<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THE LEGENDS FUND, INC.
(Name of Registrant as Specified In Its Charter)
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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 (Set forth the amount on which the
filing fee is calculated and state how it was determined.
_______________________________________________________________
4) Proposed maximum aggregate value of transaction:
<PAGE>
_______________________________________________________________
5) Total Fee Paid:
_______________________________________________________________
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
______________________________________________________________
2) Form, Schedule or Registration Statement No.:
______________________________________________________________
3) Filing Party:
______________________________________________________________
4) Date Filed:
_____________________________________________________________
<PAGE>
PRELIMINARY COPIES
THE LEGENDS FUND, INC.
515 West Market Street
Louisville, Kentucky 40202
_________________________________________
Notice of Special Meeting of Shareholders
_________________________________________
To the Shareholders of The Legends Fund, Inc.:
A special meeting of shareholders of the Harris Bretall Sullivan & Smith
Equity Growth Portfolio, Scudder Kemper Value Portfolio, Zweig Asset Allocation
Portfolio and Zweig Equity (Small Cap) Portfolio (each, a "Portfolio" and
collectively, the "Portfolios"), each a series of The Legends Fund, Inc. (the
"Fund"), will be held at 515 West Market Street, Louisville, Kentucky 40202, on
July 10, 1998, at 3:00 p.m., Eastern Time. The purpose of the Meeting is:
(1) to approve or disapprove the new investment management agreement
between the Fund and Integrity Capital Advisers, Inc. (the "Manager"),
separately with respect to each Portfolio;
(2) to approve or disapprove new sub-advisory agreements pertaining to:
(a) Harris Bretall Sullivan & Smith Equity Growth Portfolio between
the Manager and Harris Bretall Sullivan & Smith, L.L.C. ("HBSS");
(b) Scudder Kemper Value Portfolio between the Manager and Scudder
Kemper Investments, Inc. ("SKI");
(c) Zweig Asset Allocation Portfolio between the Manager and
Zweig/Glaser Advisers; and
(d) Zweig Equity (Small Cap) Portfolio between the Manager and
Zweig/Glaser Advisers;
(3) to approve or disapprove the interim investment advisory agreements
pertaining to:
(a) Harris Bretall Sullivan & Smith Growth Portfolio between the Fund
and HBSS;
(b) Scudder Kemper Value Portfolio between the Fund and SKI;
<PAGE>
(c) Zweig Asset Allocation Portfolio between the Fund and
Zweig/Glaser Advisers; and
(d) Zweig Equity (Small Cap) Portfolio between the Fund and
Zweig/Glaser Advisers; and
(4) to transact such other matters as may properly come before the meeting
or any adjournment thereof.
The Board of Directors of the Fund has fixed the close of business on June
4, 1998 as the record date for determining the number of shares outstanding and
the contract holders entitled to give voting instructions with respect to the
Fund.
By Order of the Board of Directors,
Kevin L. Howard
Secretary
June 19, 1998
EACH CONTRACT HOLDER IS URGED TO EXERCISE THE RIGHT TO GIVE VOTING INSTRUCTIONS
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF THE FUND BY FILLING IN, DATING AND
SIGNING THE ENCLOSED VOTING INSTRUCTIONS CARD AND RETURNING IT IN THE RETURN
ENVELOPE PROVIDED.
2
<PAGE>
PRELIMINARY COPIES
THE LEGENDS FUND, INC.
515 West Market Street
Louisville, Kentucky 40202
Harris Bretall Sullivan & Smith Equity Growth Portfolio
Scudder Kemper Value Portfolio
Zweig Asset Allocation Portfolio
Zweig Equity (Small Cap) Portfolio
_________________________________________
PROXY STATEMENT
Special Meeting of Shareholders
July 10, 1998 at 3:00 p.m.
____________________________________
THE BOARD OF DIRECTORS OF THE LEGENDS FUND, INC. (THE "FUND") SOLICITS YOUR
PROXY FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS (THE "MEETING"). The Meeting
is scheduled to be held at 515 West Market Street, Louisville, Kentucky 40202,
on July 10, 1998 at 3:00 p.m. As described in more detail below, the Meeting is
being called for the following purposes:
PORTFOLIO(S) TO WHICH
SUMMARY OF PROPOSAL PROPOSAL APPLIES
1. (a) To approve or disapprove the new All Portfolios (voting
investment management agreement between the separately)
Fund and Integrity Capital Advisors, Inc.
(the "Manager").
2. (a) To approve or disapprove the new Harris Bretall Sullivan &
sub-advisory agreement between the Manager Smith Equity Growth
and Harris Bretall Sullivan & Smith, L.L.C. Portfolio
("HBSS") as sub-adviser for the Portfolio.
(b) To approve or disapprove the new Scudder Kemper Value
sub-advisory agreement between the Manager Portfolio
and Scudder Kemper Investments, Inc.
("SKI") as sub-adviser for the Portfolio.
(c) To approve or disapprove the new Zweig Asset Allocation
sub-advisory agreement between the Manager Portfolio
and Zweig/Glaser Advisers
as sub-adviser for the Portfolio.
(d) To approve or disapprove the new Zweig Equity (Small Cap)
sub-advisory agreement between the Manager Portfolio
and Zweig/Glaser Advisers
<PAGE>
as sub-adviser for the Portfolio.
3. To approve or disapprove the interim
investment advisory agreements pertaining
to:
(a) Harris Bretall Sullivan & Smith Harris Bretall Sullivan &
Growth Portfolio between the Fund and HBSS; Smith Equity Growth
Portfolio
(b) Scudder Kemper Value Portfolio Scudder Kemper Value
between the Fund and SKI; Portfolio
(c) Zweig Asset Allocation Portfolio Zweig Asset Allocation
between the Fund and Zweig/Glaser Advisers; Portfolio
and
(d) Zweig Equity (Small Cap) Portfolio Zweig Equity (Small Cap)
between the Fund and Zweig/Glaser Advisers. Portfolio
4. To transact such other matters as may
properly come before the Meeting or any
adjournment thereof.
The Fund was incorporated in Maryland on July 22, 1992, under the name
"Integrity Series Fund, Inc." and is an open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). It is a series-type investment company currently consisting of
four investment portfolios (each, a "Portfolio" and collectively the
"Portfolios"). Shares of the Portfolios are offered to separate accounts
("Separate Accounts") of Integrity Life Insurance Company ("Integrity") and
National Integrity Life Insurance Company ("National Integrity"), a
wholly-owned subsidiary of Integrity, for the investment of contributions
under certain variable annuity contracts ("contracts") issued by Integrity
and National Integrity.
This Proxy Statement is being furnished on or about June 19, 1998 on
behalf of the Board of Directors of the Fund (the "Board of Directors," the
"Board" or the "Directors") to the shareholders of the Fund for their use in
obtaining voting instructions from the contract holders on the proposals to
be considered at the Meeting. The Board of Directors has fixed the close of
business on June 4, 1998 as the record date (the "Record Date") for
determining the number of shares outstanding and the contract holders
entitled to give voting instructions to Integrity and National Integrity.
At the Record Date, the total number of shares of the Portfolios
outstanding were as follows:
<TABLE>
<CAPTION>
APPROXIMATE
SHARES APPROXIMATE PERCENTAGE
HELD BY PERCENTAGE SHARES HELD HELD BY
TOTAL SEPARATE HELD BY BY SEPARATE SEPARATE
NUMBER OF ACCOUNT II SEPARATE ACCOUNT II ACCOUNT II OF
SHARES OF ACCOUNT II OF OF NATIONAL NATIONAL
PORTFOLIO OUTSTANDING INTEGRITY INTEGRITY INTEGRITY INTEGRITY
- --------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
<PAGE>
Harris Bretall
Sullivan & Smith
Equity Growth _______ ________ ______% _______ _______%
Scudder
Kemper
Value _______ _______ ______% _______ _______%
Zweig Asset
Allocation _______ _______ ______% _______ _______%
Zweig Equity
(Small Cap) _______ _______ ______% _______ _______%
Total Fund ______ ______ ______% ______ ______%
</TABLE>
As of the Record Date, no person or "group" (as such term is defined in
the Securities Exchange Act of 1934, as amended, and the rules thereunder)
was known to the Fund to have allocated contributions under variable annuity
contracts such that, upon the pass-through of voting rights by Integrity and
National Integrity, such person or group would have the right to give voting
instructions with respect to more than 5% of the outstanding shares of any
Portfolio. The Directors and officers of the Fund, both individually and as a
group, own less than 1% of each Portfolio's outstanding shares.
The Fund expects that the solicitation of voting instructions from contract
holders will be made by mail, and solicitation also may be made by telephone
communications from employees of the Manager, the Fund=s investment manager, or
its affiliates, who will not receive compensation for such services. All costs
of the meeting and soliciting proxies will be borne by the Manager or its
affiliates.
Integrity and National Integrity, the holders of record of shares of the
Portfolios, are required to "pass through" to their contract holders the right
to vote shares of the Portfolios. The Fund expects that Integrity and National
Integrity will solicit voting instructions from their contract holders and that
Integrity and National Integrity will vote 100% of the shares of the Portfolios
held by their respective Separate Accounts. Integrity and National Integrity
will vote shares of the Portfolios for which no instructions have been received
in the same proportion as they vote shares for which they have received
instructions. Abstentions will have the effect of a negative vote on a proposal.
Unmarked voting instructions from contract holders will be voted in favor of the
proposals. Integrity and National Integrity, as record shareholders of the
Portfolios, may adjourn the meeting of shareholders for a period or periods of
not more than 60 days in the aggregate if necessary to obtain additional voting
instructions from contract holders. The cost of preparing and distributing to
contract holders additional proxy materials if required in connection with any
adjournment will be borne as set forth in the preceding paragraph.
3
<PAGE>
Proxies executed by shareholders may be revoked by a written instrument
received by the Secretary of the Fund at any time before they are exercised, by
the delivery of a later-dated proxy or by attendance at the meeting and voting
in person. Pursuant to the Fund's Articles of Incorporation, the presence in
person or by proxy of the holders of record of one-third of the shares issued
and outstanding and entitled to vote at a meeting shall constitute a quorum for
the transaction of business at such meeting.
The shareholders of each of the Portfolios vote separately with respect to
Proposal Nos. 1, 2 and 3.
All information in the Proxy Statement about HBSS, SKI and Zweig/Glaser
Advisers (each a "Sub-Adviser," and collectively, the "Sub-Advisers") has been
provided by each respective Sub-Adviser and all information in the Proxy
Statement about the Manager and ARM Financial Group, Inc. ("ARM") has been
provided by the Manager and ARM.
EACH CONTRACT HOLDER IS URGED TO EXERCISE THE RIGHT TO GIVE VOTING INSTRUCTIONS
FOR THE SPECIAL MEETING OF SHAREHOLDERS OF THE PORTFOLIOS BY FILLING IN, DATING
AND SIGNING THE VOTING INSTRUCTIONS CARD FOR THE PORTFOLIO AND RETURNING THE
CARD IN THE RETURN ENVELOPE PROVIDED.
4
<PAGE>
PROPOSAL NO. 1: APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT
HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO
SCUDDER KEMPER VALUE PORTFOLIO
ZWEIG ASSET ALLOCATION PORTFOLIO
ZWEIG EQUITY (SMALL CAP) PORTFOLIO
BACKGROUND
The Morgan Stanley Leverage Equity Fund II, L.P., Morgan Stanley Capital
Partners III, L.P., Morgan Stanley Capital Investors, L.P. and MSCP III 892
Investors, L.P., investment funds sponsored by Morgan Stanley, Dean Witter,
Discover & Co. Group, Inc. ("MSDW") (collectively "Morgan Stanley"), previously
owned in the aggregate approximately 53% of the outstanding shares of common
stock of ARM. On May 8, 1998, Morgan Stanley sold its entire interest in ARM,
pursuant to a secondary public offering of shares of common stock of ARM (the
"Sale"). The Sale may be deemed to constitute an indirect change in control of
the Manager, and therefore an "assignment," as that term is defined in the 1940
Act, of the investment management agreement that was then in effect between the
Manager and the Fund, on behalf of each Portfolio (the "Old Management
Agreement"). As required by the 1940 Act, the Old Management Agreement provided
for its automatic termination upon assignment. The Old Management Agreement
terminated on May 8, 1998, effective upon consummation of the Sale.
On May 8, 1998, the Board of Directors of the Fund approved a new
investment management agreement between the Manager and the Fund, on behalf of
each Portfolio (the "New Management Agreement"). The New Management Agreement
is identical to the Old Management Agreement, with the exception of the
effective and termination dates. The New Management Agreement is being
submitted for approval by shareholders of each Portfolio. A copy of the New
Management Agreement is annexed to this Proxy Statement as Exhibit A.
The Manager has agreed to provide the services specified in the Old
Management Agreement to the Fund and its Portfolios without charge on an interim
basis until the New Management Agreement has been approved by shareholders. It
is proposed that the New Management Agreement become effective immediately upon
shareholder approval.
In addition, the sub-advisory agreements that were in effect prior to the
Sale (the "Old Sub-Advisory Agreements," and together with the Old Management
Agreement, the "Old Advisory Agreements") provided for their automatic
termination upon the termination of the Old Management Agreement. The Board of
Directors therefore approved new sub-advisory agreements between the Manager and
the respective Sub-Adviser on behalf of each Portfolio (the "New Sub-Advisory
Agreements," each a "New Sub-Advisory Agreement" and together with the New
Management Agreement, the "New Advisory Agreements"). The New Sub-Advisory
Agreements will become effective immediately upon shareholder approval and are
discussed below under Proposal No. 2.
5
<PAGE>
To ensure the continued provision of investment advisory services during
the interim period prior to receipt of shareholder approval (the "Interim
Period"), the Board of Directors has approved interim investment advisory
agreements (the "Interim Agreements" and each an "Interim Agreement") between
the Fund, on behalf of each Portfolio, and the respective Sub-Adviser. The
Interim Agreements are discussed below under Proposal No. 3.
THE OLD AND NEW MANAGEMENT AGREEMENTS
The Old Management Agreement was dated November 26, 1993, and amended April
1, 1994 and February 1, 1996 to reflect the addition of certain Portfolios. The
Old Management Agreement was last approved by shareholders on October 30, 1997,
in connection the reallocation of management fees between the Manager and the
Sub-Advisers. As stated above, the Old Management Agreement terminated on May
8, 1998, effective upon consummation of the Sale.
The following is a summary of the material terms of the New Management
Agreement, which are the same as the material terms of the Old Management
Agreement:
SERVICES. Pursuant to the New Management Agreement between the Fund and
the Manager, the Manager is responsible for the management of the Fund and
administration of its business affairs. The Manager is authorized to enter
into sub-advisory agreements with registered investment advisers pursuant to
which it may delegate its obligations for providing investment advisory and
certain other services in connection with the Portfolios. Pursuant to such
authority, the Manager will enter into the New Sub-Advisory Agreements with each
of HBSS, SKI and Zweig/Glaser Advisers relating to the Harris Bretall Sullivan &
Smith Equity Growth Portfolio, the Scudder Kemper Value Portfolio, the Zweig
Asset Allocation Portfolio and the Zweig Equity (Small Cap) Portfolio,
respectively. The Manager is responsible, among other things, for general
supervision of the respective Sub-Advisers, subject to general oversight by the
Board of Directors. In addition, the Manager is obligated to keep certain books
and records of the Fund and administer the Fund's corporate affairs. In
connection therewith, the Manager furnishes the Fund with office facilities,
together with those ordinary clerical and bookkeeping services which are not
being furnished by the Fund's custodian or transfer and dividend disbursing
agent.
COMPENSATION FOR SERVICES. Each Portfolio will pay the Manager a fee (the
"Management Fee") at the annual rate set forth below, accrued daily and
calculated as a percentage of the net assets of each respective Portfolio. The
Manager will compensate each Sub-Adviser out of the Management Fee received from
the respective Portfolio. The Manager retains (on an annual basis) .25% of
average daily net assets of each Portfolio after compensating the Sub-Advisers.
The following rates are the same rates that were in effect under the Old
Management Agreement.
<TABLE>
<CAPTION>
PORTFOLIO MANAGEMENT FEE PAYABLE BY
PORTFOLIO TO THE MANAGER
<S> <C>
6
<PAGE>
Harris Bretall Sullivan & Smith Equity .65%
Growth Portfolio
Scudder Kemper Value Portfolio .65%
Zweig Asset Allocation Portfolio .90%
Zweig Equity (Small Cap) Portfolio 1.05%
</TABLE>
The aggregate fees paid to the Manager by the Portfolios under the Old
Management Agreement for the fiscal year ended June 30, 1997 were $807,307,
including $160,836 paid by the Harris Bretall Sullivan & Smith Equity Growth
Portfolio; $164,290 paid by the Scudder Kemper Value Portfolio; $396,657 paid
by the Zweig Asset Allocation Portfolio; and $112,524 paid by the Zweig
Equity (Small Cap) Portfolio. The Manager compensated each Sub-Adviser out
of these fees in the amounts discussed below under Proposal No. 2, "The
Sub-Advisory Agreements - Compensation for Services." Until October 30,
1997, the Manager retained .15% of average net assets of each Portfolio (on
an annual basis), after compensating the Sub-Advisers.
PAYMENT OF EXPENSES. Each Portfolio bears all expenses incurred in its
operation that are not specifically assumed by the Manager or ARM Securities
Corporation ("ARM Securities"), as distributor. General expenses of the Fund
not readily identifiable as belonging to one of the Portfolios are allocated
among the Portfolios by or under the direction of the Board of Directors in such
manner as the Board determines to be fair and equitable.
The Manager has voluntarily limited the expenses of the Portfolios, other
than for brokerage commissions and the Management Fee, to .50% of average net
assets on an annualized basis. The Manager's reimbursement of Portfolio
expenses results in an increase to each Portfolio's yield and total return. The
Manager has reserved the right to withdraw or modify its policy of expense
reimbursement for the Portfolios. For the fiscal year ended June 30, 1997, the
Manager reimbursed the Zweig Equity (Small Cap) Portfolio in the amount of
$29,273.
LIMITATION OF LIABILITY. Under the New Management Agreement, except as may
otherwise be required under the 1940 Act, the Manager and any of its affiliates
and each person who, within the meaning of Section 15 of the Securities Act of
1933, as amended, controls the Manager, will not be liable for any error or
judgment or mistake of law or for any loss suffered by the Fund in connection
with the performance of the New Management Agreement, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of the
Manager in the performance of its duties or from reckless disregard of its
duties and obligations thereunder.
TERM. The New Management Agreement provides that it will continue in
effect for two years and thereafter from year to year, subject to approval at
least annually in accordance with the requirements of the 1940 Act ("Annual
Approval").
7
<PAGE>
TERMINATION; ASSIGNMENT. The New Management Agreement may be terminated
at any time without penalty upon 60 days' written notice by the Manager, the
Board of Directors, acting pursuant to a resolution adopted by a majority of the
Directors who are not "interested persons" of the Fund within the meaning of the
1940 Act (the "Independent Directors"), or by the affirmative vote of the
holders of a "majority of the outstanding voting securities" of a Portfolio (as
defined in the 1940 Act). The New Management Agreement also provides that it
will terminate in the event of its assignment (as defined in the 1940 Act).
BOARD CONSIDERATIONS
The Board of Directors, including all of the Independent Directors,
determined that the terms of the New Management Agreement are fair and
reasonable and that the approval of the New Management Agreement on behalf of
the Fund and each Portfolio is in the best interests of the Fund and of each
respective Portfolio and its shareholders.
In determining to approve the New Management Agreement, the Board
evaluated the factors they deemed relevant with respect to each Portfolio.
