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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] 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:_________________________________________________________
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THE GCG TRUST
1475 DUNWOODY DRIVE
WEST CHESTER, PA 19380
800-366-0066
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS OF THE SMALL
CAP SERIES, AND THE MANAGED GLOBAL SERIES
JANUARY 28, 2000
To the Shareholders of the Managed Global Series and Small Cap
Series of The GCG Trust:
Notice is hereby given to the holders of shares of beneficial
interest (the "Shares") of the Managed Global Series and Small Cap
Series 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 1475 Dunwoody Drive, West Chester, PA
19380, on January 28, 2000, at 10:00 a.m., local time, for the
following purposes:
1. To approve a new Portfolio Management Agreement among the
Trust, Directed Services, Inc. ("DSI") and Capital Guardian
Trust Company on behalf of the Managed Global Series; and
2. To approve a new Portfolio Management Agreement among the
Trust, DSI and Capital Guardian Trust Company on behalf of
the Small Cap Series;
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 December
20, 1999, 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
January 6, 2000
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MANAGEMENT OF THE TRUST RECOMMENDS THAT YOU CAST YOUR VOTE FOR THE
APPROVAL OF THE NEW PORTFOLIO MANAGEMENT AGREEMENT.
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 THE PROPOSALS NOTICED ABOVE.
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THE GCG TRUST
1475 DUNWOODY DRIVE
WEST CHESTER, PENNSYLVANIA 19380
800-366-0066
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PROXY STATEMENT
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SPECIAL MEETING OF SHAREHOLDERS OF THE
SMALL CAP SERIES
MANAGED GROWTH SERIES
JANUARY 28, 2000
This Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees (the "Board") of The GCG Trust
(the "Trust"), a Massachusetts business trust, of proxies to be voted
at a Special Meeting of the Shareholders of the Trust, and at any and
all adjournments thereof (the "Meeting"), to be held at 1475 Dunwoody
Drive, West Chester, PA 19380, on January 28, 2000, at 10:00 a.m.
local time. The approximate mailing date of this Proxy Statement and
accompanying form of proxy is January 7, 2000.
The Board has fixed the close of business on December 20, 1999,
as the record date (the "Record Date") for the determination of
holders of shares of beneficial interest ("Shares") in each Series of
the Trust entitled to vote at the Meeting. Shareholders on the
Record Date will be entitled to one vote for each full Share held and
a fractional vote for each fractional Share.
The Board of Trustees of the Trust is soliciting shareholder
votes on proposals affecting only two portfolios; the Managed Global
Series and the Small Cap Series (the "Series"). Shareholders of the
Series only are being requested to vote on the following proposals
(the "Proposals"):
1. To approve a new Portfolio Management Agreement among the Trust,
Directed Services, Inc. ("DSI" or the "Manager") and Capital Guardian
Trust Company ("Capital Guardian" or "Portfolio Manager") on behalf
of the Managed Global Series.
2. To approve a new Portfolio Management Agreement among the Trust,
DSI and Capital Guardian on behalf of the Small Cap Series; and
To transact such other business as may properly come before
the Meeting or any adjournment thereof.
The new Portfolio Management Agreement (the "New Portfolio
Management Agreement" or sometimes the "Capital Guardian Agreement")
will not result in higher shareholder fees.
The Series represented by this proxy statement involves two (2)
of twenty-four (24) operational portfolios of the Trust. The Shares
of the Series currently are offered to separate accounts of
affiliated insurance companies: Golden American Life Insurance
Company ("Golden American"), First Golden American Life Insurance
Company of New York ("First Golden") and Equitable Life Insurance
Company of Iowa ("Equitable Life") (collectively, the "Participating
Insurance Companies") to serve as an investment medium for variable
annuity contracts and variable life insurance policies (collectively,
"Variable Contracts") issued by the Participating Insurance
Companies. These separate accounts are registered with the Securities
and Exchange Commission as investment companies. In accordance with
the Investment Company Act of 1940 (the "1940 Act"), it is expected
that each Participating Insurance Company, issuing a Variable Contract
funded by a registered separate account that participates in the
Trust, will request voting instructions from the owners of the
Variable Contracts ("Variable Contract Owners") and will vote Shares
or other voting interests in the separate account in proportion to
the voting instructions received.
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The Participating Insurance Companies are required to vote Shares of the
Series held by their registered separate accounts in accordance with
instructions received from Variable Contract Owners. Each Participating
Insurance Company is also required to vote Shares of the Series held
in each registered separate account for which it has not received
instructions in the same proportion as it votes Shares held by that
separate account for which it has received instructions. Shares held
by each 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 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. 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 Golden
American or their agents or affiliates personally or by telephone.
All expenses in connection with the solicitation of the proxies will
be borne by DSI, the manager of the Trust.
VOTING. Shares which represent interests in a Series are being
asked to vote separately on the Proposals, and as appropriate, any
other business which may properly come before the Meeting. The
voting requirement for approval of these Proposals and any other
proposal requires a vote of the "majority of the outstanding voting
securities" of each Series which means the lesser of: (i) 67% or more
of the shares of the Series entitled to vote thereon present at the
Meeting, if the holders of more than 50% of the outstanding Shares of
the Series are present or represented by proxy; or (ii) more than 50%
of the outstanding Shares of the Series.
If the New Portfolio Management Agreement is approved by a
majority vote of the outstanding shares of the Series affected, it
will remain in effect for that Series, having already been approved
by the Board to become effective on February 1, 2000. If the
Shareholders of a Series should fail to approve the New Portfolio
Management Agreement, the Board will determine the appropriate action
to take.
In the event that a quorum is present at the Meeting but
sufficient votes to approve a Proposal are not received, the persons
named as proxies may propose one or more adjournments of such Meeting
to permit further solicitation of proxies for that Proposal provided
they determine that such an adjournment and additional solicitation
is reasonable and in the interest of the shareholders. Such action
should be based on a consideration of all relevant factors including
the nature of the Proposals, 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 the Proposals prior to any
adjournment if sufficient votes have been received for approval of
the Proposals.
The presence in person or by proxy of the holders of thirty
percent (30%) of the outstanding Shares is required to constitute a
quorum at the Meeting. As of the Record Date, the sole shareholders
of the Series were participating insurance companies. Since
participating insurance companies are the legal owners of the Shares,
attendance by the participating insurance companies at the meeting
will constitute a quorum under the Trust's Amended and Restated
Agreement and Declaration of Trust. Shares beneficially held by
Variable Contract Owners present in person or represented by proxy at
the Meeting will be counted for the purpose of calculating the votes
cast on the issues before the Meeting. For purposes of determining
the presence of a quorum and counting votes on the matters presented,
shares represented by abstentions will be counted as present, but not
cast, at the Meeting. Under the 1940 Act, the affirmative vote
necessary to approve a matter under consideration may be determined
with reference to a percentage of votes present at the Meeting, which
would have the effect of treating abstentions as if they were votes
against a proposal.
The Trust knows of no items of business other than the Proposals
mentioned in 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
As described in the Trust's prospectus, investment management
services are provided to the Trust and each of its several Series by
DSI pursuant to an investment management agreement with the Trust.
Subject to the supervision and approval of the Board and approval of
the shareholders of the respective Series, DSI is responsible for
engaging various investment advisory organizations (each, a
"portfolio manager") to provide portfolio management services to the
respective Series. The investment management agreement provides,
among other things,
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that in carrying out its responsibility to supervise and manage all
aspects of the Series' operations, the Manager may engage, subject to
the approval of the Board and, where required, the shareholders of a
Series, a portfolio manager to provide investment advisory services in
relation to the Series, and delegate to the Portfolio Manager the duty,
among other things, to implement the Series' investment program as
determined by DSI, including the duty to determine what issuers and
securities will be purchased for or sold to the Series. The investment
management agreement, including the fees payable to the Manager thereunder,
have not been and are not proposed to be changed in connection with the
portfolio management agreement changes discussed herein.
DSI is also responsible for monitoring and evaluating the
performance of the various portfolio managers. DSI has formulated a
portfolio management strategy for the Trust that would encourage the
Trust's growth and provide a range of investment opportunities for
the Participating Insurance Companies and their Variable Contract
Owners. DSI has come to believe that the Trust's interest--and those
of its shareholders--would best be served by creating, through the
medium of the Trust's several Series, a matrix of diverse but
complimentary investment portfolios. As the Trust's Manager, DSI
believes that the best way to accomplish this goal is to employ
portfolio managers whose differing styles cover the investment
spectrum, from those that favor value-oriented investing to
aggressive growth. DSI believes that the Proposals set forth in this
Proxy Statement represent a step toward making this goal a reality.
