
LGT Asset Management, 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 notify the Portfolio Manager in writing. If the Port
folio Manager is willing to render such services, it shall notify the Trust
and Manager in writing, whereupon such series shall become a Series hereunder,
and be subject to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will provide
a continuous investment program for each Series' portfolio and determine the
composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of each Series' assets by determining
the securities and other
investments that shall be purchased, entered into, sold, closed, or exchanged
for the Series, when these transactions should be executed, and what portion
of the assets of each Series should be held in the various securities and
other investments in which it may invest, and the Portfolio Manager is hereby
authorized to execute and perform such services on behalf of each Series. To
the extent permitted by the investment policies of the Series, the Portfolio
Manager shall make decisions for the Series as to foreign currency matters and
make determinations as to and execute and perform foreign currency exchange
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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) manage each Series so that it
will qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, (2) manage each Series so as to ensure compliance by
the Series with the diversification requirements of Section 817(h) of the
Internal Revenue Code and regulations issued thereunder, and (3) use
reasonable efforts to manage the Series so as to ensure compliance by each
Series with any other rules and regulations pertaining to investment vehicles
underlying variable annuity or variable life insurance policies. The Manager
or the Trust will notify the Portfolio Manager of any pertinent changes,
modifications to, or interpretations of Section 817(h) of the Internal Revenue
Code and regulations issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all
rules and regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Trust's Board
of Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended, of
which the Portfolio Manager has received a copy. The Manager or the Trust
will notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or
sale of a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its affiliates,
the Portfolio Manager may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be so
sold or purchased with those of its other clients where such aggregation is
not inconsistent with the policies set forth in the Registration Statement.
In such event, allocation of the securities so purchased or sold, as well as
the expenses incurred in the transaction, will be made by the Portfolio
Manager in a manner that is fair and equitable in the judgment of the
Portfolio Manager in the exercise of its fiduciary obligations to the Trust
and to such other clients, subject to review by the Manager and the Board of
Trustees.
(d) In connection with the purchase and sale of securities for a
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Series, as may be reasonably necessary
to enable the custodian and portfolio accounting agent to perform its
administrative and record keeping responsibilities with respect to the Series.
With respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, the Portfolio Manager will arrange for the automatic transmission of
the confirmation of such trades to the Trust's custodian and portfolio
accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the
determination by the custodian and portfolio accounting agent for the Trust of
the valuation of portfolio securities and other investments of the Series.
The Portfolio Manager will assist the custodian and portfolio accounting agent
for the Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value of any
portfolio securities or other assets of the Series for which the custodian and
portfolio accounting agent seeks assistance from or identifies for review by
the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting agent
for the
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Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of the 1940 Act and the Investment Advisers Act of 1940 (the
"Advisers Act"), as well as other applicable laws. The Portfolio Manager will
furnish to regulatory authorities having the requisite authority any
information or reports in connection with such services which may be requested
in order to ascertain whether the operations of the Trust are being conducted
in a manner consistent with applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board
of Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with respect
to the Series such periodic and special reports as the Trustees and the
Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
person or persons as it believes necessary to assist it in carrying out its
obligations under this Agreement. However, the Portfolio Manager may not
retain as subadviser any company that would be an "investment adviser," as
that term is defined in the 1940 Act, to the Series unless the contract with
such company is approved by a majority of the Trust's Board of Trustees and a
majority of Trustees who are not parties to any agreement or contract with
such company and who are not "interested persons," as defined in the 1940 Act,
of the Trust, the Manager, or the Portfolio Manager, or any such company that
is retained as subadviser, and is approved by the vote of a majority of the
outstanding voting securities of the applicable Series of the Trust to the
extent required by the 1940 Act. The Portfolio Manager shall be responsible
for making reasonable inquiries and for reasonably ensuring that any employee
of the Portfolio Manager, any subadviser that the Portfolio Manager has
employed or with which it has associated with respect to the Series, or any
employee thereof has not, to the best of the Portfolio Manager's knowledge, in
any material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code, or involving
the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the 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
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would
have charged for effecting that transaction, if the Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker- dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. The Portfolio Manager has
reviewed the post-effective amendment to the Registration Statement for the
Trust filed with the Securities and Exchange Commission that contains
disclosure about the Portfolio Manager, and represents and warrants that, with
respect to the disclosure about the Portfolio Manager or information relating,
directly or indirectly, to the Portfolio Manager, such Registration Statement
contains, as of the date hereof, no untrue statement of any material fact and
does not 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 record keeping services;
(c) Expenses of the Series' custodial services including record
keeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of
each Series's net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses
of International Management Reports (as appropriate) for each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio
Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
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(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
15 of this Agreement), and the legal obligations of the Trust to indemnify its
Trustees, officers, employees, shareholders, distributors, and agents with
respect thereto; and
(r) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly as described in Schedule B.
7. SEED MONEY. The Manager agrees that the Portfolio Manager shall not
be responsible for providing money for the initial capitalization of the
Series.
8. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall immediately notify
the Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser; or
has commenced proceedings or an investigation that may result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, or (3) upon having a reasonable
basis for believing that the Series has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or
the Regulations thereunder. The Portfolio Manager further agrees to notify
the Manager and the Trust immediately of any material fact known to the
Portfolio Manager respecting or relating to the Portfolio Manager that is not
contained in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, or of any statement contained therein that
becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the
Portfolio Manager (1) in the event that the SEC has censured the Manager or
the Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an investment
adviser; or has commenced proceedings or an investigation that may result in
any of these actions, (2) upon having a reasonable basis for believing that
the Series has ceased to qualify or might not qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, or (3)
upon having a reasonable basis for believing that the Series has ceased to
comply with the diversification provisions of Section 817(h) of the Internal
Revenue Code or the Regulations thereunder.
9. INSURANCE COMPANY OFFEREES. All parties acknowledge that the Trust
will offer its shares so that it may serve as an investment vehicle for
variable annuity contracts and variable life insurance policies issued by
insurance companies. The Trust and the Manager agree that shares of the Series
may be offered only to the separate accounts and general account of insurance
companies that are approved in writing by the Portfolio Manager. The
Portfolio Manager agrees that shares of this Series may be offered to separate
accounts and the general account of Golden American Variable Life Insurance
Company and to the general and separate accounts of any insurance
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companies
that are or become affiliated with Golden American Life Insurance Company. The
Manager and Trust agree that the Portfolio Manager shall be under no
obligation to investigate insurance companies to which the Trust offers or
proposes to offer its shares.
10. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-
3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
or the Manager's request, although the Portfolio Manager may, at its own
expense, make and retain a copy of such records. The Portfolio Manager further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
11. COOPERATION. Each party to this Agreement agrees to cooperate with
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
12. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER. The Manager and the
Trust agree that neither the Trust, the Manager, nor affiliated persons of the
Trust or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
advance by the Portfolio Manager, except with the prior permission of the
Portfolio Manager. The parties agree that in the event that the Manager or an
affiliated person of the Manager sends sales literature or other promotional
material to the Portfolio Manager for its approval and the Portfolio Manager
has not commented within 30 days, the Manager and its affiliated persons may
use and distribute such sales literature or other promotional material,
although, in such event, the Portfolio Manager shall not be deemed to have
approved of the contents of such sales literature or other promotional
material.
13. CONTROL. Notwithstanding any other provision of the Agreement, it
is understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
14. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
15. LIABILITY. Except as may otherwise be required by the 1940 Act or
the rules thereunder or other applicable law, the Trust and the Manager agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
16. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person, if
any, who, within the meaning of Section 15 of the
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1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, the Internal Revenue Code,
under any other statute, at common law or otherwise, arising out of the
Manager's responsibilities to the Trust which (1) may be based upon any
misfeasance, malfeasance, or nonfeasance by the Manager, any of its employees
or representatives or any affiliate of or any person acting on behalf of the
Manager or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact supplied by, or which is the responsibility of,
the Manager and contained in the Registration Statement or prospectus covering
shares of the Trust or a Series, or any amendment thereof or any supplement
thereto, or the omission or alleged omission to state therein a material fact
known or which should have been known to the Manager and was required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon information
furnished to the Manager or the Trust or to any affiliated person of the
Manager by a Portfolio Manager Indemnified Person; provided however, that in
no case shall the indemnity in favor of the Portfolio Manager Indemnified
Person be deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of
its reckless disregard of obligations and duties under this Agreement.
(b) Notwithstanding Section 15 of this Agreement, the Portfolio
Manager agrees to indemnify and hold harmless the Manager, any affiliated
person of the Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls ("controlling person") the Manager (all
of such persons being referred to as "Manager Indemnified Persons") against
any and all losses, claims, damages, liabilities, or litigation (including
legal and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal Revenue
Code, under any other statute, at common law or otherwise, arising out of the
Portfolio Manager's responsibilities as Portfolio Manager of the Series which
(1) may be based upon any misfeasance, malfeasance, or nonfeasance by the
Portfolio Manager, any of its employees or representatives, or any affiliate
of or any person acting on behalf of the Portfolio Manager, (2) may be based
upon a failure to comply with Section 2, Paragraph (a) of this Agreement, or
(3) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or prospectus covering
the shares of the Trust or a Series, or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact known or
which should have been known to the Portfolio Manager and was required to be
stated therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon information furnished
to the Manager, the Trust, or any affiliated person of the Manager or Trust by
the Portfolio Manager or any affiliated person of the Portfolio Manager;
provided, however, that in no case shall the indemnity in favor of a Manager
Indemnified Person be deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 16 with respect to any claim made against a Portfolio Manager
Indemnified Person unless such Portfolio Manager Indemnified Person shall have
notified the Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Portfolio Manager
Indemnified Person (or after such Portfolio Manager Indemnified Person shall
have received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this Section
16. In case any such action is brought against the Portfolio Manager
Indemnified Person, the Manager will be entitled to participate, at its own
expense, in the defense thereof or, after notice to the Portfolio Manager
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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 16 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Portfolio
Manager of any such claim shall not relieve the Portfolio Manager from any
liability which it may have to the Manager Indemnified Person against whom
such action is brought otherwise than on account of this Section 16. In case
any such action is brought against the Manager Indemnified Person, the
Portfolio Manager will be entitled to participate, at its own expense, in the
defense thereof or, after notice to the Manager Indemnified Person, to assume
the defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Portfolio Manager assumes the defense of any such action and
the selection of counsel by the Portfolio Manager to represent both the
Portfolio Manager and the Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment of
the Manager Indemnified Person, adequately represent the interests of the
Manager Indemnified Person, the Portfolio Manager will, at its own expense,
assume the defense with counsel to the Portfolio Manager and, also at its own
expense, with separate counsel to the Manager Indemnified Person which
counsel shall be
satisfactory to the Portfolio Manager and to the Manager Indemnified Person.
The Manager Indemnified Person shall bear the fees and expenses of any
additional counsel retained by it, and the Portfolio Manager shall not be
liable to the Manager Indemnified Person under this Agreement for any legal or
other expenses subsequently incurred by the Manager Indemnified Person
independently in connection with the defense thereof other than reasonable
costs of investigation. The Portfolio Manager shall not have the right to
compromise on or settle the litigation without the prior written consent of
the Manager Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Manager Indemnified
Person.
17. DURATION AND TERMINATION. This Agreement shall become effective on
the date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to each Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for such Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
such Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding
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shares of any other Series or
(ii) that this Agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio Manager and the Trust, (b) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of each Series,
upon sixty (60) days' written notice to the Manager and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust. In the event of
termination for any reason, all records of each Series for which the Agreement
is terminated shall promptly be returned to the Manager or the Trust, free
from any claim or retention of rights in such record by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. The Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 10, 11, 12, 15, 16, and 19 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 17.
18. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
19. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property
of the Manager and/or its affiliates, and that the Portfolio Manager has the
right to use such name (or derivative or logo) only with the approval of the
Manager and only so long as the Manager is Manager to the Trust and/or the
Series. Upon termination of the Management Agreement between the Trust and
the Manager, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name "Chancellor LGT Asset
Management, Inc." or any derivative thereof or logo associated with that name
is the valuable property of the Portfolio Manager and its affiliates and that
the Trust and/or the Series have the right to use such name (or derivative or
logo) in offering materials of the Trust with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a portfolio manager to the
Trust and/or the Series. Upon termination of this Agreement between the
Trust, the Manager, and the Portfolio Manager, the Trust shall forthwith cease
to use such name (or derivative or logo).
20. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Amended
and Restated Agreement and Declaration of Trust has been executed on behalf of
the Trust by Trustees of the Trust in their capacity as Trustees of the Trust
and not individually. The obligations of this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon any
Trustee, officer, or shareholder of the Trust individually.
21. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
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(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(c) To the extent permitted under Section 17 of this Agreement,
this Agreement may only be assigned by any party with the prior written
consent of the other parties.
(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby, and to this extent, the provisions of
this Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
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
CHANCELLOR LGT ASSET
MANAGEMENT, INC.
_______________________________ By:________________________________
Attest
_______________________________ By:________________________________
Title Title
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SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Chancellor LGT Asset Management, Inc.
shall act as Portfolio Manager is as follows:
Capital Appreciation Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Chancellor LGT Asset Management, Inc.
("Portfolio Manager") to the following Series of The GCG Trust, pursuant to
the attached Portfolio Management Agreement, the Manager will pay the
Portfolio Manager a fee, payable monthly, based on the average daily net
assets of the Series at the following annual rates of the average daily net
assets of the Series.
SERIES RATE
------ ----
Capital Appreciation 0.50%
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EXHIBIT C
SUB-ADVISORY AGREEMENT
THE GCG TRUST
_____________, 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 _____________, 1997 (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 objective(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.
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 record keeping
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.
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(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 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 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
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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.
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.
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8. TERM OF AGREEMENT
This Agreement shall become effective for each Portfolio on the date set
forth above (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
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 be 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-Adviser 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.
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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
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
-----------------
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 D
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this _____ day of _____________, 1997 among The GCG Trust
(the "Trust"), a Massachusetts business trust, Directed Services, Inc.
("Manager"), a New York corporation, and T. Rowe Price Associates, Inc.
("Portfolio Manager"), a Maryland corporation.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of
____________, 1997, a copy of which has been provided to the Portfolio
Manager, the Trust has retained the Manager to render advisory, management,
and administrative services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint the Portfolio
Manager to render investment advisory services to the Series designated on
Schedule A of this Agreement (the "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided. In the event the Trust designates one or more series other
than the Series with respect to which the Trust and the Manager wish to retain
the Portfolio Manager to render investment advisory services hereunder, they
shall notify the Portfolio Manager in writing. If the Portfolio Manager is
willing to render such services, it shall notify the Trust and Manager in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will provide
a continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the
assets of the Series should be held in the various securities and other
investments in which it may invest, and the Portfolio Manager is hereby
authorized to execute and perform such services on behalf of the Series. To
the extent permitted by the investment policies of the Series, the Portfolio
Manager shall make decisions for the Series as to foreign currency matters and
make determinations as to and execute and perform foreign currency exchange
contracts on behalf of the Series. The Portfolio Manager will provide the
services under this Agreement in accordance with the Series' investment
objective or objectives, policies, and restrictions as stated in the Trust's
Registration Statement filed with the Securities and Exchange Commission
("SEC"), as amended, and provided to the Portfolio Manager by the Manager.
The Portfolio Manager further agrees as follows:
(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
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steps necessary
to manage the Series so as to ensure compliance by the Series with the
diversification requirements of Section 817(h) of the Internal Revenue Code
and regulations issued thereunder, and (3) use reasonable efforts to manage
the Series so as to ensure compliance by the Series with any other rules and
regulations pertaining to investment vehicles underlying variable annuity or
variable life insurance policies. The Manager or the Trust will notify the
Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and regulations
issued thereunder. In managing the Series in accordance with these
requirements, the Portfolio Manager shall be entitled to act and rely upon
advice of counsel to the Trust, counsel to the Manager, or counsel to the
Portfolio Manager, such counsel to be reasonably acceptable to the Manager.
(b) The Portfolio Manager will conform with the 1940 Act and all
rules and regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Trust's Board
of Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended, of
which the Portfolio Manager has received a copy. The Manager or the Trust
will notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or
sale of a security to be in the best interest of the Series as well as of
other investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by applicable
laws and regulations, but shall not be obligated to, aggregate the securities
to be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the
Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Portfolio Manager in a manner that is fair and equitable in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust and to such other clients, subject to reasonable review by the
Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities
to be
purchased or sold on behalf of the Series, as may be reasonably necessary to
enable the custodian and portfolio accounting agent to perform its
administrative and record keeping responsibilities with respect to the Series.
With respect to portfolio securities to be purchased or sold through the
Depository Trust Company, the Portfolio Manager will arrange for the automatic
transmission of the confirmation of such trades to the Trust's custodian and
portfolio accounting agent.
(e) The Portfolio Manager will assist the custodian and portfolio
accounting agent for the Trust in determining or confirming, consistent with
the procedures and policies stated in the Registration Statement for the
Trust, the value of any portfolio securities or other assets of the Series for
which the custodian and portfolio accounting agent reasonably seeks assistance
from or identifies for review by the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting agent
for the Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of the 1940 Act and the Investment Advisers Act of 1940 (the
"Advisers Act"), as well as other applicable laws. The Portfolio Manager will
furnish to regulatory authorities having the requisite authority any
information or reports in connection with such services which may be
requested.
(g) The Portfolio Manager will provide reports to the Trust's Board
of Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with respect
to the Series such
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periodic and special reports as shall be agreed upon by the
Trustees, the Manager, and the Portfolio Manager, which agreement shall not be
unreasonably withheld.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
person or persons as it believes necessary to assist it in carrying out its
obligations under this Agreement. However, the Portfolio Manager may not
retain as subadviser any company that would be an "investment adviser," as
that term is defined in the 1940 Act, to the Series unless the contract with
such company is approved by a majority of the Trust's Board of Trustees and a
majority of Trustees who are not parties to any agreement or contract with
such company and who are not "interested persons," as defined in the 1940 Act,
of the Trust, the Manager, or the Portfolio Manager, or any such company that
is retained as subadviser, and is approved by the vote of a majority of the
outstanding voting securities of the applicable Series of the Trust to the
extent required by the 1940 Act. The Portfolio Manager shall be responsible
for making reasonable inquiries and for reasonably ensuring that any employee
of the Portfolio Manager, any subadviser that the Portfolio Manager has
employed or with which it has associated with respect to the Series, or any
employee thereof has not, to the best of the Portfolio Manager's knowledge, in
any material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code, or involving
the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer for effecting a portfolio investment
transaction in excess of the amount of commission another broker- dealer would
have charged for effecting that transaction, if the Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker- dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such
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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 or will review the post-effective amendment to the Registration
Statement for the Trust filed or to be filed with the Securities and Exchange
Commission that contains or will contain disclosure about the Portfolio
Manager that has been provided by the Portfolio Manager, and represents and
warrants that, with respect to the disclosure about the Portfolio Manager or
information relating, directly or indirectly, to the Portfolio Manager,
such Registration
Statement, to the extent it contains information provided by or respecting the
Portfolio Manager, contains or will contain, as of the date of filing with the
Securities and Exchange Commission, no untrue statement of any material fact
and does not omit any statement of a material fact which was required to be
stated therein or necessary to make the statements contained therein not
misleading. The Portfolio Manager further represents and warrants that it is
a duly registered investment adviser under the Advisers Act and a duly
registered investment adviser in all states in which the Portfolio Manager is
required to be registered.
5. EXPENSES. During the term of this Agreement, the Portfolio Manager
will pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public
accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder record keeping services;
(c) Expenses of the Series' custodial services including record
keeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of
the Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses
of International Management Reports (as appropriate) for the Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio
Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to Trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate thereof;
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(o) The Trust's 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 or Section 15 of this Agreement), and the legal obligations of the Trust to
indemnify its Trustees, officers, employees, shareholders, distributors, and
agents with respect thereto; and
(r) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, as described on Schedule B.
7. SEED MONEY. The Manager agrees that the Portfolio Manager shall not
be responsible for providing money for the capitalization of the Series.
8. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall immediately notify
the Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser; or
has commenced proceedings or an investigation that may result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, or (3) upon having a reasonable
basis for believing that the Series has ceased to comply or might not comply
with the diversification provisions of Section 817(h) of the Internal Revenue
Code or the Regulations thereunder. The Portfolio Manager further agrees to
notify the Manager and the Trust immediately of any material fact known to the
Portfolio Manager respecting or relating to the Portfolio Manager that is not
contained in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, or of any statement contained therein that
becomes untrue in any material respect (provided such Registration Statement
or a prospectus for the Trust is provided to the Portfolio Manager).
(b) The Manager agrees that it shall immediately notify the
Portfolio Manager (1) in the event that the SEC has censured the Manager or
the Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an investment
adviser; or has commenced proceedings or an investigation that may result in
any of these actions, (2) upon having a reasonable basis for believing that
the Series has ceased to qualify or might not qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, or (3)
upon having a reasonable basis for believing that the Series has ceased to
comply with the diversification provisions of Section 817(h) of the Internal
Revenue Code or the Regulations thereunder.
9. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-
3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
or the Manager's request, although the Portfolio Manager may, at its own
expense, make and retain a copy of such records. The Portfolio Manager further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-1 under the 1940 Act.
10. COOPERATION. Each party to this Agreement agrees to cooperate with
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
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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, the Portfolio Manager will
use its best efforts to comment within 30 days.
12. CONTROL. Notwithstanding any other provision of the Agreement, it
is understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. LIABILITY. The Portfolio Manager may rely upon information
reasonably believed by it to be accurate and reliable. Except as may
otherwise be required by the 1940 Act or the rules thereunder or other
applicable law, the Trust and the Manager agree that the Portfolio Manager,
any affiliated person of the Portfolio Manager, and each person, if any, who,
within the meaning of Section 15 of the 1933 Act controls the Portfolio
Manager shall not be liable for, or subject to any damages, expenses, or
losses in connection with, any act or omission connected with or arising out
of any services rendered under this Agreement, except by reason of willful
misfeasance, bad faith, or gross negligence in the performance of the
Portfolio Manager's duties, or by reason of reckless disregard of the
Portfolio Manager's obligations and duties under this Agreement.