Among other things, the Board considered the fact that although ultimate
ownership of the Manager's parent company had changed, senior officers of the
Manager had assured the Board that there would be no change in the personnel
providing services to the Fund and its Portfolios or in the quality of those
services. Senior officers of the Manager also informed the Board that they did
not foresee any changes in the day-to-day operations of the Manager or its
affiliates as a result of the Sale. The Board was also advised that senior
management of ARM owned in the aggregate approximately seven percent of the
outstanding common stock of ARM, and that no single holder held more than five
percent of the outstanding common stock of ARM as a result of the Sale.
The Board also considered that the New Management Agreement is the same as
the Old Management Agreement in all material respects, including the rate of
Management Fee. The Board also considered that the compensation to be paid by
the Manager to the Sub-Advisers under the New Sub-Advisory Agreements would
result in the Manager being compensated at the same effective rate as under the
Old Advisory Agreements. The Board took into account that the Manager had
agreed to provide supervisory and administrative services to the Fund at no
charge during the Interim Period, and determined that it was necessary and in
the best interests of each Portfolio and its shareholders to enter into the New
Management Agreement to ensure continued receipt of such services after the
Interim Period. As part of their deliberations, the Board also took into
account the following, among other factors: the nature and quality of the
services provided or reasonably anticipated to be provided and the results
achieved or reasonably anticipated to be achieved by the Manager and
Sub-Advisers; the amount and structure of the investment management and
sub-advisory fees generally; and the organizational capability and financial
condition of the Manager, each Sub-Adviser and its respective affiliates.
RECOMMENDATION OF THE BOARD OF DIRECTORS
8
<PAGE>
As a result of their deliberations, at an in-person meeting held on May 7,
1998, the Board of Directors, including all Independent Directors, voted
unanimously to approve the New Management Agreement and to recommend to
shareholders that they vote "FOR" Proposal No. 1.
VOTE REQUIRED FOR PROPOSAL NO. 1
Shareholders of each of the Portfolios vote separately on whether to
approve Proposal No. 1 with respect to that particular Portfolio. Approval of
Proposal No. 1 with respect to a Portfolio requires the affirmative vote of a
majority of the outstanding voting securities of that Portfolio. "Majority" for
this purpose under the 1940 Act means the lesser of (1) more than 50% of the
outstanding shares of the Portfolio or (2) 67% or more of the shares of the
Portfolio represented at the meeting if more than 50% of such shares are
represented.
IF PROPOSAL NO. 1 IS NOT APPROVED BY THE SHAREHOLDERS OF ANY PORTFOLIO, THE
INTERIM AGREEMENT DESCRIBED IN PROPOSAL NO. 3 FOR THAT PORTFOLIO WILL CONTINUE
IN EFFECT FOR THAT PORTFOLIO (SUBJECT TO RECEIPT OF SHAREHOLDER APPROVAL
THEREOF) AND THE BOARD WILL CONSIDER WHAT ACTION, IF ANY, SHOULD BE TAKEN TO
OBTAIN THE NECESSARY SUPERVISORY AND ADMINISTRATIVE SERVICES. FAILURE TO
APPROVE PROPOSAL NO. 1 BY THE SHAREHOLDERS OF A PARTICULAR PORTFOLIO WILL NOT
AFFECT THE APPROVAL OF PROPOSAL NO. 1 WITH RESPECT TO ANY OTHER PORTFOLIO.
PROPOSAL NO. 2: APPROVAL OF THE NEW SUB-ADVISORY AGREEMENTS
HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO
SCUDDER KEMPER VALUE PORTFOLIO
ZWEIG ASSET ALLOCATION PORTFOLIO
ZWEIG EQUITY (SMALL CAP) PORTFOLIO
BACKGROUND
In anticipation of the Sale and the termination of the Old Sub-Advisory
Agreements as a result of the termination of the Old Management Agreement, the
Board of Directors of the Fund, acting by unanimous written consent, terminated
each of the Old Sub-Advisory Agreements effective immediately prior to the
consummation of the Sale. The Board then approved the New Sub-Advisory
Agreements between the Manager and the respective Sub-Adviser, on behalf of each
Portfolio. The New Sub-Advisory Agreements are being submitted for approval by
shareholders of each Portfolio. A form of the New Sub-Advisory Agreements
between the Manager and each of HBSS and SKI is annexed as Exhibit B-1; a form
of the New Sub-Advisory Agreements between the Manager and Zweig/Glaser Advisers
is annexed as Exhibit B-2. The New Sub-Advisory Agreements are each identical
to the respective Old Sub-Advisory Agreements, with the exception of their
effective and termination dates. It is proposed that the New Sub-Advisory
Agreements will become effective immediately upon shareholder approval, subject
to the Management Agreement having been approved by shareholders.
9
<PAGE>
THE OLD AND NEW SUB-ADVISORY AGREEMENTS
The Old Sub-Advisory Agreement between the Manager and HBSS with respect
to Harris Bretall Sullivan & Smith Equity Growth Portfolio was dated November
14, 1997 and was last approved by shareholders on October 30, 1997 in connection
with a reallocation of the sub-advisory fees payable by the Manager and a change
in control of HBSS. The Old Sub-Advisory Agreement between the Manager and SKI
with respect to Scudder Kemper Value Portfolio was dated December 30, 1997 and
was last approved by shareholders on December 30, 1997, in connection with a
change in control of the predecessor Sub-Adviser. The Old Sub-Advisory
Agreements between the Manager and Zweig/Glaser Advisers with respect to Zweig
Asset Allocation Portfolio and Zweig Equity (Small Cap) Portfolio were dated
November 26, 1993, as amended on October 30, 1997 and were last approved by
shareholders on October 30, 1997, in connection with a reallocation of the
sub-advisory fees payable by the Manager. The Old Sub-Advisory Agreements were
terminated immediately prior to consummation of the Sale on May 8, 1998.
The following is a summary of the material terms of each New Sub-Advisory
Agreement, which are the same as the material terms of the respective Old
Sub-Advisory Agreement:
ADVISORY SERVICES. The Sub-Adviser will provide a continuous investment
program for the Portfolio, including investment research with respect to all
securities and investments and cash equivalents in the Portfolio.
COMPENSATION FOR SERVICES. The Manager (and not the Fund) will pay to each
Sub-Adviser a sub-advisory fee at the annual rate set forth below, calculated as
a percentage of the average daily net assets of the Portfolio.
<TABLE>
<CAPTION>
SUB-ADVISORY
SUB-ADVISER PORTFOLIO FEE RATE
<S> <C> <C>
Harris Bretall Sullivan & Smith
HBSS Equity Growth Portfolio .40%
SKI Scudder Kemper Value Portfolio .40%
Zweig/Glaser Advisers Zweig Asset Allocation Portfolio .65%
Zweig/Glaser Advisers Zweig Equity (Small Cap) Portfolio .80%
</TABLE>
The foregoing rates are the same as the rates in effect under the respective Old
Sub-Advisory Agreements. Effective as of October 31, 1997, the annual fee rate
paid to each Sub-Adviser was
10
<PAGE>
reduced by .10%. The sub-advisory fees for the fiscal year ended June 30, 1997
paid to the Sub-Advisers by the Manager (under the former fee schedule) were
$123,720 to HBSS with respect to the Harris Bretall Sullivan & Smith Equity
Growth Portfolio; $126,377 to SKI with respect to the Scudder Kemper Value
Portfolio; $308,047 to Zweig/Glaser Advisers with respect to the Zweig Asset
Allocation Portfolio; and $96,449 to Zweig/ Glaser Advisers with respect to the
Zweig Equity (Small Cap) Portfolio.
PAYMENT OF EXPENSES. The Sub-Adviser agrees to assume and pay all of the
costs and expenses of performing its obligations thereunder.
LIMITATION OF LIABILITY. Under each New Sub-Advisory Agreement, except as
may otherwise be required under the 1940 Act, the Sub-Adviser and any of its
affiliated persons and each person who, within the meaning of Section 15 of the
Securities Act of 1933, as amended, controls the Sub-Adviser will 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 thereunder,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Sub-Adviser's duties, or by reason of reckless disregard of
the Sub-Adviser's obligations and duties thereunder.
TERM. Each New Sub-Advisory Agreement will continue for two years and
thereafter from year to year subject to Annual Approval.
TERMINATION; ASSIGNMENT. Each New Sub-Advisory Agreement may be terminated
at any time without penalty upon 60 days' written notice by the Sub-Adviser, the
Manager, the Board of Directors, acting pursuant to a resolution adopted by a
majority of the Independent Directors, or by the affirmative vote of the
holders of a "majority of the outstanding voting securities" of the Portfolio
(as defined in the 1940 Act). Each New Sub-Advisory Agreement also provides
that it will automatically terminate in the event of its assignment (as defined
in the 1940 Act) or termination of the New Management Agreement.
BOARD CONSIDERATIONS
The Board of Directors, including all the Independent Directors,
determined that the terms of the New Sub-Advisory Agreements are fair and
reasonable and that the approval of the New Sub-Advisory Agreements on behalf of
the Fund and each Portfolio is in the best interests of the Fund and of each
respective Portfolio and its shareholders. In determining to approve the New
Sub-Advisory Agreements, the Board of Directors evaluated the factors they
deemed relevant with respect to each Portfolio, including the factors described
above with respect to the New Management Agreement. In addition, the Board
considered the fact that the Sale had no effect with respect to the operations
of any of the Sub-Advisers, since they are independent of both ARM and Morgan
Stanley.
RECOMMENDATION OF THE BOARD OF DIRECTORS
11
<PAGE>
As a result of their deliberations, at an in-person meeting held on May 8,
1998, the Board of Directors, including all Independent Directors, voted
unanimously to approve the New Sub-Advisory Agreements and to recommend to
shareholders that they vote "FOR" Proposal No. 2.
VOTE REQUIRED FOR PROPOSAL NO. 2
Shareholders of each of the Portfolios vote separately on whether to
approve Proposal No. 2 with respect to that particular Portfolio. Approval of
Proposal No. 2 with respect to a Portfolio requires the affirmative vote of a
majority of the outstanding voting securities of that Portfolio. "Majority" for
this purpose under the 1940 Act means the lesser of (1) more than 50% of the
outstanding shares of the Portfolio or (2) 67% or more of the shares of the
Portfolio represented at the meeting if more than 50% of such shares are
represented.
IF PROPOSAL NO. 2 IS NOT APPROVED BY THE SHAREHOLDERS OF ANY PORTFOLIO, THE
INTERIM AGREEMENT DESCRIBED IN PROPOSAL NO. 3 FOR THAT PORTFOLIO WILL CONTINUE
IN EFFECT FOR THAT PORTFOLIO (SUBJECT TO RECEIPT OF SHAREHOLDER APPROVAL
THEREOF), AND THE BOARD WILL CONSIDER WHAT OTHER ACTION, IF ANY, SHOULD BE TAKEN
TO OBTAIN ADVISORY SERVICES. FAILURE TO APPROVE PROPOSAL NO. 2 BY THE
SHAREHOLDERS OF A PORTFOLIO WILL NOT AFFECT THE APPROVAL OF PROPOSAL NO. 2 WITH
RESPECT TO ANY OTHER PORTFOLIO.
PROPOSAL NO. 3: APPROVAL OF THE INTERIM AGREEMENTS
HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO
SCUDDER KEMPER VALUE PORTFOLIO
ZWEIG ASSET ALLOCATION PORTFOLIO
ZWEIG EQUITY (SMALL CAP) PORTFOLIO
BACKGROUND
In order to ensure continuity of investment advisory services for the
Portfolios upon the termination of the Old Advisory Agreements, and prior to
shareholder approval of the New Advisory Agreements, the Board of Directors
approved the Interim Agreements, which are investment advisory agreements
directly between the Fund, on behalf of each respective Portfolio, and the
respective Sub-Adviser. A form of Interim Agreement between the Fund and each
of HBSS and SKI is annexed as Exhibit C-1; a form of Interim Agreement between
the Fund and Zweig/Glaser Advisers is annexed as Exhibit C-2. The Interim
Agreements are similar to the Old Sub-Advisory Agreements, with the principal
difference being that, because the Interim Agreements are directly between the
Sub-Advisers and the Fund (rather than between the Sub-Advisers and the
Manager), the fees thereunder are payable by the respective Portfolio and not
the Manager.
The Interim Agreements were approved by the Fund's Board of Directors on
May 7, 1998 and became effective immediately. They will terminate upon approval
of Proposals Nos. 1 and 2 by the shareholders of the respective Portfolios.
12
<PAGE>
THE INTERIM AGREEMENTS
The following is a summary of the material terms of each Interim Agreement:
ADVISORY SERVICES. The Sub-Adviser provides a continuous investment
program for the Portfolio, including investment research with respect to all
securities and investments and cash equivalents in the Portfolio.
COMPENSATION FOR SERVICES. The Portfolio pays to each Sub-Adviser a fee,
accrued daily and calculated as a percentage of the average daily net assets of
the Portfolio at the annual rate set forth below. The annual rate set forth in
each respective Interim Agreement is the same as the rate payable to the
respective Sub-Adviser under the Old and New Sub-Advisory Agreements.
<TABLE>
<CAPTION>
INTERIM
SUB-ADVISER PORTFOLIO ADVISORY FEE
<S> <C> <C>
HBSS Harris Bretall Sullivan & Smith .40%
Equity Growth Portfolio
SKI Scudder Kemper Value Portfolio .40%
Zweig/Glaser Advisers Zweig Asset Allocation Portfolio .65%
Zweig/Glaser Advisers Zweig Equity (Small Cap) Portfolio .80%
</TABLE>
PAYMENT OF EXPENSES. The Sub-Adviser assumes and pays all of the costs
and expenses of performing its obligations thereunder. The Portfolio bears
all expenses incurred in its operations that are not assumed by its principal
underwriter or affiliates of its principal underwriter.
LIMITATION OF LIABILITY. Under each Interim Agreement, except as may
otherwise be required under the 1940 Act, the Sub-Adviser and any of its
affiliated persons and each person who, within the meaning of Section 15 of the
Securities Act of 1933, as amended, controls the Sub-Adviser will 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 thereunder,
except by reason of willful misfeasance, bad faith, or gross negligence in the
performance of the Sub-Adviser's duties, or by reason of reckless disregard of
the Sub-Adviser's obligations and duties thereunder.
TERM. Each Interim Agreement will continue in effect until the earlier to
occur of (i) such time as the New Advisory Agreements are approved by the
Portfolio's shareholders, or, subject to approval by the respective Portfolio's
shareholders, (ii) the second anniversary of the effective
13
<PAGE>
date of the Interim Agreements. Unless sooner terminated, each Interim
Agreement shall continue in effect after the term specified in clause (ii) of
the preceding sentence, subject to Annual Approval.
TERMINATION; ASSIGNMENT. Each Interim Agreement may be terminated at any
time without penalty upon 60 days' written notice by the Sub-Adviser, the Board
of Directors, acting pursuant to a resolution adopted by a majority of the
Independent Directors, or by the affirmative vote of the holders of a "majority
of the outstanding voting securities" of the Portfolio (as defined in the 1940
Act). Each Interim Agreement also provides that it will automatically terminate
in the event of its assignment (as defined in the 1940 Act).
BOARD CONSIDERATIONS
The Board of Directors, including all the Independent Directors, determined
that the terms of the Interim Agreements are fair and reasonable and that the
approval of the Interim Agreements on behalf of the Fund and each Portfolio is
in the best interests of the Fund and of each respective Portfolio and its
shareholders.
In determining to approve the Interim Agreements, the Board of Directors
evaluated the factors they deemed relevant with respect to each Portfolio. The
Board of Directors considered, among other things, the fact that the Old
Sub-Advisory Agreements were being terminated as a result of actions affecting
ARM and not the Sub-Advisers, and that the Sub-Advisers would not receive any
direct or indirect monetary or other benefit as a result of the Sale. The Board
of Directors took into account the fact that the Manager had agreed to continue
to provide administrative and supervisory services free of charge until receipt
of shareholder approval of the New Management Agreement, but that the only way
to ensure continued investment advisory services for the Portfolios pending
shareholder approval of the New Advisory Agreements would be to enter into the
Interim Agreements directly with the Sub-Advisers. The Board of Directors also
considered that because the annual fee rates payable under the Interim
Agreements are lower than under the Old Management Agreement, each Portfolio
would pay lower fees during the Interim Period than under the Old Advisory
Agreements. The Board also took into account the factors discussed under "Board
Considerations" with respect to Proposal No. 1.
Finally, the Board of Directors considered that the Interim Agreements
would become effective immediately, without having first been approved by
shareholders. Normally, an investment advisory (or sub-advisory) agreement
between a registered investment company and an investment adviser (or
sub-adviser) cannot take effect until the agreement has been approved by
shareholders in the manner specified by the 1940 Act. There is a limited
exception to this requirement set forth in Rule 15a-4 under the 1940 Act. The
Rule provides that if an advisory (or sub-advisory) contract is terminated or
not renewed by an investment company's board of directors, a successor advisory
contract may be in effect for 120 days thereafter, without having been approved
by shareholders, provided certain conditions are met. The conditions are that
the contract must have been approved by the investment company's board of
directors, including a majority of the directors who are not "interested
persons" within the meaning of the 1940 Act,
14
<PAGE>
and the compensation to be received under the contract may not exceed the
compensation which would have been received under the most recent investment
advisory contract that was approved by shareholders. The exception provided by
Rule 15a-4 is not available with respect to an investment advisory contract with
an investment adviser whose contract has terminated as a result of an assignment
in connection with which "such investment adviser, or a controlling person
thereof, directly or indirectly receives money or other benefit. . . ." As
stated earlier, the Old Sub-Advisory Agreements were terminated by action of the
Board immediately prior to consummation of the Sale. Since (i) none of the
Sub-Advisers has received or will receive, directly or indirectly, money or
other benefit in connection with the Sale, and (ii) the rates of advisory fees
payable under the Interim Agreements are the same as under the Old Sub-Advisory
Agreements (and less than under the Old Management Agreement), the conditions of
Rule 15a-4 have been met with respect to the Interim Agreements.
RECOMMENDATION OF THE BOARD OF DIRECTORS
As a result of their deliberations, at an in-person held on meeting on May
8, 1998, the Board of Directors, including all of the Independent Directors,
voted unanimously to approve the Interim Agreements and to recommend to the
Shareholders that they vote "FOR" Proposal No. 3.
VOTE REQUIRED FOR PROPOSAL NO. 3
Shareholders of each of the Portfolios vote separately on whether to
approve Proposal No. 3 with respect to that particular Portfolio. Approval of
Proposal No. 3 with respect to a Portfolio requires the affirmative vote of a
majority of the outstanding voting securities of that Portfolio. "Majority" for
this purpose under the 1940 Act means the lesser of (1) more than 50% of the
outstanding shares of the Portfolio or (2) 67% or more of the shares of the
Portfolio represented at the meeting if more than 50% of such shares are
represented.
FAILURE TO APPROVE PROPOSAL NO. 3 BY THE SHAREHOLDERS OF ONE PORTFOLIO WILL
NOT AFFECT THE APPROVAL OF PROPOSAL NO. 3 WITH RESPECT TO ANY OTHER PORTFOLIO.
THE FAILURE TO APPROVE PROPOSAL NO. 3 IS SIGNIFICANT TO A PORTFOLIO ONLY IF
PROPOSALS NOS. 1 AND 2 ARE ALSO NOT APPROVED WITH RESPECT TO THAT PORTFOLIO. IN
SUCH EVENT, THE BOARD WILL CONSIDER WHAT ACTION SHOULD BE TAKEN TO OBTAIN
ADVISORY SERVICES FOR SUCH PORTFOLIO.
GENERAL INFORMATION
INFORMATION ABOUT THE MANAGER
The Manager is a wholly-owned subsidiary of ARM, a Delaware corporation.
The address of the Manager and ARM is 515 West Market Street, 8th Floor,
Louisville, Kentucky 40202.