These Proposals would, if approved by shareholders, appoint Capital
Guardian, an investment advisory organization to serve as portfolio
manager to the Series. The Proposals in this Proxy Statement were
presented to a meeting of the Trust's Board of Trustees held on
November 16, 1999 with the recommendation of DSI. The Board
considered the Proposals and each were approved by the Board,
including a majority of the Board members ("Independent Trustees")
who are not "interested persons" of the Trust within the meaning of
the 1940 Act.
INFORMATION ABOUT CAPITAL GUARDIAN TRUST COMPANY.
Capital Guardian Trust Company, located at 333 South Hope Street,
Los Angeles, CA 90071, subject to shareholder approval, will begin
management of the Portfolio on February 1, 2000. Capital Guardian is
a wholly owned subsidiary of Capital Group International, Inc. which
is located at the same address as Capital Guardian. Capital Guardian
has been providing investment management services since 1968 and
manages over $98 billion in assets as of September 30, 1999. Capital
Guardian is a Trust Company and, therefore, is not required to
register as an investment advisor pursuant to provisions of the
Investment Advisors Act of 1940.
The portfolios are managed by a team of portfolio managers. Each
portfolio is divided into segments, and each has its own manager who
makes independent decisions within portfolio guidelines and objectives.
In selecting investments for the Managed Global Series, Capital
Guardian seeks to identify foreign stocks that it believes have an
attractive valuation, high return on invested capital, excellent cash
flow, strong balance sheets and strong management. Capital Guardian uses
a research driven "bottom-up" approach in that decisions are made based
upon extensive field research and direct company contact. Capital Guardian
blends its basic value-oriented approach with macroeconomic and political
judgements on the outlook for economies, industries, currencies and markets.
When assessing companies for the Small Cap Series, Capital Guardian uses
a value-oriented approach in which it tries to identify the differences between
the underlying value of a company and the price of its security. Value is
identified in a number of ways, including the relationship of the stock's
current price to earnings, the strength of the company's balance sheet, and
the price-to-book value. Capital Guardian looks at a number of variables,
including the fundamental long-term outlook for the company, the extent to
which shares may be consdered undervalued and the expectations of the market
as a whole.
See Appendix 1 for a list of the directors and the principal
executive officers of Capital Guardian, a table setting forth the
other investment companies managed by Capital Guardian with similar
investment policies and objectives to those of the Series Managed Global
and the Small Cap Series, and other information about Capital Guardian.
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PROPOSAL 1
APPROVAL OF A NEW PORTFOLIO MANAGEMENT AGREEMENT
AMONG THE TRUST, DSI AND CAPITAL GUARDIAN TRUST COMPANY WITH RESPECT
TO THE MANAGED GLOBAL SERIES
THE PUTNAM AGREEMENT WITH RESPECT TO THE MANAGED GLOBAL SERIES
In accordance with provisions for the delegation of authority,
DSI and the Trust entered into a portfolio management agreement with
Putnam Investment Management, Inc. ("Putnam") for the Managed Global
Series pursuant to which portfolio management duties were delegated
by DSI to Putnam. The current Putnam Agreement, dated October 9, 1997
was last approved by the shareholders of the Managed Global Series on
October 24, 1997 for the purposes of initial approval and has been
annually thereafter reapproved by the Board of Trustees, including a
majority of the Independent Trustees.
Under the terms of the Putnam Agreement, Putnam agreed to furnish
the Series with portfolio management services in connection with a
continuous investment program for the Managed Global Series'
portfolio which is to be managed in accordance with the investment
objective, investment policies and restrictions of the Series as set
forth in the prospectus and statement of additional information of
the Trust and in accordance with the Trust's Amended and Restated
Declaration of Trust and By-laws.
The rate of compensation under the Putnam Agreement, as paid by the
Manager, and based on the average daily net assets as follows:
0.70% of first $300 million; and
0.60% on net assets over $300 million
TERM AND TERMINATION. The Putnam Agreement provides that it would
remain in effect for two years from the date of the agreement, and
be renewable thereafter for successive annual periods as long as
such continuance is approved in accordance with the 1940 Act. The
Putnam Agreement can be terminated at any time without penalty upon
60 days' written notice to the other party to the agreement, and
would terminate automatically in the event of its "assignment" by
either party as defined under the 1940 Act. The Putnam Agreement
will be terminated as of the close of business on January 31, 2000.
THE CAPITAL GUARDIAN AGREEMENT WITH RESPECT TO THE MANAGED GLOBAL SERIES
The terms and conditions of the Capital Guardian Agreement, with
respect to the Managed Global Series, are different in several
respects from those of the Putnam Agreement, including the decreased
portfolio manager fee rates payable by DSI, not the Trust, and
certain changes relating to Capital Guardian's compliance
responsibilities. In addition, certain clarifying changes that are
not believed to be material have been made to the Capital Guardian
Agreement.
The Putnam Agreement required Putnam to use its best efforts to
comply with certain provisions of the Internal Revenue Code that
permit the Series to receive the favorable tax treatment most similar
mutual funds receive. The Capital Guardian Agreement requires Capital
Guardian to comply with such provisions, without providing for any
defense that it did not comply despite using its best efforts to do
so. In addition, while both the Capital Guardian Agreement and the
Putnam Agreement require each to maintain and preserve records
related to portfolio transactions, and supply such records to the
Manager, the Putnam Agreement defined Putnam's obligations with
regards to such requirements as "good faith" and "best judgment,"
while the Capital Guardian Agreement provides for such requirements
in unconditional terms.
While each of the Putnam and Capital Guardian Agreements provide
that the Manager shall indemnify the portfolio manager in all cases
except for the willful misfeasance, gross negligence or bad faith of
the portfolio manager, under the Capital Guardian Agreement, claims
made against the portfolio manager based upon alleged untrue
statements in the prospectus and statement of additional information
and sales literature do not require willful
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misfeasance, gross negligence or bad faith of Capital Guardian if such
statements are made in reliance of information furnished by Capital
Guardian.
In addition, in an effort to allocate more accurately duties,
costs and responsibilities, the Capital Guardian Agreement delineates
provisions not included in the Putnam Agreement, such as:
* A provision that specifically requires Capital Guardian to
assist with pricing portfolio assets.
* provisions for participation in the defense of each party by the
other party, limitations on costs associated with investigations, and
restrictions on settlement without prior written consent of the other
party in cases involving findings of "wrongdoing";
* provisions to restrict subadvisors that may be engaged by
Capital Guardian to those approved by a majority of the Trust's
Trustees and also approved by a vote of a majority of the
outstanding voting securities of the Series;
* provisions that allow for brokerage transactions with an
affiliated broker dealer of Capital Guardian, with continuous Trustee
and Manager monitoring
* provisions relating to seed money;
* a general cooperation provision;
* provisions providing for representations, such as
representations that relevant licenses have been obtained; and
* a provision for amendments and notices.
For the services provided by Capital Guardian to the Managed Global
Series, DSI will pay Capital Guardian a fee, based on the average daily
net assets of the Managed Global Series at the following annual rate:
0.65% on first $150 million;
0.55% on next $150 million;
0.45% on next $200 million; and
0.40% thereafter.
Note that while these fees represent a change from the Putnam Agreement,
the fees paid by the Trust, on behalf of the Managed Global Series, to DSI
will not change as a result of this proxy.
At its meeting on November 16, 1999, the Board approved the Capital
Guardian Agreement and recommended it be submitted to shareholders
for their approval. The Capital Guardian Agreement is attached as Exhibit A.
If the Capital Guardian Agreement is approved by a majority of
the outstanding shares of the Series, it will become effective as of
February 1, 2000, and will remain in effect for two years and
thereafter for successive annual periods as long as such continuance
is approved in accordance with the 1940 Act. The Capital Guardian
Agreement may be terminated at any time without penalty upon 60 days'
written notice to the other party to the agreement, and will
automatically terminate in the event of its assignment by any
party as defined under the 1940 Act.
TRUSTEES' RECOMMENDATION -- PROPOSAL ONE
In determining whether it was appropriate to approve the New
Portfolio Management Agreement with Capital Guardian for the Managed
Global Series and to recommend approval to Shareholders, a majority
of the Trustees, including a majority of the Trustees who also are not
interested persons of The Trust, DSI or Capital Guardian, considered
various matters and materials provided by DSI and Capital Guardian.