15. LIABILITY RESPECTING TAX COMPLIANCE. Notwithstanding Section 14,
the Portfolio Manager shall be liable for all losses, claims, damages,
liabilities, or litigation (including reasonable legal and other expenses)
incurred by the Trust or the Manager, any affiliated person of the Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933
Act, controls the Manager, arising out of the Portfolio Manager's
responsibilities as Portfolio Manager of the Series which are based upon a
failure to comply with Section 2, Paragraph (a)(1) or (2) of this Agreement.
16. DURATION AND TERMINATION. This Agreement shall become effective on
the date first indicated above. Unless sooner terminated as provided herein,
the Agreement shall remain in full force and effect for two (2) years from the
date first indicated above and continue on an annual basis thereafter with
respect to the Series; provided that such annual continuance is specifically
approved each year by (a) the vote of a majority of the entire Board of
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Series, and (b) the vote of a
majority of those Trustees who are not parties to this Agreement or interested
persons (as such term is defined in the 1940 Act) of any such party to this
Agreement cast in person at a meeting called for the purpose of voting on such
approval. The Portfolio Manager shall not provide any services for a Series
or receive any fees on account of such Series with respect to which this
Agreement is not approved as described in the preceding sentence. However,
any approval of this Agreement by the holders of a majority of the outstanding
shares (as defined in the 1940 Act) of a Series shall be effective to continue
this Agreement with respect to the Series notwithstanding (i) that this
Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (ii) that this Agreement has not
been approved by the vote of a majority of the outstanding shares of the
Trust, unless such approval shall be required by any other applicable law or
otherwise. Notwithstanding the foregoing, this Agreement may be terminated
for each or any Series hereunder: (a) by the Manager at any time without
penalty, upon sixty (60) days' written notice to the Portfolio Manager and the
Trust, (b) at any time without payment of any penalty by the Trust, upon the
vote of a majority of the Trust's Board of
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Trustees or a majority of the
outstanding voting securities of each Series, upon sixty (60) days' written
notice to the Manager and the Portfolio Manager, or (c) by the Portfolio
Manager at any time without penalty, upon sixty (60) days' written notice to
the Manager and the Trust. In the event of termination for any reason, all
records of each Series for which the Agreement is terminated shall promptly be
returned to the Manager or the Trust, free from any claim or retention of
rights in such record by the Portfolio Manager, although the Portfolio Manager
may, at its own expense, make and retain a copy of such records. The
Agreement shall automatically terminate in the event of its assignment (as
such term is described in the 1940 Act). In the event this Agreement is
terminated or is not approved in the manner described above, the Sections or
Paragraphs numbered 2(f), 9, 10, 11, 14, 15, and 18 of this Agreement shall
remain in effect, as well as any applicable provision of this Paragraph
numbered 16.
17. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property
of the Manager and/or its affiliates, and that the Portfolio Manager has the
right to use such name (or derivative or logo) only with the approval of the
Manager and only so long as the Manager is Manager to the Trust and/or the
Series. Upon termination of the Management Agreement between the Trust and
the Manager, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name "T. Rowe Price Associates, Inc."
or any derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust and/or
the Series have the right to use such name (or derivative or logo) in offering
materials of the Trust with the approval of the Portfolio Manager and for so
long as the Portfolio Manager is a portfolio manager to the Trust and/or the
Series. Upon termination of this Agreement between the Trust, the Manager,
and the Portfolio Manager, the Trust shall forthwith cease to use such name
(or derivative or logo).
19. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Amended
and Restated Agreement and Declaration of Trust has been executed on behalf of
the Trust by Trustees of the Trust in their capacity as Trustees of the Trust
and not individually. The obligations of this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon any
Trustee, officer, or shareholder of the Trust individually.
20. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement,
this Agreement may only be assigned by any party with the prior written
consent of the other parties.
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(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby, and to this extent, the provisions of
this Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
__________________________________ By:________________________________
Attest
__________________________________ ___________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:________________________________
Attest
__________________________________ ___________________________________
Title Title
T. ROWE PRICE ASSOCIATES, INC.
__________________________________ By:________________________________
Attest
__________________________________ ___________________________________
Title Title
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SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which T. Rowe Price Associates, Inc. shall
act as Portfolio Manager is as follows:
Fully Managed Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by T. Rowe Price Associates, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rate of the average daily net assets of the Series:
SERIES RATE
------ ----
Fully Managed Series 0.50%
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EXHIBIT E
PORTFOLIO MANAGEMENT AGREEMENT
Agreement made this ____ day of ____________, 1997 among The GCG Trust
(the "Trust"), a Massachusetts business trust, Directed Services, Inc.
("Manager"), a New York corporation, and Van Eck Associates Corporation
("Portfolio Manager"), a Delaware corporation.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of ____________
__, 1997, a copy of which has been provided to the Portfolio Manager, the
Trust has retained the Manager to render advisory, management, and
administrative services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint Van Eck
Associates Corporation to act as Portfolio Manager to the Hard Assets Series
(the "Series") for the periods and on the terms set forth in this Agreement.
The Portfolio Manager accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided. In the event
the Trust designates one or more series other than the Series with respect to
which the Trust and the Manager wish to retain the Portfolio Manager to render
investment advisory services hereunder, they shall notify the Portfolio
Manager in writing. If the Portfolio Manager is willing to render such
services, it shall notify the Trust and Manager in writing, whereupon such
series shall become a Series hereunder, and be subject to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will provide
a continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of the Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and perform
foreign currency exchange contracts on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, policies, and restrictions as
stated in the Trust's Registration Statement filed with the Securities and
Exchange Commission ("SEC"), as
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amended, copies of which shall be sent to the
Portfolio Manager by the Manager. The Portfolio Manager further agrees as
follows:
(a) The Portfolio Manager will (1) use reasonable efforts to manage
the Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) manage the Series so as to
ensure compliance by the Series with the diversification requirements of
Section 817(h) of the Internal Revenue Code and regulations issued thereunder,
and (3) use reasonable efforts to manage the Series so as to ensure compliance
by the Series with any other rules and regulations pertaining to investment
vehicles underlying variable annuity or variable life insurance policies. The
Manager or the Trust will notify the Portfolio Manager of any pertinent
changes, modifications to, or interpretations of Section 817(h) of the
Internal Revenue Code and regulations issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all
rules and regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Trust's Board
of Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended, of
which the Portfolio Manager has received a copy. The Manager or the Trust
will notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or
sale of a security to be in the best interest of the Series as well as of
other investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by applicable
laws and regulations, including but not limited to Section 17(d) of the 1940
Act, but shall not be obligated to, aggregate the securities to be so sold or
purchased with those of its other clients where such aggregation is not
inconsistent with the policies set forth in the Registration Statement. In
such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Portfolio Manager in
a manner that is fair and equitable in the judgment of the Portfolio Manager
in the exercise of its fiduciary obligations to the Trust and to such other
clients.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Trust on a daily basis, such
confirmation, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Series, as may be reasonably necessary
to enable the custodian and portfolio accounting agent to perform its
administrative and record keeping responsibilities with respect to the Series.
With respect to portfolio securities to be purchased or sold through the
Depository Trust Company, the Portfolio Manager will arrange for the automatic
transmission of the confirmation of such trades to the Trust's custodian and
portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the
determination by the custodian and portfolio accounting agent for the Trust of
the valuation of portfolio securities and other investments of the Series.
The Portfolio Manager will assist the custodian and portfolio accounting agent
for the Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value of any
portfolio securities or other assets of the Series for which the custodian and
portfolio accounting agent seeks assistance from or identifies for review by
the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting agent
for the Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of the 1940 Act and the Investment Advisers Act of 1940 (the
"Advisers Act), as well as other applicable laws. The Portfolio Manager will
furnish to regulatory authorities having the requisite authority any
information or reports in connection with such services which may be requested
in order to ascertain
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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) The Portfolio Manager will not disclose or use any records or
information obtained pursuant to this Agreement (excluding investment research
and investment advice) in any manner whatsoever except as expressly authorized
in this Agreement or in the ordinary course of business in connection with
placing orders for the purchase and sale of securities, and will keep
confidential any information obtained pursuant to this Agreement, and disclose
such information only if the Board of Trustees of the Trust has authorized
such disclosure, or if such disclosure is required by applicable federal or
state law or regulations or regulatory authorities having the requisite
authority. The Trust and the Manager will not disclose or use any records or
information respecting the Portfolio Manager obtained pursuant to this
Agreement in any manner whatsoever except as expressly authorized in this
Agreement, and will keep confidential any information obtained pursuant to
this Agreement, and disclose such information only as expressly authorized in
this Agreement, if the Board of Trustees of the Trust has authorized such
disclosure, or if such disclosure is required by applicable federal or state
law or regulations or regulatory authorities having the requisite authority.
(i) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
person or persons as it believes necessary to assist it in carrying out its
obligations under this Agreement. However, the Portfolio Manager may not
retain as subadviser any company that would be an "investment adviser," as
that term is defined in the 1940 Act, to the Series unless the contract with
such company is approved by a majority of the Trust's Board of Trustees and a
majority of Trustees who are not parties to any agreement or contract with
such company and who are not "interested persons," as defined in the 1940 Act,
of the Trust, the Manager, or the Portfolio Manager, or any such company that
is retained as subadviser, and is approved by the vote of a majority of the
outstanding voting securities of the applicable Series of the Trust to the
extent required by the 1940 Act. The Portfolio Manager shall be responsible
for making reasonable inquiries and for reasonably ensuring that any employee
of the Portfolio Manager, any subadviser that the Portfolio Manager has
employed or with which it has associated with respect to the Series, or any
employee thereof has not, to the best of the Portfolio Manager's knowledge, in
any material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code, or involving
the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission
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or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer for
effecting a portfolio investment transaction in excess of the amount of
commission another broker- dealer would have charged for effecting that
transaction, if the Portfolio Manager or its affiliate determines in good
faith that such amount of commission was reasonable in relation to the value
of the brokerage and research services provided by such broker- dealer, viewed
in terms of either that particular transaction or the Portfolio Manager's or
its affiliate's overall responsibilities with respect to the Series and to
their other clients as to which they exercise investment discretion. To the
extent consistent with these standards, the Portfolio Manager is further
authorized to allocate the orders placed by it on behalf of the Series to the
Portfolio Manager if it is registered as a broker-dealer with the SEC, to its
affiliated broker-dealer, or to such brokers and dealers who also provide
research or statistical material, or other services to the Series, the
Portfolio Manager, or an affiliate of the Portfolio Manager. Such allocation
shall be in such amounts and proportions as the Portfolio Manager shall
determine consistent with the above standards, and the Portfolio Manager will
report on said allocation regularly to the Board of Trustees of the Trust
indicating the broker-dealers to which such allocations have been made and the
basis therefor.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. The Portfolio Manager has
reviewed the initial Registration Statement for the Trust filed with the
Securities and Exchange Commission and represents and warrants that, with
respect to the disclosure about the Portfolio Manager or information relating,
directly or indirectly, to the Portfolio Manager, such Registration Statement
contains, as of the date hereof, no untrue statement of any material fact and
does not omit any statement of a material fact which was required to be stated
therein or necessary to make the statements contained therein not misleading.
The Portfolio Manager further represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of 1940, as
amended ("Advisers Act") and a duly registered investment adviser in all
states in which the Portfolio Manager is required to be registered.
5. EXPENSES. During the term of this Agreement, the Portfolio Manager
will pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management under this Agreement. The Manager or
the Trust shall be responsible for all the expenses of the Trust's operations
including, but not limited to:
(a) Expenses of all audits by the Trust's independent public
accountants;
(b) Expenses of the Trust's transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Trust's custodial services including
recordkeeping services provided by the custodian;
(d) Expenses of maintaining the Trust's tax records;
(e) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio
Manager;
(f) Taxes levied against the Trust;
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(g) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(h) Costs, including the interest expense, of borrowing money;
(i) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(j) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(k) Costs of printing stock certificates representing shares of the
Trust;
(l) Trustees' fees and expenses to Trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate thereof;
(m) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(n) Association membership dues;
(o) Extraordinary expenses of the Trust as may arise including
expenses incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under Section
15 of this Agreement), and the legal obligations of the Trust to indemnify its
Trustees, officers, employees, shareholders, distributors, and agents with
respect thereto; and
(p) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, based on the average daily net
assets of the Series at the annual rate of .50% of the average daily net
assets of the Series.
7. SEED MONEY. The Manager agrees that the Portfolio Manager shall not
be responsible for providing money for the initial capitalization of the Trust
or the Series.
8. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall immediately notify
the Manager and the Trust (1) in the event that the Securities and Exchange
Commission has censured the Portfolio Manager; placed limitations upon its
activities, functions or operations; suspended or revoked its registration as
an investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis for
believing that the Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
or (3) upon having a reasonable basis for believing that the Series has ceased
to comply with the diversification provisions of Section 817(h) of the
Internal Revenue Code or the Regulations thereunder. The Portfolio Manager
further agrees to notify the Manager and the Trust immediately of any material
fact known to the Portfolio Manager respecting or relating to the Portfolio
Manager that is not contained in the Registration Statement or prospectus for
the Trust, or any amendment or supplement thereto, or of any statement
contained therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the
Portfolio Manager (1) in the event that the Securities and Exchange Commission
has censured the Manager or the Trust; placed limitations upon either of their
activities, functions, or operations; suspended or revoked the Manager's
registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that the Series has ceased to
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qualify or might
not qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, or (3) upon having a reasonable basis for believing
that the Series has ceased to comply with the diversification provisions of
Section 817(h) of the Internal Revenue Code or the Regulations thereunder.
9. INSURANCE COMPANY OFFEREES. All parties acknowledge that the Trust
will offer its shares so that it may serve as an investment vehicle for
variable annuity contracts and variable life insurance policies issued by
insurance companies. The Trust and the Manager agree that shares of the Series
may be offered only to the separate accounts and general account of insurance
companies that are approved in writing by the Portfolio Manager. The
Portfolio Manager agrees that shares of this Series may be offered to separate
accounts and the general account of Golden American Life Insurance Company and
to separate accounts and the general accounts of any insurance companies that
are affiliated with Golden American Life Insurance Company. The Manager and
Trust agree that the Portfolio Manager shall be under no obligation to
investigate insurance companies to which the Trust offers or proposes to offer
its shares.
10. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-
3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
or the Manager's request, although the Portfolio Manager may, at its own
expense, make and retain a copy of such records. The Portfolio Manager further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
11. COOPERATION. Each party to this Agreement agrees to cooperate with
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
12. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER. The Manager and the
Trust agree that neither the Trust, the Manager, nor affiliated persons of the
Trust or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
writing in advance by the Portfolio Manager, except with the prior written
permission of the Portfolio Manager. The parties agree that in the event that
the Manager or an affiliated person of the Manager sends sales literature or
other promotional material to the Portfolio Manager for its written approval
and the Portfolio Manager has not commented within 30 days, the Manager and
its affiliated persons may use and distribute such sales literature or other
promotional material, although, in such event, the Portfolio Manager shall not
be deemed to have consented to such use and distribution.
13. CONTROL. Notwithstanding any other provision of the Agreement, it
is understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
14. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
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15. LIABILITY. Except as may otherwise be required by the 1940 Act or
the rules thereunder or other applicable law, the Trust and the Manager agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
16. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person, if
any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, under any other statute,
at common law or otherwise, arising out of the Manager's responsibilities to
the Trust which (1) may be based upon any misfeasance, malfeasance, or
nonfeasance by the Manager, any of its employees or representatives or any
affiliate of or any person acting on behalf of the Manager or (2) may be based
upon any untrue statement or alleged untrue statement of a material fact
supplied by, or which is the responsibility of, the Manager and contained in
the Registration Statement or prospectus covering shares of the Trust or any
Series, or any amendment thereof or any supplement thereto, or the omission or
alleged omission to state therein a material fact known or which should have
been known to the Manager and was required to be stated therein or necessary
to make the statements therein not misleading, unless such statement or
omission was made in reliance upon information furnished to the Manager or the
Trust or to any affiliated person of the Manager by a Portfolio Manager
Indemnified Person; provided however, that in no case shall the indemnity in
favor of the Portfolio Manager Indemnified Person be deemed to protect such
person against any liability to which any such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(b) Notwithstanding Section 15 of this Agreement, the Portfolio
Manager agrees to indemnify and hold harmless the Manager, any affiliated
person
of the Manager, and each person, if any, who, within the meaning of Section 15
of the 1933 Act, controls ("controlling person") the Manager (all of such
persons being referred to as "Manager Indemnified Persons") against any and
all losses, claims, damages, liabilities, or litigation (including legal and
other expenses) to which a Manager Indemnified Person may become subject under
the 1933 Act, 1940 Act, the Advisers Act, under any other statute, at common
law or otherwise, arising out of the Portfolio Manager's responsibilities as
Portfolio Manager of the Series which (1) may be based upon any misfeasance,
malfeasance, or nonfeasance by the Portfolio Manager, any of its employees or
representatives, or any affiliate of or any person acting on behalf of the
Portfolio Manager, (2) may be based upon a failure to comply with Section 2,
Paragraph (a) of this Agreement, or (3) may be based upon any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or prospectus covering the shares of the Trust or any Series, or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact known or which should have been known to the Portfolio
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, if such a statement or omission was made in
reliance upon information furnished to the Manager, the Trust, or any
affiliated person of the Manager or Trust by the Portfolio Manager or any
affiliated person of the Portfolio Manager; provided, however, that in no case
shall the indemnity in favor of a Manager Indemnified Person be deemed to
protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
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(c) The Manager shall not be liable under Paragraph (a) of this
Section 16 with respect to any claim made against a Portfolio Manager
Indemnified Person unless such Portfolio Manager Indemnified Person shall have
notified the Manager in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Portfolio Manager Indemnified Person (or after such
Portfolio Manager Indemnified Person shall have received notice of such
service on any designated agent), but failure to notify the Manager of any
such claim shall not relieve the Manager from any liability which it may have
to the Portfolio Manager Indemnified Person against whom such action is
brought otherwise than on account of this Section 16. In case any such action
is brought against the Portfolio Manager Indemnified Person, the Manager will
be entitled to participate, at its own expense, in the defense thereof or,
after notice to the Portfolio Manager Indemnified Person, to assume the
defense thereof, with counsel satisfactory to the Portfolio Manager
Indemnified Person. If the Manager assumes the defense and the selection of
counsel by the Manager to represent both the Manager and the Portfolio Manager
Indemnified Person would result in a conflict of interests and therefore,
would not, in the reasonable judgment of the Portfolio Manager Indemnified
Person, adequately represent the interests of the Portfolio Manager
Indemnified Person, the Manager will, at its own expense, assume the defense
with counsel to the Manager and, also at its own expense, with separate
counsel to the Portfolio Manager Indemnified Person which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified Person.
The Portfolio Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Manager shall not be liable to
the Portfolio Manager Indemnified Person under this Agreement for any legal or
other expenses subsequently incurred by the Portfolio Manager Indemnified
Person independently in connection with the defense thereof other than
reasonable costs of investigation. The Manager shall not have the right to
compromise on or settle the litigation without the prior written consent of
the Portfolio Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the Portfolio
Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b)
of this Section 16 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Portfolio Manager in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Manager Indemnified Person (or after such Manager
Indemnified Person shall have received notice of such service on any
designated agent), but failure to notify the Portfolio Manager of any such
claim shall not relieve the Portfolio Manager from any liability which it may
have to the Manager Indemnified Person against whom such action is brought
otherwise than on account of this Section 16. In case any such action is
brought against the Manager Indemnified Person, the Portfolio Manager will be
entitled to participate, at its own expense, in the defense thereof or, after
notice to the Manager Indemnified Person, to assume the defense thereof, with
counsel satisfactory to the Manager Indemnified Person. If the Portfolio
Manager assumes the defense and the selection of counsel by the Portfolio
Manager to represent both the Portfolio Manager and the Manager Indemnified
Person would result in a conflict of interest and therefore, would not, in the
reasonable judgment of the Manager Indemnified Person, adequately represent
the interests of the Manager Indemnified Person, the Portfolio Manager will,
at its own expense, assume the defense with counsel to the Portfolio Manager
and, also at its own expense, with separate counsel to the Manager Indemnified
Person which counsel shall be satisfactory to the Portfolio Manager and to the
Manager Indemnified Person. The Manager Indemnified Person shall bear the
fees and expenses of any additional counsel retained by it, and the Portfolio
Manager shall not be liable to the Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the Manager
Indemnified Person independently in connection with the defense thereof other
than reasonable costs of investigation. The Portfolio Manager shall not have
the right to compromise on or settle the litigation without the prior written
consent of the Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the Manager
Indemnified Person.
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17. DURATION AND TERMINATION. This Agreement shall become effective on
the date of its execution. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis with respect to each Series unless
terminated as provided in this Section; provided that such annual continuance
is specifically approved each year by (a) the vote of a majority of the entire
Board of Trustees of the Trust, or by the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of each Series, and
(b) the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons (as such term is defined in the 1940 Act) of
any such party to this Agreement cast in person at a meeting called for the
purpose of voting on such approval. The Portfolio Manager shall not provide
any services for such Series or receive any fees on account of such Series
with respect to which this Agreement is not approved as described in the
preceding sentence. Notwithstanding the foregoing, this Agreement may be
terminated: (a) by the Manager at any time without penalty, upon sixty (60)
days' written notice to the Portfolio Manager and the Trust, (b) at any time
without payment of any penalty by the Trust, upon the vote of a majority of
the Trust's Board of Trustees or a majority of the outstanding voting
securities of each Series, upon sixty (60) days' written notice to the Manager
and the Portfolio Manager, or (c) by the Portfolio Manager at any time without
penalty, upon sixty (60) days' written notice to the Manager and the Trust.