15
<PAGE>
The following chart lists the name, address and principal occupation of the
principal executive officer and each director of the Manager:
Principal Occupation
(if other than officer or
Name Address director of the Manager)
- ---- ------- ------------------------
Martin H. Ruby 515 West Market Street, Chairman of the Board and
Louisville, KY 40202 Chief Executive Officer,
ARM
Robert H. Scott 515 West Market Street, General Counsel and
Louisville, KY 40202 Secretary, ARM
Peter S. Resnik 515 West Market Street, Treasurer, ARM
Louisville, KY 40202
Barry G. Ward 515 West Market Street, Controller, ARM
Louisville, KY 40202
Michael A. Cochran 515 West Market Street, Tax Officer, ARM
Louisville, KY 40202
Craig A. Hawley 515 West Market Street, Assistant General
Louisville, KY 40202 Counsel, ARM
Kevin L. Howard 515 West Market Street, Assistant General
Louisville, KY 40202 Counsel, ARM
Patricia L. Tackett 515 West Market Street, Assistant Secretary, ARM
Louisville, KY 40202
The following chart lists those officers and Directors of the Fund who are also
affiliated with ARM and/or the Manager, and sets forth the nature of those
affiliations:
Position with the
Name Fund Position with ARM and/or the Manager
- ---- ----------------- ------------------------------------
John R. Lindholm Chairman and President - Retail Business Division,
Director ARM
Barry G. Ward Controller Controller, ARM and the Manager
Peter S. Resnik Treasurer Treasurer, ARM and the Manager
16
<PAGE>
Kevin L. Howard Secretary Assistant General Counsel, ARM and
Assistant Secretary, the Manager
Michael A. Cochran Tax Officer Tax Officer, the Manager and ARM
The principal occupation of each person listed above is his occupation with
ARM. The address of each of the above listed persons is 515 West Market
Street, 8th Floor, Louisville, Kentucky 40202.
INFORMATION ABOUT THE SUB-ADVISERS
HARRIS BRETALL SULLIVAN & SMITH, L.L.C., One Sansome Street, Suite 3300,
San Francisco, California 94104, serves as the Sub-Adviser to Harris Bretall
Sullivan & Smith Equity Growth Portfolio. HBSS was founded in 1971 and is
owned by Value Asset Management, Inc. and employees of HBSS. The firm
provides investment management services to institutions and individuals, and
at March 31, 1998, had assets under management of approximately $3.3 billion.
HBSS also serves as investment adviser to other investment companies having
similar investment objectives to the Harris Bretall Sullivan & Smith Equity
Growth Portfolio as indicated in Exhibit D.
The following chart lists the names, addresses and principal occupation of
the principal officer and each director of HBSS:
<TABLE>
<CAPTION>
Name Address Principal Occupation
- ---- ------- --------------------
<S> <C> <C>
W. Graeme Bretall, CFA One Sansome Street, Suite 3300 President
San Francisco, CA 94104
Henry B. Dunlap Smith, CFA One Sansome Street, Suite 3300 Partner
San Francisco, CA 94104
John J. Sullivan, CFA One Sansome Street, Suite 3300 Partner
San Francisco, CA 94104
Gordon J. Ceresino One Sansome Street, Suite 3300 Partner
San Francisco, CA 94104
Susan A. Foley, CFA One Sansome Street, Suite 3300 Partner
San Francisco, CA 94104
David S. Post, CFA One Sansome Street, Suite 3300 Partner
San Francisco, CA 94104
17
<PAGE>
Name Address Principle Occupation
- ---- ------- --------------------
Joseph N. Calderazzo One Sansome Street, Suite 3300 Senior Vice President -
San Francisco, CA 94104 Portfolio Manager
</TABLE>
SCUDDER KEMPER INVESTMENTS, INC., 345 Park Avenue, New York, New York 10154,
serves as the Sub-Adviser to Scudder Kemper Value Portfolio. SKI was formed on
December 31, 1997 pursuant to a transaction agreement whereby Zurich Insurance
Company became the majority shareholder in Scudder, Stevens & Clark, Inc.
("Scudder"), with approximately 70% interest, and Scudder merged with ZKI
Holding Corporation. As of March 31, 1998, SKI managed over $200 billion in
assets. SKI also serves as investment adviser to other investment companies
having similar investment objectives to the Scudder Kemper Value Portfolio as
indicated in Exhibit E.
The following chart lists the names, addresses and principal occupation of
the principal officer and each director of SKI:
Name Address Principal Occupation
- ---- ------- --------------------
Stephen R. 345 Park Avenue Treasurer and Chief Financial
Beckwith New York, NY 10154 Officer, SKI
Lynn Birdsong 345 Park Avenue Corporate Vice President and
New York, NY 10154 Director, SKI
Lawrence Cheng Mythenquai 2 Member of Corporate Executive Board
8002 Zurich, and Chief Investment Officer for
Switzerland Investments and International Asset
Management, Zurich and Director, SKI
Steven Gluckstern Mythenquai 2 Member of Corporate Executive Board
8002 Zurich, and responsible for Reinsurance,
Switzerland Structured Finance, Capital Market
Products and Strategic Investments,
Zurich and Director, SKI
Rolf Hueppi Mythenquai 2 Chairman and Chief Executive
8002 Zurich, Officer, Zurich; Chairman of Board
Switzerland of Directors and Director, SKI
Kathryn L. Quirk 345 Park Avenue General Counsel, Chief Compliance
New York, NY 10154 Officer and Secretary, SKI
Markus Rohrbasser Mythenquai 2 Chief Financial Officer and Member
8002 Zurich, of Corporate Executive Board, Zurich
Switzerland and Director, SKI
18
<PAGE>
Cornelia Small 345 Park Avenue Corporate Vice President and
New York, NY 10154 Director, SKI
Edmond Villani 345 Park Avenue President, Chief Executive Officer
New York, NY 10154 and Director, SKI
ZWEIG/GLASER ADVISERS, 900 Third Avenue, New York, New York 10022, serves as the
Sub-Adviser for Zweig Asset Allocation Portfolio and Zweig Equity (Small Cap)
Portfolio. Glaser Corp., a Delaware corporation formed by Eugene J. Glaser, and
Zweig Management Corp., a Delaware corporation controlled by Dr. Martin E.
Zweig, are the general partners of Zweig/Glaser. Dr. Zweig is also Chairman of
Zweig/Glaser and Mr. Glaser is President. Dr. Zweig has provided investment
advisory and portfolio management services for over 27 years and is currently
affiliated with investment advisers, which, as of March 31, 1998 managed over $8
billion in assets. Dr. Zweig is also President and Director of The Zweig Fund,
Inc. and the Zweig Total Return Fund, Inc., closed-end funds traded on the NYSE
with combined assets of over $1 billion. Zweig/Glaser also serves as investment
adviser to other investment companies having similar investment objectives to
the Zweig Asset Allocation Portfolio and Zweig Equity (Small Cap) Portfolio as
indicated in Exhibit F.
AFFILIATED BROKERS
Until May 8, 1998, the Manager was affiliated with Morgan Stanley & Co.
Incorporated ("Morgan Stanley & Co."), a registered broker-dealer. Zweig/Glaser
Advisers is affiliated with Zweig Securities Corp., a registered broker-dealer.
From time to time, a portion of one or more Portfolios' brokerage transactions
may be conducted with such broker-dealers, subject to policies established by
the Board of Directors to ensure that all brokerage commissions paid to such
broker-dealers by any Portfolio with which they are affiliated are fair and
reasonable. For the fiscal year ended June 30, 1997, the Fund paid the
following brokerage commissions with respect to the Portfolios set forth below
to Morgan Stanley & Co. Also presented below for the fiscal year ended June 30,
1997 are the brokerage commissions paid to Morgan Stanley & Co. as a percentage
of the aggregate brokerage commissions paid by each Portfolio and as a
percentage of the aggregate dollar amount of portfolio transactions involving
the payment of commissions engaged in by such Portfolio.
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS PAID TO MORGAN STANLEY & CO.
As a Percentage of
As a Percentage Portfolio
of Aggregate Transactions
Portfolio Paid ($) Commissions Involving Commissions
--------- --------- ----------- ---------------------
<S> <C> <C> <C>
Zweig Asset Allocation
Portfolio 50,774 68% 84%
Zweig Equity (Small Cap) 8,051 51% 69%
19
<PAGE>
<CAPTION>
BROKERAGE COMMISSIONS PAID TO MORGAN STANLEY & CO.
As a Percentage of
As a Percentage Portfolio
of Aggregate Transactions
Portfolio Paid ($) Commissions Involving Commissions
--------- --------- ----------- ---------------------
<S> <C> <C> <C>
Portfolio
Scudder Kemper Value
Portfolio 2,060 3% 4%
</TABLE>
DISTRIBUTOR
ARM Securities acts without remuneration as the Fund's Distributor pursuant
to a Distribution Agreement dated May 8, 1998. ARM Securities is a wholly-owned
subsidiary of ARM. Shares of the Fund and the Portfolios are sold only to
separate accounts of Integrity and National Integrity. ARM Securities' address
is 100 North Minnesota Street, P.O. Box 69, New Ulm, Minnesota 56073-0069.
TRANSFER AGENT, DIVIDEND AGENT, RECORDKEEPING AGENT AND CUSTODIAN
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, acts as the Fund's transfer agent, dividend disbursing agent,
recordkeeping agent and custodian.
OTHER MATTERS
The Board of Directors does not know of any other business to be brought
before the meeting. If any other matters properly come before the meeting,
proxies will vote on such matters in their discretion.
REPORTS TO SHAREHOLDERS AND FINANCIAL STATEMENTS
The Fund will furnish, without charge, a copy of the most recent Annual and
Semi-Annual Reports to contract owners. Copies of the Annual and Semi-Annual
Reports may be obtained from the Fund, without charge, by contacting the Fund in
writing at the address on the cover of this Proxy Statement, or by calling
1-800-325-8583.
SHAREHOLDER PROPOSALS
The Fund is not required to hold annual meetings of shareholders and
currently does not intend to hold such meetings unless shareholder action is
required in accordance with the 1940 Act or the Fund's Articles of
Incorporation. A shareholder proposal to be considered for inclusion in the
proxy statement at any meeting of shareholders hereafter called must be
submitted a
20
<PAGE>
reasonable time before the proxy statement relating thereto is mailed. Whether a
proposal submitted will be included in the proxy statement will be determined in
accordance with applicable federal and state laws.
Respectfully Submitted,
Kevin L. Howard
Secretary
Dated: June 19, 1998
CONTRACT HOLDERS ARE REQUESTED TO FILL IN, DATE AND SIGN THE VOTING
INSTRUCTIONS CARD AND RETURN IT PROMPTLY IN THE ENCLOSED PREPAID ENVELOPE.
21
<PAGE>
EXHIBIT A
THE LEGENDS FUND. INC.
MANAGEMENT AGREEMENT
Agreement, made this ___ day of _________, 1998 between The Legends Fund,
Inc., a Maryland corporation (the FUND), and Integrity Capital Advisors, Inc., a
Delaware corporation (the MANAGER).
W I T N E S S ET H
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the 1940 ACT); and
WHEREAS, the shares of beneficial interest of the Fund are divided into
separate series or portfolios (each, a PORTFOLIO), each of which is established
pursuant to a resolution of the Board of Directors of the Fund, and the Board of
Directors may from time to time terminate such Portfolios or establish and
terminate additional Portfolios; and
WHEREAS, the Manager is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the ADVISERS ACT); and
WHEREAS, the Fund desires to retain the Manager to render or contract to
obtain as hereinafter provided investment advisory and-supervisory services to
the Fund and the Fund also desires to avail itself of the facilities available
from the Manager with respect to the administration of the Fund's day to day
business affairs, and the Manager is willing to render or contract for such
investment advisory, supervisory and administrative services;
NOW, THEREFORE, the parties agree as follows:
1. APPOINTMENT OF MANAGER. The Fund hereby appoints the Manager to act as
manager of the Fund and administrator of its business affairs for the
period and on the terms set forth in this Agreement. The Manager accepts
such appointment and agrees to render the services herein described, for
the compensation herein provided. The Manager is authorized to enter into
sub-advisory agreements (SUB-ADVISORY AGREEMENTS) with registered
investment advisers (each a SUB-ADVISER and collectively the SUB-ADVISERS)
pursuant to which the Manager delegates to the Sub-Advisers its
obligations for providing investment advisory and certain other services
in connection with one or more of the Portfolios; provided, that the
Manager, and not the Fund, shall be responsible for any compensation
payable under the Sub-Advisory Agreements. Any such Sub-Advisory Agreement
may be entered into by the Manager on such terms and in such manner as may
be permitted by the 1940 Act and the rules thereunder. For each Portfolio
for which the Manager has entered into a Sub-Advisory
<PAGE>
Agreement, the Sub-Adviser shall have the primary responsibility for
providing investment advisory services as setforth in Section 2 and shall
be responsible for broker-dealer selection as set forth in Section 3 and
maintaining books and records as set forth in Section 4, and the Manager
will have supervisory responsibility for investment advisory services
furnished by the Sub-Adviser pursuant to the Sub-Advisory Agreement. The
Manager will review the performance of each Sub-Adviser and make
recommendations to the Board of Directors of the Fund with respect to the
retention and renewal of Sub-Advisory Agreements.
2. Investment Advisory Services. Subject to the supervision of the Fund's
Board of Directors, the Manager will provide a continuous investment
program for each Portfolio and determine the composition of the assets of
each Portfolio, including determination of the purchase, retention or sale
of the securities, cash, and other investments contained in such
Portfolio's holdings. The Manager will provide investment research and
conduct a continuous program of evaluation, investment, sales, and
reinvestment of each Portfolio's assets by determining the securities and
other investments that shall be purchased, entered into, sold, closed, or
exchanged for such Portfolio, when these transactions should be executed,
and what portion of the assets of such Portfolio should be held in the
various securities and other investments in which it may invest, and the
Manager is hereby authorized to execute and perform such services, or to
arrange for execution and performance of such services, on behalf of each
Portfolio. To the extent, if any, permitted by the investment policies of
a Portfolio, the Manager shall make determinations as to and execute and
perform futures contracts and options on behalf of such Portfolio. The
Manager will provide the services under this Agreement in accordance with
each Portfolio's investment objective or objectives, policies, procedures
and restrictions as stated in the Fund's Registration Statement, as
amended from time to time (the REGISTRATION STATEMENT), filed with the
Securities and Exchange Commission (the SEC) and any other documents that
set forth investment policies, procedures or restrictions governing the
Portfolio.
The Manager further agrees as follows:
(a) The Manager will manage each Portfolio (i) so that it will
qualify as a regulated investment company under Subchapter M
of the Internal Revenue Code of 1986, as amended (the CODE),
and (ii) so as to ensure compliance by such Portfolio with the
diversification requirements of Section 817(h) of the Code and
regulations issued thereunder. In managing the Portfolio in
accordance with these requirements, the Manager shall be
entitled to receive and act upon advice of counsel.
(b) In undertaking its duties under this Agreement, the Manager
will comply with the 1940 Act and all rules and regulations
thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the
Fund's Board of Directors of which it has notice and the
provisions of the Registration Statement.
2
<PAGE>
(c) On occasions when the Manager deems the purchase or sale of a
security to be in the best interest of a Portfolio as well as
of the Manager's or the Manager's affiliates' other investment
advisory clients, the Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated
to, aggregate the securities to be so sold or purchased with
those of its other clients where such aggregation is not
inconsistent with the policies set forth in the Registration
Statement. In such event, the Manager will allocate the
securities so purchased or sold, as well as the expenses
incurred in the transaction, in a manner that is fair and
equitable in the Manager's judgment in the exercise of the
Manager's fiduciary obligations to the Fund and to such other
clients.
(d) In connection with the purchase and sale of securities for
each Portfolio, the Manager will arrange for the transmission
to the custodian, transfer agent, dividend disbursing agent
and recordkeeping agent for the Fund (such custodian and agent
or agents hereinafter referred to as the AGENT), on a daily
basis, such confirmations, trade tickets (which shall state
industry classifications unless the Manager has previously
furnished a list of classifications for portfolio securities),
and other documents and information, including, but not
limited to, Cusip or other numbers that identify securities to
be purchased or sold on behalf of each Portfolio and, with
respect to mortgage derivative and asset-backed securities
purchased by the Manager for a Portfolio, 1066Q reports and
supplemental information as required to be available pursuant
to IRS Publication 938, as may be reasonably necessary to
enable the Agent to perform its administrative and
recordkeeping responsibilities with respect to such Portfolio.
With respect to portfolio securities to be purchased or sold
through the Depository Trust Company, the Manager will arrange
for the automatic transmission of the confirmation of such
trades to the Fund's Agents.
(e) The Manager will monitor on a daily basis, by review of daily
pricing reports provided by the Agent to the Manager, the
determination by the Agent for the Fund of the valuation of
portfolio securities and other investments of each Portfolio.
The Manager shall not be obligated to independently verify the
Agent's pricing determinations, and the Agent's responsibility
for accurate pricing determinations of the value of the
Portfolio's securities shall not be reduced by the Manager's
duty to monitor such determinations. The Manager will assist
the Agent in determining or confirming, consistent with the
procedures and policies stated in the Registration Statement,
the value of any portfolio securities or other assets of each
Portfolio for which the Agent seeks assistance from or
identifies for review by the Manager.
3
<PAGE>
(f) The Manager will make available to the Fund, promptly upon
request, all of each Portfolio's investment records and
ledgers maintained by the Manager as are necessary to assist
the Fund to comply with requirements of the 1940 Act and the
Advisers Act, as well as other applicable laws. The Manager
will furnish to regulatory authorities having the requisite
authority any information or reports in connection with its
services which may be requested in order to ascertain whether
the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
(g) The Manager will provide reports, which may be prepared by the
Agent, to the Fund's Board of Directors for consideration at
meetings of the Board on the investment program for each
Portfolio and the issuers and securities represented in each
Portfolio's securities holdings, including a schedule of the
investments and other assets held in such Portfolio and a
statement of all purchases and sales for the Portfolio since
the last such statement, and will furnish the Fund's Board of
Directors with periodic and special reports with respect to
the Portfolio as the Directors may reasonably request,
including statistical information with respect to the
Portfolio's securities.
3. BROKER-DEALER SELECTION. The Manager is responsible for decisions to buy
or sell securities and other investments for each Portfolio, broker-dealer
and futures commission merchants' selection, and negotiation of brokerage
commission and futures commission merchants' rates. As a general matter,
in executing portfolio transactions, the Manager may employ or deal with
such broker-dealers or futures commission merchants as may, in the
Manager's best judgment, provide prompt and reliable execution of the
transactions at favorable prices and reasonable commission rates. In
selecting such broker-dealers or futures commission merchants, the Manager
shall consider all relevant factors, including price (including the
applicable brokerage commission, dealer spread or futures commission
merchant rate), the size of the order, the nature of the market for the
security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer or
futures commission merchant involved, the quality of the service, the
difficulty of execution, and the execution capabilities and operational
facilities of the firm involved, and, in the case of securities, the
firm's risk in positioning a block of securities. Subject to such policies
as the Board of Directors may determine and consistent with Section 28(e)
of the Securities Exchange Act of 1934, as amended (the 1934 ACT), the
Manager shall not be deemed to have acted unlawfully or to have breached
any duty created by this Agreement or otherwise solely by reason of the
Manager's having caused a Portfolio to pay a member of an exchange, broker
or dealer an amount of commission for effecting a securities transaction
in excess of the amount of commission another member of an exchange,
broker or dealer would have charged for effecting that transaction, if the
Manager 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 member of an exchange, broker or dealer viewed in terms
of either that particular transaction or the Manager's overall
responsibilities with respect to such
4
<PAGE>
Portfolio and to the other clients as to which the Manager exercises
investment discretion. In accordance with Section 11(a) of the 1934 Act
and Rule lla2-2('I') thereunder, and subject to any other applicable laws
and regulations including Section 17(e) of the 1940 Act and Rule 17e-1
thereunder, the Manager may engage its affiliates, or any Sub-Adviser to
the Fund and its respective affiliates, as broker-dealers or futures
commission merchants to effect portfolio transactions in securities and
other investments for a Portfolio.