Information considered by the Trustees included, among other things,
the following: (1) the compensation to be received from DSI (not the
Trust) by Capital Guardian for its portfolio management services and
the fairness and reasonableness of such compensation; (2) the nature
and the quality of the portfolio management services expected to be
rendered under the New Portfolio Management Agreement; (3) the
background and prior experience of Capital Guardian and its team of
investment professionals; (4) the financial condition of Capital
Guardian and its parent Capital Group International, Inc.; (5) that
the engagement of Capital Guardian would also assist in efforts to
increase the Series' net
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assets, which could result in reductions in the Series and the Trust's
expenses through spreading fixed costs over a larger asset base; (6)
the assessment of Capital Guardian's operational and compliance
capabilities; and (7) the performance of other funds with similar
investment objectives and investment styles that are managed by
Capital Guardian.
In light of the circumstances, a majority of the Trustees,
including a majority of the Independent Trustees, concluded that the
terms of the Capital Guardian Agreement are fair and reasonable and
in the best interests of the Series and its shareholders. Also based
upon its evaluation, the Board further concluded that the engagement
of Capital Guardian as Portfolio Manager to the Series would offer
the Series access to highly effective management and advisory
services and capabilities. Accordingly, and as required in accordance
with the 1940 Act, a majority of the Trustees, including a majority
of the Independent Trustees, approved and recommended submission of
the Capital Guardian Agreement to shareholders of the Series for
their approval.
As noted above, from October 24, 1997, Putnam served as the
portfolio manager of the Managed Global Series, pursuant to the terms
of the Putnam Agreement. This agreement was last approved by the
shareholders of the Managed Global Series on October 9, 1997 and has
been thereafter annually reapproved by the Independent Trustees. As
more fully described above, at a meeting of the Board held on November
16, 1999, the Board determined that it would be in the best interests of
the Series to replace the Putnam with another investment management
organization. Accordingly, the Board approved the termination of the
Putnam Agreement and the engagement of Capital Guardian pursuant to
the Capital Guardian Agreement on behalf of the Managed Global
Series. The Capital Guardian Agreement will become effective on
February 1, 2000. The Putnam Agreement will terminate on the same
date that the Capital Guardian Agreement will become effective. The
Capital Guardian Agreement will not result in an increase in fees
payable by shareholders.
The New Portfolio Management Agreement, as approved by the Board,
is submitted to the shareholders of the Managed Global Series for
approval. If the Capital Guardian Agreement is approved by the
shareholders of the Managed Global Series, it will continue in
effect. The Capital Guardian Agreement will remain in force for two
years from its effective date and will then continue in effect from
year to year thereafter in accordance with its terms. If the Capital
Guardian Agreement is disapproved, the Board of Trustees will decide
what action to take.
PROPOSAL 2
APPROVAL OF A NEW PORTFOLIO MANAGEMENT AGREEMENT
AMONG THE TRUST, DSI AND CAPITAL GUARDIAN TRUST COMPANY WITH RESPECT
TO THE SMALL CAP SERIES
THE FRED ALGER AGREEMENT WITH RESPECT TO THE SMALL CAP SERIES
In accordance with provisions for the delegation of authority,
DSI and the Trust entered into an portfolio management agreement with
Fred Alger Investment Management, Inc. ("Fred Alger") for the Small
Cap Series pursuant to which portfolio management duties were
delegated by DSI to Fred Alger. The current Fred Alger Agreement,
dated October 24, 1997, was last approved by the shareholders of the
Small Cap Series on October 9, 1997 and has been thereafter annually
reapproved by the Board of Trustees, including a majority of the
Independent Trustees.
Under the terms of the Fred Alger Agreement, Fred Alger agreed
to furnish the Series with portfolio management services in
connection with a continuous investment program for the Small Cap
Series' portfolio which is to be managed in accordance with the
investment objective, investment policies and restrictions of the
Series as set forth in the prospectus and statement of additional
information of the Trust and in accordance with the Trust's Amended
and Restated Declaration of Trust and By-laws.
The rate of compensation under the Fred Alger Agreement, as paid
by DSI (not the Trust) and based on the average daily net assets, is
0.50%.
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THE CAPITAL GUARDIAN AGREEMENT AND THE FRED ALGER AGREEMENT
The terms and conditions of the Capital Guardian Agreement, with
respect to the Small Cap Series, are substantially identical to the
Fred Alger Agreement, except that the fees paid to the portfolio
manager are lower than under the Fred Alger Agreement. Although such
fees are lower, they are paid by DSI, not the Series, and fees for
the Series will not be lower and thus, will not lower costs to investors.
Therefore, DSI will receive a larger portion of the fees in an
arrangement that better reflects the allocation of responsibilities
between DSI and the Portfolio Manager.
At its meeting on November 16, 1999, the Board approved the Capital
Guardian Agreement which is attached to this proxy as Exhibit A.
For the services provided by Capital Guardian to the Small Cap Series,
DSI will pay Capital Guardian a fee, based on the average daily net assets
of the Small Cap Series at the following annual rates:
0.55% on first $500 million; and
0.35% thereafter.
Note that while these fees represent a change from the Fred Alger Agreement,
the fees paid by the Trust, on behalf of the Small Cap Series, to DSI will not
change as a result of this proxy
If the Capital Guardian Agreement is approved by a majority of
the outstanding shares of the Series, it will become effective as of
February 1, 2000, and will remain in effect for two years and
thereafter for successive annual periods as long as such continuance
is approved in accordance with the 1940 Act. The Capital Guardian
Agreement may be terminated at any time without penalty upon 60 days'
written notice to the other party to the agreement, and will
automatically terminate in the event of its assignment by any
party as defined under the 1940 Act.
TRUSTEES' RECOMMENDATION -- PROPOSAL TWO
In determining whether it was appropriate to approve the New Portfolio
Management Agreement for the Small Cap Series and to recommend approval
to Shareholders, a majority of the Board of Trustees, including a majority
of the Trustees who are not interested persons of the Trust, DSI or Capital
Guardian, considered various matters and materials provided by DSI and
Capital Guardian. Information considered by the Trustees included, among
other things, the following: (1) the compensation to be received from DSI
(not the Trust) by Capital Guardian for its portfolio management services
and the fairness and reasonableness of such compensation; (2) the nature
and the quality of the portfolio management services expected to be rendered
under the New Portfolio Management Agreement; (3) the background and prior
experience of Capital Guardian and its team of investment professionals;
(4) the financial condition of Capital Guardian and its parent Capital
Group International, Inc.; (5) that the engagement of Capital Guardian
would also assist in efforts to increase the Series' net assets, which
could result in reductions in the Series' and the Trust expenses through
spreading fixed costs over a larger asset base; (6) the assessment of
Capital Guardian's operational and compliance capabilities; and (7) the
performance of other funds with similar investment objectives and investment
styles that are managed by Capital Guardian.
In light of the circumstances, a majority of the Trustees,
including a majority of the Independent Trustees, concluded that the
terms of the Capital Guardian Agreement are fair and reasonable and
in the best interests of the Series and its shareholders. Also based
upon its evaluation, the Board further concluded that the engagement
of Capital Guardian as investment advisor to the Series would offer
the Series access to highly effective management and advisory
services and capabilities. Accordingly, and as required in
accordance with the 1940 Act, a majority of the Trustees, including a
majority of the Independent Trustees, approved and recommended
submission of the Capital Guardian Agreement to shareholders of the
Series for their approval.
As noted above, from October 24, 1996, Fred Alger served as the
portfolio manager of the Small Cap Series, pursuant to the terms of
the current Fred Alger Agreement. The agreement was last approved by
shareholders of the Small Cap Series on October 9, 1997 and has been
thereafter annually reapproved by the Board, including a majority of
the Independent Trustees. As more fully described above, the Board
determined that it would be in the best interests of the Series to
replace the Fred Alger with another investment management organization.
Accordingly, at a meeting of the Board held on November 16, 1999, the
Board approved the termination of the Fred Alger Agreement and the
engagement of Capital Guardian pursuant to the Capital Guardian Agreement
on behalf of the Small Cap Series. The Capital Guardian Agreement will
become effective on February 1, 2000. The Fred Alger
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Agreement will terminate on the same date that the Capital guardian Agreement
will become effective. The Capital Guardian Agreement will not result in
an increase in fees payable by shareholders.
The New Portfolio Management Agreement, as approved by the Board,
is submitted for approval by the shareholders of the Managed Global
Series. If the Capital Guardian Agreement is approved by the
shareholders of the Managed Global Series, it will continue in
effect. The Capital Guardian Agreement will remain in force for two
years from its effective date and will then continue in effect from
year to year thereafter in accordance with its terms.