In the event of termination for any reason, all records of each Series for
which the
Agreement is terminated shall promptly be returned to the Manager or the
Trust, free from any claim or retention of rights in such record by the
Portfolio Manager, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Agreement shall automatically
terminate in the event of its assignment (as such term is defined in the 1940
Act). In the event this Agreement is terminated or is not approved in the
manner described above, the Sections or Paragraphs numbered 2(f), 2(h), 10,
11, 12, 15, 16, and 19 of this Agreement shall remain in effect, as well as
any applicable provision of this Paragraph numbered 17.
18. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
19. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property
of the Manager and its affiliates, and that the Portfolio Manager has the
right to use such name (or derivative or logo) only with the approval of the
Manager and only so long as the Manager is Manager to the Trust and/or the
Series. Upon termination of the Management Agreement between the Trust and
the Manager, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name Van Eck or any derivative
thereof or logo associated with that name is the valuable property of the
Portfolio Manager and its affiliates and that the Trust and/or the Series have
the right to use such name (or derivative or logo) in offering materials of
the Trust with the approval of the Portfolio Manager and for so long as the
Portfolio Manager is a portfolio manager to the Trust and/or the Series. Upon
termination of this Agreement between the Trust, the Manager, and the
Portfolio Manager, the Trust shall forthwith cease to use such name (or
derivative or logo).
20. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Amended
and Restated Agreement and Declaration of Trust has been executed on behalf of
the Trust by Trustees of the Trust in their capacity as Trustees of the Trust
and not individually. The obligations of this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon any
Trustee, officer, or shareholder of the Trust individually.
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21. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(c) To the extent permitted under Section 17 of this Agreement,
this Agreement may only be assigned by any party with the prior written
consent of the other parties.
(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby, and to this extent, the provisions of
this Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
VAN ECK ASSOCIATES CORPORATION
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
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EXHIBIT F
PORTFOLIO MANAGEMENT AGREEMENT
Agreement made this ____ day of _________, 1997, 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 __________
___, 1997, a copy of which has been provided to the Portfolio Manager, the
Trust has retained the Manager to render advisory, management, and
administrative services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint Equitable
Investment Services, Inc. to act as Portfolio Manager to the Series designated
on Schedule A of this Agreement (each a "Series") for the periods and on the
terms set forth in this Agreement. The Portfolio Manager accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided. In the event the Trust designates one or more
series other than the Series with respect to which the Trust and the Manager
wish to retain the Portfolio Manager to render investment advisory services
hereunder, they shall promptly notify the Portfolio Manager in writing. If
the Portfolio Manager is willing to render such services, it shall so notify
the Trust and Manager in writing, whereupon such series shall become a Series
hereunder, and be subject to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will provide
a continuous investment program for each Series' portfolio and determine the
composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of each Series' assets by determining
the securities and other
investments that shall be purchased, entered into, sold, closed, or exchanged
for the Series, when these transactions should be executed, and what portion
of the assets of each Series should be held in the various securities and
other investments in which it may invest, and the Portfolio Manager is hereby
authorized to execute and perform such services on behalf of each Series. To
the extent permitted by the investment policies of the Series, the Portfolio
Manager shall make decisions for the Series as to foreign currency matters and
make determinations as to and execute and perform foreign currency exchange
contracts on behalf of the Series. The Portfolio Manager will provide the
services under this Agreement in accordance with the Series' investment
objective or objectives, policies, and restrictions as stated in the Trust's
Registration Statement filed with the Securities and Exchange Commission (the
"SEC"),
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as from time to time amended, copies of which shall be sent to the
Portfolio Manager by the Manager upon filing with the SEC. The Portfolio
Manager further agrees as follows:
(a) The Portfolio Manager will (1) manage each Series so that no
action or omission on the part of the Portfolio Manager will cause a Series to
fail to meet the requirements to qualify as a regulated investment company
specified in Section 851 of the Internal Revenue Code (other than the
requirements for the Trust to register under the 1940 Act and to file with its
tax return an election to be a regulated investment company, both of which
shall not be the responsibility of the Portfolio Manager), (2) manage each
Series so that no action or omission on the part of the Portfolio Manager
shall cause a Series to fail to comply with the diversification requirements
of Section 817(h) of the Internal Revenue Code and regulations issued
thereunder, and (3) use reasonable efforts to manage the Series so that no
action or omission on the part of the Portfolio Manager shall cause a Series
to fail to comply with any other rules and regulations pertaining to
investment vehicles underlying variable annuity or variable life insurance
policies. The Manager will notify the Portfolio Manager promptly if the
Manager believes that a Series is in violation of any requirement specified in
the first sentence of this paragraph. The Manager or the Trust will notify
the Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and regulations
issued thereunder and of rules or regulations pertaining to investment
vehicles underlying variable annuity or variable life insurance policies.
(b) The Portfolio Manager will perform its duties hereunder
pursuant to the 1940 Act and all rules and regulations thereunder, all other
applicable federal and state laws and regulations, with any applicable
procedures adopted by the Trust's Board of Trustees of which the Portfolio
Manager has been notified in writing, and the provisions of the Registration
Statement of the Trust under the Securities Act of 1933 (the "1933 Act") and
the 1940 Act, as supplemented or amended, of which the Portfolio Manager has
received a copy ("Registration Statement"). The Manager or the Trust will
notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or
sale of a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its affiliates,
the Portfolio Manager may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be so
sold or purchased with those of its other clients where such aggregation is
not inconsistent with the policies set forth in the Registration Statement.
In such event, allocation of the securities so purchased or sold, as well as
the expenses
incurred in the transaction, will be made by the Portfolio Manager in a manner
that is fair and equitable in the judgment of the Portfolio Manager in the
exercise of its fiduciary obligations to the Trust and to such other clients,
subject to review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for a
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Series, as may be reasonably necessary
to enable the custodian and portfolio accounting agent to perform its
administrative and record keeping 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
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agree that the Portfolio Manager
shall not bear responsibility or liability for the determination or accuracy
of the valuation of any portfolio securities and other assets of the Series
except to the extent that the Portfolio Manager exercises judgment with
respect to any such valuation.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian and portfolio accounting agent
for the Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of the 1940 Act and the Investment Advisers Act of 1940 (the
"Advisers Act"), as well as other applicable laws. The Portfolio Manager will
furnish to regulatory authorities having the requisite authority any
information or reports in connection with such services which may be requested
in order to ascertain whether the operations of the Trust are being conducted
in a manner consistent with applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board
of Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with respect
to the Series such periodic and special reports as the Trustees and the
Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
person or persons as it believes necessary to assist it in carrying out its
obligations under this Agreement. However, the Portfolio Manager may not
retain as subadviser any company that would be an "investment adviser," as
that term is defined in the 1940 Act, to the Series unless the contract with
such company is approved by a majority of the Trust's Board of Trustees and a
majority of Trustees who are not parties to any agreement or contract with
such company and who are not "interested persons," as defined in the 1940
Act, of the Trust, the
Manager, or the Portfolio Manager, or any such company that is retained as
subadviser, and is approved by the vote of a majority of the outstanding
voting securities of the applicable Series of the Trust to the extent required
by the 1940 Act. The Portfolio Manager shall be responsible for making
reasonable inquiries and for reasonably ensuring that any employee of the
Portfolio Manager, any subadviser that the Portfolio Manager has employed or
with which it has associated with respect to the Series, or any employee
thereof has not, to the best of the Portfolio Manager's knowledge, in any
material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code, or involving
the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission
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<PAGE>
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
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 record keeping services;
(c) Expenses of the Series' custodial services including record
keeping 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;
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(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio
Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to Trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate thereof;
(o) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
(q) Extraordinary expenses of the Trust as may arise including
expenses incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under Section
14 of this Agreement), and the legal obligations of the Trust to indemnify its
Trustees, officers, employees, shareholders, distributors, and agents with
respect thereto; and
(r) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly as described in Schedule B.
7. SEED MONEY. The Manager agrees that the Portfolio Manager shall not
be responsible for providing money for the initial capitalization of the
Series.
8. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall promptly notify the
Manager and the Trust (1) in the event that the SEC or other governmental
authority has censured the Portfolio Manager; placed limitations upon its
activities, functions or operations; suspended or revoked its registration, if
any, as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that the Series has ceased to qualify or might
not qualify as a regulated investment company under Subchapter M of the
Internal Revenue
F-5
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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 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
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of additional information for the Trust, as they may
be amended or supplemented from time to time, or in reports or proxy
statements for the Trust, or in sales literature or other promotional material
approved in advance by the Portfolio Manager, except with the prior permission
of the Portfolio Manager.
12. CONTROL. Notwithstanding any other provision of the Agreement, it
is understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. LIABILITY. Except as may otherwise be required by the 1940 Act or
the rules thereunder or other applicable law, the Trust and the Manager agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933
Act, controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
15. INDEMNIFICATION.
(a) Notwithstanding Section 14 of this Agreement, the Manager
agrees to indemnify and hold harmless the Portfolio Manager, any affiliated
person of the Portfolio Manager (other than the Manager), and each person, if
any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, the Internal Revenue Code,
under any other statute, at common law or otherwise, arising out of the
Manager's responsibilities to the Trust which (1) may be based upon any
misfeasance, malfeasance, or nonfeasance by the Manager, any of its employees
or representatives or any affiliate of or any person acting on behalf of the
Manager or (2) may be based upon any untrue statement or alleged untrue
statement 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,
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the Advisers Act, the Internal Revenue Code, under any other statute, at
common law or otherwise, arising out of the Portfolio Manager's
responsibilities as Portfolio Manager of the Series which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Portfolio Manager,
any of its employees or representatives, or any affiliate of or any person
acting on behalf of the Portfolio Manager, (2) may be based upon a failure to
comply with Section 2, Paragraph (a) of this Agreement, or (3) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement or prospectus covering the shares of
the Trust or a Series, or any amendment or supplement thereto, or the omission
or alleged omission to state therein a material fact known or which should
have been known to the Portfolio Manager and was required to be stated therein
or necessary to make the statements therein not misleading, if such a
statement or omission was made in reliance upon information furnished to the
Manager, the Trust, or any affiliated person of the Manager or Trust by the
Portfolio Manager or any affiliated person of the Portfolio Manager; provided,
however, that in no case shall the indemnity in favor of a Manager Indemnified
Person be deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 15 with respect to any claim made against a Portfolio Manager
Indemnified Person unless such Portfolio Manager Indemnified Person shall have
notified the Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Portfolio Manager
Indemnified Person (or after such Portfolio Manager Indemnified Person shall
have received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this Section
15. In case any such action is brought against the Portfolio Manager
Indemnified Person, the Manager will be entitled to participate, at its own
expense, in the defense thereof or, after notice to the Portfolio Manager
Indemnified Person, to assume the defense thereof, with counsel satisfactory
to the Portfolio Manager Indemnified Person. If the Manager assumes the
defense of any such action and the selection of counsel by the Manager to
represent both the Manager and the Portfolio Manager Indemnified Person would
result in a conflict of interests and therefore, would not, in the reasonable
judgment of the Portfolio Manager Indemnified Person, adequately represent the
interests of the Portfolio Manager Indemnified Person, the Manager will, at
its own expense, assume the defense with counsel to the Manager and, also at
its own expense, with separate counsel to the Portfolio Manager Indemnified
Person, which counsel shall be satisfactory to the Manager and to the
Portfolio Manager Indemnified Person. The Portfolio Manager Indemnified
Person shall bear the fees and expenses of any additional counsel retained by
it, and the Manager shall not
be liable to the Portfolio Manager Indemnified Person under this Agreement for
any legal or other expenses subsequently incurred by the Portfolio Manager
Indemnified Person independently in connection with the defense thereof other
than reasonable costs of investigation. The Manager shall not have the right
to compromise on or settle the litigation without the prior written consent of
the Portfolio Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the Portfolio
Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b)
of this Section 15 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Portfolio
Manager of any such claim shall not relieve the Portfolio Manager from any
liability which it may have to the Manager Indemnified Person against whom
such action is brought otherwise than on account of this
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<PAGE>
Section 15. In case
any such action is brought against the Manager Indemnified Person, the
Portfolio Manager will be entitled to participate, at its own expense, in the
defense thereof or, after notice to the Manager Indemnified Person, to assume
the defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Portfolio Manager assumes the defense of any such action and
the selection of counsel by the Portfolio Manager to represent both the
Portfolio Manager and the Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment of
the Manager Indemnified Person, adequately represent the interests of the
Manager Indemnified Person, the Portfolio Manager will, at its own expense,
assume the defense with counsel to the Portfolio Manager and, also at its own
expense, with separate counsel to the Manager Indemnified Person which counsel
shall be satisfactory to the Portfolio Manager and to the Manager Indemnified
Person. The Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Portfolio Manager shall not be
liable to the Manager Indemnified Person under this Agreement for any legal or
other expenses subsequently incurred by the Manager Indemnified Person
independently in connection with the defense thereof other than reasonable
costs of investigation. The Portfolio Manager shall not have the right to
compromise on or settle the litigation without the prior written consent of
the Manager Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Manager Indemnified
Person.
(e) The Manager shall not be liable under this Section 15 to
indemnify and hold harmless the Portfolio Manager and the Portfolio Manager
shall not be liable under this Section 15 to indemnify and hold harmless the
Manager with respect to any losses, claims, damages, liabilities, or
litigation that first become known to the party seeking indemnification during
any period that the Portfolio Manager is, within the meaning of Section 15 of
the 1933 Act, a controlling person of the Manager.
16. DURATION AND TERMINATION. This Agreement shall become effective on
the date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to each Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
each Series, and (b) the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons (as such term is defined in
the 1940 Act) of any such party to this Agreement cast in person at a meeting
called for the purpose of voting on such approval. The Portfolio Manager shall
not provide any services for such Series or receive any fees on account of
such Series with respect to which this Agreement is not approved as described
in the preceding sentence. However, any approval of this Agreement by the
holders of a majority of the outstanding shares (as defined in the 1940 Act)
of a Series shall be effective to continue this Agreement with respect to such
Series notwithstanding (i) that this Agreement has not been approved by the
holders of a majority of the outstanding shares of any other Series or (ii)
that this Agreement has not been approved by the vote of a majority of the
outstanding shares of the Trust, unless such approval shall be required by any
other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio 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 addition, this
Agreement shall terminate with respect to a Series in the event that it is not
initially approved by the vote of a majority of the outstanding voting
securities of that Series at a meeting of shareholders at which approval of
the Agreement shall be considered by shareholders of the Series. In the event
of termination for any reason, all records of each Series for which the
Agreement is terminated shall promptly be returned to the Manager or the
Trust, free from any claim or retention of rights in such records by the
Portfolio Manager, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Agreement shall automatically
terminate in the event of its assignment (as such term is described in the
1940 Act). In the event this Agreement is terminated or is not approved in
the
F-9
<PAGE>
manner described above, the Sections or Paragraphs numbered 2(f), 9, 10,
11, 14, 15, and 18 of this Agreement shall remain in effect, as well as any
applicable provision of this Paragraph numbered 16.
17. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property
of the Manager and/or its affiliates, and that the Portfolio Manager has the
right to use such name (or derivative or logo) only with the approval of the
Manager and only so long as the Manager is Manager to the Trust and/or the
Series. Upon termination of the Management Agreement between the Trust and
the Manager, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name "Equitable Investment Services,
Inc." or any derivative thereof or logo associated with that name is the
valuable property of the Portfolio Manager and its affiliates and that the
Trust and/or the Series have the right to use such name (or derivative or
logo) in offering materials of the Trust with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a portfolio manager to the
Trust and/or the Series. Upon termination of this Agreement between the
Trust, the Manager, and the Portfolio Manager, the Trust shall forthwith cease
to use such name (or derivative or logo).
19. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Amended
and Restated Agreement and Declaration of Trust has been executed on behalf of
the Trust by Trustees of the Trust in their capacity as Trustees of the Trust
and not individually. The obligations of this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon any
Trustee, officer, or shareholder of the Trust individually.
20. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(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.
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<PAGE>
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
__________________________________ By:___________________________________
Attest
__________________________________ ______________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
EQUITABLE INVESTMENT
SERVICES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
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<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Equitable Investment Services, Inc.
shall act as Portfolio Manager are as follows:
Limited Maturity Bond Series
Liquid Asset Series
Market Manager Series
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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 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
------ ----
Limited Maturity Bond Series 0.30% of the first $25 million
0.25% of the next $50 million
0.20% of the next $75 million
0.15% of the amount over $150 million;
subject to a minimum annual fee of $35,000
(payable at the end of each calendar year)
starting from the time that the Portfolio
Manager renders investment management
services for the assets of the Series,
and this amount shall be pro-rated for any
portion of a year in which the Portfolio
Management Agreement is not in effect or
during which the obligation to pay this
minimum fee has not commenced.
Liquid Asset Series 0.20% of the first $25 million
0.15% of the next $50 million
0.10% of the amount over $75 million;
subject to a minimum annual fee of $35,000
(payable at the end of each calendar year)
starting from the time that the Portfolio
Manager renders 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>
EXHIBIT G
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of ____________, 1997 among The GCG Trust
(the "Trust"), a Massachusetts business trust, Directed Services, Inc.
("Manager"), a New York corporation, and Zweig Advisors Inc. ("Portfolio
Manager"), a Delaware corporation.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of ____________
__, 1997, a copy of which has been provided to the Portfolio Manager, the
Trust has retained the Manager to render advisory, management, and
administrative services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint Zweig
Advisors Inc. to act as Portfolio Manager to the Series designated on Schedule
A of this Agreement (each a "Series") for the periods and on the terms set
forth in this Agreement. The Portfolio Manager accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided. In the event the Trust designates one or more series other than the
Series with respect to which the Trust and the Manager wish to retain the
Portfolio Manager to render investment advisory services hereunder, they shall
notify the Portfolio Manager in writing. If the Portfolio Manager is willing
to render such services, it shall notify the Trust and Manager in writing,
whereupon such series shall become a Series hereunder, and be subject to this
Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will provide
a continuous investment program for each Series' portfolio and determine the
composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of each Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for
each Series, when these transactions should be executed, and what portion of
the assets of each Series should be held in the various securities and other
investments in which it may invest, and the Portfolio Manager is hereby
authorized to execute and perform such services on behalf of each Series. To
the extent permitted by the investment policies of each Series, the Portfolio
Manager shall make decisions for the Series as to foreign currency matters and
make determinations as to and execute and perform foreign currency exchange
contracts on behalf of the Series. The Portfolio Manager will provide the
services under this Agreement in accordance with each Series' investment
objective or objectives, policies, and restrictions as stated in the Trust's
Registration Statement filed with the Securities and Exchange Commission
("SEC"), as
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<PAGE>
amended, copies of which shall be sent to the Portfolio Manager by
the Manager. The Portfolio Manager further agrees as follows:
(a) The Portfolio Manager will (1) use reasonable efforts to manage
each Series so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) manage each Series so as to
ensure compliance by the Series with the diversification requirements of
Section 817(h) of the Internal Revenue Code and regulations issued thereunder,
and (3) use reasonable efforts to manage each Series so as to ensure
compliance by each Series with any other rules and regulations pertaining to
investment vehicles underlying variable annuity or variable life insurance
policies. The Manager or the Trust will notify the Portfolio Manager of any
pertinent changes, modifications to, or interpretations of Section 817(h) of
the Internal Revenue Code and regulations issued thereunder. In managing each
Series in accordance with these requirements, the Portfolio Manager shall be
entitled to receive and act upon advice of counsel to the Trust, counsel to
the Manager, or counsel to the Portfolio Manager that is also acceptable to
the Manager.
(b) The Portfolio Manager will conform with the 1940 Act and all
rules and regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Trust's Board
of Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended, of
which the Portfolio Manager has received a copy. The Manager or the Trust
will notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or
sale of a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its affiliates,
the Portfolio Manager may, to the extent permitted by applicable laws and
regulations, including but not limited to Section 17(d) of the 1940 Act, but
shall not be obligated to, aggregate the securities to be so sold or purchased
with those of its other clients where such aggregation is not inconsistent
with the policies set forth in the Registration Statement. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Portfolio Manager in a manner
that is fair and equitable in the judgment of the Portfolio Manager in the
exercise of its fiduciary obligations to the Trust and to such other clients.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Trust on a daily basis, such
confirmation, trade tickets, and other documents and information, including,
but not limited
to, Cusip, Sedol, or other numbers that identify securities to be purchased or
sold on behalf of each Series, as may be reasonably necessary to enable the
custodian and portfolio accounting agent to perform its administrative and
record keeping responsibilities with respect to the Series. With respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, the Portfolio Manager will arrange for the automatic transmission of
the confirmation of such trades to the Trust's custodian and portfolio
accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the
determination by the custodian and portfolio accounting agent for the Trust of
the valuation of portfolio securities and other investments of the Series.
The Portfolio Manager will assist the custodian and portfolio accounting agent
for the Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value of any
portfolio securities or other assets of the Series for which the custodian and
portfolio accounting agent seeks assistance from or identifies for review by
the Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of each Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting agent
for the Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of
G-2
<PAGE>
the 1940 Act and the Investment Advisers Act of 1940 (the
"Adviser Act"), as well as other applicable laws. The Portfolio Manager will
furnish to regulatory authorities having the requisite authority any
information or reports in connection with such services which may be requested
in order to ascertain whether the operations of the Trust are being conducted
in a manner consistent with applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board
of Trustees for consideration at meetings of the Board on the investment
program for each Series and the issuers and securities represented in each
Series' portfolio, and will furnish the Trust's Board of Trustees with respect
to each Series such periodic and special reports as the Trustees and the
Manager may reasonably request.