4. BOOKS AND RECORDS. The Manager shall keep the Fund's books and records
required to be maintained by it pursuant to this Agreement, the 1940 Act
or otherwise. The Manager agrees that all records which it maintains for
the Fund are the property of the Fund and it will surrender promptly to
the Fund any such records upon the Fund's request, provided however that
the Manager may retain a copy of such records. The Manager further agrees
to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
any such records as are required to be maintained by the Manager
hereunder.
5. ADMINISTRATIVE AND SUPERVISORY SERVICES.
(a) The Manager will coordinate all matters relating to the functions of
the Portfolios' Sub-Advisers, Agents, accountants, attorneys, and
other parties performing services or operational functions for the
Portfolios.
(b) The Manager will furnish without cost to the Fund, or pay the cost
of, such office space, office equipment and office facilities as are
adequate for the Fund's needs.
(c) The Manager will provide, without remuneration from or other cost to
the Fund, the services of a sufficient number of individuals
competent to perform all of the Fund's executive, administrative and
clerical functions as are necessary to ensure compliance with
federal securities laws as well as other applicable laws and to
provide effective supervision and administration of the Portfolios
and which are not performed by employees or other agents engaged by
the Fund or by the Manager acting in some other capacity pursuant to
a separate agreement or arrangement with the Fund. The Manager shall
authorize and permit any of its directors, officers and employees
who may be elected as Directors or officers of the Fund to serve in
the capacities in which they are elected without any remuneration
from the Fund.
(d) The Manager will assist in the preparation of all periodic reports
to the shareholders of the Fund and all reports and filings required
to maintain the registration and qualification of the Fund's shares,
or to meet other regulatory or tax requirements applicable to the
Fund, under federal and state securities and tax laws.
(e) The Manager shall prepare and, after approval by the Fund, file and
arrange for the distribution of proxy materials and periodic reports
to Fund shareholders as required by applicable law.
5
<PAGE>
(f) The Manager shall prepare, or cause the preparation of, and, after
approval by the Fund, arrange for the filing of such registration
statements and other documents with the SEC and other federal and
state regulatory authorities as may be required by applicable law.
(g) The Manager shall take such other action with respect to the
Portfolios, after approval by the Fund, as may bc required by
applicable law, including without limitation the rules and
regulations of the SEC and of state securities or insurance
commissions and other regulatory agencies.
(h) The Manager shall make its officers and employees available to the
Board of Directors and officers of the Fund and Sub-Advisers for
consultation and discussions regarding the supervision and
administration of the Portfolios.
6. EXPENSES.
(a) During the term of this Agreement, the Manager shall pay, or cause a
Sub-Adviser to pay, the-following expenses:
(i) The salaries and expenses of all personnel of the Fund and the
Manager except the fees and expenses of Directors who are not
"interested persons" (within the meaning of the 1940 Act) of
the Fund, the Manager, National Integrity Life Insurance
Company ("National Integrity"), or any Sub-Adviser;
(ii) All expenses reasonably incurred by the Manager in connection
with providing the services described above, including the
provision of office space, office equipment, office
facilities, and executive, administrative and clerical
personnel in accordance with paragraph 2(i) hereof, but
excluding the expenses described below to be assumed by the
Fund;
(iii) The fees of the Sub-Advisers pursuant to the Sub-Advisory
Agreements; and
(iv) The costs and expenses payable by the Sub-Advisers pursuant to
the Sub-Advisory Agreements.
(b) Each Portfolio is responsible for and bears all expenses incurred in
its operation that are not specifically assumed by the Manager or
Integrity Financial Services, Inc., the Fund's distributor, pursuant
to the Distribution Agreement with the Fund. General expenses of the
Fund not readily identifiable as belonging to one of the Portfolios
will be allocated among the Portfolios by or under the direction of
the Fund's Board of Directors in such manner as the Board shall
determine to be fair and equitable. Expenses borne by each Portfolio
include, but are not limited to, the following (or the Portfolio's
allocated share of the following):
6
<PAGE>
(i) The cost (including brokerage commissions, if any) of
securities purchased or sold by the Portfolio and any losses
incurred in connection therewith;
(ii) Investment management fees due hereunder (but not
sub-advisory fees, which are payable by the Manager);
(iii) Organizational expenses;
(iv) Filing fees and expenses relating to the registration and
qualification of the Fund or the shares of a Portfolio under
federal or state securities laws and maintenance of such
registrations and qualifications;
(v) Fees and expenses payable to the Directors who are not
"interested persons" of the Fund or the Manager, National
Integrity or any Sub-Adviser;
(vi) Taxes (including any income or franchise taxes) and
governmental fees;
(vii) Costs of any liability, directors' and officers',
uncollectible items of deposit and other insurance and
fidelity bonds;
(viii) Legal, accounting and auditing expense;
(ix) Charges of custodians, transfer agents and other agents;
(x) Expenses of setting in type and providing a camera-ready copy
of prospectuses and supplements thereto, expenses of setting
in type and printing or otherwise reproducing statements of
additional information and supplements thereto and reports
and proxy materials for existing shareholders;
(xi) Any extraordinary expenses (including fees and disbursements
of counsel) incurred by the Fund or Portfolio;
(xii) Fees, voluntary assessments and other expenses incurred in
connection with membership in investment company
organizations; and
(xiii) Costs of meetings of shareholders.
(c) In the event the expenses of the Fund for any fiscal year (including
the fees payable to the Manager but excluding interest, taxes,
brokerage commissions and litigation and indemnification expenses
and other extraordinary expenses not incurred in the ordinary course
of the Fund's business) exceed the lowest applicable annual expense
limitation established and enforced pursuant to the statute or
regulations of any
7
<PAGE>
applicable jurisdictions, the compensation due the Manager hereunder
will be reduced by the amount of such excess. If such excess amount
exceeds the compensation payable to the Manager hereunder, the
Manager will not be required to make any additional payments to the
Fund in reimbursement of such expenses.
7. COMPENSATION. For the services provided and the expenses assumed pursuant
to this Agreement, each Portfolio will pay to the Manager as full
compensation therefor a fee as set forth below. This fee will be deducted
from the assets of the respective Portfolio and paid to the Manager
monthly, but will be accrued daily for purposes of determining the value
of each Portfolio on each day the New York Stock Exchange is open for
trading. Any reduction in the fee payable pursuant to paragraph 6(c) shall
be made monthly, and will be subject to readjustment during the year.
<TABLE>
<CAPTION>
Annual Percentage of
Average Net Assets Paid By
Name of Portfolio Portfolio to Manager
- ----------------- --------------------
<S> <C>
Zweig Asset Allocation Portfolio .90%
Harris Bretall Sullivan & Smith
Equity Growth Portfolio .65%
Scudder Kemper Value Portfolio .65%
Zweig Equity (Small Cap) Portfolio 1.05%
</TABLE>
8. LIABILITY. Except as may otherwise be required by the 1940 Act and the
rules and regulations thereunder, the Manager, any of its affiliated
persons and each person, if any, who, within the meaning of Section 15 of
the Securities Act of 1933, as amended, controls the 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 on the part of the Manager in the
performance of its duties or from reckless disregard of its duties and
obligations under this Agreement.
9. TERM. Unless sooner terminated, this Agreement shall continue in effect
for two years and thereafter for successive one year periods, provided
that such continuance is specifically approved at least annually in
conformity with the requirements of the 1940 Act; provided, however, that
this Agreement may be terminated by the Fund or any Portfolio thereof
(with respect to such Portfolio) at any time, without the payment of any
penalty, by the Board of Directors of the Fund or by vote of a majority of
the outstanding voting securities (as defined in the 1940 Act) of a
Portfolio, or by the Manager at any time, without the payment of any
penalty, upon not less than 60 days' prior written notice to the other
party. This Agreement shall terminate automatically in the event of its
assignment (as defined in the 1940 Act).
8
<PAGE>
10. NON-EXCLUSIVITY. Nothing in this Agreement shall limit or restrict the
right of any director, officer or employee of the Manager who may also be
a Director, officer or employee of the Fund to engage in any other
business or to devote his or her time and attention in part to the
management or other aspects of any business, whether of a similar or
dissimilar nature, nor limit or restrict the right of the Manager to
engage in any other business or to render services of any kind to any
other corporation, firm, individual or association.
11. AMENDMENTS. This Agreement may be amended by mutual consent in writing,
but the consent of the Fund must be obtained in conformity with the
requirements of the 1940 Act.
12. NOTICES. Any notice or other communication required to be given pursuant
to this Agreement shall be deemed duly given if delivered or mailed by
registered mail, postage prepaid, (I) to the Manager at 515 West Market
Street, 8th Floor, Louisville, KY 40202, Attention: President; or (2) to
the Fund at 515 West Market Street, 8th Floor, Louisville, KY 40202,
Attention: President.
13. CHOICE OF LAW. This Agreement is made and to be principally performed in
the State of New York, and except insofar as the 1940 Act or other federal
laws and regulations may be controlling, this Agreement shall be governed
by, and construed and enforced in accordance with, the internal laws of
the State of New York.
14. SEPARATE SERIES. The Fund is a corporation organized under the Maryland
General Corporation Law on July 22, 1992. The Fund is a corporation with
separate series, or Portfolios, and all debts, liabilities, obligations
and expenses of a particular Portfolio shall be enforceable only against
the assets of that Portfolio and not against the assets of any other
Portfolio or of the Fund as a whole.
1. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
16. COUNTERPARTS. This Agreement may be executed in counterparts, and each
counterpart shall for all purposes be deemed an original, and all such
counterparts shall together constitute one and the same instrument.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
THE LEGENDS FUND, INC.
By __________________________
INTEGRITY CAPITAL ADVISORS, INC.
By __________________________
10
<PAGE>
EXHIBIT B-1
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT, made this ___ day of __________, 1998, between Integrity Capital
Advisors, Inc. (MANAGER), a Delaware corporation, and _______________________, a
______________________corporation.
WHEREAS, Manager, a wholly-owned subsidiary of ARM Financial Group, Inc., is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended (the ADVISERS ACT);
WHEREAS, the Sub-Adviser is an investment adviser registered under the Advisers
Act;
WHEREAS, pursuant to a Management Agreement dated _________________(the
MANAGEMENT AGREEMENT), Manager acts as Investment Manager to The Legends Fund,
Inc. (the Fund), an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the 1940 ACT);
WHEREAS, the Fund is authorized to issue multiple series of shares, each such
series representing a separate portfolio of securities and investments; and
WHEREAS, Manager desires to retain the Sub-Adviser to furnish investment
advisory services to the __________________________________Portfolio of the Fund
(the PORTFOLIO), and the Sub-Adviser is willing to accept such appointment on
the terms and conditions set forth herein.
NOW, THEREFORE, based on the premises and the consideration set forth herein,
Manager and the Sub-Adviser agree as follows:
SECTION 1. INVESTMENT ADVISORY SERVICES.
Subject to the supervision of the Fund's Board of Directors and Manager, the
Sub-Adviser will provide a continuous investment program for the Portfolio and
determine the composition of the assets of the Portfolio, including
determination of the purchase, retention or sale of the securities, cash, and
other investments contained in the Portfolio's holdings. The Sub-Adviser will
provide investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Portfolio's assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Portfolio, when these transactions should be
executed, and what portion of the assets of the Portfolio should be held in the
various securities and other investments in which it may invest, and the
Sub-Adviser is hereby authorized to execute and perform such services on behalf
of the Portfolio. To the extent, if any, permitted by the investment policies of
the Portfolio, the Sub-Adviser shall make determinations as to and execute and
perform futures contracts and options on behalf of the Portfolio. The
Sub-Adviser will provide the services under this Agreement in accordance with
the Portfolio's investment objective or objectives, policies, and restrictions
as stated in the Fund's Registration Statement filed with the Securities and
Exchange Commission (SEC). Manager agrees to supply the Sub-Adviser with a copy
of the Registration Statement and each amendment thereto (the Registration
Statement as amended from time to time hereinafter referred to as the
REGISTRATION STATEMENT) and any other documents that set forth investment
policies, procedures or restrictions governing the Portfolio and to notify the
Sub-Adviser in writing of any changes in the investment objectives, policies,
procedures and restrictions governing the Portfolio.
1
<PAGE>
The Sub-Adviser further agrees as follows:
(a) The Sub-Adviser will manage the Portfolio (i) so that it will qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the CODE), and (ii) so as to ensure compliance by the
Portfolio with the diversification requirements of Section 817(h) of the Code
and regulations issued thereunder. In managing the Portfolio in accordance with
these requirements, the Sub-Adviser shall be entitled to receive and act upon
advice of counsel to the Fund, counsel to Manager or counsel to the Sub-Adviser,
provided the Sub-Adviser's counsel is acceptable to Manager.
(b) In undertaking its duties under this Agreement, the Sub-Adviser will comply
with the 1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations, with any applicable procedures adopted
by the Fund's Board of Directors of which it has notice and the provisions of
the Registration Statement.
(c) On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Portfolio as well as of the Sub-Adviser's or
the Sub-Adviser's affiliates' other investment advisory clients, the Sub-Adviser
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, the Sub-Adviser
will allocate the securities so purchased or sold, as well as the expenses
incurred in the transaction, in a manner that is fair and equitable in the
Sub-Adviser's judgment in the exercise of the Sub-Adviser's fiduciary
obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities for the Portfolio,
the Sub-Adviser, together with Manager, will arrange for the transmission to the
custodian, transfer agent, dividend disbursing agent and recordkeeping agent for
the Fund (such custodian and agent or agents hereinafter referred to as the
AGENT), on a daily basis, such confirmation, trade tickets (which shall state
industry classifications unless the Sub-Adviser has previously furnished a list
of classifications for portfolio securities), and other documents and
information, including (but not limited to) Cusip or other numbers that identify
securities to be purchased or sold on behalf of the Portfolio and, with respect
to mortgage derivative and asset-backed securities purchased by the Sub-Adviser
for the Portfolio, 1066Q reports and supplemental information as required to be
available pursuant to IRS Publication 938, as may be reasonably necessary to
enable the Agent to perform its administrative and recordkeeping
responsibilities with respect to the Portfolio. With respect to portfolio
securities to be purchased or sold through the Depository Trust Company, the
Sub-Adviser will arrange for the automatic transmission of the confirmation of
such trades to the Fund's Agent, and if requested, Manager.
(e) The Sub-Adviser will monitor on a daily basis, by review of daily pricing
reports provided by the Agent to the Sub-Adviser, the determination by the Agent
for the Fund of the valuation of portfolio securities and other investments of
the Portfolio. The Sub-Adviser shall not be obligated to independently verify
the Agent's pricing determinations, and the Agent's responsibility for accurate
pricing determinations of the value of the Portfolios's securities shall not be
reduced by the Sub-Adviser's duty to monitor such determinations. The
Sub-Adviser will assist the Agent in determining or confirming, consistent with
the procedures and policies stated in the Registration Statement, the value of
any portfolio securities or other assets of the Portfolio for which the Agent
seeks assistance from or identifies for review by the Sub-Adviser.
(f) The Sub-Adviser will make available to the Fund and Manager, promptly upon
request, all of the Portfolio's
2
<PAGE>
investment records and ledgers maintained by the Sub-Adviser as are necessary to
assist the Fund and Manager to comply with requirements of the 1940 Act and the
Advisers Act, as well as other applicable laws. The Sub-Adviser will furnish to
regulatory authorities having the requisite authority any information or reports
in connection with its services which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
(g) The Sub-Adviser will provide reports, which may be prepared by the Agent, to
the Fund's Board of Directors for consideration at meetings of the Board on the
investment program for the Portfolio and the issuers and securities represented
in the Portfolio's securities holdings, including a schedule of the investments
and other assets held in the Portfolio and a statement of all purchases and
sales for the Portfolio since the last such statement, and will furnish the
Fund's Board of Directors with periodic and special reports with respect to the
Portfolio as the Directors and Manager may reasonably request, including
statistical information with respect to the Portfolio's securities. In addition,
the Sub-Adviser will make available at each meeting of the Board of Directors,
either in person or by telephone conference call as instructed by Manager on
behalf of the Board of Directors of the Fund, an appropriate person to discuss
the investment performance of the Portfolio.
(h) The Sub-Adviser will provide information and reports to Manager as Manager
shall reasonably request to enable it to review the performance of the
Sub-Adviser under this Agreement.
SECTION 2. BROKER-DEALER SELECTION.
The Sub-Adviser is responsible for decisions to buy and sell securities and
other investments for the Portfolio, broker-dealer and futures commission
merchant selection, and negotiation of brokerage commission and futures
commission merchants' rates. As a general matter, in executing portfolio
transactions the Sub-Adviser may employ or deal with such broker-dealers or
futures commission merchants as may, in the Sub-Adviser's best judgment, provide
prompt and reliable execution of the transactions at favorable prices and
reasonable commission rates. In selecting such broker-dealers or futures
commission merchants, the Sub-Adviser shall consider all relevant factors,
including price (including the applicable brokerage commission, dealer spread or
futures commission merchant rate), the size of the order, the nature of the
market for the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer or futures
commission merchant involved, the quality of the service, the difficulty of
execution, and the execution capabilities and operational facilities of the firm
involved, and, in the case of securities, the firm's risk in positioning a block
of securities. Subject to such policies as the Board of Directors may determine
and consistent with Section 28(e) of the Securities Exchange Act of 1934, as
amended (the 1934 ACT), the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of the Sub-Adviser's having caused the Portfolio to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
if the Sub-Adviser 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 member of an exchange, broker or dealer, viewed in terms of
either that particular transaction or the Sub-Adviser's overall responsibilities
with respect to the Portfolio and to the Sub-Adviser's other clients as to which
the Sub-Adviser exercises investment discretion. In accordance with Section
11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the 1940 Act and Rule
17e-1 thereunder, the Sub-Adviser may engage its affiliates, Manager and its
affiliates or any other sub-adviser to the Fund and its respective affiliates as
broker-dealers or futures commission merchants to effect portfolio transactions
in securities and other investments for the Portfolio.
SECTION 3. RECORDS, REPORTS, ETC.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all
3
<PAGE>
records which the Sub-Adviser maintains for the Portfolio are the property of
the Fund and further agrees to surrender promptly to the Fund any of such
records upon the Fund's or Manager's request or upon termination of this
Agreement, although the Sub-Adviser may, at the Sub-Adviser's own expense, make
and retain a copy of such records. The Sub-Adviser further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940 Act the records required
to be maintained by Rule 31a-1 under the 1940 Act and to preserve the records
required by the Rule 204-2 under the Advisers Act for the period specified in
the Rule.
SECTION 4. PAYMENT OF EXPENSES.
The Sub-Adviser shall assume and pay all of the costs and expenses of performing
its obligations under this Agreement.
SECTION 5. COMPENSATION FOR SERVICES.
Manager will pay to the Sub-Adviser a monthly sub-advisory fee (adjusted pro
rata for any shorter applicable period) at an annual rate of .40% of the average
daily net assets of the Portfolio from the management fee actually received by
Manager from the Fund; provided, however, that the sub-advisory fee shall be
reduced proportionately if the management fee actually paid to Manager by the
Portfolio shall have been reduced as a result of applicable state expense
limitations or fee waivers agreed to in writing by the Sub-Adviser. The
sub-advisory fee shall be computed, accrue and be payable in the same manner as
the management fee which is payable by the Fund to Manager pursuant to the
Management Agreement and as specified in the Fund's Registration Statement.
SECTION 6. LIABILITY FOR SERVICES.