MANAGED GLOBAL SERIES AND SMALL CAP SERIES SHAREHOLDER ACTION REQUIRED
At the Meeting, shareholders of each Series are being asked to
approve a portfolio management agreement with a new Portfolio
Manager, Capital Guardian. If the new Agreement is approved by a
Series, it will take effect with respect to that Series. If the new
Agreement is disapproved by the shareholders of either Series, the
Board will determine what action to take.
OUTSTANDING SHARES
As of the Record Date, the following number of Shares were
outstanding for each Series of the Trust whose shareholders are being
asked to vote for a change:
SERIES SHARES OUTSTANDING
Managed Global 7,958,216.905
Small Cap 14,835,116.244
No Trustee or executive officer beneficially owns any substantial
interest in any Series of the Trust.
As of the Record Date, no contract owners were known to the Trust
to be the beneficial owner of more than 5% of the Shares of any
Series of the Trust subject to this Proxy Statement.
For the fiscal year ended December 1998, Managed Global Series
paid $1,096 in commissions to ING Barings, an affiliate of the
Manager, DSI. This represented 0.17% of total commissions paid on
behalf of the Series. Also for the fiscal year ending December 1998,
the Portfolio Managers to the Small Cap Series paid $262,004 in
commissions to Fred Alger & Co., Inc., an affiliate of Fred Alger
Investment Management, Inc. This represented 98.18% of total
commissions paid on behalf of the Series.
For the 1999 period ending November 1999, Managed Global Series
did not make any brokerage transaction through an affiliated broker.
Also for the 1999 period ended November 1999, the Portfolio Managers
to the Small Cap Series paid $282,450 in commissions to Fred Alger &
Co., Inc. This represented 97.71% of total commissions paid.
For the fiscal year ending December 1998, DSI paid on behalf of
the Managed Global Series a total of $826,757 in portfolio management
fees. Had the proposed fee been in effect, the portfolio manager
would have received $767,703 in portfolio management fees. For the
fiscal year ending December 1998, DSI paid on behalf of the Small Cap
Series a total of $473,285 in portfolio management fees. Had the
proposed fee been in effect for 1998, the portfolio manager would have
received $615,271. The proposed fees would have represented a 17.1%
decline for the Managed Global Series and a 30.0% increase for the
Small Cap Series. The 30.0% increase, with regards to the Small Cap
Series, results from a breakpoint schedule that results in higher fees
for fewer assets, but will cause the rate of compensation payable by DSI
to decrease as assets increase.
For the period ending November 1999, DSI paid on behalf of the
Managed Global Series a total of $845,041 in portfolio management
fees. Had the proposed fee been in effect, the portfolio manager
would have received $784,681 in portfolio management fees. For the
1999 period ending November 1999, DSI paid on behalf of the Small Cap
Series a total of $916,818 in portfolio management fees. Had the
proposed fee been in effect, the portfolio managers would have
received $1,122,283. The proposed fee would have represented a 7.1%
decline for the Managed Global Series and a 22.4% increase for the
Small Cap Series. The 22.4% increase, with regards to the Small Cap
Series, results from a breakpoint schedule that results in higher fees
for fewer assets, but will cause the rate of compensation payable by DSI
to decrease more rapidly as assets increase.
8
<PAGE>
<PAGE>
OFFICERS AND DIRECTORS OF THE TRUST
The principal executive officers of the Trust and their ages and
principal occupations are set forth following. The executive officers
of the Trust are elected annually and each serves until his or her
successor shall have been duly elected and qualified.
Barnett Chernow, age 49, serves as President of the Trust and
Chairman of the Board of Trustees since December 1999. Additionally,
Mr. Chernow is President, Golden American and First Golden, May 1998
to present; Executive Vice President, Directed Services, Inc., October
1993 to present; Vice President, Equitable Life, 1996 to present.
Myles R. Tashman, age 57, serves as Secretary of the Trust.
Additionally, he is Executive Vice President and Secretary, Golden
American since 1993, General Counsel since July 1996 and Director
since January 1998; Executive Vice President and Secretary, DSI since
1993, General Counsel since July 1996 and Director since January
1998; Assistant Secretary, Equitable Life since 1996.
Mary Bea Wilkinson, age 43, serves as Treasurer of the Trust.
Additionally, she is Senior Vice President of First Golden American
Life Insurance Company of New York. Formerly, she was Senior Vice
President, Golden American, November 1993 to December 1996;
President, DSI, January 1995 to December 1996.
J. Michael Earley, age 54, serves as Trustee of the Trust. President,
and Chief Executive Officer, Bankers Trust Company, Des Moines, Iowa
since July 1992; President and Chief Executive Officer, Mid-America
Savings Bank, Waterloo, Iowa from April, 1987 to June, 1992.
R. Barbara Gitenstein, age 51, serves as Trustee of the Trust. President,
The College of New Jersey since January 1999; Trustee Provost, Drake
University from July 1992 to December 1998; Assistant Provost, State
University of New York from August, 1991 to July, 1992; Associate Provost,
State University of New York-Oswego from January, 1989 to August, 1991.
Robert A. Grayson, age 72, serves as Trustee of the Trust. Co-founder,
Grayson Associates, Inc. since 1970; Adjunct Professor of Marketing, New York
University School of Business Administration; former Director, The Golden
Financial Group, Inc.; former Senior Vice President, David & Charles
Advertising. Mr. Grayson has served in these capacities for the last five years.
Stanley B. Seidler, age 71, serves as Trustee of the Trust. President,
Iowa Periodicals, Inc. since 1990 and President, Excell Marketing L.C.
since 1994.
Roger B. Vincent, age 54, serves as Trustee of the Trust. President,
Springwell Corporation; Director Petralone, Inc.; formerly, Managing
Director Bankers Trust Company. Mr. Vincent has served in these capacities
for the last five years.
Elizabeth J. Newell, age 52, serves as Trustee of the Trust. President
and Chief Executive Officer of KRAGIE/NEWELL, Inc. Ms. Newell has served in
this capacity for the last five years.
DISTRIBUTOR
Shares of the Trust are distributed through Directed Services,
Inc. (the "Distributor"). The Distributor's address is 1475 Dunwoody
Drive, West Chester, Pennsylvania 19380. The Distributor 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.
ADJOURNMENT
In the event that sufficient votes in favor of the proposal set
forth in the Notice of Meeting are not received by the time scheduled
for the Meeting, the persons named as Proxies may propose one or more
adjournments of the Meeting after the date set for the original
Meeting to permit further solicitation of proxies with respect to the
proposal. In addition, if, in the judgment of the persons named as
Proxies, it is advisable to defer action on the proposal, 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 question in
person or by proxy at the session of the Meeting to be adjourned, as
required by the Trust's Amended and Restated Agreement and
Declaration of Trust and By-Laws. The persons named as Proxies will
vote in favor of such adjournment those Proxies which they are
entitled to vote in favor the proposal. They will vote against any
such adjournment those Proxies required to be voted against the
proposal. None of the costs of any additional solicitation
9
<PAGE>
<PAGE>
and of any adjourned session will be borne by the Trust. If the proposal
receives sufficient favorable votes by the time of the Meeting, the
proposal will be acted upon and such action will be final.
ANNUAL REPORT
The Trust's 1998 Annual Report to Shareholders was mailed on or
about March 1, 1999. The most recent Semi-annual Report of the Trust,
including unaudited semi-annual financial statements for the period
ended June 30, 1999, was mailed to shareholders on August 27, 1999.
IF YOU SHOULD DESIRE AN ADDITIONAL COPY OF EITHER OF THESE REPORTS,
EACH CAN BE OBTAINED, WITHOUT CHARGE, FROM DSI BY CALLING (800) 366-
0066.
COSTS OF SOLICITATION
The costs associated with the Meeting will be paid by DSI.
Neither the Trust nor its Shareholders will bear any costs associated
with this meeting.
OTHER BUSINESS
The management of the Trust knows of no other business to be
presented at the meeting other than the matters set forth in this
Statement. If any other business properly comes before the meeting,
the persons designated as proxies will exercise their best judgment
in deciding how to vote on such matters.
SHAREHOLDER PROPOSALS
Pursuant to the applicable law 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
2000 or in subsequent years until so required by the 1940 Act or
other applicable laws. For those years in which annual shareholder
meetings are held, proposals which shareholders of the Trust intend
to present for inclusion in the proxy materials with respect to the
annual meeting of shareholders must be received by the Trust within a
reasonable period of time before the solicitation is made.
Please complete the enclosed authorization card and return it
promptly in the enclosed self-addressed postage-paid envelope. You
may revoke your proxy at any time prior to the meeting by written
notice to the Trust or by submitting an authorization card bearing a
later date.