(h) The Portfolio Manager will not disclose or use any records or
information obtained pursuant to this Agreement (excluding investment research
and investment advice) in any manner whatsoever except as expressly authorized
in this Agreement or in the ordinary course of business in connection with
placing orders for the purchase and sale of securities, and will keep
confidential any information obtained pursuant to this Agreement, and disclose
such information only if the Board of Trustees of the Trust has authorized
such disclosure, or if such disclosure is required by applicable federal or
state law or regulations or regulatory authorities having the requisite
authority. The Trust and the Manager will not disclose or use any records or
information respecting the Portfolio Manager obtained pursuant to this
Agreement in any manner whatsoever except as expressly authorized in this
Agreement, and will keep confidential any information obtained pursuant to
this Agreement, and disclose such information only as expressly authorized in
this Agreement, if the Board of Trustees of the Trust has authorized such
disclosure, or if such disclosure is required by applicable federal or state
law or regulations or regulatory authorities having the requisite authority.
(i) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
person or persons as it believes necessary to assist it in carrying out its
obligations under this Agreement. However, the Portfolio Manager may not
retain as subadviser any company that would be an "investment adviser," as
that term is defined in the 1940 Act, to the Series unless the contract with
such company is approved by a majority of the Trust's Board of Trustees and a
majority of Trustees who are not parties to any agreement or contract with
such company and who are not "interested persons," as defined in the 1940 Act,
of the Trust, the Manager, or the Portfolio Manager, or any such company that
is retained as subadviser, and is approved by the vote of a majority of the
outstanding voting securities of the applicable Series of the Trust to the
extent required by the 1940 Act. The Portfolio Manager shall be responsible
for making reasonable inquiries and for reasonably ensuring that any employee
of the Portfolio Manager, any subadviser that the Portfolio Manager has
employed or with which it has associated with respect to the Series, or any
employee thereof has not, to the best of the Portfolio Manager's knowledge, in
any material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code, or involving
the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage
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commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for a Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to a Series
in any transaction may be less favorable than that available from another
broker-dealer if the difference is reasonably justified, in the judgment of
the Portfolio Manager in the exercise of its fiduciary obligations to the
Trust, by other aspects of the portfolio execution services offered. Subject
to such policies as the Board of Trustees may determine and consistent with
Section 28(e) of the Securities Exchange Act of 1934, the Portfolio Manager
shall not be deemed to have acted unlawfully or to have breached any duty
created by this Agreement or otherwise solely by reason of its having
caused a Series to pay a broker-dealer for
effecting a portfolio investment transaction in excess of the amount of
commission another broker- dealer would have charged for effecting that
transaction, if the Portfolio Manager or its affiliate determines in good
faith that such amount of commission was reasonable in relation to the value
of the brokerage and research services provided by such broker- dealer, viewed
in terms of either that particular transaction or the Portfolio Manager's or
its affiliate's overall responsibilities with respect to the Series and to
their other clients as to which they exercise investment discretion. To the
extent consistent with these standards, the Portfolio Manager is further
authorized to allocate the orders placed by it on behalf of the Series to the
Portfolio Manager if it is registered as a broker-dealer with the SEC, to its
affiliated broker-dealer, or to such brokers and dealers who also provide
research or statistical material, or other services to the Series, the
Portfolio Manager, or an affiliate of the Portfolio Manager. Such allocation
shall be in such amounts and proportions as the Portfolio Manager shall
determine consistent with the above standards, and the Portfolio Manager will
report on said allocation regularly to the Board of Trustees of the Trust
indicating the broker-dealers to which such allocations have been made and the
basis therefor.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. The Portfolio Manager has
reviewed the initial Registration Statement for the Trust filed with the
Securities and Exchange Commission and represents and warrants that, with
respect to the disclosure about the Portfolio Manager or information relating,
directly or indirectly, to the Portfolio Manager, such Registration Statement
contains, as of the date hereof, no untrue statement of any material fact and
does not omit any statement of a material fact which was required to be stated
therein or necessary to make the statements contained therein not misleading.
The Portfolio Manager further represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of 1940, as
amended ("Advisers Act") and a duly registered investment adviser in all
states in which the Portfolio Manager is required to be registered.
5. EXPENSES. During the term of this Agreement, the Portfolio Manager
will pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management under this Agreement. The Manager or
the Trust shall be responsible for all the expenses of the Trust's operations
including, but not limited to:
(a) Expenses of all audits by the Trust's independent public
accountants;
(b) Expenses of the Trust's transfer agent, registrar, dividend
disbursing agent, and shareholder record keeping services;
(c) Expenses of the Trust's custodial services including record
keeping services provided by the custodian;
(d) Expenses of maintaining the Trust's tax records;
(e) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio
Manager;
(f) Taxes levied against the Trust;
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(g) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(h) Costs, including the interest expense, of borrowing money;
(i) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(j) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(k) Costs of printing stock certificates representing shares of the
Trust;
(l) Trustees' fees and expenses to Trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate thereof;
(m) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(n) Association membership dues;
(o) Extraordinary expenses of the Trust as may arise including
expenses incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under Section
15 of this Agreement), and the legal obligations of the Trust to indemnify its
Trustees, officers, employees, shareholders, distributors, and agents with
respect thereto; and
(p) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, as described in Schedule B.
7. SEED MONEY. The Manager agrees that the Portfolio Manager shall not
be responsible for providing money for the initial capitalization of the Trust
or the Series.
8. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall immediately notify
the Manager and the Trust (1) in the event that the Securities and Exchange
Commission has censured the Portfolio Manager; placed limitations upon its
activities, functions or operations; suspended or revoked its registration as
an investment adviser; or has commenced proceedings or an investigation that
may result in any of these actions, (2) upon having a reasonable basis for
believing that a Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
or (3) upon having a reasonable basis for believing that a Series has ceased
to comply with the diversification provisions of Section 817(h) of the
Internal Revenue Code or the Regulations thereunder. The Portfolio Manager
further agrees to notify the Manager and the Trust immediately of any material
fact known to the Portfolio Manager respecting or relating to the Portfolio
Manager that is not contained in the Registration Statement or prospectus for
the Trust, or any amendment or supplement thereto, or of any statement
contained therein that becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the
Portfolio Manager (1) in the event that the Securities and Exchange Commission
has censured the Manager or the Trust; placed limitations upon either of their
activities, functions, or operations; suspended or revoked the Manager's
registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that a Series has ceased to qualify or might
not qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, or (3) upon having a reasonable basis for believing
that a Series has ceased to comply
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with the diversification provisions of
Section 817(h) of the Internal Revenue Code or the Regulations thereunder.
9. INSURANCE COMPANY OFFEREES. All parties acknowledge that the Trust
will offer its shares so that it may serve as an investment vehicle for
variable annuity contracts and variable life insurance policies issued by
insurance companies. The Trust and the Manager agree that shares of the Series
may be offered only to the separate accounts and general account of insurance
companies that are approved in writing by the Portfolio Manager. The
Portfolio Manager agrees that shares of the Series may be offered to separate
accounts and the general account of Golden American Life Insurance Company and
to separate accounts and the general accounts of any insurance companies that
are affiliated with Golden American Life Insurance Company. The Manager and
Trust agree that the Portfolio Manager shall be under no obligation to
investigate insurance companies to which the Trust offers or proposes to offer
its shares.
10. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-
3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
or the Manager's request, although the Portfolio Manager may, at its own
expense, make and retain a copy of such records. The Portfolio Manager further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
11. COOPERATION. Each party to this Agreement agrees to cooperate with
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
12. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER. The Manager and the
Trust agree that neither the Trust, the Manager, nor affiliated persons of the
Trust or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
writing in advance by the Portfolio Manager, except with the prior written
permission of the Portfolio Manager. The parties agree that in the event that
the Manager or an affiliated person of the Manager sends sales literature or
other promotional material to the Portfolio Manager for its written approval
and the Portfolio Manager has not commented within 30 days, the Manager and
its affiliated persons may use and distribute such sales literature or other
promotional material, although, in such event, the Portfolio Manager shall not
be deemed to have consented to such use and distribution.
13. CONTROL. Notwithstanding any other provision of the Agreement, it
is understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
14. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of a Series) or
from engaging in other activities.
15. LIABILITY. Except as may otherwise be required by the 1940 Act or
the rules thereunder or other applicable law, the Trust and the Manager agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
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16. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person, if
any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, under any other statute,
at common law or otherwise, arising out of the Manager's responsibilities to
the Trust which (1) may be based upon any misfeasance, malfeasance, or
nonfeasance by the Manager, any of its employees or representatives or any
affiliate of the Manager, any portfolio manager of any other series of the
Trust, or person acting on behalf of the Manager or (2) may be based upon any
untrue statement or alleged untrue statement of a material fact supplied by,
or which is the responsibility of, the Manager and contained in the
Registration Statement or prospectus covering shares of the Trust or any
Series, or any amendment thereof or any supplement thereto, or the omission or
alleged omission to state therein a material fact known or which should have
been known to the Manager and was required to be stated therein or necessary
to make the statements therein not misleading, unless such statement or
omission was made in reliance upon information furnished to the Manager or the
Trust or to any affiliated person of the Manager by a Portfolio Manager
Indemnified Person; provided however, that in no case shall the indemnity in
favor of the Portfolio Manager Indemnified Person be deemed to protect such
person against any liability to which any such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of its reckless disregard of
obligations and duties under this Agreement.
(b) Notwithstanding Section 15 of this Agreement, the Portfolio
Manager agrees to indemnify and hold harmless the Manager, any affiliated
person of the Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls ("controlling person") the Manager (all
of such persons being referred to as "Manager Indemnified Persons") against
any and all losses, claims, damages, liabilities, or litigation (including
legal and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, under any other
statute, at common law or otherwise, arising out of the Portfolio Manager's
responsibilities as Portfolio Manager of the Series which (1) may be based
upon any misfeasance, malfeasance, or nonfeasance by the Portfolio Manager,
any of its employees or representatives, or any affiliate of or any person
acting on behalf of the Portfolio Manager, or (2) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or prospectus covering the shares of the Trust or any
Series, or any amendment or supplement thereto, or the omission or alleged
omission to state therein a material fact known or which should have been
known to the Portfolio Manager and was required to be stated therein or
necessary to make the statements therein not misleading, if such a statement
or omission was made in reliance upon information furnished to the Manager,
the Trust, or any affiliated person of the Manager or Trust by the Portfolio
Manager or any affiliated person of the Portfolio Manager; provided, however,
that in no case shall the indemnity in favor of a Manager Indemnified Person
be deemed to protect such person against any liability to which any such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 16 with respect to any claim made against a Portfolio Manager
Indemnified Person unless such Portfolio Manager Indemnified Person shall have
notified the Manager in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Portfolio Manager Indemnified Person (or after such
Portfolio Manager Indemnified Person shall have received notice of such
service on any designated agent), but failure to notify the Manager of any
such claim shall not relieve the Manager from any liability which it may have
to the Portfolio Manager Indemnified Person against whom such action is
brought otherwise than on account of this Section 16.
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In case any such action
is brought against the Portfolio Manager Indemnified Person, the Manager will
be entitled to participate, at its own expense, in the defense thereof or,
after notice to the Portfolio Manager Indemnified Person, to assume the
defense thereof, with counsel satisfactory to the Portfolio Manager
Indemnified Person. If the Manager assumes the defense and the selection of
counsel by the Manager to represent both the Manager and the Portfolio Manager
Indemnified Person would result in a conflict of interests and therefore,
would not, in the reasonable judgment of the Portfolio Manager Indemnified
Person, adequately represent the interests of the Portfolio Manager
Indemnified Person, the Manager will, at its own expense, assume the defense
with counsel to the Manager and, also at its own expense, with separate
counsel to the Portfolio Manager Indemnified Person which counsel shall be
satisfactory to the Manager and to the Portfolio Manager Indemnified Person.
The Portfolio Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Manager shall not be liable to
the Portfolio Manager Indemnified Person under this Agreement for any legal or
other expenses subsequently incurred by the Portfolio Manager Indemnified
Person independently in connection with the defense thereof other than
reasonable costs of investigation. The Manager shall not have the right to
compromise on or settle the litigation without the prior written consent of
the Portfolio Manager Indemnified Person if the compromise or settlement
results, or may result in a finding of wrongdoing on the part of the Portfolio
Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b)
of this Section 16 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Portfolio Manager in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Manager Indemnified Person (or after such Manager
Indemnified Person shall have received notice of such service on any
designated agent), but failure to notify the Portfolio Manager of any such
claim shall not relieve the Portfolio Manager from any liability which it may
have to the Manager Indemnified Person against whom such action is brought
otherwise than on account of this Section 16. In case any such action is
brought against the Manager Indemnified Person, the Portfolio Manager will be
entitled to participate, at its own expense, in the defense thereof or, after
notice to the Manager Indemnified Person, to assume the defense thereof, with
counsel satisfactory to the Manager Indemnified Person. If the Portfolio
Manager assumes the defense and the selection of counsel by the Portfolio
Manager to represent both the Portfolio Manager and the Manager Indemnified
Person would result in a conflict of interests and therefore, would not, in
the reasonable judgment of the Manager Indemnified Person, adequately
represent the interests of the Manager Indemnified Person, the Portfolio
Manager will, at its own expense, assume the defense with counsel to the
Portfolio Manager and, also at its own expense, with separate counsel to the
Manager Indemnified Person which counsel shall be satisfactory to the
Portfolio Manager and to the Manager Indemnified Person. The Manager
Indemnified Person shall bear the fees and expenses of any additional counsel
retained by it, and the Portfolio Manager shall not be liable to the Manager
Indemnified Person under this Agreement for any legal or other expenses
subsequently incurred by the Manager Indemnified Person independently in
connection with the defense thereof other than reasonable costs of
investigation. The Portfolio Manager shall not have the right to compromise
on or settle the litigation without the prior written consent of the Manager
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Manager Indemnified Person.
17. DURATION AND TERMINATION. This Agreement shall become effective on
the date 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 with respect to each Series unless
terminated as provided in this Section; provided that such annual continuance
is specifically approved each year by (a) the vote of a majority of the entire
Board of Trustees of the Trust, or by the vote of a majority of the
outstanding voting securities (as defined in the 1940 Act) of each Series, and
(b) the vote of a majority of those Trustees who are not parties to this
Agreement or interested persons (as such term is defined in the 1940 Act) of
any such party to this Agreement cast in person at a meeting called for the
purpose of voting on such approval. The Portfolio Manager shall not provide
any services for such Series or receive any fees on account of such Series
with respect to which
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this Agreement is not approved as described in the
preceding sentence. Notwithstanding the foregoing, this Agreement may be
terminated: (a) by the Manager at any time without penalty, upon sixty (60)
days' written notice to the Portfolio Manager and the Trust, (b) at any time
without payment of any penalty by the Trust, upon the vote of a majority of
the Trust's Board of Trustees or a majority of the outstanding voting
securities of each Series, upon sixty (60) days' written notice to the Manager
and the Portfolio Manager, or (c) by the Portfolio Manager at any time without
penalty, upon sixty (60) days' written notice to the Manager and the Trust.
In the event of termination for any reason, all records of each Series for
which the
Agreement is terminated shall promptly be returned to the Manager or the
Trust, free from any claim or retention of rights in such record by the
Portfolio Manager, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Agreement shall automatically
terminate in the event of its assignment (as such term is defined in the 1940
Act). In the event this Agreement is terminated or is not approved in the
manner described above, the Sections or Paragraphs numbered 2(f), 2(h), 10,
11, 12, 15, 16, and 19 of this Agreement as well as any applicable provision
of this Paragraph numbered 17 shall remain in effect.
18. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
19. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property
of the Manager and its affiliates, and that the Portfolio Manager has the
right to use such name (or derivative or logo) only with the approval of the
Manager and only so long as the Manager is Manager to the Trust and/or the
Series. Upon termination of the Management Agreement between the Trust and
the Manager, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the word Zweig or any derivative thereof
or logo associated with that word is the property right of Martin E. Zweig,
and that the Trust and/or the Series have the right to use such word (or
derivative or logo) in offering materials of the Trust only with the approval
of the Portfolio Manager and only so long as the Portfolio Manager is a
portfolio manager to the Trust and/or the Series. Upon termination of this
Agreement between the Trust, the Manager, and the Portfolio Manager, the Trust
shall forthwith cease to use such word (or derivative or logo).
20. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Amended
and Restated Agreement and Declaration of Trust has been executed on behalf of
the Trust by Trustees of the Trust in their capacity as Trustees of the Trust
and not individually. The obligations of this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon any
Trustee, officer, or shareholder of the Trust individually.
21. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(c) To the extent permitted under Section 17 of this Agreement,
this Agreement may only be assigned by any party with the prior written
consent of the other parties.
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(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby, and to this extent, the provisions of
this Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
ZWEIG ADVISORS INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
Martin E. Zweig hereby consents and agrees to the use of the word "Zweig"
upon the terms and conditions set forth in Section 19 of the foregoing
Agreement.
_____________________________
Martin E. Zweig
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SCHEDULE A
The Series of the GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Zweig Advisors Inc. shall act as
Portfolio Manager are as follows:
Multiple Allocation Series
Strategic Equity Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Zweig Advisors Inc. ("Portfolio Manager") to
the following Series of The GCG Trust, pursuant to the attached Portfolio
Management Agreement, the Manager will pay the Portfolio Manager a fee,
payable monthly, based on the average daily net assets of the Series at the
following annual rates of the average daily net assets of the Series:
SERIES RATE
------ ----
Multiple Allocation Series 0.50%
Strategic Equity Series 0.50%
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EXHIBIT H
PORTFOLIO MANAGEMENT AGREEMENT
Agreement made this _____ day of ___________, 1997 among The GCG Trust
(the "Trust"), a Massachusetts business trust, Directed Services, Inc.
("Manager"), a New York corporation, and E.I.I. Realty Securities, Inc.
("Portfolio Manager"), a New York corporation.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of __________
___, 1997, a copy of which has been provided to the Portfolio Manager, the
Trust has retained the Manager to render advisory, management, and
administrative services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint E.I.I. Realty
Securities, Inc. to act as Portfolio Manager to the Series designated on
Schedule A of this Agreement (the "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided. In the event the Trust designates one or more series other
than the Series with respect to which the Trust and the Manager wish to retain
the Portfolio Manager to render investment advisory services hereunder, they
shall notify the Portfolio Manager in writing. If the Portfolio Manager is
willing to render such services, it shall notify the Trust and Manager in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will provide
a continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for
the Series, when these transactions should be executed, and what portion of
the assets of the Series should be held in the various securities and other
investments in which it may invest, and the Portfolio Manager is hereby
authorized to execute and perform such services on behalf of the Series. To
the extent permitted by the investment policies of the Series, the Portfolio
Manager shall make decisions for the Series as to foreign currency matters and
make determinations as to and execute and perform foreign currency exchange
contracts on behalf of the Series. The Portfolio Manager will provide the
services under this Agreement in accordance with the Series' investment
objective or objectives, policies, and restrictions as stated in the Trust's
Registration Statement filed with the Securities and Exchange Commission
("SEC"), as
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amended, copies of which shall be sent to the Portfolio Manager by
the Manager. The Portfolio Manager further agrees as follows:
(a) The Portfolio Manager will (1) take all steps necessary to
manage the Series so that it will qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, (2) take all steps necessary
to manage the Series so as to ensure compliance by the Series with the
diversification requirements of Section 817(h) of the Internal Revenue Code
and regulations issued thereunder, and (3) use reasonable efforts to manage
the Series so as to ensure compliance by the Series with any other rules and
regulations pertaining to investment vehicles underlying variable annuity or
variable life insurance policies. The Manager or the Trust will notify the
Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and regulations
issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all
rules and regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Trust's Board
of Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended, of
which the Portfolio Manager has received a copy. The Manager or the Trust
will notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or
sale of a security to be in the best interest of the Series as well as of
other investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by applicable
laws and regulations, but shall not be obligated to, aggregate the securities
to be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the
Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Portfolio Manager in a manner that is fair and equitable in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust and to such other clients, subject to review by the Manager and
the Board of Trustees.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Series, as may be reasonably necessary
to enable the custodian and portfolio accounting agent to perform its
administrative
and record keeping responsibilities with respect to the Series. With respect
to portfolio securities to be purchased or sold through the Depository Trust
Company, the Portfolio Manager will arrange for the automatic transmission of
the confirmation of such trades to the Trust's custodian and portfolio
accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the
determination by the portfolio accounting agent for the Trust of the valuation
of portfolio securities and other investments of the Series. The Portfolio
Manager will assist the custodian and portfolio accounting agent for the Trust
in determining or confirming, consistent with the procedures and policies
stated in the Registration Statement for the Trust, the value of any portfolio
securities or other assets of the Series for which the custodian and portfolio
accounting agent seeks assistance from or identifies for review by the
Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting agent
for the Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of the 1940 Act and the Investment Advisers Act of 1940 (the
"Advisers Act"), as well as other applicable laws. The Portfolio Manager will
furnish to regulatory authorities having the requisite authority any
information or reports in
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connection with such services which may be requested
in order to ascertain whether the operations of the Trust are being conducted
in a manner consistent with applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board
of Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with respect
to the Series such periodic and special reports as the Trustees and the
Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
person or persons as it believes necessary to assist it in carrying out its
obligations under this Agreement. However, the Portfolio Manager may not
retain as subadviser any company that would be an "investment adviser," as
that term is defined in the 1940 Act, to the Series unless the contract with
such company is approved by a majority of the Trust's Board of Trustees and a
majority of Trustees who are not parties to any agreement or contract with
such company and who are not "interested persons," as defined in the 1940 Act,
of the Trust, the Manager, or the Portfolio Manager, or any such company that
is retained as subadviser, and is approved by the vote of a majority of the
outstanding voting securities of the applicable Series of the Trust to the
extent required by the 1940 Act. The Portfolio Manager shall be responsible
for making reasonable inquiries and for reasonably ensuring that any employee
of the Portfolio Manager, any subadviser that the Portfolio Manager has
employed or with which it has associated with respect to the Series, or any
employee thereof has not, to the best of the Portfolio Manager's knowledge, in
any material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code, or involving
the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer for effecting a portfolio investment
transaction in excess of the amount of commission another broker- dealer would
have charged for effecting that transaction, if the Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker- dealer, viewed in terms of either that particular
transaction
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or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. The Portfolio Manager has
reviewed the post-effective amendment to the Registration Statement for the
Trust filed with the Securities and Exchange Commission that contains
disclosure about the Portfolio Manager, and represents and warrants that, with
respect to the disclosure about the Portfolio Manager or information relating,
directly or indirectly, to the Portfolio Manager, such Registration Statement
contains, as of
the date hereof, no untrue statement of any material fact and does not 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 record keeping services;
(c) Expenses of the Series' custodial services including record
keeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of
the Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses
of International Management Reports (as appropriate) for the Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio
Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
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(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 result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, or (3) upon having a reasonable
basis for believing that the Series has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or
the Regulations thereunder. The Portfolio Manager further agrees to notify
the Manager and the Trust immediately of any material fact known to the
Portfolio Manager respecting or relating to the Portfolio Manager that is not
contained in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, or of any statement contained therein that
becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the
Portfolio Manager (1) in the event that the SEC has censured the Manager or
the Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an investment
adviser; or has commenced proceedings or an investigation that may result in
any of these actions, (2) upon having a reasonable basis for believing that
the Series has ceased to qualify or might not qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, or (3)
upon having a reasonable basis for believing that the Series has ceased to
comply with the diversification provisions of Section 817(h) of the Internal
Revenue Code or the Regulations thereunder.
9. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-
3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
or the Manager's request, although the Portfolio Manager may, at its own
expense, make and retain a copy of such records. The Portfolio Manager
further agrees to preserve for the periods prescribed by Rule 31a-2 under
the 1940 Act the records required
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to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
10. COOPERATION. Each party to this Agreement agrees to cooperate with
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
11. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER. The Manager and the
Trust agree that neither the Trust, the Manager, nor affiliated persons of the
Trust or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
advance by the Portfolio Manager, except with the prior permission of the
Portfolio Manager. The parties agree that in the event that the Manager or an
affiliated person of the Manager sends sales literature or other promotional
material to the Portfolio Manager for its approval and the Portfolio Manager
has not commented within 30 days, the Manager and its affiliated persons may
use and distribute such sales literature or other promotional material,
although, in such event, the Portfolio Manager shall not be deemed to have
approved of the contents of such sales literature or other promotional
material.
12. CONTROL. Notwithstanding any other provision of the Agreement, it
is understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. LIABILITY. Except as may otherwise be required by the 1940 Act or
the rules thereunder or other applicable law, the Trust and the Manager agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
15. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person, if
any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, the Internal Revenue Code,
under any other statute, at common law or otherwise, arising out of the
Manager's responsibilities to the Trust which (1) may be based upon any
misfeasance, malfeasance, or nonfeasance by the Manager, any of its employees
or representatives or any affiliate of or any person acting on behalf of the
Manager or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact supplied by, or which is the responsibility of,
the Manager and contained in the Registration Statement or prospectus covering
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shares of the Trust or a Series, or any amendment thereof or any supplement
thereto, or the omission or alleged omission to state therein a material fact
known or which should have been known to the Manager and was required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon information
furnished to the Manager or the Trust or to any affiliated person of the
Manager by a Portfolio Manager Indemnified Person; provided however, that in
no case shall the indemnity in favor of the Portfolio Manager Indemnified
Person be deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of
its reckless disregard of obligations and duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio
Manager agrees to indemnify and hold harmless the Manager, any affiliated
person of the Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls ("controlling person") the Manager (all
of such persons being referred to as "Manager Indemnified Persons") against
any and all losses, claims, damages, liabilities, or litigation (including
legal and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal Revenue
Code, under any other statute, at common law or otherwise, arising out of the
Portfolio Manager's responsibilities as Portfolio Manager of the Series which
(1) may be based upon any misfeasance, malfeasance, or nonfeasance by the
Portfolio Manager, any of its employees or representatives, or any affiliate
of or any person acting on behalf of the Portfolio Manager, (2) may be based
upon a failure to comply with Section 2, Paragraph (a) of this Agreement, or
(3) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or prospectus covering
the shares of the Trust or a Series, or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact known or
which should have been known to the Portfolio Manager and was required to be
stated therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon information furnished
to the Manager, the Trust, or any affiliated person of the Manager or Trust by
the Portfolio Manager or any affiliated person of the Portfolio Manager;
provided, however, that in no case shall the indemnity in favor of a Manager
Indemnified Person be deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 15 with respect to any claim made against a Portfolio Manager
Indemnified Person unless such Portfolio Manager Indemnified Person shall have
notified the Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Portfolio Manager
Indemnified Person (or after such Portfolio Manager Indemnified Person shall
have received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this Section
15. In case any such action is brought against the Portfolio Manager
Indemnified Person, the Manager will be entitled to participate, at its own
expense, in the defense thereof or, after notice to the Portfolio Manager
Indemnified Person, to assume the defense thereof, with counsel satisfactory
to the Portfolio Manager Indemnified Person. If the Manager assumes the
defense of any such action and the selection of counsel by the Manager to
represent both the Manager and the Portfolio Manager Indemnified Person would
result in a conflict of interests and therefore, would not, in the reasonable
judgment of the Portfolio Manager Indemnified Person, adequately represent the
interests of the Portfolio Manager Indemnified Person, the Manager will, at
its own expense, assume the defense with counsel to the Manager and, also at
its own expense, with separate counsel to the Portfolio Manager Indemnified
Person, which counsel shall be satisfactory to the Manager and to the
Portfolio Manager Indemnified Person. The Portfolio Manager Indemnified
Person shall bear the fees and expenses of any additional counsel retained by
it, and the Manager shall not be liable to the Portfolio Manager Indemnified
Person under this Agreement for any legal or other expenses subsequently
incurred by the Portfolio Manager
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Indemnified Person independently in
connection with the defense thereof other than reasonable costs of
investigation. The Manager shall not have the right to compromise on or settle
the litigation without the prior written consent of the Portfolio Manager
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b)
of this Section 15 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Portfolio
Manager of any such claim shall not relieve the Portfolio Manager from any
liability which it may have to the Manager Indemnified Person against whom
such action is brought otherwise than on account of this Section 15. In case
any such action is brought against the Manager Indemnified Person, the
Portfolio Manager will be entitled to participate, at its own expense, in the
defense thereof or, after notice to the Manager Indemnified Person, to assume
the defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Portfolio Manager assumes the defense of any such action and
the selection of counsel by the Portfolio Manager to represent both the
Portfolio Manager and the Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment of
the Manager Indemnified Person, adequately represent the interests of the
Manager Indemnified Person, the Portfolio Manager will, at its own expense,
assume the defense with counsel to the Portfolio Manager and, also at its own
expense, with separate counsel to the Manager Indemnified Person which
counsel shall be
satisfactory to the Portfolio Manager and to the Manager Indemnified Person.
The Manager Indemnified Person shall bear the fees and expenses of any
additional counsel retained by it, and the Portfolio Manager shall not be
liable to the Manager Indemnified Person under this Agreement for any legal or
other expenses subsequently incurred by the Manager Indemnified Person
independently in connection with the defense thereof other than reasonable
costs of investigation. The Portfolio Manager shall not have the right to
compromise on or settle the litigation without the prior written consent of
the Manager Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Manager Indemnified
Person.
16. DURATION AND TERMINATION. This Agreement shall become effective on
the date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to the Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for a Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
the Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding shares of any other Series or
(ii) that this Agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio Manager and the Trust, (b) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of each Series,
upon sixty (60) days' written notice to the Manager and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust. In the event of
termination for any reason, all
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records of each Series for which the Agreement
is terminated shall promptly be returned to the Manager or the Trust, free
from any claim or retention of rights in such record by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. The Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 9, 10, 11, 14, 15, and 18 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 16.
17. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of
the outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property
of the Manager and/or its affiliates, and that the Portfolio Manager has the
right to use such name (or derivative or logo) only with the approval of the
Manager and only so long as the Manager is Manager to the Trust and/or the
Series. Upon termination of the Management Agreement between the Trust and
the Manager, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name "E.I.I. Realty Securities, Inc."
or any derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust and/or
the Series have the right to use such name (or derivative or logo) in offering
materials of the Trust with the approval of the Portfolio Manager and for so
long as the Portfolio Manager is a portfolio manager to the Trust and/or the
Series. Upon termination of this Agreement between the Trust, the Manager,
and the Portfolio Manager, the Trust shall forthwith cease to use such name
(or derivative or logo).
19. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Amended
and Restated Agreement and Declaration of Trust has been executed on behalf of
the Trust by Trustees of the Trust in their capacity as Trustees of the Trust
and not individually. The obligations of this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon any
Trustee, officer, or shareholder of the Trust individually.
20. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement,
this Agreement may only be assigned by any party with the prior written
consent of the other parties.
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(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.
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(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
E.I.I. REALTY SECURITIES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
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SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which E.I.I. Realty Securities, Inc. shall
act as Portfolio Manager is as follows:
Real Estate Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by E.I.I. Realty Securities, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rate of the average daily net assets of the Series:
SERIES RATE
------ ----
Real Estate Series 0.50% of net assets
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EXHIBIT I
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this _____ day of ___________, 1997 among The GCG Trust
(the "Trust"), a Massachusetts business trust, Directed Services, Inc.
("Manager"), a New York corporation, and Kayne, Anderson Investment
Management, L.P. ("Portfolio Manager"), a California limited partnership.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of
_______________, 1997, a copy of which has been provided to the Portfolio
Manager, the Trust has retained the Manager to render advisory, management,
and administrative services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint Kayne,
Anderson Investment Management, L.P. to act as Portfolio Manager to the Rising
Dividends Series (the "Series") for the periods and on the terms set forth in
this Agreement. The Portfolio Manager accepts such appointment and agrees to
furnish the services herein set forth for the compensation herein provided.
In the event the Trust designates one or more series other than the Series
with respect to which the Trust and the Manager wish to retain the Portfolio
Manager to render investment advisory services hereunder, they shall notify
the Portfolio Manager in writing. If the Portfolio Manager is willing to
render such services, it shall notify the Trust and Manager in writing,
whereupon such series shall become a Series hereunder, and be subject to this
Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will provide
a continuous investment program for each Series' portfolio and determine the
composition of the assets of each Series' portfolio, including determination
of the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of each Series' assets by determining
the securities and other
investments that shall be purchased, entered into, sold, closed, or exchanged
for the Series, when these transactions should be executed, and what portion
of the assets of each Series should be held in the various securities and
other investments in which it may invest, and the Portfolio Manager is hereby
authorized to execute and perform such services on behalf of each Series. To
the extent permitted by the investment policies of the Series, the Portfolio
Manager shall make decisions for the Series as to foreign currency matters and
make determinations as to and execute and perform foreign currency exchange
contracts on behalf of the Series. The Portfolio Manager will provide the
services under this Agreement in accordance with the Series' investment
objective or objectives, policies, and restrictions as stated in the Trust's
Registration Statement filed with the Securities and Exchange Commission
("SEC"), as
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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 each Series so that it will qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, (2) take all steps necessary
to manage each Series so as to ensure compliance by the Series with the
diversification requirements of Section 817(h) of the Internal Revenue Code
and regulations issued thereunder, and (3) use reasonable efforts to manage
the Series so as to ensure compliance by each Series with any other rules and
regulations pertaining to investment vehicles underlying variable annuity or
variable life insurance policies. The Manager or the Trust will notify the
Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and regulations
issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all
rules and regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Trust's Board
of Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended, of
which the Portfolio Manager has received a copy. The Manager or the Trust
will notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or
sale of a security to be in the best interest of a Series as well as of other
investment advisory clients of the Portfolio Manager or any of its affiliates,
the Portfolio Manager may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be so
sold or purchased with those of its other clients where such aggregation is
not inconsistent with the policies set forth in the Registration Statement.
In such event, allocation of the securities so purchased or sold, as well as
the expenses incurred in the transaction, will be made by the Portfolio
Manager in a manner that is fair and equitable in the judgment of the
Portfolio Manager in the exercise of its fiduciary obligations to the Trust
and to such other clients, subject to review by the Manager and the Board of
Trustees.
(d) In connection with the purchase and sale of securities for a
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Series, as may be reasonably
necessary to
enable the custodian and portfolio accounting agent to perform its
administrative and record keeping responsibilities with respect to the Series.
With respect to portfolio securities to be purchased or sold through the
Depository Trust Company, the Portfolio Manager will arrange for the automatic
transmission of the confirmation of such trades to the Trust's custodian and
portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the
determination by the portfolio accounting agent for the Trust of the valuation
of portfolio securities and other investments of the Series. The Portfolio
Manager will assist the custodian and portfolio accounting agent for the Trust
in determining or confirming, consistent with the procedures and policies
stated in the Registration Statement for the Trust, the value of any portfolio
securities or other assets of the Series for which the custodian and portfolio
accounting agent seeks assistance from or identifies for review by the
Portfolio Manager.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting agent
for the Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of the 1940 Act and the Investment Advisers Act of 1940 (the
"Advisers Act"), as well as other applicable laws. The
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Portfolio Manager will
furnish to regulatory authorities having the requisite authority any
information or reports in connection with such services which may be requested
in order to ascertain whether the operations of the Trust are being conducted
in a manner consistent with applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board
of Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with respect
to the Series such periodic and special reports as the Trustees and the
Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
person or persons as it believes necessary to assist it in carrying out its
obligations under this Agreement. However, the Portfolio Manager may not
retain as subadviser any company that would be an "investment adviser," as
that term is defined in the 1940 Act, to the Series unless the contract with
such company is approved by a majority of the Trust's Board of Trustees and a
majority of Trustees who are not parties to any agreement or contract with
such company and who are not "interested persons," as defined in the 1940 Act,
of the Trust, the Manager, or the Portfolio Manager, or any such company that
is retained as subadviser, and is approved by the vote of a majority of the
outstanding voting securities of the applicable Series of the Trust to the
extent required by the 1940 Act. The Portfolio Manager shall be responsible
for making reasonable inquiries and for reasonably ensuring that any employee
of the Portfolio Manager, any subadviser that the Portfolio Manager has
employed or with which it has associated with respect to the Series, or any
employee thereof has not, to the best of the Portfolio Manager's knowledge, in
any material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code, or involving
the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for each Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the 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
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research services
provided by such broker- dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. The Portfolio Manager has
reviewed the post-effective amendment to the Registration Statement for the
Trust filed with the Securities and Exchange Commission that contains
disclosure about the Portfolio Manager, and represents and warrants that, with
respect to the disclosure about the Portfolio Manager or information
relating, directly or
indirectly, to the Portfolio Manager, such Registration Statement contains, as
of the date hereof, no untrue statement of any material fact and does not 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 record keeping services;
(c) Expenses of the Series' custodial services including record
keeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of
each Series's net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses
of International Management Reports (as appropriate) for each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio
Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
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(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
15 of this Agreement), and the legal obligations of the Trust to indemnify its
Trustees, officers, employees, shareholders, distributors, and agents with
respect thereto; and
(r) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, based on the average daily net
assets of the Series at the annual rate of 0.50% of the average daily net
assets of the Series.
7. SEED MONEY. The Manager agrees that the Portfolio Manager shall not
be responsible for providing money for the initial capitalization of the
Series.
8. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall immediately notify
the Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser; or
has commenced proceedings or an investigation that may result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, or (3) upon having a reasonable
basis for believing that the Series has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or
the Regulations thereunder. The Portfolio Manager further agrees to notify
the Manager and the Trust immediately of any material fact known to the
Portfolio Manager respecting or relating to the Portfolio Manager that is not
contained in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, or of any statement contained therein that
becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the
Portfolio Manager (1) in the event that the SEC has censured the Manager or
the Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an investment
adviser; or has commenced proceedings or an investigation that may result in
any of these actions, (2) upon having a reasonable basis for believing that
the Series has ceased to qualify or might not qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, or (3)
upon having a reasonable basis for believing that the Series has ceased to
comply with the diversification provisions of Section 817(h) of the Internal
Revenue Code or the Regulations thereunder.
9. INSURANCE COMPANY OFFEREES. All parties acknowledge that the Trust
will offer its shares so that it may serve as an investment vehicle for
variable annuity contracts and variable life insurance policies issued by
insurance companies. The Trust and the Manager agree that shares of the
Series may be
offered only to the separate accounts and general account of insurance
companies that are approved in writing by the Portfolio Manager. The
Portfolio Manager agrees that shares of this Series may be offered to separate
accounts and the general account of Golden American Life Insurance Company and
to the general and separate accounts of any
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insurance companies that are or
become affiliated with Golden American Life Insurance Company. The Manager
and Trust agree that the Portfolio Manager shall be under no obligation to
investigate insurance companies to which the Trust offers or proposes to offer
its shares.
10. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-
3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
or the Manager's request, although the Portfolio Manager may, at its own
expense, make and retain a copy of such records. The Portfolio Manager further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
11. COOPERATION. Each party to this Agreement agrees to cooperate with
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
12. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER. The Manager and the
Trust agree that neither the Trust, the Manager, nor affiliated persons of the
Trust or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or representations
contained in the Registration Statement, prospectus, or statement of
additional information for the Trust shares, as they may be amended or
supplemented from time to time, or in reports or proxy statements for the
Trust, or in sales literature or other promotional material approved in
advance by the Portfolio Manager, except with the prior permission of the
Portfolio Manager. The parties agree that in the event that the Manager or an
affiliated person of the Manager sends sales literature or other promotional
material to the Portfolio Manager for its approval and the Portfolio Manager
has not commented within 30 days, the Manager and its affiliated persons may
use and distribute such sales literature or other promotional material,
although, in such event, the Portfolio Manager shall not be deemed to have
approved of the contents of such sales literature or other promotional
material.
13. CONTROL. Notwithstanding any other provision of the Agreement, it
is understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
14. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
15. LIABILITY. Except as may otherwise be required by the 1940 Act or
the rules thereunder or other applicable law, the Trust and the Manager agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Portfolio Manager's duties, or by reason of reckless
disregard of the Portfolio Manager's obligations and duties under this
Agreement.
16. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person, if
any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as
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"Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, the Internal Revenue Code,
under any other statute, at common law or otherwise, arising out of the
Manager's responsibilities to the Trust which (1) may be based upon any
misfeasance, malfeasance, or nonfeasance by the Manager, any of its employees
or representatives or any affiliate of or any person acting on behalf of the
Manager or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact supplied by, or which is the responsibility of,
the Manager and contained in the Registration Statement or prospectus covering
shares of the Trust or a Series, or any amendment thereof or any supplement
thereto, or the omission or alleged omission to state therein a material fact
known or which should have been known to the Manager and was required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon information
furnished to the Manager or the Trust or to any affiliated person of the
Manager by a Portfolio Manager Indemnified Person; provided however, that in
no case shall the indemnity in favor of the Portfolio Manager Indemnified
Person be deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of
its reckless disregard of obligations and duties under this Agreement.
(b) Notwithstanding Section 15 of this Agreement, the Portfolio
Manager agrees to indemnify and hold harmless the Manager, any affiliated
person of the Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls ("controlling person") the Manager (all
of such persons being referred to as "Manager Indemnified Persons") against
any and all losses, claims, damages, liabilities, or litigation (including
legal and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal Revenue
Code, under any other statute, at common law or otherwise, arising out of the
Portfolio Manager's responsibilities as Portfolio Manager of the Series which
(1) may be based upon any misfeasance, malfeasance, or nonfeasance by the
Portfolio Manager, any of its employees or representatives, or any affiliate
of or any person acting on behalf of the Portfolio Manager, (2) may be based
upon a failure to comply with Section 2, Paragraph (a) of this Agreement, or
(3) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or prospectus covering
the shares of the Trust or a Series, or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact known or which should have been known to the Portfolio
Manager and was required to be stated therein or necessary to make the
statements therein not misleading, if such a statement or omission was made in
reliance upon information furnished to the Manager, the Trust, or any
affiliated person of the Manager or Trust by the Portfolio Manager or any
affiliated person of the Portfolio Manager; provided, however, that in no case
shall the indemnity in favor of a Manager Indemnified Person be deemed to
protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 16 with respect to any claim made against a Portfolio Manager
Indemnified Person unless such Portfolio Manager Indemnified Person shall have
notified the Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Portfolio Manager
Indemnified Person (or after such Portfolio Manager Indemnified Person shall
have received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this Section
16. In case any such action is brought against the Portfolio Manager
Indemnified Person, the Manager will be entitled to participate, at its own
expense, in the defense thereof or, after notice to the Portfolio Manager
Indemnified Person, to assume the defense thereof, with counsel satisfactory
to the Portfolio Manager Indemnified Person. If the Manager assumes the
defense of any such action and the selection of counsel by the Manager to
represent both the Manager and the Portfolio Manager Indemnified
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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 16 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Portfolio
Manager of any such claim shall not relieve the Portfolio Manager from any
liability which it may have to the Manager
Indemnified Person against whom such action is brought otherwise than on
account of this Section 16. In case any such action is brought against the
Manager Indemnified Person, the Portfolio Manager will be entitled to
participate, at its own expense, in the defense thereof or, after notice to
the Manager Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Manager Indemnified Person. If the Portfolio Manager
assumes the defense of any such action and the selection of counsel by the
Portfolio Manager to represent both the Portfolio Manager and the Manager
Indemnified Person would result in a conflict of interests and therefore,
would not, in the reasonable judgment of the Manager Indemnified Person,
adequately represent the interests of the Manager Indemnified Person, the
Portfolio Manager will, at its own expense, assume the defense with counsel to
the Portfolio Manager and, also at its own expense, with separate counsel to
the Manager Indemnified Person which counsel shall be satisfactory to the
Portfolio Manager and to the Manager Indemnified Person. The Manager
Indemnified Person shall bear the fees and expenses of any additional counsel
retained by it, and the Portfolio Manager shall not be liable to the Manager
Indemnified Person under this Agreement for any legal or other expenses
subsequently incurred by the Manager Indemnified Person independently in
connection with the defense thereof other than reasonable costs of
investigation. The Portfolio Manager shall not have the right to compromise
on or settle the litigation without the prior written consent of the Manager
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Manager Indemnified Person.