Except as may otherwise be required by the 1940 Act or the rules thereunder or
other applicable law, and except as set forth in the next paragraph, the Fund
and Manager agree that the Sub-Adviser, any of its affiliated persons, and each
person, if any, who, within the meaning of Section 15 of the Securities Act of
1933, as amended, controls the Sub-Adviser, 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 Sub-Adviser's duties, or by reason of reckless disregard of
the Sub-Adviser's obligations and duties under this Agreement.
SECTION 7. INDEMNIFICATION BY SUB-ADVISER.
The Sub-Adviser agrees to indemnify and hold harmless Manager against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which Manager may become subject arising out of or based on
the breach or alleged breach by the Sub-Adviser of any provisions of this
Agreement; provided, however, that the Sub-Adviser shall not be liable under
this paragraph in respect of any loss, expense, claim, damage or liability to
the extent that a court having jurisdiction shall have determined by a final
judgment, or independent counsel agreed upon by Manager and the Sub-Adviser
shall have concluded in a written opinion, that such loss, expense, claim,
damage or liability resulted primarily from Manager's willful misfeasance, bad
faith or gross negligence or by reason of the reckless disregard by Manager of
its duties. The foregoing indemnification shall be in addition to any rights
that Manager may have at common law or otherwise. The Sub-Adviser's agreements
in this paragraph shall, upon the same terms and conditions, extend to and inure
to the benefit of each person who may be deemed to control Manager, be
controlled by Manager or be under common control with Manager and its
affiliates, directors, officers, employees and agents. The Sub-Adviser's
agreements in this paragraph shall also extend to any of Manager's successors or
the successors of the aforementioned affiliates, directors, officers, employees
or agents.
SECTION 8. INDEMNIFICATION BY MANAGER.
4
<PAGE>
Manager agrees to indemnify and hold harmless the Sub-Adviser against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which the Sub-Adviser may become subject arising out of or
based on the breach or alleged breach by Manager of any provisions of this
Agreement or the Management Agreement, or any wrongful action or alleged
wrongful action by Manager or its affiliates in the distribution of the Fund's
shares, or any wrongful action or alleged wrongful action by the Fund other than
wrongful action or alleged wrongful action that was caused by the breach by the
Sub-Adviser of the provisions of this Agreement; provided, however, that Manager
shall not be liable under this paragraph in respect of any loss, expense, claim,
damage or liability to the extent that a court having jurisdiction shall have
determined by a final judgment, or independent counsel agreed upon by Manager
and the Sub-Adviser shall have concluded in a written opinion, that such loss,
expense, claim, damage or liability resulted primarily from the Sub-Adviser's
willful misfeasance, bad faith or gross negligence or by reason of the reckless
disregard by the Sub-Adviser of its duties. The foregoing indemnification shall
be in addition to any rights that the Sub-Adviser may have at common law or
otherwise. Manager's agreements in this paragraph shall, upon the same terms and
conditions, extend to and inure to the benefit of each person who may be deemed
to control the Sub-Adviser, be controlled by the Sub-Adviser or be under common
control with the Sub-Adviser and to each of the Sub-Adviser's and each such
person's respective affiliates, directors, officers, employees and agents.
Manager's agreements in this paragraph shall also extend to any of the
Sub-Adviser's successors or the successors of the aforementioned affiliates,
directors, officers, employees or agents.
SECTION 9. NOTICE AND DEFENSE OR PROCEEDINGS, ETC.
Promptly after receipt by a party indemnified under paragraph 7 or 8 above of
notice of the commencement of any action, proceeding or investigation for which
indemnification will be sought, such indemnified party shall promptly notify the
indemnifying party in writing; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may otherwise have to any
indemnified party unless such omission results in actual material prejudice to
the indemnifying party. In case any action or proceeding shall be brought
against any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, individually or jointly with any other indemnifying party, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of any action or proceeding, the indemnifying
party shall not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation. If the
indemnifying party does not elect to assume the defense of any action or
proceeding, the indemnifying party on a monthly basis shall reimburse the
indemnified party for the legal fees and expenses incurred by the indemnified
party for continuing its defense thereof. Regardless of whether or not the
indemnifying party shall have assumed the defense of any action or proceeding,
the indemnified party shall not settle or compromise the action or proceeding
without the prior written consent of the indemnifying party.
SECTION 10. REPRESENTATIONS AND WARRANTIES; COVENANTS.
(a) The Sub-Adviser hereby represents and warrants as follows:
(i) The Sub-Adviser is registered with the SEC as an investment adviser under
the Advisers Act, and such registration is current, complete and in full
compliance with all material applicable provisions of the Advisers Act and the
rules and regulations thereunder;
(ii) The Sub-Adviser has all requisite authority to enter into, execute, deliver
and perform the Sub-Adviser's obligations under this Agreement;
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(iii) The Sub-Adviser's performance of its obligations under this Agreement does
not conflict with any law, regulation or order to which the Sub-Adviser is
subject; and
(iv) The Sub-Adviser has reviewed the Registration Statement for the Fund filed
with the SEC, and with respect to the disclosure about the Sub-Adviser and the
Portfolio or information relating, directly or indirectly, to the Sub-Adviser or
the Portfolio which was made in reliance upon and in conformity with written
information provided by the Sub-Adviser to the Fund specifically for use therein
or, if written information was not provided, which the Sub-Adviser had the
opportunity to review prior to filing with the SEC, such Registration Statement
contains, as of its date, no untrue statement of any material fact and does not
omit any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading.
(b) The Sub-Adviser hereby covenants and agrees that, so long as this Agreement
shall remain in effect:
(i) The Sub-Adviser shall maintain the Sub-Adviser's registration as an
investment adviser under the Advisers Act, and such registration shall at all
times remain current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and regulations
thereunder;
(ii) The Sub-Adviser's performance of its obligations under this Agreement shall
not conflict with any law, regulation or order to which the Sub-Adviser is then
subject;
(iii) The Sub-Adviser shall at all times fully comply with the Advisers Act, the
1940 Act, all applicable rules and regulations under such Acts and all other
applicable law;
(iv) The Sub-Adviser shall promptly notify Manager and the Fund upon the
occurrence of any event that might disqualify or prevent the Sub-Adviser from
performing its duties under this Agreement. The Sub-Adviser further agrees to
notify Manager and the Fund promptly with respect to written material that has
been provided to the Fund or Manager by the Sub-Adviser for inclusion in the
Registration Statement or prospectus for the Fund or any supplement or amendment
thereto, or, if written material has not been provided, with respect to the
information in the Registration Statement or Prospectus, or any amendment or
supplement thereto, reviewed by the Sub-Adviser, in either case of any untrue
statement of a material fact or of any omission of any statement of a material
fact which is required to be stated therein or is necessary to make the
statements contained therein not misleading; and
(v) If the Sub-Adviser is a partnership, the Sub-Adviser shall notify the Fund
and Manager of any change in membership within a reasonable time after such
change.
SECTION 11. EXCLUSIVITY OF SERVICES AND USE OF NAMES.
The Sub-Adviser acknowledges that a fundamental marketing feature of the
variable annuity contracts and certificates offered through Integrity Life
Insurance Company (INTEGRITY)and National Integrity Life Insurance Company
(NATIONAL INTEGRITY), a wholly-owned subsidiary of Integrity, under which
contributions may be allocated to separate accounts of Integrity and National
Integrity for the purchase of shares of the Portfolio is the fact that the
Sub-Adviser provides investment advisory services to the Portfolio. In
recognition thereof and of the costs incurred by the Fund and Manager in
establishing the Portfolio and registering the Fund as an investment company,
the Sub-Adviser agrees that from the date of this Agreement until the earlier of
(i) six months after the date Integrity and National Integrity begin offering to
the public variable annuity contracts and certificates funded in whole or in
part by the Portfolio or (ii) May 31, 1993, the Sub-Adviser and the
Sub-Adviser's affiliates shall not provide investment advisory services to any
registered investment company or portfolio thereof which has investment
objectives and policies substantially similar to those of the Portfolio and
which serves as a funding
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vehicle for any variable annuity product (excluding advisory arrangements in
existence on the date of this Agreement) without the prior written approval of
the Fund, Integrity and National Integrity. The Sub-Adviser acknowledges that a
breach of this provision may irreparably harm the Fund, Integrity or National
Integrity. In the event of a breach of this provision, the Fund, Integrity or
National Integrity shall be entitled to injunctive relief, to enforcement by
specific performance of this Agreement, and to actual and punitive damages.
The Sub-Adviser further acknowledges and agrees that the names THE LEGENDS FUND
and PINNACLE, and abbreviations or logos associated with those names, are the
valuable property of Manager and its affiliates; that the Fund, Manager and its
affiliates have the right to use such names, abbreviations and logos; and that
the Sub-Adviser shall use the names THE LEGENDS FUND and PINNACLE, and
associated abbreviations and logos, only in connection with the Sub-Adviser's
performance of its duties hereunder.
Manager acknowledges that "Harris Bretall Sullivan & Smith" (the SUB-ADVISER'S
NAME) is distinctive in connection with investment advisory and related services
provided by the Sub-Adviser, the Sub-Adviser's name is a property right of the
Sub-Adviser, and the Sub-Adviser's name in the name of the Portfolio is
understood to be used by the Fund with the Sub-Adviser's consent. The
Sub-Adviser hereby grants to the Fund a non-exclusive license to use the
Sub-Adviser's name in the name of the Portfolio upon the conditions hereinafter
set forth; provided that the Fund may use such name only so long as the
Sub-Adviser shall be retained as the investment sub-adviser of the Portfolio
pursuant to the terms of this Agreement. Any such use by the Fund shall in no
way prevent the Sub-Adviser or any of its successors or assigns from using or
permitting the use of the Sub-Adviser's name along with any other word or words,
for, by or in connection with any other entity or business, other than the Fund
or its business, whether or not the same directly competes or conflicts with the
Fund or its business in any manner, except for the six month period as described
in the first paragraph of this Section.
Manager acknowledges that the Fund shall use the Sub-Adviser's name in the
Portfolio for the period set forth herein in a manner not inconsistent with the
interests of the Sub-Adviser and that the Fund's rights in the Sub-Adviser's
name are limited to its use as a component of the Portfolio's name and in
connection with accurately describing the activities of the Portfolio. In the
event that the Sub-Adviser shall cease to be the
investment sub-adviser of the Portfolio, then Fund at its own expense, upon the
Sub-Adviser's written request:
(i) shall cease to use the Sub-Adviser's name, or any combination thereof as
part of the Portfolio's name or for any other commercial purpose (other than the
right to refer to the Portfolio's former name in the Fund's Registration
Statement, proxy materials and other Fund documents to the extent required under
the 1940 Act);
(ii) shall on all letterheads and other materials designed to be read or used by
salesmen, distributors or investors, state in a prominent position and prominent
type that the Sub-Adviser has ceased to be the investment sub-adviser of the
Portfolio; and
(ii) shall use its best efforts to cause the Fund's officers and directors to
take any all actions which may be necessary or desirable to effect the foregoing
and to reconvey to the Sub-Adviser all rights which the Fund may have to such
name. Manager agrees to take any all actions as may be necessary or desirable to
effect the foregoing.
The Sub-Adviser hereby agrees and consents to the use of the Sub-Adviser's name
upon the foregoing terms and conditions.
SECTION 12. ENTIRE AGREEMENT; AMENDMENT, WAIVER.
This Agreement supersedes all prior agreements between the parties and
constitutes the entire agreement by the parties. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
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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 with respect to the Portfolio until approved as
required by the 1940 Act.
SECTION 13. EFFECTIVENESS AND DURATION OF AGREEMENT.
Unless sooner terminated, this Agreement shall continue in effect for two
years and thereafter for successive one year periods, provided that
continuation of this Agreement and the terms thereof are specifically
approved annually in accordance with the requirements of the 1940 Act by a
majority of the Directors of the Fund, including a majority of the Directors
who are not interested persons of the Sub-Adviser, Manager or the Fund, cast
in person at a meeting called for the purpose of voting on such approval.
SECTION 14. TERMINATION OF AGREEMENT, ASSIGNMENT.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Sub-Adviser or by Manager, upon sixty (60) days' written notice
from the terminating party to the other party and to the Fund, or by the Fund,
upon sixty (60) days written notice to the Sub-Adviser and Manager, acting
pursuant to a resolution adopted by a majority of the members of the Board of
Directors who are not interested persons or by a vote of the holders of the
lesser of (1) 67% of the Portfolio's voting shares present if the holders of
more than 50% of the outstanding shares are present in person or by proxy, or
(2) more than 50% of the outstanding shares of the Portfolio.
This Agreement shall automatically terminate in the event of its assignment or
the termination of the
Management Agreement pertaining to the Portfolio. Termination of this Agreement
shall not affect rights of the parties which have accrued prior thereto.
The provisions of paragraphs 6, 7, 8, 9 and 11 shall survive the termination of
this Agreement, except that if Manager or the Fund terminates the Agreement, the
first paragraph of Section 11 shall not survive termination.
SECTION 15. DEFINITIONS.
The terms ASSIGNMENT and INTERESTED PERSON when used in this Agreement shall
have the meanings given such terms in the 1940 Act and the rules and regulations
thereunder.
SECTION 16. CONCERNING APPLICABLE PROVISIONS OF LAW.
This Agreement shall be subject to all applicable provisions of law, including,
without limitation, the applicable provisions of the 1940 Act, and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control. This Agreement shall be governed
by the laws of the State of New York, without reference to principles of
conflicts of law.
SECTION 17. COUNTERPARTS.
This Agreement may be executed in counterparts, and each counterpart shall for
all purposes be deemed an original and all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, authorized officers of Manager and the Sub-Adviser have
executed this Agreement as
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of the day and year first written above.
INTEGRITY CAPITAL ADVISORS, INC.
By:
---------------------------------
Attest:
-----------------------------
[SUB-ADVISER]
By:
---------------------------------
Attest:
-----------------------------
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EXHIBIT B-2
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT, made this ___ day of __________, 1998, between Integrity Capital
Advisors, Inc. (MANAGER), a Delaware corporation, and Zweig/Glaser Advisers, a
New York partnership
WHEREAS, Manager, a wholly-owned subsidiary of ARM Financial Group, Inc., is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended (the ADVISERS ACT);
WHEREAS, the Sub-Adviser is an investment adviser registered under the Advisers
Act;
WHEREAS, pursuant to a Management Agreement dated _________________ (the
MANAGEMENT AGREEMENT), Manager acts as Investment Manager to The Legends Fund,
Inc. (the Fund), an open-end management investment company registered under the
Investment Company Act of 1940, as amended (the 1940 ACT);
WHEREAS, the Fund is authorized to issue multiple series of shares, each such
series representing a separate portfolio of securities and investments; and
WHEREAS, Manager desires to retain the Sub-Adviser to furnish investment
advisory services to the Zweig Equity (Small Cap) Portfolio of the Fund (the
PORTFOLIO), and the Sub-Adviser is willing to accept such appointment on the
terms and conditions set forth herein.
NOW, THEREFORE, based on the premises and the consideration set forth herein,
Manager and the Sub-Adviser agree as follows:
SECTION 1. INVESTMENT ADVISORY SERVICES.
Subject to the supervision of the Fund's Board of Directors and Manager, the
Sub-Adviser will provide a continuous investment program for the Portfolio and
determine the composition of the assets of the Portfolio, including
determination of the purchase, retention or sale of the securities, cash, and
other investments contained in the Portfolio's holdings. The Sub-Adviser will
provide investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Portfolio's assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Portfolio, when these transactions should be
executed, and what portion of the assets of the Portfolio should be held in the
various securities and other investments in which it may invest, and the
Sub-Adviser is hereby authorized to execute and perform such services on behalf
of the Portfolio. To the extent, if any, permitted by the investment policies of
the Portfolio, the Sub-Adviser shall make determinations as to and execute and
perform futures contracts and options on behalf of the Portfolio. The
Sub-Adviser will provide the services under this Agreement in accordance with
the Portfolio's investment objective or objectives, policies, and restrictions
as stated in the Fund's Registration Statement filed with the Securities and
Exchange Commission (SEC). Manager agrees to supply the Sub-Adviser with a copy
of the Registration Statement and each amendment thereto (the Registration
Statement as amended from time to time hereinafter referred to as the
REGISTRATION STATEMENT) and any other documents that set forth investment
policies, procedures or restrictions governing the Portfolio and to notify the
Sub-Adviser in writing of any changes in the investment objectives, policies,
procedures and restrictions governing the Portfolio.
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The Sub-Adviser further agrees as follows:
(a) The Sub-Adviser will manage the Portfolio (i) so that it will qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the CODE), and (ii) so as to ensure compliance by the
Portfolio with the diversification requirements of Section 817(h) of the Code
and regulations issued thereunder. In managing the Portfolio in accordance with
these requirements, the Sub-Adviser shall be entitled to receive and act upon
advice of counsel to the Fund, counsel to Manager or counsel to the Sub-Adviser,
provided the Sub-Adviser's counsel is acceptable to Manager.
(b) In undertaking its duties under this Agreement, the Sub-Adviser will comply
with the 1940 Act and all rules and regulations thereunder, all other applicable
federal and state laws and regulations, with any applicable procedures adopted
by the Fund's Board of Directors of which it has notice and the provisions of
the Registration Statement.
(c) On occasions when the Sub-Adviser deems the purchase or sale of a security
to be in the best interest of the Portfolio as well as of the Sub-Adviser's or
the Sub-Adviser's affiliates' other investment advisory clients, the Sub-Adviser
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, the Sub-Adviser
will allocate the securities so purchased or sold, as well as the expenses
incurred in the transaction, in a manner that is fair and equitable in the
Sub-Adviser's judgment in the exercise of the Sub-Adviser's fiduciary
obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities for the Portfolio,
the Sub-Adviser, together with Manager, will arrange for the transmission to the
custodian, transfer agent, dividend disbursing agent and recordkeeping agent for
the Fund (such custodian and agent or agents hereinafter referred to as the
AGENT), on a daily basis, such confirmation, trade tickets (which shall state
industry classifications unless the Sub-Adviser has previously furnished a list
of classifications for portfolio securities), and other documents and
information, including (but not limited to) Cusip or other numbers that identify
securities to be purchased or sold on behalf of the Portfolio and, with respect
to mortgage derivative and asset-backed securities purchased by the Sub-Adviser
for the Portfolio, 1066Q reports and supplemental information as required to be
available pursuant to IRS Publication 938, as may be reasonably necessary to
enable the Agent to perform its administrative and recordkeeping
responsibilities with respect to the Portfolio. With respect to portfolio
securities to be purchased or sold through the Depository Trust Company, the
Sub-Adviser will arrange for the automatic transmission of the confirmation of
such trades to the Fund's Agent, and if requested, Manager.
(e) The Sub-Adviser will monitor on a daily basis, by review of daily pricing
reports provided by the Agent to the Sub-Adviser, the determination by the Agent
for the Fund of the valuation of portfolio securities and other investments of
the Portfolio. The Sub-Adviser shall not be obligated to independently verify
the Agent's pricing determinations, and the Agent's responsibility for accurate
pricing determinations of the value of the Portfolios's securities shall not be
reduced by the Sub-Adviser's duty to monitor such determinations. The
Sub-Adviser will assist the Agent in determining or confirming, consistent with
the procedures and policies stated in the Registration Statement, the value of
any portfolio securities or other assets of the Portfolio for which the Agent
seeks assistance from or identifies for review by the Sub-Adviser.
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(f) The Sub-Adviser will make available to the Fund and Manager, promptly upon
request, all of the Portfolio's investment records and ledgers maintained by the
Sub-Adviser as are necessary to assist the Fund and Manager to comply with
requirements of the 1940 Act and the Advisers Act, as well as other applicable
laws. The Sub-Adviser will furnish to regulatory authorities having the
requisite authority any information or reports in connection with its services
which may be requested in order to ascertain whether the operations of the Fund
are being conducted in a manner consistent with applicable laws and regulations.