By Order of the Board of Trustees
/s/ Myles R. Tashman
---------------------------------
Myles R. Tashman, Secretary
January 6, 2000
West Chester, PA
10
<PAGE>
<PAGE>
APPENDIX 1
OTHER INFORMATION REGARDING CAPITAL GUARDIAN TRUST COMPANY
The directors and principal executive officers of Capital Guardian
Trust Company and their principal occupations are as shown below. The
business address of each person is:
Capital Guardian Trust Company
Directors and Officers
(as of November 30, 1999)
NAME AFFILIATIONS WITHIN LAST TWO YEARS
- ---- ----------------------------------
Timothy D. Amour Director, Capital Guardian
Trust Company, Capital
Research and Management
Company and Capital
Management Services, Inc.;
Chairman and Chief Executive
Officer, Capital Research
Company.
Donnalisa Barnum Senior Vice President,
Capital Guardian Trust
Company; Vice President,
Capital International, Inc.
and Capital International
Limited.
Andrew F. Barth Director, Capital Guardian
Trust Company and ,Capital
Research and Management
Company; Director and
Research Director, Capital
International Research,
Inc.; President, Capital
Guardian Research Company;
Formerly Director and
Executive Vice President,
Capital Guardian Research
Company.
Michael D. Beckman Senior Vice President,
Treasurer and Director,
Capital Guardian Trust
Company; Director, Capital
Guardian Trust Company of
Nevada; Treasurer, Capital
International Research, Inc.
and Capital Guardian
Research Company; Director
and Treasurer, Capital
Guardian (Canada), Inc.;
Formerly Chairman and
Director, Capital
International Asia Pacific
Management Company.
Michael A. Burik Senior Counsel, The Capital
Group Companies, Inc.;
Senior Vice President,
Capital Guardian Trust
Company.
Elizabeth A. Burns Senior Vice President,
Capital Guardian Trust
Company.
Larry P. Clemmensen Director, Capital Guardian
Trust Company and American
Funds Distributors, Inc.;
Chairman and Director,
American Funds Service
Company; Director and
President, The Capital Group
Companies, Inc. and Capital
Management Services, Inc.;
Senior Vice President and
Director, Capital Research and
Management Company, Treasurer,
Capital Strategy, Inc.
Kevin G. Clifford Director and President,
American Funds Distributors,
Inc.; Director, Capital
Guardian Trust Company.
A-1
<PAGE>
<PAGE>
Roberta A. Conroy Senior Vice President,
Director and Counsel, Capital
Guardian Trust Company; Senior
Vice President and Secretary,
Capital International, Inc.;
Assistant General Counsel, The
Capital Group Companies, Inc.,
Secretary, Capital Guardian
International, Inc.; Formerly,
Secretary, Capital Management
Services, Inc.
John B. Emerson Senior Vice President, Capital
Guardian Trust Company;
Director, Capital Guardian
Trust Company, a Nevada
Corporation.
Michael Ericksen Senior Vice President, Capital
Guardian Trust Company;
Director and Senior Vice
President, Capital
International Limited.
David I. Fisher Vice Chairman and Director,
Capital International, Inc.,
Capital International Limited
and Capital International
K.K.; Chairman and Director,
Capital International S. A.
and Capital Guardian Trust
Company; Director and
President, Capital
International Limited
(Bermuda); Director, The
Capital Group Companies, Inc.,
Capital International
Research, Inc., Capital Group
Research, Inc. and Capital
Research and Management
Company.
Richard N. Havas Senior Vice President, Capital
Guardian Trust Company,
Capital International, Inc.
and Capital International
Limited; Director and Senior
Vice President, Capital
International Research, Inc.;
Director and Senior Vice
President Capital Guardian
(Canada), Inc.
Frederick M. Hughes, Jr Senior Vice President, Capital
Guardian Trust Company.
William H. Hurt Senior Vice President and
Director, Capital Guardian
Trust Company; Chairman and
Director, Capital Guardian
Trust Company, a Nevada
Corporation and Capital
Strategy Research, Inc.;
Formerly, Director, The
Capital Group Companies, Inc.
Peter C. Kelly Senior Vice President, Capital
Guardian Trust Company;
Assistant General Counsel, The
Capital Group Companies, Inc.;
Director and Senior Vice
President, Capital
International, Inc.
Robert G. Kirby Chairman Emeritus, Capital
Guardian Trust Company; Senior
Partner, The Capital Group
Companies, Inc.
Nancy J. Kyle Senior Vice President and
Director, Capital Guardian
Trust Company; President and
Director, Capital Guardian
(Canada), Inc.
Karin L. Larson Director, The Capital Group
Companies, Inc., Capital Group
Research, Inc., Capital
Guardian Trust Company,
Director and Chairman, Capital
Guardian Research Company and
Capital International
Research, Inc., Formerly,
Director and Senior Vice
President , Capital Guardian
Research Company.
Appendix 1 A-2
<PAGE>
<PAGE>
James R. Mulally Senior Vice President and
Director, Capital Guardian
Trust Company; Senior Vice
President, Capital International
Limited; Vice President,
Capital Research Company;
Formerly, Director, Capital
Guardian Research Company.
Shelby Notkin Senior Vice President, Capital
Guardian Trust Company; Director,
Capital Guardian Trust Company, a
Nevada Corporation.
Mary M. O'Hern Senior Vice President, Capital
Guardian Trust Company and Capital
International Limited; Vice
President, Capital International, Inc.
Jeffrey C. Paster Senior Vice President, Capital
Guardian Trust Company.
Robert V. Pennington Senior Vice President, Capital
Guardian Trust Company; President
and Director Capital Guardian
Trust Company, a Nevada
Corporation Company.
Jason M. Pilalas Director, Capital Guardian
Trust Company; Senior Vice
President and Director,
Capital International
Research, Inc.; Formerly,
Director and Senior Vice
President, Capital Guardian
Research Company.
Robert Ronus President and Director,
Capital Guardian Trust
Company; Chairman and
Director, Capital Guardian
(Canada), Inc., Director,
Capital International, Inc.
and Capital Guardian
Research Company; Senior
Vice President, Capital
International, Inc.; Capital
International Limited and
Capital International S.A.;
Formerly, Chairman, Capital
Guardian International
Research Company and Director,
Capital International, Inc.
James F. Rothenberg Director, American Funds
Distributors, Inc., American
Funds Service Company, The
Capital Group Companies,
Inc., Capital Group Research,
Inc., Capital Guardian Trust
Company and Capital Management
Services, Inc.; Director and
President, Capital Research and
Management, Inc.; Formerly,
Director of Capital Guardian Trust
Company, a Nevada Corporation,
and Capital Research Company.
Theodore R. Samuels Senior Vice President and
Director, Capital Guardian
Trust Company; Director,
Capital International
Research, Inc.; Formerly,
Director, Capital Guardian
Research Company.
Lionel A. Sauvage Senior Vice President,
Capital Guardian Trust
Company; Vice President,
Capital International
Research, Inc.; Formerly,
Director, Capital Guardian
Research Company.
John H. Seiter Executive Vice President and
Director, Capital Guardian
Trust Company; Senior Vice
President, Capital Group
International, Inc.; and
Vice President, The Capital
Group Companies, Inc.
Karen Skinner-Twoney Vice President, Capital
Guardian Trust Company;
Director, Vice President and
Treasurer, Capital Guardian
Trust Company, a Nevada
Corporation.
Appendix 1 A-3
<PAGE>
<PAGE>
Eugene P. Stein Executive Vice President
and Director, Capital Guardian
Trust Company; Formerly,
Director, Capital Guardian
Research Company.
Phil A. Swan Senior Vice President,
Capital Guardian Trust
Company.
Shaw B. Wagener Director, Capital Guardian
Trust Company, Capital
International Asia Pacific
Management Company S.A.,
Capital Research and
Management Company and
Capital International
Management Company S.A.;
President and Director,
Capital International, Inc.;
Senior Vice President,
Capital Group International,
Inc.
Joanne Weckbacher Senior Vice President,
Capital Guardian Trust
Company.
Eugene M. Waldron Senior Vice President,
Capital Guardian Trust
Company.
Appendix 1 A-4
<PAGE>
<PAGE>
Capital Guardian Trust Company manages the following registered investment
companies with similiar investment style as that of the Small Cap Series:
<TABLE>
<CAPTION>
Name Fee Schedule* Assets at 09/30/99
- ---- ------------- ------------------
<S> <C> <C>
Pacific Select Fund First 30,000,000 0.500% 290,074,189
Next 30,000,000 0.400%
Over 60,000,000 0.300%
Manulife-Small Cap Blend Trust On all assets 0.550% 31,253,766
*Fees may vary between accounts due to the level of services that may be
provided by CGTC or its affiliates.