17. DURATION AND TERMINATION. This Agreement shall become effective on
the date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to each Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of each Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for such Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
such Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding shares of any other Series or
(ii) that this Agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise.
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Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written notice to
the Portfolio Manager and the Trust, (b) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of each Series,
upon sixty (60) days' written notice to the Manager and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust. In the event of
termination for any reason, all records of each Series for which the Agreement
is terminated shall promptly be returned to the Manager or the Trust, free
from any claim or retention of rights in such record by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of
such records. The Agreement shall automatically terminate in the event of its
assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 10, 11, 12, 15, 16, and 19 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 17.
18. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
19. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property
of the Manager and/or its affiliates, and that the Portfolio Manager has the
right to use such name (or derivative or logo) only with the approval of the
Manager and only so long as the Manager is Manager to the Trust and/or the
Series. Upon termination of the Management Agreement between the Trust and
the Manager, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name "Kayne, Anderson Investment
Management, L.P." or any derivative thereof or logo associated with that name
is the valuable property of the Portfolio Manager and its affiliates and that
the Trust and/or the Series have the right to use such name (or derivative or
logo) in offering materials of the Trust with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a portfolio manager to the
Trust and/or the Series. Upon termination of this Agreement between the
Trust, the Manager, and the Portfolio Manager, the Trust shall forthwith cease
to use such name (or derivative or logo).
20. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Amended
and Restated Agreement and Declaration of Trust has been executed on behalf of
the Trust by Trustees of the Trust in their capacity as Trustees of the Trust
and not individually. The obligations of this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon any
Trustee, officer, or shareholder of the Trust individually.
21. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
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(c) To the extent permitted under Section 17 of this Agreement,
this Agreement may only be assigned by any party with the prior written
consent of the other parties.
(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby, and to this extent, the provisions of
this Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
KAYNE, ANDERSON INVESTMENT
MANAGEMENT, L.P.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
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EXHIBIT J
PORTFOLIO MANAGEMENT AGREEMENT
Agreement made this _____ day of ______________, 1997 among The GCG Trust
(the "Trust"), a Massachusetts business trust, Directed Services, Inc.
("Manager"), a New York corporation, and Fred Alger Management, Inc.
("Portfolio Manager"), a New York corporation.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of
_____________, 1997, a copy of which has been provided to the Portfolio
Manager, the Trust has retained the Manager to render advisory, management,
and administrative services to many of the Trust's series; and
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint Fred Alger
Management, Inc. to act as Portfolio Manager to the Series designated on
Schedule A of this Agreement (the "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will provide
a continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should be
executed, and what portion of the assets of the Series should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of
the Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make
determinations as to and execute and perform foreign currency exchange
contracts on behalf of the Series. The Portfolio Manager will provide the
services under this Agreement in accordance with the Series' investment
objective or objectives, policies, and restrictions as stated in the Trust's
Registration Statement filed with the Securities and Exchange Commission
("SEC"), as amended, copies of which shall be sent to the Portfolio Manager by
the Manager. The Portfolio Manager further agrees as follows:
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(a) The Portfolio Manager will (1) take all steps necessary to
manage the Series so that it will qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, (2) take all steps necessary
to manage the Series so that the Series will comply with the diversification
requirements of Section 817(h) of the Internal Revenue Code and regulations
issued thereunder, and (3) use reasonable efforts to manage the Series so that
the Series will comply with any other rules and regulations pertaining to
investment vehicles underlying variable annuity or variable life insurance
policies. The Manager or the Trust will notify the Portfolio Manager of any
pertinent changes, modifications to, or interpretations of Section 817(h) of
the Internal Revenue Code and regulations issued thereunder.
(b) In performing its services hereunder, the Portfolio Manager
will conform with the 1940 Act and all rules and regulations thereunder, all
other applicable federal and state laws and regulations, with any applicable
procedures adopted by the Trust's Board of Trustees of which the Portfolio
Manager has been sent a copy, and all applicable provisions of the
Registration Statement of the Trust under the Securities Act of 1933 (the
"1933 Act") and the 1940 Act, as supplemented or amended, of which the
Portfolio Manager has received a copy. The Manager or the Trust will notify
the Portfolio Manager of pertinent provisions of applicable state insurance
law with which the Portfolio Manager must comply under this Paragraph 2(b).
(c) On occasions when the Portfolio Manager deems the purchase or
sale of a security to be in the best interest of the Series as well as of
other investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by applicable
laws and regulations, but shall not be obligated to, aggregate the securities
to be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the
Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction, will
be made by the Portfolio Manager in a manner that is fair and equitable in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust and to such other clients, subject to review by the Manager, who
will be promptly notified, and the Board of Trustees.
(d) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Series, as may be reasonably necessary
to enable the custodian and portfolio accounting agent to perform its
administrative and record keeping responsibilities with respect to the Series.
With respect to portfolio securities to be purchased or sold through the
Depository Trust Company, the Portfolio Manager will arrange for the automatic
transmission of the confirmation of such trades to the Trust's custodian and
portfolio accounting agent.
(e) The Portfolio Manager will monitor on a daily basis the
determination by the portfolio accounting agent for the Trust of the valuation
of portfolio securities and other investments of the Series. The Portfolio
Manager will assist the Manager, custodian and portfolio accounting agent for
the Trust in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the Trust, the value and
liquidity of any portfolio securities or other assets of the Series for which
the custodian and portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager. The Portfolio Manager will be
responsible for monitoring and maintaining industry classifications for
purposes of compliance with investment concentration requirements under the
1940 Act.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting agent
for the Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of the 1940 Act and the Investment Advisers Act of 1940 (the
"Advisers Act"), as well as other applicable laws. The Portfolio Manager will
furnish to regulatory authorities having the requisite authority any
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information or reports in connection with such services which may be requested
in order to ascertain whether the operations of the Trust are being conducted
in a manner consistent with applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board
of Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, will furnish the Trust's Board of Trustees with respect to
the Series such periodic and special reports as the Trustees and the Manager
may reasonably request, and will attend Board meetings upon the request of the
Board of Trustees.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
person or persons as it believes necessary to assist it in carrying out its
obligations under this Agreement. However, the Portfolio Manager may not
retain as subadviser any company that would be an "investment adviser," as
that term is defined in the 1940 Act, to the Series unless the contract with
such company is approved by a majority of the Trust's Board of Trustees and a
majority of Trustees who are not parties to any agreement or contract with
such company and who are not "interested persons," as defined in the 1940 Act,
of the Trust, the Manager, or the Portfolio Manager, or any such company that
is retained as subadviser, and is approved by the vote of a majority of the
outstanding voting securities of the applicable Series of the Trust to the
extent required by the 1940 Act. The Portfolio Manager shall be responsible
for making reasonable inquiries and for reasonably ensuring that any employee
of the Portfolio Manager, any subadviser that the Portfolio Manager has
employed or with which it has associated with respect to the Series, or any
employee thereof has not, to the best of the Portfolio Manager's knowledge, in
any material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement, fraudulent
conversion, or misappropriation of funds or securities, involving violations
of Sections 1341, 1342, or 1343 of Title 18, United States Code, or involving
the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged violation of any
provision of any state insurance law involving fraud, deceit, or knowing
misrepresentation; or
(iii) been found by any federal or state regulatory
authorities, within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state securities laws
involving fraud, deceit, or knowing misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer for effecting a portfolio investment
transaction in excess of the amount of commission another broker-dealer would
have charged for effecting that transaction, if the Portfolio Manager
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or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. The Portfolio Manager has
reviewed the post-effective amendment to the Registration Statement for the
Trust filed with the Securities and Exchange Commission and provided to the
Portfolio Manager that contains disclosure about the Portfolio Manager, and
represents and warrants that, with respect to the disclosure about the
Portfolio Manager or information relating, directly or indirectly, to the
Portfolio Manager, such
Registration Statement contains, as of the date hereof, no untrue statement of
any material fact and does not omit any statement of a material fact which was
required to be stated therein or necessary to make the statements contained
therein not misleading. The Portfolio Manager further represents and warrants
that it is a duly registered investment adviser under the Advisers Act and a
duly registered investment adviser in all states in which the Portfolio
Manager is required to be registered for purposes of this Agreement.
5. EXPENSES. During the term of this Agreement, the Portfolio Manager
will pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public
accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder record keeping services;
(c) Expenses of the Series' custodial services including record
keeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of
the Series' net assets;
(e) Expenses of obtaining daily pricing reports (as appropriate)
for the Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio
Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
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(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to Trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate thereof;
(o) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
(q) Extraordinary expenses of the Trust as may arise including
expenses incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under Section
14 of this Agreement), and the legal obligations of the Trust to indemnify its
Trustees, officers, employees, shareholders, distributors, and agents with
respect thereto; and
(r) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable as described on Schedule B.
7. SEED MONEY. The Trust and the Manager agree that the Portfolio
Manager shall not be responsible for providing money for the initial
capitalization of the Series.
8. COMPLIANCE. The Portfolio Manager agrees that it shall immediately
notify the Manager and the Trust (1) in the event that the SEC has censured
the Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser; or
has commenced proceedings or an investigation that may result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (3) upon having a reasonable basis
for believing that the Series has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the Regulations
thereunder, or (4) upon discovery of any error in the pricing, trading, or
maintenance of the Series. The Portfolio Manager further agrees to notify the
Manager and the Trust immediately of any material fact known to the Portfolio
Manager respecting or relating to the Portfolio Manager that is not contained
in the Registration Statement or prospectus for the Trust provided to the
Portfolio Manager by the Manager, or any amendment or supplement thereto, or
of any statement contained therein that becomes untrue in any material
respect. The Manager agrees that it shall immediately notify the Portfolio
Manager (1) in the event that the SEC has censured the Manager or the Trust;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Manager's registration as an investment adviser; or
has commenced proceedings or an investigation that may result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (3) upon having a reasonable basis
for believing that the Series has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the Regulations
thereunder, or (4) upon discovery of any error in the pricing, trading, or
maintenance of the Series.
9. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-
3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
or the Manager's request, although the Portfolio Manager may, at its own
expense, make and retain a copy of such records. The Portfolio Manager
further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records required to be maintained with respect to the management of the
Series' portfolio by Rule 31a-l(b) and (f) under the 1940 Act and to preserve
the records with respect to the management of the Series= portfolio required
by Rule 204-2 under the Advisers Act for the period specified in the Rule.
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10. COOPERATION. Each party to this Agreement agrees to cooperate with
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
11. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER. The Manager and the
Trust agree that neither the Trust, the Manager, nor affiliated persons of the
Trust or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
Portfolio Manager, its affiliates, or the Series other than the information or
representations contained in the Registration Statement, prospectus, or
statement of additional information for the Trust shares, as they may be
amended or supplemented from time to time, or in reports or proxy statements
for the Trust (which information and representations, insofar as they pertain
to the Portfolio Manager and its affiliates, shall have been made only in
reliance on and in conformity with information supplied by the Portfolio
Manager or an affiliate), or in sales literature or other promotional material
approved in advance by the Portfolio Manager, except with the prior permission
of the Portfolio Manager. The parties agree that in the event that the
Manager or an affiliated person of the Manager sends sales literature or other
promotional material to the Portfolio Manager for its approval and the
Portfolio Manager has not commented within 7 days, the Manager and its
affiliated persons may use and distribute such sales literature or other
promotional material, and the Portfolio Manager shall be deemed to have
approved of the contents of such sales literature or other promotional
material.
12. CONTROL. Notwithstanding any other provision of the Agreement, it
is understood and agreed that the Trust shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve, or disapprove any action
hereunder taken on its behalf by the Portfolio Manager.
13. SERVICES NOT EXCLUSIVE. It is understood that the services of the
Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies (whether or not
their investment objectives and policies are similar to those of the Series)
or from engaging in other activities.
14. LIABILITY. Except as may otherwise be required by the 1940 Act or
the rules thereunder or other applicable law, the Trust and the Manager agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of the Portfolio Manager's negligent performance of its duties, or by
reason of any violation of the Portfolio Manager's obligations and duties
under this Agreement.
15. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person, if
any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, the Internal Revenue Code,
under any other statute, at common law or otherwise, arising out of the
Manager's responsibilities to the Trust which (1) may be based upon any
willful misfeasance, bad faith, or gross negligence in the performance of
duties under this Agreement or reckless disregard of obligations and duties
under this Agreement by the Manager, any of its employees or representatives
or any affiliate of or any person acting on behalf of the Manager or (2) may
be based upon any untrue statement or alleged untrue statement of a material
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fact supplied by, or which is the responsibility of, the Manager or the Trust
and contained in the Registration Statement or prospectus covering shares of
the Trust or the Series, or any amendment thereof or any supplement thereto,
or the omission or alleged omission to state therein a material fact known or
which should have been known to the Manager or the Trust and was required to
be stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon information
furnished to the Manager or the Trust or to any affiliated person of the
Manager by a Portfolio Manager Indemnified Person; provided however, that in
no case shall the indemnity in favor of the Portfolio Manager Indemnified
Person be deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of
its reckless disregard of obligations and duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio
Manager agrees to indemnify and hold harmless the Manager, any affiliated
person of the Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls ("controlling person") the Manager (all
of such persons being referred to as "Manager Indemnified Persons") against
any and all losses, claims, damages, liabilities, or litigation (including
legal and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal Revenue
Code, under any other statute, at common law or otherwise, arising out of the
Portfolio Manager's responsibilities under this Agreement which (1) may be
based upon any willful misfeasance, bad faith, or gross negligence in the
performance of duties under this Agreement or reckless disregard of
obligations and duties under this Agreement by the Portfolio Manager, any of
its employees or representatives, or any affiliate of or any person acting on
behalf of the Portfolio Manager, (2) may be based upon any negligence in the
performance of its obligations under Section 2, Paragraph (a) of this
Agreement, or (3) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or
prospectus covering the shares of the Trust or a Series, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact known or which should have been known to the Portfolio Manager
and was required to be stated therein or necessary to make the statements
therein not misleading, if such a statement or omission was made in reliance
upon information furnished to the Manager, the Trust, or any affiliated person
of the Manager or Trust by the Portfolio Manager or any affiliated person of
the Portfolio Manager; provided, however, that in no case shall the indemnity
in favor of a Manager
Indemnified Person be deemed to protect such person against any liability to
which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its duties, or
by reason of its reckless disregard of its obligations and duties under this
Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 15 with respect to any claim made against a Portfolio Manager
Indemnified Person unless such Portfolio Manager Indemnified Person shall have
notified the Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Portfolio Manager
Indemnified Person (or after such Portfolio Manager Indemnified Person shall
have received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this Section
15. In case any such action is brought against the Portfolio Manager
Indemnified Person, the Manager will be entitled to participate, at its own
expense, in the defense thereof or, after notice to the Portfolio Manager
Indemnified Person, to assume the defense thereof, with counsel satisfactory
to the Portfolio Manager Indemnified Person. If the Manager assumes the
defense of any such action and the selection of counsel by the Manager to
represent both the Manager and the Portfolio Manager Indemnified Person would
result in a conflict of interests and therefore, would not, in the reasonable
judgment of the Portfolio Manager Indemnified Person, adequately represent the
interests of the Portfolio Manager Indemnified Person, the Manager will, at
its own expense, assume the defense with counsel to the Manager and, also at
its own expense, with separate counsel to the Portfolio Manager Indemnified
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Person, which counsel shall be satisfactory to the Manager and to the
Portfolio Manager Indemnified Person. The Portfolio Manager Indemnified
Person shall bear the fees and expenses of any additional counsel retained by
it, and the Manager shall not be liable to the Portfolio Manager Indemnified
Person under this Agreement for any legal or other expenses subsequently
incurred by the Portfolio Manager Indemnified Person independently in
connection with the defense thereof other than reasonable costs of
investigation. The Manager shall not have the right to compromise on or
settle the litigation without the prior written consent of the Portfolio
Manager Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Portfolio Manager
Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b)
of this Section 15 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Portfolio
Manager of any such claim shall not relieve the Portfolio Manager from any
liability which it may have to the Manager Indemnified Person against whom
such action is brought otherwise than on account of this Section 15. In case
any such action is brought against the Manager Indemnified Person, the
Portfolio Manager will be entitled to participate, at its own expense, in the
defense thereof or, after notice to the Manager Indemnified Person, to assume
the defense thereof, with counsel satisfactory to the Manager Indemnified
Person. If the Portfolio Manager assumes the defense of any such action and
the selection of counsel by the Portfolio Manager to represent both
the Portfolio Manager and the Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment of
the Manager Indemnified Person, adequately represent the interests of the
Manager Indemnified Person, the Portfolio Manager will, at its own expense,
assume the defense with counsel to the Portfolio Manager and, also at its own
expense, with separate counsel to the Manager Indemnified Person which counsel
shall be satisfactory to the Portfolio Manager and to the Manager Indemnified
Person. The Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Portfolio Manager shall not be
liable to the Manager Indemnified Person under this Agreement for any legal or
other expenses subsequently incurred by the Manager Indemnified Person
independently in connection with the defense thereof other than reasonable
costs of investigation. The Portfolio Manager shall not have the right to
compromise on or settle the litigation without the prior written consent of
the Manager Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Manager Indemnified
Person.
16. DURATION AND TERMINATION. This Agreement shall become effective on
the date first above indicated above. Unless terminated as provided herein,
the Agreement shall remain in full force and effect for two (2) years from
such date and continue on an annual basis thereafter with respect to the
Series; provided that such annual continuance is specifically approved each
year by (a) the vote of a majority of the entire Board of Trustees of the
Trust, or by the vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Series, and (b) the vote of a majority of
those Trustees who are not parties to this Agreement or interested persons (as
such term is defined in the 1940 Act) of any such party to this Agreement cast
in person at a meeting called for the purpose of voting on such approval. Any
approval of this Agreement by the holders of a majority of the outstanding
shares (as defined in the 1940 Act) of the Series shall be effective to
continue this Agreement with respect to the Series notwithstanding (i) that
this Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (ii) that this Agreement has not
been approved by the vote of a majority of the outstanding shares of the
Trust, unless such approval shall be required by any other applicable law or
otherwise. Notwithstanding the foregoing, this Agreement may be terminated:
(a) by the Manager at any time without penalty, upon sixty (60) days' written
notice to the Portfolio Manager and the Trust, (b) at any time without payment
of any penalty by the Trust, upon the vote of a majority of the Trust's Board
of Trustees or a majority of the outstanding voting securities of the Series,
upon sixty (60) days' written notice to the Manager
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and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust. In the event of
termination for any reason, all records of the Series for which the Agreement
is terminated shall promptly be returned to the Manager or the Trust, free
from any claim or retention of rights in such record by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. This Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(f), 9, 10, 11, 14, 15, and 18 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 16.
17. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver,
discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property
of the Manager and/or its affiliates, and that the Portfolio Manager has the
right to use such name (or derivative or logo) only with the approval of the
Manager and only so long as the Manager is Manager to the Trust and/or the
Series. Upon termination of the Management Agreement between the Trust and
the Manager, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name "Fred Alger Management, Inc." or
any derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust and/or
the Series have the right to use such name (or derivative or logo) in offering
materials of the Trust only with the approval of the Portfolio Manager and
only for so long as the Portfolio Manager is a portfolio manager to the Trust
and/or the Series. Upon termination of this Agreement between the Trust, the
Manager, and the Portfolio Manager, the Trust shall forthwith cease to use
such name (or derivative or logo).
19. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Amended
and Restated Agreement and Declaration of Trust has been executed on behalf of
the Trust by Trustees of the Trust in their capacity as Trustees of the Trust
and not individually. The obligations of this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon any
Trustee, officer, or shareholder of the Trust individually.
20. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Delaware, without giving effect to any provisions relating to conflict of
laws, provided that nothing herein shall be construed in a manner inconsistent
with the 1940 Act, the Advisers Act or rules or orders of the SEC thereunder.
The term "affiliate" or "affiliated person" as used in this Agreement shall
mean "affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement,
this Agreement may only be assigned by any party with the prior written
consent of the other parties.
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(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby, and to this extent, the provisions of
this Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
FRED ALGER MANAGEMENT, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
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<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement to which Fred Alger Management, Inc. shall act
as Portfolio Manager are as follows:
SMALL CAP SERIES
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Fred Alger Management, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rates of the average daily net assets of the Series:
SERIES RATE
------ ----
Small Cap Series 0.50% of net assets
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<PAGE>
EXHIBIT K
PORTFOLIO MANAGEMENT AGREEMENT
Agreement made this _____ day of ___________, 1997 among The GCG Trust
(the "Trust"), a Massachusetts business trust, Directed Services, Inc.
("Manager"), a New York corporation, and Eagle Asset Management, Inc.