(g) The Sub-Adviser will provide reports, which may be prepared by the Agent, to
the Fund's Board of Directors for consideration at meetings of the Board on the
investment program for the Portfolio and the issuers and securities represented
in the Portfolio's securities holdings, including a schedule of the investments
and other assets held in the Portfolio and a statement of all purchases and
sales for the Portfolio since the last such statement, and will furnish the
Fund's Board of Directors with periodic and special reports with respect to the
Portfolio as the Directors and Manager may reasonably request, including
statistical information with respect to the Portfolio's securities. In addition,
the Sub-Adviser will make available at each meeting of the Board of Directors,
either in person or by telephone conference call as instructed by Manager on
behalf of the Board of Directors of the Fund, an appropriate person to discuss
the investment performance of the Portfolio.
(h) The Sub-Adviser will provide information and reports to Manager as Manager
shall reasonably request to enable it to review the performance of the
Sub-Adviser under this Agreement.
SECTION 2. BROKER-DEALER SELECTION.
The Sub-Adviser is responsible for decisions to buy and sell securities and
other investments for the Portfolio, broker-dealer and futures commission
merchant selection, and negotiation of brokerage commission and futures
commission merchants' rates. As a general matter, in executing portfolio
transactions the Sub-Adviser may employ or deal with such broker-dealers or
futures commission merchants as may, in the Sub-Adviser's best judgment, provide
prompt and reliable execution of the transactions at favorable prices and
reasonable commission rates. In selecting such broker-dealers or futures
commission merchants, the Sub-Adviser shall consider all relevant factors,
including price (including the applicable brokerage commission, dealer spread or
futures commission merchant rate), the size of the order, the nature of the
market for the security or other investment, the timing of the transaction, the
reputation, experience and financial stability of the broker-dealer or futures
commission merchant involved, the quality of the service, the difficulty of
execution, and the execution capabilities and operational facilities of the firm
involved, and, in the case of securities, the firm's risk in positioning a block
of securities. Subject to such policies as the Board of Directors may determine
and consistent with Section 28(e) of the Securities Exchange Act of 1934, as
amended (the 1934 ACT), the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty created by this Agreement or otherwise
solely by reason of the Sub-Adviser's having caused the Portfolio to pay a
member of an exchange, broker or dealer an amount of commission for effecting a
securities transaction in excess of the amount of commission another member of
an exchange, broker or dealer would have charged for effecting that transaction,
if the Sub-Adviser 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 member of an exchange, broker or dealer, viewed in terms of
either that particular transaction or the Sub-Adviser's overall responsibilities
with respect to the Portfolio and to the Sub-Adviser's other clients as to which
the Sub-Adviser exercises investment discretion. In accordance with Section
11(a) of the 1934 Act and Rule 11a2-2(T) thereunder, and subject to any other
applicable laws and regulations including Section 17(e) of the 1940 Act and Rule
17e-1 thereunder, the Sub-Adviser may engage its affiliates, Manager and its
affiliates or any other sub-adviser to the Fund and its respective affiliates as
broker-dealers or futures commission merchants to effect portfolio transactions
in securities and other investments for the Portfolio.
SECTION 3. RECORDS, REPORTS, ETC.
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In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Sub-Adviser hereby agrees that all records which the Sub-Adviser maintains for
the Portfolio are the property of the Fund and further agrees to surrender
promptly to the Fund any of such records upon the Fund's or Manager's request or
upon termination of this Agreement, although the Sub-Adviser may, at the
Sub-Adviser's own expense, make and retain a copy of such records. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act and to preserve the records required by the Rule 204-2 under the
Advisers Act for the period specified in the Rule.
SECTION 4. PAYMENT OF EXPENSES.
The Sub-Adviser shall assume and pay all of the costs and expenses of performing
its obligations under this Agreement.
SECTION 5. COMPENSATION FOR SERVICES.
Manager will pay to the Sub-Adviser a monthly sub-advisory fee (adjusted pro
rata for any shorter applicable period) at an annual rate of .80% of the average
daily net assets of the Portfolio from the management fee actually received by
Manager from the Fund; provided, however, that the sub-advisory fee shall be
reduced proportionately if the management fee actually paid to Manager by the
Portfolio shall have been reduced as a result of applicable state expense
limitations or fee waivers agreed to in writing by the Sub-Adviser. The
sub-advisory fee shall be computed, accrue and be payable in the same manner as
the management fee which is payable by the Fund to Manager pursuant to the
Management Agreement and as specified in the Fund's Registration Statement.
SECTION 6. LIABILITY FOR SERVICES.
Except as may otherwise be required by the 1940 Act or the rules thereunder or
other applicable law, and except as set forth in the next paragraph, the Fund
and Manager agree that the Sub-Adviser, any of its affiliated persons, and each
person, if any, who, within the meaning of Section 15 of the Securities Act of
1933, as amended, controls the Sub-Adviser, 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 Sub-Adviser's duties, or by reason of reckless disregard of
the Sub-Adviser's obligations and duties under this Agreement.
SECTION 7. INDEMNIFICATION BY SUB-ADVISER.
The Sub-Adviser agrees to indemnify and hold harmless Manager against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which Manager may become subject arising out of or based on
the breach or alleged breach by the Sub-Adviser of any provisions of this
Agreement; provided, however, that the Sub-Adviser shall not be liable under
this paragraph in respect of any loss, expense, claim, damage or liability to
the extent that a court having jurisdiction shall have determined by a final
judgment, or independent counsel agreed upon by Manager and the Sub-Adviser
shall have concluded in a written opinion, that such loss, expense, claim,
damage or liability resulted primarily from Manager's willful misfeasance, bad
faith or gross negligence or by reason of the reckless disregard by Manager of
its duties. The foregoing indemnification shall be in addition to any rights
that Manager may have at common law or otherwise. The Sub-Adviser's agreements
in this paragraph shall, upon the same terms and conditions, extend to and inure
to the benefit of each person who may be deemed to control Manager, be
controlled by Manager or be under common control with Manager and its
affiliates, directors, officers, employees and agents. The Sub-Adviser's
agreements in this paragraph shall also extend to any of Manager's successors or
the successors of the aforementioned affiliates, directors, officers,
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employees or agents.
SECTION 8. INDEMNIFICATION BY MANAGER.
Manager agrees to indemnify and hold harmless the Sub-Adviser against any
losses, expenses, claims, damages or liabilities (or actions or proceedings in
respect thereof), to which the Sub-Adviser may become subject arising out of or
based on the breach or alleged breach by Manager of any provisions of this
Agreement or the Management Agreement, or any wrongful action or alleged
wrongful action by Manager or its affiliates in the distribution of the Fund's
shares, or any wrongful action or alleged wrongful action by the Fund other than
wrongful action or alleged wrongful action that was caused by the breach by the
Sub-Adviser of the provisions of this Agreement; provided, however, that Manager
shall not be liable under this paragraph in respect of any loss, expense, claim,
damage or liability to the extent that a court having jurisdiction shall have
determined by a final judgment, or independent counsel agreed upon by Manager
and the Sub-Adviser shall have concluded in a written opinion, that such loss,
expense, claim, damage or liability resulted primarily from the Sub-Adviser's
willful misfeasance, bad faith or gross negligence or by reason of the reckless
disregard by the Sub-Adviser of its duties. The foregoing indemnification shall
be in addition to any rights that the Sub-Adviser may have at common law or
otherwise. Manager's agreements in this paragraph shall, upon the same terms and
conditions, extend to and inure to the benefit of each person who may be deemed
to control the Sub-Adviser, be controlled by the Sub-Adviser or be under common
control with the Sub-Adviser and to each of the Sub-Adviser's and each such
person's respective affiliates, directors, officers, employees and agents.
Manager's agreements in this paragraph shall also extend to any of the
Sub-Adviser's successors or the successors of the aforementioned affiliates,
directors, officers, employees or agents.
SECTION 9. NOTICE AND DEFENSE OR PROCEEDINGS, ETC.
Promptly after receipt by a party indemnified under paragraph 7 or 8 above of
notice of the commencement of any action, proceeding or investigation for which
indemnification will be sought, such indemnified party shall promptly notify the
indemnifying party in writing; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may otherwise have to any
indemnified party unless such omission results in actual material prejudice to
the indemnifying party. In case any action or proceeding shall be brought
against any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, individually or jointly with any other indemnifying party, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party.
After notice from the indemnifying party to the indemnified party of its
election to assume the defense of any action or proceeding, the indemnifying
party shall not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than reasonable costs of investigation. If the
indemnifying party does not elect to assume the defense of any action or
proceeding, the indemnifying party on a monthly basis shall reimburse the
indemnified party for the legal fees and expenses incurred by the indemnified
party for continuing its defense thereof. Regardless of whether or not the
indemnifying party shall have assumed the defense of any action or proceeding,
the indemnified party shall not settle or compromise the action or proceeding
without the prior written consent of the indemnifying party.
SECTION 10. REPRESENTATIONS AND WARRANTIES; COVENANTS.
(a) The Sub-Adviser hereby represents and warrants as follows:
(i) The Sub-Adviser is registered with the SEC as an investment adviser under
the Advisers Act, and such
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registration is current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and regulations
thereunder;
(ii) The Sub-Adviser has all requisite authority to enter into, execute, deliver
and perform the Sub-Adviser's obligations under this Agreement;
(iii) The Sub-Adviser's performance of its obligations under this Agreement does
not conflict with any law, regulation or order to which the Sub-Adviser is
subject; and
(iv) The Sub-Adviser has reviewed the Registration Statement for the Fund filed
with the SEC, and with respect to the disclosure about the Sub-Adviser and the
Portfolio or information relating, directly or indirectly, to the Sub-Adviser or
the Portfolio which was made in reliance upon and in conformity with written
information provided by the Sub-Adviser to the Fund specifically for use therein
or, if written information was not provided, which the Sub-Adviser had the
opportunity to review prior to filing with the SEC, such Registration Statement
contains, as of its date, no untrue statement of any material fact and does not
omit any statement of a material fact which was required to be stated therein or
necessary to make the statements contained therein not misleading.
(b) The Sub-Adviser hereby covenants and agrees that, so long as this Agreement
shall remain in effect:
(i) The Sub-Adviser shall maintain the Sub-Adviser's registration as an
investment adviser under the Advisers Act, and such registration shall at all
times remain current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and regulations
thereunder;
(ii) The Sub-Adviser's performance of its obligations under this Agreement shall
not conflict with any law, regulation or order to which the Sub-Adviser is then
subject;
(iii) The Sub-Adviser shall at all times fully comply with the Advisers Act, the
1940 Act, all applicable rules and regulations under such Acts and all other
applicable law;
(iv) The Sub-Adviser shall promptly notify Manager and the Fund upon the
occurrence of any event that might disqualify or prevent the Sub-Adviser from
performing its duties under this Agreement. The Sub-Adviser further agrees to
notify Manager and the Fund promptly with respect to written material that has
been provided to the Fund or Manager by the Sub-Adviser for inclusion in the
Registration Statement or prospectus for the Fund or any supplement or amendment
thereto, or, if written material has not been provided, with respect to the
information in the Registration Statement or Prospectus, or any amendment or
supplement thereto, reviewed by the Sub-Adviser, in either case of any untrue
statement of a material fact or of any omission of any statement of a material
fact which is required to be stated therein or is necessary to make the
statements contained therein not misleading; and
(v) If the Sub-Adviser is a partnership, the Sub-Adviser shall notify the Fund
and Manager of any change in membership within a reasonable time after such
change.
SECTION 11. EXCLUSIVITY OF SERVICES AND USE OF NAMES.
The Sub-Adviser acknowledges that a fundamental marketing feature of the
variable annuity contracts and certificates offered through Integrity Life
Insurance Company (INTEGRITY)and National Integrity Life Insurance Company
(NATIONAL INTEGRITY), a wholly-owned subsidiary of Integrity, under which
contributions may be allocated to separate accounts of Integrity and National
Integrity for the purchase of shares of the Portfolio is the fact that the
Sub-Adviser provides investment advisory services to the Portfolio. In
recognition thereof and of the
6
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costs incurred by the Fund and Manager in establishing the Portfolio and
registering the Fund as an investment company, the Sub-Adviser agrees that from
the date of this Agreement until the earlier of (i) six months after the date
Integrity and National Integrity begin offering to the public variable annuity
contracts and certificates funded in whole or in part by the Portfolio or (ii)
______________, 199__, the Sub-Adviser and the Sub-Adviser's affiliates shall
not provide investment advisory services to any registered investment company or
portfolio thereof which has investment objectives and policies substantially
similar to those of the Portfolio and which serves as a funding vehicle for any
variable annuity product (excluding advisory arrangements in existence on the
date of this Agreement) without the prior written approval of the Fund,
Integrity and National Integrity. The Sub-Adviser acknowledges that a breach of
this provision may irreparably harm the Fund, Integrity or National Integrity.
In the event of a breach of this provision, the Fund, Integrity or National
Integrity shall be entitled to injunctive relief, to enforcement by specific
performance of this Agreement, and to actual and punitive damages.
The Sub-Adviser further acknowledges and agrees that the names THE LEGENDS FUND
and PINNACLE, and abbreviations or logos associated with those names, are the
valuable property of Manager and its affiliates; that the Fund, Manager and its
affiliates have the right to use such names, abbreviations and logos; and that
the Sub-Adviser shall use the names THE LEGENDS FUND and PINNACLE, and
associated abbreviations and logos, only in connection with the Sub-Adviser's
performance of its duties hereunder.
Manager acknowledges that "Zweig" (the SUB-ADVISER'S NAME) is distinctive in
connection with investment advisory and related services provided by the
Sub-Adviser, the Sub-Adviser's name is a property right of the Sub-Adviser
and/or the individual whose name is part of the Sub-Adviser's name, and the
Sub-Adviser's name in the name of the Portfolio is understood to be used by the
Fund with the Sub-Adviser's consent. The Sub-Adviser hereby grants to the Fund a
non-exclusive license to use the Sub-Adviser's name in the name of the Portfolio
upon the conditions hereinafter set forth; provided that the Fund may use such
name only so long as (i) the Sub-Adviser shall be retained as the investment
sub-adviser of the Portfolio pursuant to the terms of this Agreement, and (ii)
the principal shall continue to be affiliated with the Sub-Adviser. Any such use
by the Fund shall in no way prevent the Sub-Adviser or its principal or any of
its or his successors or assigns from using or permitting the use of the
Sub-Adviser's or the principal's name along with any other word or words, for,
by or in connection with any other entity or business, other than the Fund or
its business, whether or not the same directly competes or conflicts with the
Fund or its business in any manner, except for the six month period as described
in the first paragraph of this Section.
Manager acknowledges that the Fund shall use the Sub-Adviser's and principal's
names in the name of the Portfolio for the period set forth herein in a manner
not inconsistent with the interests of the Sub-Adviser and its principal and
that the Fund's rights in the Sub-Adviser's and principal's name are limited to
its use as a component of the Portfolio's name and in connection with accurately
describing the activities of the Portfolio. In the event that the Sub-Adviser
shall cease to be the investment sub-adviser of the Portfolio or the principal
shall cease to be affiliated with the Sub-Adviser, then Fund at its own expense,
upon the Sub-Adviser's or the principal's written request:
(i) shall cease to use the Sub-Adviser's or principal's name, as the case may
be, or any combination thereof as part of the Portfolio's name or for any other
commercial purpose (other than the right to refer to the Portfolio's former name
in the Fund's Registration Statement, proxy materials and other Fund documents
to the extent required under the 1940 Act);
(ii) shall on all letterheads and other materials designed to be read or used by
salesmen, distributors or investors, state in a prominent position and prominent
type that the Sub-Adviser has ceased to be the investment sub-adviser of the
Portfolio or that the principal has ceased to be affiliated with the
Sub-Adviser, as the case may be; and
7
<PAGE>
(iii) shall use its best efforts to cause the Fund's officers and directors to
take any all actions which may be necessary or desirable to effect the foregoing
and to reconvey to the Sub-Adviser or the principal all rights which the Fund
may have to such name. Manager agrees to take any all actions as may be
necessary or desirable to effect the foregoing.
The Sub-Adviser hereby agrees and consents to the use of the Sub-Adviser's name
and that of the principal upon the foregoing terms and conditions.
SECTION 12. ENTIRE AGREEMENT; AMENDMENT, WAIVER.
This Agreement supersedes all prior agreements between the parties and
constitutes the entire agreement by the parties. 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 with respect to the Portfolio until approved as
required by the 1940 Act.
SECTION 13. EFFECTIVENESS AND DURATION OF AGREEMENT.
Unless sooner terminated, this Agreement shall continue in effect for two
years and thereafter for successive one year periods, provided that
continuation of this Agreement and the terms thereof are specifically
approved annually in accordance with the requirements of the 1940 Act by a
majority of the Directors of the Fund, including a majority of the Directors
who are not interested persons of the Sub-Adviser, Manager or the Fund, cast
in person at a meeting called for the purpose of voting on such approval.
SECTION 14. TERMINATION OF AGREEMENT, ASSIGNMENT.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Sub-Adviser or by Manager, upon sixty (60) days' written notice
from the terminating party to the other party and to the Fund, or by the Fund,
upon sixty (60) days written notice to the Sub-Adviser and Manager, acting
pursuant to a resolution adopted by a majority of the members of the Board of
Directors who are not interested persons or by a vote of the holders of the
lesser of (1) 67% of the Portfolio's voting shares present if the holders of
more than 50% of the outstanding shares are present in person or by proxy, or
(2) more than 50% of the outstanding shares of the Portfolio.
This Agreement shall automatically terminate in the event of its assignment or
the termination of the
Management Agreement pertaining to the Portfolio. Termination of this Agreement
shall not affect rights of the parties which have accrued prior thereto.
The provisions of paragraphs 6, 7, 8, 9 and 11 shall survive the termination of
this Agreement, except that if Manager or the Fund terminates the Agreement, the
first paragraph of Section 11 shall not survive termination.
SECTION 15. DEFINITIONS.
The terms ASSIGNMENT and INTERESTED PERSON when used in this Agreement shall
have the meanings given such terms in the 1940 Act and the rules and regulations
thereunder.
SECTION 16. CONCERNING APPLICABLE PROVISIONS OF LAW.
8
<PAGE>
This Agreement shall be subject to all applicable provisions of law, including,
without limitation, the applicable provisions of the 1940 Act, and to the extent
that any provisions herein contained conflict with any such applicable
provisions of law, the latter shall control. This Agreement shall be governed
by the laws of the State of New York, without reference to principles of
conflicts of law.
SECTION 17. COUNTERPARTS.
This Agreement may be executed in counterparts, and each counterpart shall for
all purposes be deemed an original and all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, authorized officers of Manager and the Sub-Adviser have
executed this Agreement as of the day and year first written above.
INTEGRITY CAPITAL ADVISORS, INC.
By:
---------------------------------
Attest:
-----------------------------
ZWEIG/GLASER ADVISERS
By:
---------------------------------
Attest:
-----------------------------
9
<PAGE>
EXHIBIT C-1
FORM OF
INTERIM ADVISORY AGREEMENT
AGREEMENT made this __th day of _____, 1998, between The Legends Fund,
Inc. (the "Fund"), a Maryland corporation, and ___________________________,
(ADVISER), a _________ corporation.
WHEREAS, the Adviser is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the ADVISERS ACT);
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the 1940 ACT), which
consists of several separate investment portfolios or series including the
___________________ Portfolio (the PORTFOLIO);
WHEREAS, the Adviser has served as sub-adviser to the Portfolio pursuant
to a Sub-Advisory Agreement, dated __________, between the Adviser and Integrity
Capital Advisors, Inc., ("Integrity") which agreement has been terminated;
WHERESAS, the Fund desires to retain the Adviser , and the adviser desires
to accept such appointment, to furnish investment advisory services to the
Portfolio on the terms and conditions set forth herein;
NOW, THEREFORE, based on the premises and the consideration set forth
herein, the Fund, on behalf of the Portfolio, and the Adviser agree as follows:
SECTION 1. INVESTMENT ADVISORY SERVICES.