</TABLE>
Capital Guardian Trust Company manages the following registered investment
companies with similiar investment style as that of the Managed Global Series:
NON-U.S. EQUITY
<TABLE>
<CAPTION>
Name Fee Schedule* Assets at 09/30/99
- ---- ------------- ------------------
<S> <C> <C>
The Diversified Investors Funds First 25,000,000 0.750% 443,049,314
Group Next 25,000,000 0.600%
Next 200,000,000 0.425%
Over 250,000,000 0.375%
Fremont International Growth Fund First 25,000,000 0.750% 48,138,129
Next 25,000,000 0.600%
Next 200,000,000 0.425%
Over 250,000,000 0.375%
Republic International Equity Fund First 25,000,000 0.700% 272,605,233
Next 25,000,000 0.550%
Next 200,000,000 0.425%
Over 250,000,000 0.375%
SEI Institutinal International First 25,000,000 0.750% 483,517,578
Trust-IEP
SEI Institutinal International Next 25,000,000 0.600% 184,863,098
Trust-IEF
American General International First 25,000,000 0.750% 8,050,371
Value Fund-AG3 Next 25,000,000 0.600%
Next 200,000,000 0.425%
Over 250,000,000 0.375%
American General International First 25,000,000 0.750% 7,800,977
Value Fund-AG2 Next 25,000,000 0.600%
Next 200,000,000 0.425%
Over 250,000,000 0.375%
</TABLE>
Appendix 1 A-5
<PAGE>
<PAGE>
NON-U.S. EQUITY
<TABLE>
<CAPTION>
Name Fee Schedule* Assets at 09/30/99
- ---- ------------- ------------------
<S> <C> <C>
New Covenant Growth Fund First 25,000,000 0.750% 70,175,776
Next 25,000,000 0.600%
Next 200,000,000 0.425%
Over 250,000,000 0.375%
ICMA Retirement Trust- First 25,000,000 0.750% 81,025,851
International Equity Next 25,000,000 0.600%
Next 200,000,000 0.425%
Over 250,000,000 0.375%
WM Trust International Growth Fund First 25,000,000 0.750% 174,379,468
WM Variable Trust International Next 25,000,000 0.600% 56,106,782
Growth Fund Next 200,000,000 0.425%
Over 250,000,000 0.375%
Equitable - Non-U.S. Equity First 150,000,000 0.650% 15,308,874
*Fees may vary between accounts due to the level of services that may be
provided by CGTC and its affiliates
</TABLE>
Appendix 1 A-6
<PAGE>
<PAGE>
EXHIBIT A
SUBADVISORY AGREEMENT
THE GCG TRUST
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of _________, 2000, among The GCG
Trust (the "Trust"), a Massachusetts business trust, Directed
Services, Inc. (the "Manager"), a New York corporation, and Capital
Guardian Trust Company ("Portfolio Manager"), a California
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
October 24, 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
Capital Guardian Trust Company to act as Portfolio Manager to the
Series designated on Schedule A of this Agreement (each a "Series")
for the periods and on the terms set forth in this Agreement. The
Portfolio Manager accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
In the event the Trust designates one or more series other than
the Series with respect to which the Trust and the Manager wish to
retain the Portfolio Manager to render investment advisory services
hereunder, they shall promptly notify the Portfolio Manager in
writing. If the Portfolio Manager is willing to render such
services, it shall so notify the Trust and Manager in writing,
whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of
the Trust's Board of Trustees and the Manager, the Portfolio Manager
will provide a continuous investment program for each Series'
portfolio and determine the composition of the assets of each Series'
portfolio, including determination of the purchase, retention, or
sale of the securities, cash, and other investments contained in the
portfolio. The Portfolio Manager will provide investment research
and conduct a continuous program of evaluation, investment, sales,
and reinvestment of each Series' assets by determining the securities
and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Series, when these transactions should
be executed, and what portion of the assets of each Series should be
held in the various securities and other investments in which it may
invest, and the Portfolio Manager is hereby authorized to execute and
perform such services on behalf of each Series. To the extent
permitted by the investment policies of the Series, the Portfolio
Manager shall make 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
E-1
<PAGE>
<PAGE>
Manager will provide the services under this Agreement in accordance
with the Series' investment objective or objectives, policies, and
restrictions as stated in the Trust's Registration Statement filed
with the Securities and Exchange Commission (the "SEC"), as from time
to time amended, copies of which shall be sent to the Portfolio
Manager by the Manager upon filing with the SEC. The Portfolio
Manager further agrees as follows:
(a) The Portfolio Manager shall (1) perform in accordance with
the requirements of Subchapter M (to the extent reasonably related to
the scope of its duties as Portfolio Manager as contemplated under
this Agreement); and (2) comply with the diversification requirements
of Section 817(h) of the Internal Revenue Code and regulations issued
thereunder in managing each Series. 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 the following duties:
(i) manage the Series assets in accordance with the Series investment
objective(s) and policies as stated in the Prospectus and Statement
of Additional Information; (ii) make day-to-day investment decisions
for the Series; and (iii) place purchase and sale orders for
portfolio transactions on behalf of the Series, pursuant to the 1940
Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations, with any applicable
procedures adopted by the Trust's Board of Trustees of which the
Portfolio Manager has been notified in writing, and the provisions of
the Registration Statement of the Trust under the Securities Act of
1933 (the "1933 Act") and the 1940 Act, as supplemented or amended,
of which the Portfolio Manager has received a copy ("Registration
Statement"). The Manager or the Trust will notify the Portfolio
Manager of pertinent provisions of applicable state insurance law
with which the Portfolio Manager must comply under this Paragraph
2(b).
(c) On occasions when the Portfolio Manager deems the purchase
or sale of a security to be in the best interest of a Series as well
as of other investment advisory clients of the Portfolio Manager or
any of its affiliates, the Portfolio Manager may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be so sold or purchased
with those of its other clients where such aggregation is not
inconsistent with the policies set forth in the Registration
Statement. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be
made by the Portfolio Manager in a manner that is fair and equitable
in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Trust and to such other clients, subject
to review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for
a Series, the Portfolio Manager will arrange for the transmission to
the custodian and portfolio accounting agent for the Series on a
daily basis, such confirmation, trade tickets, and other documents
and information, including, but not limited to, Cusip, Sedol, or
other numbers that identify securities to be purchased or sold on
behalf of the Series, as may be reasonably necessary to enable the
custodian and portfolio accounting agent to perform its
administrative and recordkeeping responsibilities with respect to the
Series. With respect to portfolio securities to be purchased or sold
through the Depository Trust Company, the Portfolio Manager will
arrange for the automatic transmission of the confirmation of such
trades to the Trust's custodian and portfolio accounting agent.
(e) The Portfolio Manager will assist the portfolio accounting
agent for the Trust in determining or confirming, consistent with the
procedures and policies stated in the Registration Statement for the
Trust, the value of any portfolio securities or other assets of the
Series for which the portfolio accounting agent seeks assistance from
or identifies for review by the Portfolio Manager, and the parties
agree that the Portfolio Manager shall not bear responsibility or
liability for the determination or accuracy of the valuation of any
portfolio securities and other assets of the Series except to the
extent that the Portfolio Manager exercises judgment with respect to
any such valuation.
Exhibit A E-2
<PAGE>
<PAGE>
(f) The Portfolio Manager will make available to the Trust and
the Manager, promptly upon request, all of the Series' investment
records and ledgers maintained by the Portfolio Manager (which shall
not include the records and ledgers maintained by the custodian and
portfolio accounting agent for the Trust) as are necessary to assist
the Trust and the Manager to comply with requirements of the 1940 Act
and the Investment Advisers Act of 1940 (the "Advisers Act"), as well
as other applicable laws. The Portfolio Manager will furnish to
regulatory authorities having the requisite authority any information
or reports in connection with such services which may be requested in
order to ascertain whether the operations of the Trust are being
conducted in a manner consistent with applicable laws and
regulations.
(g) The Portfolio Manager will provide reports to the Trust's
Board of Trustees for consideration at meetings of the Board on the
investment program for the Series and the issuers and securities
represented in the Series' portfolio, and will furnish the Trust's
Board of Trustees with respect to the Series such periodic and
special reports as the Trustees and the Manager may reasonably
request.