("Portfolio Manager"), a Florida corporation.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company;
WHEREAS, the Trust is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series
having its own investment objective or objectives, policies, and limitations;
WHEREAS, the Trust currently offers shares in multiple series, may offer
shares of additional series in the future, and intends to offer shares of
additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of
_____________, 1997, a copy of which has been provided to the Portfolio
Manager, the Trust has retained the Manager to render advisory, management,
and administrative services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio Manager
to furnish investment advisory services to one or more of the series of the
Trust, and the Portfolio Manager is willing to furnish such services to the
Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint Eagle Asset
Management, Inc. to act as Portfolio Manager to the Series designated on
Schedule A of this Agreement (the "Series") for the periods and on the terms
set forth in this Agreement. The Portfolio Manager accepts such appointment
and agrees to furnish the services herein set forth for the compensation
herein provided. In the event the Trust designates one or more series other
than the Series with respect to which the Trust and the Manager wish to retain
the Portfolio Manager to render investment advisory services hereunder, they
shall notify the Portfolio Manager in writing. If the Portfolio Manager is
willing to render such services, it shall notify the Trust and Manager in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will provide
a continuous investment program for the Series' portfolio and determine the
composition of the assets of the Series' portfolio, including determination of
the purchase, retention, or sale of the securities, cash, and other
investments contained in the portfolio. The Portfolio Manager will provide
investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Series' assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for
the Series, when these transactions should be executed, and what portion of
the assets of the Series should be held in the various securities and other
investments in which it may invest, and the Portfolio Manager is hereby
authorized to execute and perform such services on behalf of the Series. To
the extent permitted by the investment policies of the Series, the Portfolio
Manager shall make decisions for the Series as to foreign currency matters and
make determinations as to and execute and perform foreign currency exchange
contracts on behalf of the Series. The Portfolio Manager will provide the
services under this Agreement in accordance with the Series' investment
objective or objectives, policies, and restrictions 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:
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<PAGE>
(a) The Portfolio Manager will (1) take all steps necessary to
manage the Series so that it will qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, (2) take all steps necessary
to manage the Series so as to ensure compliance by the Series with the
diversification requirements of Section 817(h) of the Internal Revenue Code
and regulations issued thereunder, and (3) use reasonable efforts to manage
the Series so as to ensure compliance by the Series with any other rules and
regulations pertaining to investment vehicles underlying variable annuity or
variable life insurance policies. The Manager or the Trust will notify the
Portfolio Manager of any pertinent changes, modifications to, or
interpretations of Section 817(h) of the Internal Revenue Code and regulations
issued thereunder.
(b) The Portfolio Manager will conform with the 1940 Act and all
rules and regulations thereunder, all other applicable federal and state laws
and regulations, with any applicable procedures adopted by the Trust's Board
of Trustees of which the Portfolio Manager has been sent a copy, and the
provisions of the Registration Statement of the Trust under the Securities Act
of 1933 (the "1933 Act") and the 1940 Act, as supplemented or amended, of
which the Portfolio Manager has received a copy. The Manager or the Trust
will notify the Portfolio Manager of pertinent provisions of applicable state
insurance law with which the Portfolio Manager must comply under this
Paragraph 2(b).
(c) In connection with the purchase and sale of securities for the
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis, such
confirmation, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Series, as may be reasonably necessary
to enable the custodian and portfolio accounting agent to perform its
administrative and record keeping responsibilities with respect to the Series.
With respect to portfolio securities to be purchased or sold through the
Depository Trust Company, the Portfolio Manager will arrange for the automatic
transmission of the confirmation of such trades to the Trust's custodian and
portfolio accounting agent.
(d) The Portfolio Manager will monitor on a daily basis the
determination by the portfolio accounting agent for the Trust of the valuation
of portfolio securities and other investments of the Series. The Portfolio
Manager will assist the custodian and portfolio accounting agent for the Trust
in determining or confirming, consistent with the procedures and policies
stated in the Registration Statement for the Trust, the value of any portfolio
securities or other assets of the Series for which the custodian and portfolio
accounting agent seeks assistance from or identifies for review by the
Portfolio Manager.
(e) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian or portfolio accounting agent
for the Trust) as are necessary to assist the Trust and the Manager to comply
with requirements of the 1940 Act and the Investment Advisers Act of 1940 (the
"Advisers Act"), as well as other applicable laws. The Portfolio Manager will
furnish to regulatory authorities having the requisite authority any
information or reports in connection with such services which may be requested
in order to ascertain whether the operations of the Trust are being conducted
in a manner consistent with applicable laws and regulations.
(f) The Portfolio Manager will provide reports to the Trust's Board
of Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees with respect
to the Series such periodic and special reports as the Trustees and the
Manager may reasonably request.
(g) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself such
person or persons as it believes necessary to assist it in carrying out its
obligations under this Agreement. However, the Portfolio Manager may not
retain as subadviser any company that would be an "investment adviser," as
that term is defined in the 1940 Act, to the Series unless the contract with
such company is approved by a majority of the Trust's Board of
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<PAGE>
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.
<PAGE>
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible for
decisions to buy and sell securities and other investments for the Series'
portfolio, broker-dealer selection, and negotiation of brokerage commission
rates. The Portfolio Manager's primary consideration in effecting a security
transaction will be to obtain the best execution for the Series, taking into
account the factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the applicable
brokerage commission or dollar spread), the size of the order, the nature of
the market for the security, the timing of the transaction, the reputation,
the experience and financial stability of the broker-dealer involved, the
quality of the service, the difficulty of execution, and the execution
capabilities and operational facilities of the firm involved, and the firm's
risk in positioning a block of securities. Accordingly, the price to the
Series in any transaction may be less favorable than that available from
another broker-dealer if the difference is reasonably justified, in the
judgment of the Portfolio Manager in the exercise of its fiduciary obligations
to the Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, the Portfolio
Manager shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused the Series to pay a broker-dealer for effecting a portfolio investment
transaction in excess of the amount of commission another broker- dealer would
have charged for effecting that transaction, if the Portfolio Manager or its
affiliate determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker- dealer, viewed in terms of either that particular
transaction or the Portfolio Manager's or its affiliate's overall
responsibilities with respect to the Series and to their other clients as to
which they exercise investment discretion. To the extent consistent with
these standards, the Portfolio Manager is further authorized to allocate the
orders placed by it on behalf of the Series to the Portfolio Manager if it is
registered as a broker-dealer with the SEC, to its affiliated broker-dealer,
or to such brokers and dealers who also provide research or statistical
material, or other services to the Series, the Portfolio Manager, or an
affiliate of the Portfolio Manager. Such allocation shall be in such amounts
and proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-dealers
to which such allocations have been made and the basis therefor.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. The Portfolio Manager has
reviewed the post-effective amendment to the Registration Statement for the
Trust filed with the Securities and Exchange Commission that contains
disclosure about the Portfolio Manager, and represents and warrants that, with
respect to the disclosure
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<PAGE>
about the Portfolio Manager or information relating,
directly or indirectly, to the Portfolio Manager, such Registration Statement
contains, as of the date hereof, no untrue statement of any material fact and
does not omit any statement of a material fact which was required to be stated
therein or necessary to make the statements contained therein not misleading.
The Portfolio Manager further represents and warrants that it is a duly
registered investment adviser under the Advisers Act and a duly registered
investment adviser in all states in which the Portfolio Manager is required to
be registered.
5. EXPENSES. During the term of this Agreement, the Portfolio Manager
will pay all expenses incurred by it and its staff and for their activities in
connection with its portfolio management duties under this Agreement. The
Manager or the Trust shall be responsible for all the expenses of the Trust's
operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public
accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder record keeping services;
(c) Expenses of the Series' custodial services including record
keeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of
the Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses
of International Management Reports (as appropriate) for the Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or an affiliate of the Portfolio
Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of the
Trust to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Trust's existence, and the regulation of shares with
federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to Trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate thereof;
(o) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
(q) Extraordinary expenses of the Trust as may arise including
expenses incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for
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<PAGE>
such expenses under Section
14 of this Agreement), and the legal obligations of the Trust to indemnify its
Trustees, officers, employees, shareholders, distributors, and agents with
respect thereto; and
(r) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay the
Portfolio Manager a fee, payable monthly, as described on Schedule B. Such
fee shall be paid without regard to any reduction in the fee paid to the
Manager as a result of any statutory or regulatory limitation on investment
company expenses.
7. SEED MONEY. The Manager agrees that the Portfolio Manager shall not
be responsible for providing money for the initial capitalization of the
Series.
8. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall immediately notify
the Manager and the Trust (1) in the event that the SEC has censured the
Portfolio Manager; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser; or
has commenced proceedings or an investigation that may result in any of these
actions, (2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, or (3) upon having a reasonable
basis for believing that the Series has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or
the Regulations thereunder. The Portfolio Manager further agrees to notify
the Manager and the Trust immediately of any material fact known to the
Portfolio Manager respecting or relating to the Portfolio Manager that is not
contained in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, or of any statement contained therein that
becomes untrue in any material respect.
(b) The Manager agrees that it shall immediately notify the
Portfolio Manager (1) in the event that the SEC has censured the Manager or
the Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Manager's registration as an investment
adviser; or has commenced proceedings or an investigation that may result in
any of these actions, (2) upon having a reasonable basis for believing that
the Series has ceased to qualify or might not qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, or (3)
upon having a reasonable basis for believing that the Series has ceased to
comply with the diversification provisions of Section 817(h) of the Internal
Revenue Code or the Regulations thereunder.
9. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-
3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Trust and further
agrees to surrender promptly to the Trust any of such records upon the Trust's
or the Manager's request, although the Portfolio Manager may, at its own
expense, make and retain a copy of such records. The Portfolio Manager further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by Rule 31a-l under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
10. COOPERATION. Each party to this Agreement agrees to cooperate with
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the Securities and
Exchange Commission and state insurance regulators) in connection with any
investigation or inquiry relating to this Agreement or the Trust.
11. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER. The Manager and the
Trust agree that neither the Trust, the Manager, nor affiliated persons of the
Trust or the Manager shall give any information or make any representations or
statements in connection with the sale of shares of the Series concerning the
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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.
13. OTHER ACTIVITIES OF PORTFOLIO MANAGER. The Manager agrees that the
Portfolio Manager and any of its officers, directors or employees, and persons
affiliated with it or with any such partner or employee may render investment
management or advisory services to other investors and institutions, and such
investors and institutions may own, purchase or sell, securities or other
interests in property the same as or similar to those which are selected for
purchase, holding or sale for the Series, and the Portfolio Manager shall be
in all respects free to take action with respect to investments in securities
or other interests in property the same as or similar to those selected for
purchase, holding or sale for the Series. On occasions when the Portfolio
Manager deems the purchase or sale of a security to be in the best interests
of the Series, as well as other clients of the Portfolio Manager, the
Portfolio Manager, to the extent permitted by applicable laws and regulations,
may, but shall be under no obligation to, aggregate the securities to be sold
or purchased in order to obtain the most favorable price or lower brokerage
commissions and efficient execution. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Portfolio Manager in the manner the Portfolio
Manager considers to be most equitable and consistent with its fiduciary
obligations to the Series and to such other clients. Nothing in this
Agreement shall impose upon the Portfolio Manager any obligation to purchase
or sell or recommend for purchase or sale, for the Series any security which
it, its officers, directors, affiliates or employees may purchase or sell for
the Portfolio Manager or such partner's, affiliate's or employee's own
accounts or for the account of any other client, advisory or otherwise.
14. LIABILITY. Except as may otherwise be required by the 1940 Act or
the rules thereunder or other applicable law, the Trust and the Manager agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager,
and each person, if any, who, within the meaning of Section 15 of the 1933 Act
controls the Portfolio Manager shall not be liable to the Trust or its
shareholders for, or subject to any damages, expenses, or losses in
connection with, any act or
omission connected with or arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Portfolio Manager's duties, or by reason
of reckless disregard of the Portfolio Manager's obligations and duties under
this Agreement.
15. INDEMNIFICATION.
(a) The Manager agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person of the Portfolio Manager, and each person, if
any, who, within the meaning of Section 15 of the 1933 Act controls
("controlling person") the Portfolio Manager (all of such persons being
referred to as "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities, or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, the Internal Revenue Code,
under any other statute, at common law or otherwise, arising out of the
Manager's responsibilities to the Trust which (1) may be based upon any
misfeasance, malfeasance, or nonfeasance by the Manager, any of its employees
or representatives or any affiliate of or any person acting on behalf of the
Manager or (2) may
K-6
<PAGE>
be based upon any untrue statement or alleged untrue
statement of a material fact supplied by, or which is the responsibility of,
the Manager and contained in the Registration Statement or prospectus covering
shares of the Trust or a Series, or any amendment thereof or any supplement
thereto, or the omission or alleged omission to state therein a material fact
known or which should have been known to the Manager and was required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon information
furnished to the Manager or the Trust or to any affiliated person of the
Manager by a Portfolio Manager Indemnified Person; provided however, that in
no case shall the indemnity in favor of the Portfolio Manager Indemnified
Person be deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or by reason of
its reckless disregard of obligations and duties under this Agreement.
(b) Notwithstanding Section 14 of this Agreement, the Portfolio
Manager agrees to indemnify and hold harmless the Manager, any affiliated
person of the Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls ("controlling person") the Manager (all
of such persons being referred to as "Manager Indemnified Persons") against
any and all losses, claims, damages, liabilities, or litigation (including
legal and other expenses) to which a Manager Indemnified Person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, the Internal Revenue
Code, under any other statute, at common law or otherwise, arising out of the
Portfolio Manager's responsibilities as Portfolio Manager of the Series which
(1) may be based upon any misfeasance, malfeasance, or nonfeasance by the
Portfolio Manager, any of its employees or representatives, or any affiliate
of or any person acting on behalf of the Portfolio Manager, (2) may be based
upon a failure to comply with Section 2, Paragraph (a) of this Agreement, or
(3) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or prospectus covering
the shares of the Trust or a Series, or any amendment or supplement thereto,
or the omission or alleged omission to state therein a material fact known or
which should have been known to the Portfolio Manager and was required to be
stated therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon information furnished
to the Manager, the Trust, or any affiliated person of the
Manager or Trust by the Portfolio Manager or any affiliated person of the
Portfolio Manager; provided, however, that in no case shall the indemnity in
favor of a Manager Indemnified Person be deemed to protect such person against
any liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and duties
under this Agreement.
(c) The Manager shall not be liable under Paragraph (a) of this
Section 15 with respect to any claim made against a Portfolio Manager
Indemnified Person unless such Portfolio Manager Indemnified Person shall have
notified the Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Portfolio Manager
Indemnified Person (or after such Portfolio Manager Indemnified Person shall
have received notice of such service on any designated agent), but failure to
notify the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager Indemnified Person
against whom such action is brought otherwise than on account of this Section
15. In case any such action is brought against the Portfolio Manager
Indemnified Person, the Manager will be entitled to participate, at its own
expense, in the defense thereof or, after notice to the Portfolio Manager
Indemnified Person, to assume the defense thereof, with counsel satisfactory
to the Portfolio Manager Indemnified Person. If the Manager assumes the
defense of any such action and the selection of counsel by the Manager to
represent both the Manager and the Portfolio Manager Indemnified Person would
result in a conflict of interests and therefore, would not, in the reasonable
judgment of the Portfolio Manager Indemnified Person, adequately represent the
interests of the Portfolio Manager Indemnified Person, the Manager will, at
its own expense, assume the defense with counsel to the Manager and, also at
its own expense, with separate counsel to the Portfolio Manager Indemnified
Person, which counsel shall be satisfactory to the Manager and to the
Portfolio Manager Indemnified
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<PAGE>
Person. The Portfolio Manager Indemnified
Person shall bear the fees and expenses of any additional counsel retained by
it, and the Manager shall not be liable to the Portfolio Manager Indemnified
Person under this Agreement for any legal or other expenses subsequently
incurred by the Portfolio Manager Indemnified Person independently in
connection with the defense thereof other than reasonable costs of
investigation. The Manager shall not have the right to compromise on or settle
the litigation without the prior written consent of the Portfolio Manager
Indemnified Person if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Portfolio Manager Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (b)
of this Section 15 with respect to any claim made against a Manager
Indemnified Person unless such Manager Indemnified Person shall have notified
the Portfolio Manager in writing within a reasonable time after the summons,
notice, or other first legal process or notice giving information of the
nature of the claim shall have been served upon such Manager Indemnified
Person (or after such Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Portfolio
Manager of any such claim shall not relieve the Portfolio Manager from any
liability which it may have to the Manager Indemnified Person against whom
such action is brought otherwise than on account of this Section 15. In case
any such action is brought against the Manager Indemnified Person, the
Portfolio Manager will be entitled to participate, at its own expense, in the
defense thereof or, after notice to the Manager Indemnified Person, to assume
the defense thereof, with counsel satisfactory to the Manager
Indemnified Person. If the Portfolio Manager assumes the defense of any such
action and the selection of counsel by the Portfolio Manager to represent both
the Portfolio Manager and the Manager Indemnified Person would result in a
conflict of interests and therefore, would not, in the reasonable judgment of
the Manager Indemnified Person, adequately represent the interests of the
Manager Indemnified Person, the Portfolio Manager will, at its own expense,
assume the defense with counsel to the Portfolio Manager and, also at its own
expense, with separate counsel to the Manager Indemnified Person which counsel
shall be satisfactory to the Portfolio Manager and to the Manager Indemnified
Person. The Manager Indemnified Person shall bear the fees and expenses of
any additional counsel retained by it, and the Portfolio Manager shall not be
liable to the Manager Indemnified Person under this Agreement for any legal or
other expenses subsequently incurred by the Manager Indemnified Person
independently in connection with the defense thereof other than reasonable
costs of investigation. The Portfolio Manager shall not have the right to
compromise on or settle the litigation without the prior written consent of
the Manager Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Manager Indemnified
Person.
16. DURATION AND TERMINATION. This Agreement shall become effective on
the date first indicated above. Unless terminated as provided herein, the
Agreement shall remain in full force and effect for two (2) years from such
date and continue on an annual basis thereafter with respect to the Series;
provided that such annual continuance is specifically approved each year by
(a) the vote of a majority of the entire Board of Trustees of the Trust, or by
the vote of a majority of the outstanding voting securities (as defined in the
1940 Act) of the Series, and (b) the vote of a majority of those Trustees who
are not parties to this Agreement or interested persons (as such term is
defined in the 1940 Act) of any such party to this Agreement cast in person at
a meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for a Series or receive any fees on
account of such Series with respect to which this Agreement is not approved as
described in the preceding sentence. However, any approval of this Agreement
by the holders of a majority of the outstanding shares (as defined in the 1940
Act) of a Series shall be effective to continue this Agreement with respect to
the Series notwithstanding (i) that this Agreement has not been approved by
the holders of a majority of the outstanding shares of any other Series or
(ii) that this Agreement has not been approved by the vote of a majority of
the outstanding shares of the Trust, unless such approval shall be required by
any other applicable law or otherwise. Notwithstanding the foregoing, this
Agreement may be terminated for each or any Series hereunder: (a) by the
Manager at any time without penalty, upon sixty (60) days' written
K-8
<PAGE>
notice to
the Portfolio Manager and the Trust, (b) at any time without payment of any
penalty by the Trust, upon the vote of a majority of the Trust's Board of
Trustees or a majority of the outstanding voting securities of each Series,
upon sixty (60) days' written notice to the Manager and the Portfolio Manager,
or (c) by the Portfolio Manager at any time without penalty, upon sixty (60)
days' written notice to the Manager and the Trust. In the event of
termination for any reason, all records of each Series for which the Agreement
is terminated shall promptly be returned to the Manager or the Trust, free
from any claim or retention of rights in such record by the Portfolio Manager,
although the Portfolio Manager may, at its own expense, make and retain a copy
of such records. The Agreement shall automatically terminate in the event of
its assignment (as such term is described in the 1940 Act). In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(e), 9, 10, 11, 14, 15, and 18 of this
Agreement shall remain in effect, as well as any applicable provision of this
Paragraph numbered 16.
17. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed
by the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the
Trust, including a majority of the Trustees of the Trust who are not
interested persons of any party to this Agreement, cast in person at a meeting
called for the purpose of voting on such approval, if such approval is
required by applicable law.
18. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable property
of the Manager and/or its affiliates, and that the Portfolio Manager has the
right to use such name (or derivative or logo) only with the approval of the
Manager and only so long as the Manager is Manager to the Trust and/or the
Series. Upon termination of the Management Agreement between the Trust and
the Manager, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name "Eagle Asset Management, Inc."
or any derivative thereof or logo associated with that name is the valuable
property of the Portfolio Manager and its affiliates and that the Trust and/or
the Series have the right to use such name (or derivative or logo) in offering
materials of the Trust with the approval of the Portfolio Manager and for so
long as the Portfolio Manager is a portfolio manager to the Trust and/or the
Series. Upon termination of this Agreement between the Trust, the Manager,
and the Portfolio Manager, the Trust shall forthwith cease to use such name
(or derivative or logo).
19. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A copy of
the Amended and Restated Agreement and Declaration of Trust for the Trust is
on file with the Secretary of the Commonwealth of Massachusetts. The Amended
and Restated Agreement and Declaration of Trust has been executed on behalf of
the Trust by Trustees of the Trust in their capacity as Trustees of the Trust
and not individually. The obligations of this Agreement shall be binding upon
the assets and property of the Trust and shall not be binding upon any
Trustee, officer, or shareholder of the Trust individually.
20. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the State of
Delaware, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement,
this Agreement may only be assigned by any party with the prior written
consent of the other parties.
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<PAGE>
(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby, and to this extent, the provisions of
this Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an agent of
the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
THE GCG TRUST
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
DIRECTED SERVICES, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
EAGLE ASSET MANAGEMENT, INC.
__________________________________ By:___________________________________
Attest
__________________________________ ____________________________________
Title Title
K-10
<PAGE>
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the attached
Portfolio Management Agreement, to which Eagle Asset Management, Inc. shall
act as Portfolio Manager is as follows:
Value Equity Series
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Eagle Asset Management, Inc. ("Portfolio
Manager") to the following Series of The GCG Trust, pursuant to the attached
Portfolio Management Agreement, the Manager will pay the Portfolio Manager a
fee, payable monthly, based on the average daily net assets of the Series at
the following annual rate of the average daily net assets of the Series:
SERIES RATE
------ ----
Value Equity Series 0.50% of net assets
K-11
<PAGE>
EXHIBIT L
OTHER INFORMATION REGARDING PILGRIM BAXTER ASSOCIATES, LTD.
The directors and principal executive officer of Pilgrim Baxter
Associates, Ltd. and their principal occupations are as shown below. The
business address of each such person is 1255 Drummers Lane, Suite 300, Wayne,
Pennsylvania 19807.