The Fund hereby appoints the Adviser to act as investment adviser to the
Portfolio for the period and on the terms set forth herein, and the Adviser
hereby accepts such appointment. Subject to the supervision of the Fund?s Board
of Directors, the Adviser will provide a continuous investment program for the
Portfolio and determine the composition of the assets of the Portfolio,
including determination of the purchase, retention or sale of the securities,
cash, and other investments contained in the Portfolio's holdings. The Adviser
will provide investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Portfolio's assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Portfolio, when these transactions should be
executed, and what portion of the assets of the Portfolio should be held in the
various securities and other investments in which it may invest, and the Adviser
is hereby authorized to execute and perform such services on behalf of the
Portfolio. To the extent, if any, permitted by the investment policies of the
Portfolio, the Adviser shall make determinations as to and execute and perform
futures contracts and options on behalf of the Portfolio. The Adviser will
provide the services under this Agreement in accordance with the Portfolio's
investment objective or objectives, policies, and restrictions as stated in the
Fund's Registration Statement filed with the Securities and Exchange Commission
(SEC). The Fund will supply the Adviser with a copy of the Registration
Statement and each amendment thereto (the Registration Statement as amended from
time to time hereinafter referred to as the REGISTRATION STATEMENT) and any
other documents that set forth investment policies, procedures or restrictions
governing the Portfolio and to notify the Adviser in writing of any changes in
the investment objectives, policies, procedures and restrictions governing the
Portfolio.
<PAGE>
The Adviser further agrees as follows:
(a) The Adviser will manage the Portfolio (i) so that it will qualify as
a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the CODE), and (ii) so as to
ensure compliance by the Portfolio with the diversification
requirements of Section 817(h) of the Code and regulations issued
thereunder. In managing the Portfolio in accordance with these
requirements, the Adviser shall be entitled to receive and act upon
advice of counsel to the Fund or counsel to the Adviser, provided
the Adviser's counsel is acceptable to the Fund.
(b) In undertaking its duties under this Agreement, the Adviser will
comply with the 1940 Act and all rules and regulations thereunder,
all other applicable federal and state laws and regulations, with
any applicable procedures adopted by the Fund's Board of Directors
of which it has notice and the provisions of the Registration
Statement.
(c) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as of
the Adviser's or the Adviser's affiliates' other investment advisory
clients, the Adviser 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, the Adviser
will allocate the securities so purchased or sold, as well as the
expenses incurred in the transaction, in a manner that is fair and
equitable in the Adviser's judgment in the exercise of the Adviser's
fiduciary obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities for the
Portfolio, the Adviser will arrange for the transmission to the
custodian, transfer agent, dividend disbursing agent and
recordkeeping agent for the Fund (such custodian and agent or agents
hereinafter referred to as the AGENT), on a daily basis, such
confirmation, trade tickets (which shall state industry
classifications unless the Adviser has previously furnished a list
of classifications for portfolio securities), and other documents
and information, including (but not limited to) CUSIP or other
numbers that identify securities to be purchased or sold on behalf
of the Portfolio and, with respect to mortgage derivative and
asset-backed securities purchased by the Adviser for the Portfolio,
1066Q reports and supplemental information as required to be
available pursuant to IRS Publication 938, as may be reasonably
necessary to enable the Agent to perform its administrative and
recordkeeping responsibilities with respect to the Portfolio. With
respect to portfolio securities to be purchased or sold through the
Depositary Trust Company, the Adviser will arrange for the automatic
transmission of the confirmation of such trades to the Fund's Agent,
and if requested, Integrity.
(e) The Adviser will monitor on a daily basis, by review of daily
pricing reports provided by the Agent to the Adviser, the
determination by the Agent for the Fund of the valuation of
portfolio securities and other investments of the Portfolio. The
Adviser shall not be obligated to independently verify the Agent's
pricing determinations, and the Agent's responsibility for accurate
pricing determinations of the value of the Portfolio's securities
shall not be reduced by the Adviser's duty to monitor such
determinations. The Adviser will assist the Agent in determining or
confirming, consistent with the procedures and policies stated in
the Registration Statement, the value of any portfolio securities or
other assets of the Portfolio for which the Agent seeks assistance
from or identifies for review by the Adviser.
<PAGE>
(f) The Adviser will make available to the Fund and Integrity, promptly
upon request, all of the Portfolio's investment records and ledgers
maintained by the Adviser as are necessary to assist the Fund to
comply with requirements of the 1940 Act, as well as other
applicable laws. The Adviser will furnish to regulatory authorities
having the requisite authority any information or reports in
connection with its services which may be requested in order to
ascertain whether the operations of the Fund are being conducted in
a manner consistent with applicable laws and regulations.
(g) The Adviser will provide reports, which may be prepared by the
Agent, to the Fund's Board of Directors for consideration at
meetings of the Board on the investment program for the Portfolio
and the issuers and securities represented in the Portfolio's
securities holdings, including a schedule of the investments and
other assets held in the Portfolio and a statement of all purchases
and sales for the Portfolio since the last such statement, and will
furnish the Funds' Board of Directors with periodic and special
reports with respect to the Portfolio as the Directors may
reasonably request, including statistical information with respect
to the Portfolio's securities. In addition, the Adviser will make
available at each meeting of the Board of Directors, either in
person or by telephone conference call as instructed by Integrity on
behalf of the Board of Directors of the Fund, an appropriate person
to discuss the investment performance of the Portfolio.
(h) The Adviser will provide information and reports to Fund as Fund
shall reasonably request to enable it to review the performance of
the Adviser under this Agreement.
SECTION 2. BROKER-DEALER SELECTION.
The Adviser is responsible for decisions to buy and sell securities and
other investments for the Portfolio, broker-dealer and futures commission
merchant selection, and negotiation of brokerage commission and futures
commission merchants' rates. As a general matter, in executing portfolio
transactions the Adviser may employ or deal with such broker-dealers or futures
commission merchants as may, in the Adviser's best judgment, provide prompt and
reliable execution of the transactions at favorable prices and reasonable
commission rates. In selecting such broker-dealers or futures commission
merchants, the Adviser shall consider all relevant factors, including price
(including the applicable brokerage commission, dealer spread or futures
commission merchant rate), the size of the order, the nature of the market for
the security or other investment, the timing of the transaction, the reputation,
experience and financial stability of the broker-dealer or futures commission
merchant involved, the quality of the service, the difficulty of execution, and
the execution capabilities and operational facilities of the firm involved, and,
in the case of securities, the firm's risk in positioning a block of securities.
Subject to such policies as the Board of Directors may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, as amended (the 1934
ACT), the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of the
Adviser's having caused the Portfolio to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, if the Adviser 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 member of an
exchange, broker or dealer, viewed in terms of either that particular
transaction or the Adviser's overall responsibilities with respect to the
Portfolio and to the Adviser's other clients as to which the Adviser exercises
investment discretion. In accordance with Section 11(a) of the 1934 Act and
Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the 1940 Act and Rule 17e-1 thereunder,
the Adviser may engage its affiliates, Integrity and its affiliates or any other
adviser or sub-adviser to the Fund and its respective affiliates as
broker-dealers or futures commission merchants to effect portfolio transactions
in securities and other investments for the Portfolio.
<PAGE>
SECTION 3. RECORDS, REPORTS, ETC.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Adviser hereby agrees that all records which the Adviser maintains for the
Portfolio are the property of the Fund and further agrees to surrender promptly
to the Fund any of such records upon the Fund's request or upon termination of
this Agreement, although the Adviser may, at the Adviser's own expense, make and
retain a copy of such records. The Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to preserve the records required
by the Rule 204-2 under the Advisers Act for the period specified in the Rule.
SECTION 4. PAYMENT OF EXPENSES.
The Adviser shall assume and pay all of the costs and expenses of
performing its obligations under this Agreement. The Portfolio shall bear all
expenses incurred in its operations that are not assumed by its principal
underwriter or affiliates of its principal underwriter.
SECTION 5. COMPENSATION FOR SERVICES.
The Portfolio will pay to the Adviser a monthly advisory fee (adjusted pro
rata for any shorter applicable period) at an annual rate of .__% of the average
daily net assets of the Portfolio. The fee will be deducted from the assets of
the Portfolio and paid to the Adviser monthly, but will be accrued for purposes
of determining the value of the Portfolio on each day the New York Stock
Exchange is open for trading. The fee shall be reduced to the extent necessary
as a result of applicable state expense limitations or fee waivers agreed to in
writing by the Adviser.
SECTION 6. LIABILITY FOR SERVICES.
Except as may otherwise be required by the 1940 Act or the rules
thereunder or other applicable law, and except as set forth in the next
paragraph, the Fund agrees that the Adviser, any of its affiliated persons, and
each person, if any, who, within the meaning of Section 15 of the Securities Act
of 1933, as amended, controls the Adviser, 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 Adviser's duties, or by reason of reckless disregard of the
Adviser's obligations and duties under this Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES; COVENANTS.
(a) The Adviser hereby represents and warrants as follows:
(i) The Adviser is registered with the SEC as an investment
adviser under the Advisers Act, and such registration is
current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(ii) The Adviser has all requisite authority to enter into,
execute, deliver and perform the Adviser's obligations under
this Agreement;
<PAGE>
(iii) The Adviser's performance of its obligations under this
Agreement does not conflict with any law, regulation or order
to which the Adviser is subject; and
(iv) The Adviser has reviewed the Registration Statement for the
Fund filed with the SEC, and with respect to the disclosure
about the Adviser and the Portfolio or information relating,
directly or indirectly, to the Adviser or the Portfolio which
was made in reliance upon and in conformity with written
information provided by the Adviser to the Fund specifically
for use therein or, if written information was not provided,
which the Adviser had the opportunity to review prior to
filing with the SEC, such Registration Statement contains, as
of its date, no untrue statement of any material fact and does
not omit any statement of a material fact which was required
to be stated therein or necessary to make the statements
contained therein not misleading.
(b) The Adviser hereby covenants and agrees that, so long as this
Agreement shall remain in effect:
(i) The Adviser shall maintain the Adviser's registration as an
investment adviser under the Advisers Act, and such
registration shall at all times remain current, complete and
in full compliance with all material applicable provisions of
the Advisers Act and the rules and regulations thereunder;
(ii) The Adviser's performance of its obligations under this
Agreement shall not conflict with any law, regulation or order
to which the Adviser is then subject;
(iii) The Adviser shall at all times fully comply with the Advisers
Act, the 1940 Act, all applicable rules and regulations under
such Acts and all other applicable law; and
(iv) The Adviser shall promptly notify the Fund upon the occurrence
of any event that might disqualify or prevent the Adviser from
performing its duties under this Agreement. The Adviser
further agrees to notify the Fund promptly with respect to
written material that has been provided to the Fund by the
Adviser for inclusion in the Registration Statement or
prospectus for the Fund or any supplement or amendment
thereto, or, if written material has not been provided, with
respect to the information in the Registration Statement or
Prospectus, or any amendment or supplement thereto, reviewed
by the Adviser, in either case of any untrue statement of a
material fact or of any omission of any statement of a
material fact which is required to be stated therein or is
necessary to make the statements contained therein not
misleading.
SECTION 8. EXCLUSIVITY OF SERVICES AND USE OF NAMES.
The Adviser acknowledges and agrees that the names THE LEGENDS FUND and
PINNACLE, and abbreviations or logos associated with those names, are the
valuable property of Integrity and its affiliates; that the Fund, Integrity and
its affiliates have the right to use such names, abbreviations and logos; and
that the Adviser shall use the names THE LEGENDS FUND and PINNACLE, and
associated abbreviations and logos, only in connection with the Adviser's
performance of its duties hereunder.
The Fund acknowledges that "__________________" (the Adviser's name) is
distinctive in connection with investment advisory and related services provided
by the Adviser, the Adviser's name is a property right of the Adviser,
<PAGE>
and the Adviser's name in the name of the Portfolio are understood to be used by
the Fund with the Adviser's consent. The Adviser hereby grants to the Fund a
non-exclusive license to use the Adviser?s name in the name of the Portfolio
upon the conditions hereinafter set forth; provided that the Fund may use such
name only so long as the Adviser shall be retained as the investment adviser of
the Portfolio pursuant to the terms of this Agreement. Any such use by the Fund
shall in no way prevent the Adviser or any of its successors or assigns from
using or permitting the use of the Adviser's name along with any other word or
words, for, by or in connection with any other entity or business, other than
the Fund or its business, whether or not the same directly competes or conflicts
with the Fund or its business.
The Fund shall use the Adviser's name in the name of the Portfolio for the
period set forth herein in a manner not inconsistent with the interests of the
Adviser and that the Fund's rights in the Adviser's name are limited to their
use as a component of the Portfolio's name and in connection with accurately
describing the activities of the Portfolio. In the event that the Adviser shall
cease to be the investment adviser of the Portfolio, then the Fund at its own
expense, upon the Sub- Adviser?s written request:
(i) shall cease to use the Adviser's name as part of the
Portfolio's name or for any other commercial purpose (other
than the right to refer to the Portfolio's former name in the
Fund's Registration Statement, proxy materials and other Fund
documents to the extent required under the 1940 Act);
(ii) shall on all letterheads and other materials designed to be
read or used by salespersons, distributors or investors, state
in a prominent position and prominent type that the Adviser
has ceased to be the investment adviser of the Portfolio; and
(iii) shall use its best efforts to cause the Fund's officers and
directors to take any and all actions which may be necessary
or desirable to effect the foregoing and to reconvey to the
Adviser all rights which the Fund may have to such name. The
Fund agrees to take any and all actions as may be necessary or
desirable to effect the foregoing.
The Adviser hereby agrees and consents to the use of the Adviser's name
upon the foregoing terms and conditions.
SECTION 9. ENTIRE AGREEMENTS; AMENDMENT, WAIVER.
This Agreement supersedes all prior agreements between the parties and
constitutes the entire Agreement by the parties. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing singed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective with respect to the Portfolio until approved as
required by the 1940 Act.
SECTION 10. EFFECTIVENESS AND DURATION OF AGREEMENT.
Unless sooner terminated, this Agreement shall continue in effect until
the earlier to occur of (i) the second anniversary of the effective date hereof
or (ii) the date on which alternative arrangements for investment advisory
services for the Portfolio shall have been approved both by the Fund's Board of
Directors and the Portfolio's
<PAGE>
shareholders in accordance with the 1940 Act. Unless sooner terminated, this
Agreement shall continue in effect after the term specified clause (i) of the
preceding sentence for successive one year periods, provided that continuation
of this Agreement and the terms thereof are specifically approved annually in
accordance with the requirements of the 1940 Act by a majority of the Directors
of the Fund, including a majority of the Directors who are not interested
persons of the Adviser or the Fund, cast in person at a meeting called for the
purpose of voting on such approval.
SECTION 11. TERMINATION OF AGREEMENT, ASSIGNMENT.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Adviser upon sixty (60) days' written notice to the Fund, or by
the Fund, upon sixty (60) days written notice to the Adviser, acting pursuant to
a resolution adopted by a majority of the members of the Board of Directors who
are not interested persons or by a vote of the holders of the lesser of (1) 67%
of the Portfolio's voting shares present if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of the Portfolio.
This Agreement shall automatically terminate in the event of its
assignment. Termination of this Agreement shall not affect rights of the
parties which have accrued prior thereto. The provisions of paragraphs 6 and 8
shall survive the termination of this Agreement.
SECTION 12. DEFINITIONS.
The terms ASSIGNMENT and INTERESTED PERSON when used in this Agreement
shall have the meanings give such terms in the 1940 Act and the rules and
regulations thereunder.
SECTION 13. CONCERNING APPLICABLE PROVISIONS OF LAW.
This Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the 1940 Act, and to
the extent that any provisions herein contained conflict with any such
applicable provisions of law, the latter shall control.
This Agreement shall be governed by the laws of the State of New York,
without reference to principles of conflicts of law.
SECTION 14. COUNTERPARTS.
This Agreement may be executed in counterparts, and each counterpart shall
for all purposed be deemed an original, and all such counterparts shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, authorized officers of the Fund and the Adviser have
executed this Agreement as of the day and year first written above.
THE LEGENDS FUND, INC. [ADVISER]
By:_________________________ By: _________________________
Attest: ____________________ Attest:______________________
<PAGE>
EXHIBIT C-2
FORM OF
INTERIM ADVISORY AGREEMENT
AGREEMENT made this __th day of _____, 1998, between The Legends Fund,
Inc. (the "Fund"), a Maryland corporation, and Zweig/Glaser Advisers, (ADVISER),
a New York partnership.
WHEREAS, the Adviser is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the ADVISERS ACT);
WHEREAS, the Fund is an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the 1940 ACT), which
consists of several separate investment portfolios or series including the
___________________ Portfolio (the PORTFOLIO);
WHEREAS, the Adviser has served as sub-adviser to the Portfolio pursuant
to a Sub-Advisory Agreement, dated __________, between the Adviser and Integrity
Capital Advisors, Inc., ("Integrity") which agreement has been terminated;
WHEREAS, the Fund desires to retain the Adviser , and the adviser desires
to accept such appointment, to furnish investment advisory services to the
Portfolio on the terms and conditions set forth herein;
NOW, THEREFORE, based on the premises and the consideration set forth
herein, the Fund, on behalf of the Portfolio, and the Adviser agree as follows:
SECTION 1. INVESTMENT ADVISORY SERVICES.
The Fund hereby appoints the Adviser to act as investment adviser to the
Portfolio for the period and on the terms set forth herein, and the Adviser
hereby accepts such appointment. Subject to the supervision of the Fund?s Board
of Directors, the Adviser will provide a continuous investment program for the
Portfolio and determine the composition of the assets of the Portfolio,
including determination of the purchase, retention or sale of the securities,
cash, and other investments contained in the Portfolio's holdings. The Adviser
will provide investment research and conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Portfolio's assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Portfolio, when these transactions should be
executed, and what portion of the assets of the Portfolio should be held in the
various securities and other investments in which it may invest, and the Adviser
is hereby authorized to execute and perform such services on behalf of the
Portfolio. To the extent, if any, permitted by the investment policies of the
Portfolio, the Adviser shall make determinations as to and execute and perform
futures contracts and options on behalf of the Portfolio. The Adviser will
provide the services under this Agreement in accordance with the Portfolio's
investment objective or objectives, policies, and restrictions as stated in the
Fund's Registration Statement filed with the Securities and Exchange Commission
(SEC). The Fund will supply the Adviser with a copy of the Registration
Statement and each amendment thereto (the Registration Statement as amended from
time to time hereinafter referred to as the REGISTRATION STATEMENT) and any
other documents that set forth investment policies, procedures or restrictions
governing the Portfolio and to notify the Adviser in writing of any changes in
the investment objectives, policies, procedures and restrictions governing the
Portfolio.
<PAGE>
The Adviser further agrees as follows:
(a) The Adviser will manage the Portfolio (i) so that it will qualify as
a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the CODE), and (ii) so as to
ensure compliance by the Portfolio with the diversification
requirements of Section 817(h) of the Code and regulations issued
thereunder. In managing the Portfolio in accordance with these
requirements, the Adviser shall be entitled to receive and act upon
advice of counsel to the Fund or counsel to the Adviser, provided
the Adviser's counsel is acceptable to the Fund.
(b) In undertaking its duties under this Agreement, the Adviser will
comply with the 1940 Act and all rules and regulations thereunder,
all other applicable federal and state laws and regulations, with
any applicable procedures adopted by the Fund's Board of Directors
of which it has notice and the provisions of the Registration
Statement.