(h) In rendering the services required under this Agreement,
the Portfolio Manager may, from time to time, employ or associate
with itself such person or persons as it believes necessary to assist
it in carrying out its obligations under this Agreement. However,
the Portfolio Manager may not retain as subadviser any company that
would be an "investment adviser," as that term is defined in the 1940
Act, to the Series unless the contract with such company is approved
by a majority of the Trust's Board of Trustees and a majority of
Trustees who are not parties to any agreement or contract with such
company and who are not "interested persons," as defined in the 1940
Act, of the Trust, the Manager, or the Portfolio Manager, or any such
company that is retained as subadviser, and is approved by the vote
of a majority of the outstanding voting securities of the applicable
Series of the Trust to the extent required by the 1940 Act. The
Portfolio Manager shall be responsible for making reasonable
inquiries and for reasonably ensuring that any employee of the
Portfolio Manager, any subadviser that the Portfolio Manager has
employed or with which it has associated with respect to the Series,
or any employee thereof has not, to the best of the Portfolio
Manager's knowledge, in any material connection with the handling of
Trust assets:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor arising out of conduct involving embezzlement,
fraudulent conversion, or misappropriation of funds or
securities, involving violations of Sections 1341, 1342, or 1343
of Title 18, United States Code, or involving the purchase or
sale of any security; or
(ii) been found by any state regulatory authority, within the
last ten (10) years, to have violated or to have acknowledged
violation of any provision of any state insurance law involving
fraud, deceit, or knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state
securities laws involving fraud, deceit, or knowing
misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is
responsible for decisions to buy and sell securities and other
investments for each Series' portfolio, broker-dealer selection, and
negotiation of brokerage commission rates. The Portfolio Manager's
primary consideration in effecting a security transaction will be to
obtain the best execution for the Series, taking into account the
factors specified in the prospectus and/or statement of additional
information for the Trust, which include price (including the
applicable brokerage commission or dollar spread), the size of the
order, the nature of the market for the security, the timing of the
transaction, the reputation, the experience and financial stability
of the broker-dealer involved, the quality of the 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
Exhibit A E-3
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<PAGE>
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. In order to assist the
Manager in reviewing and updating the Trust's Registration Statement
filed with the SEC, the Portfolio Manager shall upon request provide
the Manager with a description of its organization, the portfolio
managers assigned to manage the Series, the method, style and
techniques by which it intends to manage each Series, and any other
relevant information about the Portfolio Manager that the Manager may
reasonably request. The Portfolio Manager represents and warrants
that such written information provided shall be accurate and
complete, but not necessarily tailored for specific Registration
Statement disclosure. Notwithstanding anything to the contrary
herein, it is understood that it is the responsibility of the Manager
and/or counsel to the Trust to meet all disclosure and other
requirements applicable to the Trust's Registration Statement. The
Portfolio Manager further represents and warrants that it is a duly
registered investment adviser under the Advisers Act, or
alternatively that it is not required to be a registered investment
adviser under the Advisers Act to perform the duties described in
this Agreement, and that it is a duly registered investment adviser
in all states in which the Portfolio Manager is required to be
registered.
5. EXPENSES. During the term of this Agreement, the Portfolio
Manager will pay all expenses incurred by it and its staff and for
their activities in connection with its portfolio management duties
under this Agreement. The Manager or the Trust shall be responsible
for all the expenses of the Trust's operations including, but not
limited to:
(a) Expenses of all audits by the Trust's independent public
accountants;
(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including
recordkeeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value
of each Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and
Analyses of International Management Reports (as appropriate) for
each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's
executive officers and employees, if any, who are not officers,
directors, stockholders, or employees of the Portfolio Manager or an
affiliate of the Portfolio Manager;
(h) Taxes levied against the Trust;
Exhibit A E-4
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<PAGE>
(i) Brokerage fees and commissions in connection with the
purchase and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and
reports of the Trust to its shareholders, the filing of reports with
regulatory bodies, the maintenance of the Trust's existence, and the
regulation of shares with federal and state securities or insurance
authorities;
(l) The Trust's legal fees, including the legal fees related to
the registration and continued qualification of the Trust's shares
for sale;
(m) Costs of printing stock certificates representing shares of
the Trust;
(n) Trustees' fees and expenses to trustees who are not
officers, employees, or stockholders of the Portfolio Manager or any
affiliate thereof;
(o) The Trust's pro rata portion of the fidelity bond required
by Section 17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
(q) Extraordinary expenses of the Trust as may arise including
expenses incurred in connection with litigation, proceedings, and
other claims (unless the Portfolio Manager is responsible for such
expenses under Section 14 of this Agreement), and the legal
obligations of the Trust to indemnify its Trustees, officers,
employees, shareholders, distributors, and agents with respect
thereto; and
(r) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will
pay the Portfolio Manager a fee, payable as described in Schedule B.
7. SEED MONEY. The Manager agrees that the Portfolio Manager
shall not be responsible for providing money for the initial
capitalization of the Series.
8. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall promptly notify
the Manager and the Trust (1) in the event that the SEC or other
governmental authority has censured the Portfolio Manager; placed
limitations upon its activities, functions or operations; suspended
or revoked its registration, if any, as an investment adviser; or has
commenced proceedings or an investigation that may result in any of
these actions, (2) upon having a reasonable basis for believing that
the Series has ceased to qualify or might not qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code,
or (3) upon having a reasonable basis for believing that the Series
has ceased to comply with the diversification provisions of Section
817(h) of the Internal Revenue Code or the regulations thereunder.
The Portfolio Manager further agrees to notify the Manager and the
Trust promptly of any material fact known to the Portfolio Manager
respecting or relating to the Portfolio Manager that is not contained
in the Registration Statement or prospectus for the Trust, or any
amendment or supplement thereto, and is required to be stated therein
or necessary to make the statements therein not misleading, or of any
statement contained therein that becomes untrue in any material
respect.
(b) The Manager agrees that it shall immediately notify the
Portfolio Manager (1) in the event that the SEC has censured the
Manager or the Trust; placed limitations upon either of their
activities, functions, or operations; suspended or revoked the
Manager's registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these
actions, (2) upon having
Exhibit A E-5
<PAGE>
<PAGE>
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,
Capital Guardian Trust Company, or any of its affiliates (other than
the Manager), or the use any of derivative of the name "Capital
Guardian Trust Company" or any affiliate listed on Schedule C or any
logo associated therewith. The Trust and the Manager agree that they
will not use any such material without the prior consent of the
Portfolio Manager, which consent shall not be unreasonably withheld.
In the event of the termination of this Agreement, the Trust and the
Manager will furnish to the Portfolio Manager copies of any of the
above-mentioned materials that refer or relate in any way to the
Portfolio Manager;
(b) the Trust and the Manager will furnish to the Portfolio
Manager such information relating to either of them or the business
affairs of the Trust as the Portfolio Manager shall from time to time
reasonably request in order to discharge its obligations hereunder;
(c) the Manager and the Trust agree that neither the Trust, the
Manager, nor affiliated persons of the Trust or the Manager shall
give any information or make any representations or statements in
connection with the sale of shares of the Series concerning the
Portfolio Manager or the Series other than the information or
representations contained in the Registration Statement, prospectus,
or statement of additional information for the Trust, as they may be
amended or supplemented from time to time, or in reports or proxy
statements for the Trust, or in sales literature or other promotional
material approved in advance by the Portfolio Manager, except with
the prior permission of the Portfolio Manager.
(d) The Manager hereby warrants and represents to the Portfolio
Manager that (a) it has obtained all applicable licenses, permits,
registrations and approvals that may be required in order to serve in
its designated capacities with respect to the Series, and shall
continue to keep current such licenses, permits, registrations and
approvals for so long as this Agreement is in effect; (b) it is not
prohibited by the 1940 Act or other applicable laws and regulations
from performing the services contemplated by this Agreement; (c) it
will immediately notify the Portfolio Manager of the occurrence of
any event that would disqualify it from serving in its designated
capacities with respect to the Series; and (d) this Agreement has
been duly and validly authorized, executed and delivered on behalf
of the Manager and is valid and binding Agreement of the Manager
enforceable in accordance with its terms.
(e) The Portfolio Manager hereby warrants and represents to the
Manager that (a) it has obtained all applicable licenses, permits,
registrations and approvals that may be required in order to serve in
its
Exhibit A E-6
<PAGE>
<PAGE>
designated capacities with respect to the Series, and shall
continue to keep current such licenses, permits, registrations and
approvals for so long as this Agreement is in effect; (b) it is not
prohibited by the 1940 Act or other applicable laws and regulations
from performing the services contemplated by this Agreement; (c) it
will immediately notify the Manager of the occurrence of any event
that would disqualify it from serving in its designated capacities
with respect to the Series; and (d) this Agreement has been duly and
validly authorized, executed and delivered on behalf of the Portfolio
Manager and is valid and binding Agreement of the Portfolio Manager
enforceable in accordance with its terms.