NAME AND POSITION
WITH PILGRIM PRINCIPAL OCCUPATION
- ----------------- --------------------
Harold J. Baxter Chairman and Chief Executive Officer
Gary L. Pilgrim Director, President and Chief Investment Officer
Pilgrim also serves as adviser or sub-adviser to other investment
companies. The following table lists the other investment companies for which
Pilgrim serves as adviser or sub-adviser, the approximate net assets of each
investment company at June 30, 1997, and the annual advisory fee received
by Pilgrim (as a percentage of average daily net assets).
INVESTMENT
NAME OF FUND NET ASSETS ADVISER FEE
- ------------ ---------- -----------
THE PBHG FUNDS, INC.
- --------------------
PBHG Growth Fund $5.7 Billion 0.85%
PBHG Insurance Series $1.4 Million 0.85%
Fund - PBHG Growth
II Portfolio
Style Select-Mid Cap $16.0 Million 1.00% Advisory Fee
Growth Sub-Advisory Fee:
.50% on 1st $250 Million
.45% over $250 Million
North American Series $48.2 Million 1.05% Advisory Fee
Life -
Pilgrim Baxter Growth Sub-Advisory Fee:
Trust .60% on 1st $200 Million
.50% over $200 Million
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<PAGE>
EXHIBIT M
OTHER INFORMATION REGARDING
CHANCELLOR LGT ASSET MANAGEMENT, INC.
The principal executive officer and the directors of Chancellor LGT Asset
Management, Inc. and their principal occupations are as shown below. The
business address of each such person, unless otherwise indicated, is 1166
Avenue of the Americas, New York, New York 10036.
NAME AND POSITION
WITH CHANCELLOR PRINCIPAL OCCUPATION
- --------------- --------------------
H.S.H. Prince Phillipp Chairman of the Board and Chief Executive
von und zu Liechtenstein Officer of Liechtenstein Global Trust, AG
Director
Herrengasse 12, FL-9490
Vaduz, Liechtenstein
Ellen H. Adams Head of North American Institutional
Director Equities, Chancellor LGT Asset
Management, Inc.
John Greenwood Chief Economist
Director Chancellor LGT Asset Management, Inc.
50 California Street
San Francisco, CA 94111
Nina Lesavoy Head of North American Institutional
Director Distribution, Chancellor LGT Asset
Management, Inc.
Paul Loach Chairman of the Board
Director Chancellor LGT Asset Management, Inc.
Merry L. Quackenbush Head of Institutional Business Strategy
Director and Marketing, Chancellor LGT Asset
Management, Inc.
Donald H. Young Head of Global Asset Allocation and
Director Quantitative Stock Selection
Chancellor LGT Asset Management, Inc.
Chancellor LGT Asset Mangement, Inc. does not act as investment
adviser to any other investment companies with investment objectives
and policies similar to those of the Capital Appreciation Series.
M-1
<PAGE>
EXHIBIT N
OTHER INFORMATION REGARDING
PUTNAM INVESTMENT MANAGEMENT, INC.
The directors and principal executive officer of Putnam Investment
Management, Inc. and their principal occupation and business address are as
shown below.
NAME AND POSITION WITH
PORTFOLIO MANAGER 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 Fund
Gordan H. Silver Director; Senior Managing Director of Putnam
Investments
Putnam also manages other investment companies with similar investment
objectives and policies. The following information sets forth the name of
each such investment company, its approximate net assets as of March 31, 1997,
and the annual advisory fee charged by Putnam.
Putnam International
Equity Funds* Assets Fee Structure
-------------------- ------ -------------
Putnam Global Growth $4,617,955,000 0.80% on 1st $500 million
0.70% on next $500 million
0.65% on next $500 million
0.60% on assets over $1.5 billion
Putnam Emerging $ 84,913,000 1.20% on 1st $500 million
Markets Fund 1.10% on next $500 million
1.05% on next $500 million
1.00% on assets over $1.5 billion
* 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 Series and Managed Global Series.
Non-Putnam Funds Assets Fee Structure
-------------------- ------ -------------
Sun America Series $11,803,267 1.00% on 1st $150 million
Trust-Emerging Markets 0.95% on next $150 million
0.85% on assets over $300 million
N-1
<PAGE>
EXHIBIT O
OTHER INFORMATION REGARDING
T. ROWE PRICE ASSOCIATES, INC.
The directors and principal executive officer of T. Rowe Price
Associates, Inc. and their principal occupations are as shown below. The
business address of each such person, unless otherwise indicated, is 100 East
Pratt Street, Baltimore, Maryland 21202.
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
George J. Collins Retired.
Director
James E. Halbkat, Jr. President of U.S. Monitor Corporation.
Director
P.O. Box 23109
Hilton Head Island,
SC 29925
Richard L. Menchel Limited Partner of the Goldman Sachs Group L.P.
Director
85 Broad Street
2nd Floor
New York, NY 10004
John W. Rosenblum Dean of Jepson School of Leadership Studies at
Director the University of Richmond; Director of:
University of Richmond Chesapeake Corporation, Camdus Communications
Richmond, VA 23173 Corp., Comdial Corporation, and Cone Mills
Corporation.
Robert L. Stickland Chairman of Loew's Companies, Inc.; Director of
Director Hannaford Bros., Co.
604 Two Piedmont Plaza
Building
Winston-Salem, NC 27104
Philip C. Walsh Consultant to Cyprus Annex Minerals Company
Director
Pleasant Valley
Peapack, NJ 07977
Anne Marie Whittemore Partner of the law firm of McGuire, Woods,
Director Battle & Booth; Director of: Owens and Minor,
One James Center Inc., USF&G Corporation, the James River
Richmond, VA 23219 Corporation and Albemarle Corporation.
James S. Riepe Director of Price-Fleming.
Vice-Chairman of the Board,
Director and Managing
Director
George A. Roche Director of Price-Fleming.
Chairman of the Board,
President and Director
M. David Testa Chairman of the Board of Price-Fleming.
Vice-Chairman of the Board,
Director and Managing
Director
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<PAGE>
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
Henry H. Hopkins Vice President of Price-Fleming.
Director and Managing
Director
Jame A. C. Kennedy III Managing Director of T. Rowe Price Associates,
Director and Managing Inc.
Director
John H. Laport, Jr. Managing Director of T. Rowe Price Associates,
Director and Managing Inc.
Director
William T. Reynolds Managing Director of T. Rowe Price Associates,
Director and Managing Inc.
Director
Brian C. Rogers Managing Director of T. Rowe Price Associates,
Director and Managing Inc.
Director
Alvin M. Younger, Jr. Secretary and Treasurer of Price-Fleming.
Chief Financial Officer,
Managing Director,
Secretary and Treasurer
T. Rowe Price Associates, Inc. also acts as investment adviser to several
registered investment companies having similar investment objectives and
policies to those of the Fully Managed Series. For its services to each such
investment company, T. Rowe Price Associates, Inc. is paid a management fee
consisting of two elements: a "group" fee and an "individual" fund fee. The
"group" fee varies and is based on the combined net assets of certain funds
distributed by T. Rowe Price Investment Services, Inc., other than
institutional or "private label" products, and funds managed and sponsored by
T. Rowe Price Associates, Inc. (excluding T. Rowe Price Index Trust, Inc.) or
by Rowe Price-Fleming International, Inc. (excluding Institutional
International Funds, Inc.) (the "Combined Price Funds"). Each such investment
company pays, as its portion of the "group" fee, an amount equal to the ratio
of its daily net assets to the daily net assets of all the Combined Price
Funds. Each investment company pays a flat "individual" fund fee based on its
net assets. The table below set forth the current "group" fee rate schedule
at various asset levels of the Combined Price Funds:
0.480% of the first $1 billion
0.450% of the next $1 billion
0.420% of the next $1 billion
0.390% of the next $1 billion
0.370% of the next $1 billion
0.360% of the next $2 billion
0.350% of the next $2 billion
0.340% of the next $5 billion
0.330% of the next $10 billion
0.320% of the next $10 billion
0.310% of the next $16 billion
0.305% of next $30 billion
0.300% thereafter
T.Rowe Price also acts as investment advisor to several registered
investment companies ("Subadvised Mutual Funds") having similar investment
objectives and policies to those of the Fully Managed Series. For this
purpose, the Subadvised Mutual Funds are mutual funds that are not
sponsored by T. ROwe Price.
O-2
<PAGE>
The table below sets forth the name of each investment company having
similar investment objectives and policies to The Fully Managed Series, the
annual rate of compensation (i.e. for the Price Funds the "individual" fee
charged by T. Rowe Price Associates, Inc. as a percentage of average daily net
assets and for the Subadvised Mututal Funds, the fee T. Rowe Price is paid for
services as subadvisor to the respective portfolio)m and net assets as of June
30, 1997.
NAME OF INVESTMENT APPROXIMATE INDIVIDUAL
REIMBURSEMENT
COMPANY NET ASSETS FUND FEE
- ------------------ -------------- ----------
T. Rowe Price Capital
Appreciation Fund $1,024,400,000 0.30%(1)
Penn Series Fund, Inc.
Flexibly managed Fund $ 455,000,000 0.79%
Ohio National Fund, Inc.
Capital Appreciation $ 419,323,081 0.70% of the first $5 million
0.50% in excess of $5 million
(1) Individua Fund Fee is subject to performance adjustment. The Performance
Fee Adjustment is based on the performance of the Fund relative to the
Standard & Poor's 500 Index. Effective November 1, 1998, there will be no
Performance Fee Adjustment.
O-3
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EXHIBIT P
OTHER INFORMATION REGARDING
VAN ECK ASSOCIATES CORPORATION
The directors and principal executive officer of Van Eck Associates
Corporation and their principal occupations are as shown below. The business
address of each such person is 99 Park Avenue, New York, New York 10016.
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
John C. van Eck, CFA Chairman of the Board, Van Eck Funds and
Chairman of the Board and Director Van Eck Worldwide Insurance Trust;
President, Chief Executive Officer,
Chairman of the Board and Director, Van
Eck Securities Corporation.
Philip D. DeFeo
President, Chief Executive Officer
and Director
Fred M. van Eck Trustee, Van Eck Funds and Van Eck
Director Worldwide Insurance Trust; Director, Van
Eck Securities Corporation; Private
Investor.
Sigrid S. van Eck Vice President, Assistant Treasurer and
Director, Vice President Director, Van Eck Securities Corporation.
and Assistant Treasurer
Derek S. van Eck, CFA Director, Van Eck Securities Corporation;
Director, Executive Vice President Executive Vice President of Van Eck Funds;
and Director of Global Investments President of Global Hard Assets Fund
series of Van Eck Funds and Worldwide Hard
Assets Fund series of Van Eck Worldwide
Insurance Trust; Vice President of Global
Balanced Fund, Gold Opportunity Fund and
Asia Infrastructure Fund series of Van Eck
Funds.
Jan F. van Eck Director and Executive Vice President, Van
Director Eck Securities Corporation.
Van Eck Associates Corporation also acts as investment adviser or sub-
adviser (in the case of PIMCO) to the following registered investment
companies having similar investment objectives and policies to those of the
Hard Assets Series. The table below sets forth the name of each such
investment company, its approximate net assets as of June 30, 1997 and the
annual advisory fee received by Van Eck Associates Corporation (as a
percentage of average daily net assets).
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NAME OF INVESTMENT COMPANY NET ASSETS ANNUAL INVESTMENT ADVISORY FEE
- -------------------------- ---------- ------------------------------
Van Eck Funds:
Gold/Resources Fund $ 86,787,915 .75% on first $500 million;
.65% on next $250 million and
.50% on assets above $750 million.
Gold Opportunity Fund $ 6,012,771 1.00% of average daily net assets.
Global Hard Assets Fund $ 66,806,920 1.00% of average daily net assets.
Van Eck Worldwide Insurance Trust:
Worldwide Hard Assets $168,139,116 1.00% on first $500 million; .
Fund .90% on next $250 million and
(f/k/a Gold and Natural .70% on assets above $750 million.
Resources Fund)
PIMCO Precious Metals Fund $ 33,399,109 .375% on first $200 Million and
.35% on assets above $200 million.
P-2
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EXHIBIT Q
OTHER INFORMATION ABOUT
EQUITABLE INVESTMENT SERVICES, INC.
The directors and principal executive officer of EISI and their principal
occupations are as shown below. Unless otherwise indicated, the business
address of each such person is 909 Locust Street, Des Moines, Iowa 50309.
NAME AND POSITION
WITH PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
Lawrence V. Durland, Jr. Senior Vice President of Equitable of Iowa
Director Companies and affiliates.
Frederick S. Hubbell Chairman, President and Chief Executive
Director and Chairman of Officer of Equitable of Iowa Companies,
the Board of Directors Equitable Life Insurance Company of Iowa,
and USG Annuity & Life Company; and
Chairman of Golden American Life Insurance
Company.
Terry Kendall President and Chief Executive Officer of
Director Golden American Life Insurance Company;
1001 Jefferson Street Chairman, President and Chief Executive
Suite 400 Officer of First Golden American Life
Wilmington, DE 19801 Insurance Company of New York; Executive
Vice President Equitable Life Insurance
Company of Iowa and USG Annuity & Life
Company.
Paul E. Larson Executive Vice President, Chief Financial
Director Officer of Equitable of Iowa Companies and
affiliates.
Thomas L. May Senior Vice President of Equitable Life
Director Insurance Company of Iowa and USG Annuity &
Life Company.
John A. Merriman Secretary and General Counsel of Equitable
Director of Iowa Companies.
Beth B. Neppl Vice President--Human Resources of
Director Equitable of Iowa Companies and affiliates.
Paul R. Schlaack President, Chief Executive Officer and
President, Chief Executive Director of Equitable Investment Services,
Officer and Director Inc.
Jerome L. Sychowski Senior Vice President and Chief Information
Director Officer of Equitable of Iowa Companies.
Q-1
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EISI also acts as investment adviser to the Money Market Portfolio of the
Equi-Select Series Trust which has investment objectives and policies similar
to those of the Liquid Asset Series. EISI also acts as investment adviser to
the Advantage Portfolio of the Equi-Select Series Trust which has investment
objectives and policies similar to those of the Limited Maturity Bond Series.
The following table sets forth the name of each such investment company, its
approximate net assets as of December 31, 1996, and the annual advisory fee
received by EISI (as a percentage of average daily net assets).
NAME OF INVESTMENT COMPANY NET ASSETS ADVISORY FEE
- -------------------------- ---------- ------------
Equi-Select Series Trust
-- Money Market Portfolio $19.1 Million .375% of first $50 million;
.35% of amount over $50 million
-- Advantage Portfolio $14.5 Million .50% of first $100 million
.35% of amount over $100 million
Q-2
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EXHIBIT R
OTHER INFORMATION ABOUT
ZWEIG ADVISORS INC.
The director and principal executive officer of Zweig Advisors Inc. and
his principal occupations ia as shown below. The business address of Mr. Zweig
is 900 Third Avenue, New York, New York 10022.
NAME AND POSITION WITH
PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
Martin E. Zweig Chairman of the Board and President of The Zweig
President and Director Fund, Inc.; Chairman of the Board and President
of The Zweig Total Return Fund, Inc.; President
and Director of Zweig Total Return Advisors,
Inc.; President and Director of Zweig Securities
Advisory Service, Inc.; Co-Chairman of Research
of Avatar Investors Associates Corp.; Managing
Director of the Managing General Partner of
Zweig-DiMenna Partners, L.P. and Zweig-DiMenna
Special Opportunities, L.P.; President and
Director of Zweig-DiMenna International
Managers, Inc.; Chairman of Zweig/Glaser
Advisers; President of Zweig Series Trust;
President and Director of Gotham Advisors, Inc.
Chairman of Euclid Advisors, Inc.; and
Consultant to Avatar Investors Associates Corp.
Jeffrey Lazar Vice President and Treasurer of The Zweig Fund,
Vice President, Treasurer Inc. and The Zweig Total Return Fund, Inc.; Vice
and Secretary President, Treasurer and Secretary of Zweig
Total Return Advisors, Inc.; Vice President of
Zweig Series Trust.
David Katzen Senior Vice President of Zweig/Glaser Advisers
Vice President and Zweig Series Trust; Executive Vice President
of Euclid Advisors, Inc.
Zweig Advisors Inc. does not act as investment adviser to any other
registered investment companies with investment objectives and policies
similar to those of the Multiple Allocation Series or the Strategic Equity
Series.
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EXHIBIT S
OTHER INFORMATION REGARDING
E.I.I. REALTY SECURITIES, INC.
The principal executive officer of E.I.I. Realty Securities, Inc. and the
directors of European Investors Holding Company, Inc., the parent of European
Investors Incorporated, and their principal occupations are as shown below.
The business address of each such person, unless otherwise indicated, is 667
Madison Avenue, New York, New York 10021.
NAME AND POSITION PRINCIPAL OCCUPATION
- ----------------- --------------------
Christian Andre Lange President, European Investors, Inc. and
President, Director affiliated companies.
Cydney Collier Donnell Managing Director, E.I.I. Realty Securities,
Vice President, Director Inc. and Vice President, E.I.I. Realty Corp.
Richard John Adler Managing Director, European Investors Inc.
Vice President, Director
David John Strupp Partner, Davis Polk & Wardwell.
Director
450 Lexington Avenue
New York, NY 10017
Horace Corbin Day Director, American Heritage Life, Blount, Inc.,
Director Altec Industries, Jension Investment Company.
85 Broad Street
New York, NY 10004
Hanns Arnt Vogels President, European Environmental Systems
Director Corporation, Thueringer Roheisen GmbH, and
Officia I Trading International GmbH; partner,
2nd Floor Rohstoffgewinnungs und Aufbereitungs GmbH & Co.
De Boelelaan 7 KG; Chairman of the Board, Stahlwerk Thueringen
1083 HJ Amsterdam GmbH; Deputy Chairman of the Board, Spezial
Technik Dresden; Member of the Board, Daimler-
Benz Aerospace AG, DALURA AG and Interturbine
Group of Companies; Member of the Supervisory
Board, MAAG Holding AG Zuerich; Member of the
Advisory Board, Thueringer Industriebeteiligungs
GmbH; Proudfoot Europe; President, Forum fuer
Zukunftsenergien e.V.; Member of the Executive
Board, Association of Industrial Energy-Economy.
J. Stuart Mackintosh Managing Director, European Investors Corporate
Director Finance, Inc.
E.I.I. Realty Securities, Inc. does not act as investment adviser to any
other investment companies with investment objectives and policies similar to
those of the Real Estate Series.
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EXHIBIT T
OTHER INFORMATION ABOUT
KAYNE, ANDERSON INVESTMENT MANAGEMENT, L.P.
The principal executive officer of Kayne, Anderson Investment Management,
L.P. and the members of KAIM Traditional, L.L.C., the general partner, and
their principal occupations are as shown below. The business address of each
such person is 1800 Avenue of the Stars, Suite 200, Los Angeles, California
90067.
NAME AND POSITION
WITH PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
Richard A. Kayne Chief Executive Officer, Kayne, Anderson
Investment Management, L.P.; Administrative
Manager of KAIM Traditional, L.L.C.
John E. Anderson Chairman, TOPA Equities
Allan M. Rudnick Chief Investment Officer, Kayne, Anderson
Investment Management, L.P.; Manager of
KAIM Traditional, L.L.C.
Kayne, Anderson Investment Management, L.P. does not presently act as
investment adviser to any other registered investment companies with
investment objectives and policies similar to those of the Rising Dividends
Series.
T-1
<PAGE>
EXHIBIT U
OTHER INFORMATION REGARDING
FRED ALGER MANAGEMENT, INC.
The directors and principal executive officer of Fred Alger Management,
Inc. and their principal occupations are as shown below. The business address
of each such person, unless otherwise indicated, is 75 Maiden Lane, New York,
New York 10038.
NAME AND POSITION
WITH PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
Frederick M. Alger Chairman of the Board of Fred Alger Management, Inc.
Chairman of the Board
David D. Alger President and Director of Fred Alger Management, Inc.
President and Director
Gregory S. Duch Executive Vice President, Treasurer and Director of
Executive Vice Fred Alger Management, Inc.
President,Treasurer
and Director
Fred Alger Management, Inc. also acts as adviser or sub-advisor to
several registered investment companies having similar investment objectives
and policies to those of the Small Cap Series. The table below sets forth the
name of each such investment company, its approximate net assets, and the
annual advisory fee (as a percentage of average daily net assets).
NAME OF COMPANY NET ASSETS ADVISORY FEE
- --------------- ---------- ------------
As Advisor:
The Alger Fund--Alger
Small Capitalization Portfolio $562 million .85%
The Alger American
Fund--Alger American
Small Capitalization
Portfolio $1.7 billion .85%
The Alger Retirement Fund--Alger
Small Cap Retirement
Portfolio $31 million .85%
U-1
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EXHIBIT V
OTHER INFORMATION ABOUT
EAGLE ASSET MANAGEMENT, INC.
The directors and the principal executive officer of Eagle Asset
Management, Inc., and their principal occupations are as shown below. The
business address of each such person is 880 Carillon Parkway, St. Petersburg,
Florida 33716.
NAME AND POSITION
WITH PORTFOLIO MANAGER PRINCIPAL OCCUPATION
- ---------------------- --------------------
Thomas A. James Chairman and Chief Executive Officer of Raymond
Chairman of the Board James Financial, Inc.; Chairman of the Board of
Trustees of the Heritage Family of Mutual Funds.
Richard K. Riess Director, President and Chief Executive Officer
Chief Executive Officer, of Eagle Asset Management, Inc.; Director of
and Director Heritage Asset Management, Inc.; and Trustee for
the Heritage Capital Appreciation Trust,
Heritage Cash Trust, Heritage Income-Growth
Trust, Heritage Income Trust, Heritage Series
Trust, and Heritage U.S. Government Income Fund.
Stephen G. Hill President of Heritage Asset Management, Inc.
Director
Eagle Asset Management, Inc. does not presently act as investment adviser
to any other registered investment companies with investment objectives and
policies similar to those of the Value Equity Series.
V-1
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