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 Portfolio Manager shall indemnify and hold harmless the
Trust and the Manager (and its affiliated companies and their
respective officers, directors and employees) from any and all
claims, losses, liabilities or damages (including reasonable
attorney's fees and other related expenses) arising out of or in
connection with the willful misfeasance, bad faith, gross negligence,
or reckless disregard of obligations or duties hereunder of the
Portfolio Manager.
(b) The Manager shall indemnify and hold harmless the Portfolio
Manager (and its affiliated companies and their respective officers,
directors and employees) from and against any and all claims, losses,
liabilities or damages (including reasonable attorney's fees and
other related expenses) arising out of any matter which does not
require the Portfolio Manager to provide an indemnity under the
preceding paragraph, including, any claim that is based upon any
untrue and alleged untrue statement contained in the Series'
Prospectus or Statement of Additional Information, any registration
statement of the Trust or Manager, any sales literature or materials
for the sale or distribution of the Series' shares, or any omission
or alleged omission to state any required statement or disclosure
necessary to make the statements in any such document not misleading,
except if such statement made in reliance on information furnished by
Portfolio Manager in writing to the Manager or the Trust for the
express purpose of inclusion therin.
(c) The Manager shall not be liable under this Section 15 with
respect to any claim made against the Portfolio Manager unless
Portfolio Manager 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 Portfolio Manager (or after such Portfolio
Manager 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 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, the Manager will be entitled to
participate, at its own expense, in the defense thereof or, after
notice to the Portfolio Manager, to assume the defense
Exhibit A E-7
<PAGE>
<PAGE>
thereof, with counsel satisfactory to the Portfolio Manager. 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 would result in a conflict of interests and therefore, would not,
in the reasonable judgment of the Portfolio Manager, adequately represent
the interests of the Portfolio Manager, 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, which counsel shall be
satisfactory to the Manager and to the Portfolio Manager. The Portfolio
Manager shall bear the fees and expenses of any additional counsel retained
by it, and the Manager shall not be liable to the Portfolio Manager under
this Agreement for any legal or other expenses subsequently incurred by
the Portfolio Manager 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 if the compromise or
settlement results, or may result in a finding of wrongdoing on the
part of the Portfolio Manager.
(d) The Portfolio Manager shall not be liable under this
Section 15 with respect to any claim made against the Manager unless
Manager 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 Manager (or after Manager 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
against whom such action is brought otherwise than on account of this
Section 15. In case any such action is brought against the Manager,
the Portfolio Manager will be entitled to participate, at its own
expense, in the defense thereof or, after notice to the Manager, to
assume the defense thereof, with counsel satisfactory to the Manager.
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 would result in a conflict of
interests and therefore, would not, in the reasonable judgment of
the Manager, adequately represent the interests of the Manager, 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 which counsel shall be satisfactory
to the Portfolio Manager and to the Manager. The Manager shall bear
the fees and expenses of any additional counsel retained by it, and
the Portfolio Manager shall not be liable to the Manager under this
Agreement for any legal or other expenses subsequently incurred by
the Manager 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 if the compromise or
settlement results, or may result in a finding of wrongdoing on the
part of the Manager.
(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
Exhibit A E-8
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<PAGE>
required by any other applicable law or otherwise. Notwithstanding
the foregoing, this Agreement may benterminated 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 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 Section 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 as soon as is reasonably possible cease to
use such name (or derivative or logo).
(b) It is understood that the name "Capital Guardian Trust
Company" or any affiliate listed on Schedule C 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 as soon as is reasonably possible 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. NOTICES. All notices and other communications hereunder shall
be in writing (including telex or similar writing) and shall be deemed
given if delivered in person or by messenger, certified mail, cable,
telegram or telex or facsimile transmission or by a reputable
overnight delivery service which provides evidence of receipt to the
parties at the following addresses or telex or facsimile transmission
numbers (or at such other address or number for a party as shall be
specified by like notice):
Exhibit A E-9
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<PAGE>
(a) if to the Portfolio Manager, to:
Capital Guardian Trust Company
333 South Hope Street, 55th Floor
Los Angeles, California 90071
Facsimile transmission number: (213) 486-9218
Attention: Treasurer
(b) if to the Manager, to:
Myles R. Tashman
Directed Services, Inc.
1475 Dunwoody Drive
West Chester, PA 19380
Facsimile transmission number: (610) 425-3520
if to the Trust, to
Myles R. Tashman
The GCG Trust
1475 Dunwoody Drive
West Chester, PA 19380
Facsimile transmission number: (610) 425-3520
Each such notice or other communication shall be effective (i) if
given by telex or facsimile transmission, when such telex or
facsimile is transmitted to the number specified in this section and
the appropriate answer back or confirmation is received, and (ii) if
given by any other means, when delivered at the address specified in
this section.
21. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, provided that nothing herein shall be
construed in a manner inconsistent with the 1940 Act, the Advisers
Act or rules or orders of the SEC thereunder. The term "affiliate"
or "affiliated person" as used in this Agreement shall mean
"affiliated person" as defined in Section 2(a)(3) of the 1940 Act.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement,
this Agreement may only be assigned by any party with the prior
written consent of the other parties.
(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby, and to
this extent, the provisions of this Agreement shall be deemed to be
severable.
(e) Nothing herein shall be construed as constituting the
Portfolio Manager as an agent of the Manager, or constituting the
Manager as an agent of the Portfolio Manager.
Exhibit A E-10
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed as of the day and year first above written.
THE GCG TRUST
Attest By:
------------------ --------------------
Title: Title:
------------------ --------------------
DIRECTED SERVICES, INC.
Attest By:
------------------ --------------------
Title: Title:
------------------ --------------------
CAPITAL GUARDIAN TRUST COMPANY
Attest By:
------------------ --------------------
Title: Title:
------------------ --------------------
Exhibit A E-11
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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 Capital Guardian
Trust Company shall act as Portfolio Manager are as follows:
Managed Global Series
Small Cap Series
Exhibit A E-12
<PAGE>
<PAGE>
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Capital Guardian Trust Company
("Portfolio Manager") to the following Series of The GCG Trust,
pursuant to the attached Portfolio Management Agreement, the Manager
will pay the Portfolio Manager a fee, computed daily and 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: FEES:
Managed Global 0.65% on first $150 million;
0.55% on next $150 million;
0.45% on next $200 million; and
0.40% thereafter.
Small Cap 0.55% on first $500 million; and
0.35% thereafter.
Exhibit A E-13
<PAGE>
<PAGE>
SCHEDULE C
CAPITAL GUARDIAN TRUST COMPANY'S AFFILIATES
1. American Funds Distributors, Inc.
2. American Funds Service Company
3. Capital Group Companies, Inc.
4. Capital Group International, Inc.
5. Capital Group Research, Inc.
6. Capital Guardian (Canada), Inc.
7. Capital Guardian Research Company
8. Capital Guardian Trust Company
9. Capital Guardian Trust Company, a Nevada Corporation
10. Capital International Advisory Company S.A.
11. Capital International All Countries Fund Management Company S.A.
12. Capital International Asia Pacific Management Company
13. Capital International Europe Fund Management Company
14. Capital International Global Small Cap Fund Management Company S.A.
15. Capital International, Inc.
16. Capital International K.K.
17. Capital International Kokusai Fund Management Company S.A.
18. Capital International Limited
19. Capital International Limited (Bermuda)
20. Capital International Management Company S.A.
21. Capital International Perspective S.A.
22. Capital International Research, Inc.
23. Capital International S.A.
24. Capital Management Services, Inc.
25. Capital Research Company
26. Capital Research and Management Company
27. Capital Strategy Research, Inc.
28. CIHAC Fund Management Company S.A
29. American Funds Group
Exhibit A E-14
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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 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 January 28, 2000 at 10:00 a.m., local time,
at 1475 Dunwoody Drive, West Chester, Pennsylvania, 19380 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.
UNITS PROPOSALS FOR AGAINST ABSTAIN
1. To approve a new Portfolio Management
Agreement among the Trust, Directed
Services, Inc. ("DSI") and Capital
Guardian Trust Company on behalf of:
MANAGED GLOBAL SERIES [ ] [ ] [ ]
2. To approve a new Portfolio Management
Agreement among the Trust, DSI and Capital
Guardian Trust Company on behalf of:
SMALL CAP 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.
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.
IMPORTANT: Joint Owners must EACH sign. Trustees and others signing in a
representative capacity should so indicate.
Date:__________, 2000 ________________________ ________________________
Contract Owner Joint Owner (If Any)
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