(c) On occasions when the Adviser deems the purchase or sale of a
security to be in the best interest of the Portfolio as well as of
the Adviser's or the Adviser's affiliates' other investment advisory
clients, the Adviser 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, the Adviser
will allocate the securities so purchased or sold, as well as the
expenses incurred in the transaction, in a manner that is fair and
equitable in the Adviser's judgment in the exercise of the Adviser's
fiduciary obligations to the Fund and to such other clients.
(d) In connection with the purchase and sale of securities for the
Portfolio, the Adviser will arrange for the transmission to the
custodian, transfer agent, dividend disbursing agent and
recordkeeping agent for the Fund (such custodian and agent or agents
hereinafter referred to as the AGENT), on a daily basis, such
confirmation, trade tickets (which shall state industry
classifications unless the Adviser has previously furnished a list
of classifications for portfolio securities), and other documents
and information, including (but not limited to) CUSIP or other
numbers that identify securities to be purchased or sold on behalf
of the Portfolio and, with respect to mortgage derivative and
asset-backed securities purchased by the Adviser for the Portfolio,
1066Q reports and supplemental information as required to be
available pursuant to IRS Publication 938, as may be reasonably
necessary to enable the Agent to perform its administrative and
recordkeeping responsibilities with respect to the Portfolio. With
respect to portfolio securities to be purchased or sold through the
Depositary Trust Company, the Adviser will arrange for the automatic
transmission of the confirmation of such trades to the Fund's Agent,
and if requested, Integrity.
(e) The Adviser will monitor on a daily basis, by review of daily
pricing reports provided by the Agent to the Adviser, the
determination by the Agent for the Fund of the valuation of
portfolio securities and other investments of the Portfolio. The
Adviser shall not be obligated to independently verify the Agent's
pricing determinations, and the Agent's responsibility for accurate
pricing determinations of the value of the Portfolio's securities
shall not be reduced by the Adviser's duty to monitor such
determinations. The Adviser will assist the Agent in determining or
confirming, consistent with the procedures and policies stated in
the Registration Statement, the value of any portfolio securities or
other assets of the Portfolio for which the Agent seeks assistance
from or identifies for review by the Adviser.
<PAGE>
(f) The Adviser will make available to the Fund and Integrity, promptly
upon request, all of the Portfolio's investment records and ledgers
maintained by the Adviser as are necessary to assist the Fund to
comply with requirements of the 1940 Act, as well as other
applicable laws. The Adviser will furnish to regulatory authorities
having the requisite authority any information or reports in
connection with its services which may be requested in order to
ascertain whether the operations of the Fund are being conducted in
a manner consistent with applicable laws and regulations.
(g) The Adviser will provide reports, which may be prepared by the
Agent, to the Fund's Board of Directors for consideration at
meetings of the Board on the investment program for the Portfolio
and the issuers and securities represented in the Portfolio's
securities holdings, including a schedule of the investments and
other assets held in the Portfolio and a statement of all purchases
and sales for the Portfolio since the last such statement, and will
furnish the Funds' Board of Directors with periodic and special
reports with respect to the Portfolio as the Directors may
reasonably request, including statistical information with respect
to the Portfolio's securities. In addition, the Adviser will make
available at each meeting of the Board of Directors, either in
person or by telephone conference call as instructed by Integrity on
behalf of the Board of Directors of the Fund, an appropriate person
to discuss the investment performance of the Portfolio.
(h) The Adviser will provide information and reports to Fund as Fund
shall reasonably request to enable it to review the performance of
the Adviser under this Agreement.
SECTION 2. BROKER-DEALER SELECTION.
The Adviser is responsible for decisions to buy and sell securities and
other investments for the Portfolio, broker-dealer and futures commission
merchant selection, and negotiation of brokerage commission and futures
commission merchants' rates. As a general matter, in executing portfolio
transactions the Adviser may employ or deal with such broker-dealers or futures
commission merchants as may, in the Adviser's best judgment, provide prompt and
reliable execution of the transactions at favorable prices and reasonable
commission rates. In selecting such broker-dealers or futures commission
merchants, the Adviser shall consider all relevant factors, including price
(including the applicable brokerage commission, dealer spread or futures
commission merchant rate), the size of the order, the nature of the market for
the security or other investment, the timing of the transaction, the reputation,
experience and financial stability of the broker-dealer or futures commission
merchant involved, the quality of the service, the difficulty of execution, and
the execution capabilities and operational facilities of the firm involved, and,
in the case of securities, the firm's risk in positioning a block of securities.
Subject to such policies as the Board of Directors may determine and consistent
with Section 28(e) of the Securities Exchange Act of 1934, as amended (the 1934
ACT), the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of the
Adviser's having caused the Portfolio to pay a member of an exchange, broker or
dealer an amount of commission for effecting a securities transaction in excess
of the amount of commission another member of an exchange, broker or dealer
would have charged for effecting that transaction, if the Adviser 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 member of an
exchange, broker or dealer, viewed in terms of either that particular
transaction or the Adviser's overall responsibilities with respect to the
Portfolio and to the Adviser's other clients as to which the Adviser exercises
investment discretion. In accordance with Section 11(a) of the 1934 Act and
Rule 11a2-2(T) thereunder, and subject to any other applicable laws and
regulations including Section 17(e) of the 1940 Act and Rule 17e-1 thereunder,
the Adviser may engage its affiliates, Integrity and its affiliates or any other
adviser or sub-adviser to the Fund and its respective affiliates as
broker-dealers or futures commission merchants to effect portfolio transactions
in securities and other investments for the Portfolio.
<PAGE>
SECTION 3. RECORDS, REPORTS, ETC.
In compliance with the requirements of Rule 31a-3 under the 1940 Act, the
Adviser hereby agrees that all records which the Adviser maintains for the
Portfolio are the property of the Fund and further agrees to surrender promptly
to the Fund any of such records upon the Fund's request or upon termination of
this Agreement, although the Adviser may, at the Adviser's own expense, make and
retain a copy of such records. The Adviser further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to preserve the records required
by the Rule 204-2 under the Advisers Act for the period specified in the Rule.
SECTION 4. PAYMENT OF EXPENSES.
The Adviser shall assume and pay all of the costs and expenses of
performing its obligations under this Agreement. The Portfolio shall bear all
expenses incurred in its operations that are not assumed by its principal
underwriter or affiliates of its principal underwriter.
SECTION 5. COMPENSATION FOR SERVICES.
The Portfolio will pay to the Adviser a monthly advisory fee (adjusted pro
rata for any shorter applicable period) at an annual rate of .__% of the average
daily net assets of the Portfolio. The fee will be deducted from the assets of
the Portfolio and paid to the Adviser monthly, but will be accrued for purposes
of determining the value of the Portfolio on each day the New York Stock
Exchange is open for trading. The fee shall be reduced to the extent necessary
as a result of applicable state expense limitations or fee waivers agreed to in
writing by the Adviser.
SECTION 6. LIABILITY FOR SERVICES.
Except as may otherwise be required by the 1940 Act or the rules
thereunder or other applicable law, and except as set forth in the next
paragraph, the Fund agrees that the Adviser, any of its affiliated persons, and
each person, if any, who, within the meaning of Section 15 of the Securities Act
of 1933, as amended, controls the Adviser, 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 Adviser's duties, or by reason of reckless disregard of the
Adviser's obligations and duties under this Agreement.
SECTION 7. REPRESENTATIONS AND WARRANTIES; COVENANTS.
(a) The Adviser hereby represents and warrants as follows:
(i) The Adviser is registered with the SEC as an investment
adviser under the Advisers Act, and such registration is
current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and
regulations thereunder;
(ii) The Adviser has all requisite authority to enter into,
execute, deliver and perform the Adviser's obligations under
this Agreement;
<PAGE>
(iii) The Adviser's performance of its obligations under this
Agreement does not conflict with any law, regulation or order
to which the Adviser is subject; and
(iv) The Adviser has reviewed the Registration Statement for the
Fund filed with the SEC, and with respect to the disclosure
about the Adviser and the Portfolio or information relating,
directly or indirectly, to the Adviser or the Portfolio which
was made in reliance upon and in conformity with written
information provided by the Adviser to the Fund specifically
for use therein or, if written information was not provided,
which the Adviser had the opportunity to review prior to
filing with the SEC, such Registration Statement contains, as
of its date, no untrue statement of any material fact and does
not omit any statement of a material fact which was required
to be stated therein or necessary to make the statements
contained therein not misleading.
(b) The Adviser hereby covenants and agrees that, so long as this
Agreement shall remain in effect:
(i) The Adviser shall maintain the Adviser's registration as an
investment adviser under the Advisers Act, and such
registration shall at all times remain current, complete and
in full compliance with all material applicable provisions of
the Advisers Act and the rules and regulations thereunder;
(ii) The Adviser's performance of its obligations under this
Agreement shall not conflict with any law, regulation or order
to which the Adviser is then subject;
(iii) The Adviser shall at all times fully comply with the Advisers
Act, the 1940 Act, all applicable rules and regulations under
such Acts and all other applicable law; and
(iv) The Adviser shall promptly notify the Fund upon the occurrence
of any event that might disqualify or prevent the Adviser from
performing its duties under this Agreement. The Adviser
further agrees to notify the Fund promptly with respect to
written material that has been provided to the Fund by the
Adviser for inclusion in the Registration Statement or
prospectus for the Fund or any supplement or amendment
thereto, or, if written material has not been provided, with
respect to the information in the Registration Statement or
Prospectus, or any amendment or supplement thereto, reviewed
by the Adviser, in either case of any untrue statement of a
material fact or of any omission of any statement of a
material fact which is required to be stated therein or is
necessary to make the statements contained therein not
misleading.
<PAGE>
SECTION 8. EXCLUSIVITY OF SERVICES AND USE OF NAMES.
The Adviser acknowledges and agrees that the names THE LEGENDS FUND and
PINNACLE, and abbreviations or logos associated with those names, are the
valuable property of Integrity and its affiliates; that the Fund, Integrity and
its affiliates have the right to use such names, abbreviations and logos; and
that the Adviser shall use the names THE LEGENDS FUND and PINNACLE, and
associated abbreviations and logos, only in connection with the Adviser's
performance of its duties hereunder.
The Fund acknowledges that "Zweig" (the Adviser's name) is distinctive in
connection with investment advisory and related services provided by the
Adviser, the Adviser's name is a property right of the Adviser and/or the
individual whose name is part of the Adviser's name (the PRINCIPAL), and the
Adviser's name in the name of the Portfolio are understood to be used by the
Fund with the Adviser's consent. The Adviser hereby grants to the Fund a
non-exclusive license to use the Adviser?s name in the name of the Portfolio
upon the conditions hereinafter set forth; provided that the Fund may use such
name only so long as (i) the Adviser shall be retained as the investment adviser
of the Portfolio pursuant to the terms of this Agreement, and (ii) the principal
shall continue to be affiliated with the Adviser. Any such use by the Fund
shall in no way prevent the Adviser or its principal or any of its or his
successors or assigns from using or permitting the use of the Adviser's or the
principal's name along with any other word or words, for, by or in connection
with any other entity or business, other than the Fund or its business, whether
or not the same directly competes or conflicts with the Fund or its business.
The Fund shall use the Adviser's and principal's name in the name of the
Portfolio for the period set forth herein in a manner not inconsistent with the
interests of the Adviser and its principal and that the Fund's rights in the
Adviser's and principal's name are limited to their use as a component of the
Portfolio's name and in connection with accurately describing the activities of
the Portfolio. In the event that the Adviser shall cease to be the investment
adviser of the Portfolio or the principal shall cease to be affiliated with the
Adviser, then the Fund at its own expense, upon the Adviser?s or the principal's
written request:
(i) shall cease to use the Adviser's or principal's name, as the case may be,
as part of the Portfolio's name or for any other commercial purpose (other than
the right to refer to the Portfolio's former name in the Fund's Registration
Statement, proxy materials and other Fund documents to the extent required under
the 1940 Act);
(ii) shall on all letterheads and other materials designed to be read or used
by salespersons, distributors or investors, state in a prominent position and
prominent type that the Adviser has ceased to be the investment adviser of the
Portfolio, or that the principal has ceased to be affiliated with the Adviser,
as the case may be; and
(iii) shall use its best efforts to cause the Fund's officers and directors to
take any and all actions which may be necessary or desirable to effect the
foregoing and to reconvey to the Adviser or the principal all rights which the
Fund may have to such name. The Fund agrees to take any and all actions as may
be necessary or desirable to effect the foregoing.
The Adviser hereby agrees and consents to the use of the Adviser's name
and that of its principal upon the foregoing terms and conditions.
SECTION 9. ENTIRE AGREEMENTS; AMENDMENT, WAIVER.
<PAGE>
This Agreement supersedes all prior agreements between the parties and
constitutes the entire Agreement by the parties. No provision of this Agreement
may be changed, waived, discharged or terminated orally, but only by an
instrument in writing singed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective with respect to the Portfolio until approved as
required by the 1940 Act.
SECTION 10. EFFECTIVENESS AND DURATION OF AGREEMENT.
Unless sooner terminated, this Agreement shall continue in effect until
the earlier to occur of (i) the second anniversary of the effective date hereof
or (ii) the date on which alternative arrangements for investment advisory
services for the Portfolio shall have been approved both by the Fund's Board of
Directors and the Portfolio's shareholders in accordance with the 1940 Act.
Unless sooner terminated, this Agreement shall continue in effect after the term
specified clause (i) of the preceding sentence for successive one year periods,
provided that continuation of this Agreement and the terms thereof are
specifically approved annually in accordance with the requirements of the 1940
Act by a majority of the Directors of the Fund, including a majority of the
Directors who are not interested persons of the Adviser or the Fund, cast in
person at a meeting called for the purpose of voting on such approval.
SECTION 11. TERMINATION OF AGREEMENT, ASSIGNMENT.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Adviser upon sixty (60) days' written notice to the Fund, or by
the Fund, upon sixty (60) days written notice to the Adviser, acting pursuant to
a resolution adopted by a majority of the members of the Board of Directors who
are not interested persons or by a vote of the holders of the lesser of (1) 67%
of the Portfolio's voting shares present if the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the outstanding shares of the Portfolio.
This Agreement shall automatically terminate in the event of its
assignment. Termination of this Agreement shall not affect rights of the
parties which have accrued prior thereto. The provisions of paragraphs 6 and 8
shall survive the termination of this Agreement.
SECTION 12. DEFINITIONS.
The terms ASSIGNMENT and INTERESTED PERSON when used in this Agreement
shall have the meanings give such terms in the 1940 Act and the rules and
regulations thereunder.
SECTION 13. CONCERNING APPLICABLE PROVISIONS OF LAW.
This Agreement shall be subject to all applicable provisions of law,
including, without limitation, the applicable provisions of the 1940 Act, and to
the extent that any provisions herein contained conflict with any such
applicable provisions of law, the latter shall control.
This Agreement shall be governed by the laws of the State of New York,
without reference to principles of conflicts of law.
SECTION 14. COUNTERPARTS.
This Agreement may be executed in counterparts, and each counterpart shall
for all purposed be deemed an original, and all such counterparts shall together
constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, authorized officers of the Fund and the Adviser have
executed this Agreement as of the day and year first written above.
THE LEGENDS FUND, INC. ZWEIG/GLASER ADVISERS
By:_________________________ By: _________________________
Attest: ____________________ Attest:______________________
<PAGE>
EXHIBIT D
OTHER MUTUAL FUNDS ADVISED BY HBSS WITH A SIMILAR INVESTMENT OBJECTIVE TO THAT
OF THE HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
NET ASSETS OF OTHER FUND ANNUAL
OTHER FUNDS (IN MILLIONS) FEE RATE
- ----------- ------------- --------
<S> <C> <C>
Saratoga Advantage Trust -
Large Cap Growth Fund $67 .40%
Jones Heward American Fund $15 .42%
Harris Bretall Sullivan &
Smith Growth Equity Fund $12 .75%
</TABLE>
HBSS reimburses the Harris Bretall Sullivan & Smith Growth Equity Fund for
expenses exceeding 1.29% of net assets.
<PAGE>
EXHIBIT E
OTHER MUTUAL FUNDS ADVISED BY SKI WITH A SIMILAR INVESTMENT OBJECTIVE TO THAT OF
THE SCUDDER KEMPER VALUE PORTFOLIO
<TABLE>
<CAPTION>
NET ASSETS OF OTHER
OTHER FUND ANNUAL FEE RATE FUND(1) (IN MILLIONS)
- ---------- --------------- ---------------------
<S> <C> <C>
.75% to $250M
Kemper Contrarian Fund(2) .72% next $750M $231
.70% next $1.5B
Kemper-Dreman High Return Equity Fund(2) .68% next $2.5B $4345
.65% next $2.5B
Kemper Small Cap Value Fund(2) .64% next $2.5B
.63% next $2.5B
.62% thereafter $1300
.75% to $500M
Scudder Large Company Value Fund .65% next $500M
(formerly Scudder Capital Growth Fund) .60% next $500M
.55% thereafter $2457
Scudder Value Fund .70% of net assets $532
Scudder Small Company Value Fund .75% of net assets(3) $291
</TABLE>
(1) Net assets as of April 30, 1998.
(2) A portfolio of Kemper Value Fund, Inc.
(3) Subject to waivers and/or expense limitations.
<PAGE>
EXHIBIT F
OTHER MUTUAL FUNDS ADVISED BY ZWEIG/GLASER WITH A SIMILAR INVESTMENT OBJECTIVE
TO THAT OF THE ZWEIG ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
NET ASSETS OF OTHER ANNUAL
OTHER FUND FUND (IN MILLIONS) FEE RATE
- ---------- ------------------ --------
<S> <C> <C>
Zweig Strategy Fund $1,331.5 0.75%
</TABLE>
OTHER MUTUAL FUNDS ADVISED BY ZWEIG/GLASER WITH A SIMILAR INVESTMENT OBJECTIVE
TO THAT OF THE ZWEIG EQUITY (SMALL CAP) PORTFOLIO
<TABLE>
<CAPTION>
NET ASSETS OF OTHER ANNUAL
OTHER FUND FUND (IN MILLIONS) FEE RATE
- ---------- ------------------ --------
<S> <C> <C>
Zweig Appreciation Fund $624.0 1.00%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S><C>
INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOXES IN THIS MANNER / / USING BLUE OR BLACK INK OR DARK PENCIL.
PLEASE DO NOT USE RED INK
- -------------------------------------------------------------------------------------------------------------------------
THIS VOTING INSTRUCTION, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE CONTRACT HOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS, PLEASE REFER TO THE PROXY STATEMENT FOR A DISCUSSION OF THE PROPOSALS.
FOR AGAINST ABSTAIN
1 To approve or disapprove the new management agreement between the Fund / / / / / /
and Integrity Capital Advisors, Inc. (the "Manager")
2 (a) To approve or disapprove the new sub-advisory agreement between / / / / / /
the Manager and Harris Bretall Sullivan & Smith, L.L.C. ("HBSS") (Harris
Bretall Sullivan & Smith Equity Growth Portfolio only)
(b) To approve or disapprove the new sub-advisory agreement between the / / / / / /
Manager and Scudder Kemper Investments, Inc. ("SKI") (Scudder Kemper Value
Portfolio only)
(c) To approve or disapprove the new sub-advisory agreement between the / / / / / /
Manager and Zweig/Glaser (Zweig Asset Allocation Portfolio only)
(d) To approve or disapprove the new sub-advisory agreement between the / / / / / /
Manager and Zweig/Glaser Advisers (Zweig Equity (Small Cap) Portfolio only)
3 (a) To approve or disapprove the interim advisory agreement between the / / / / / /
Fund and HBSS (Harris Bretall Sullivan & Smith Equity Growth Portfolio only)
(b) To approve or disapprove the interim advisory agreement between the / / / / / /
Fund and SKI (Scudder Kemper Value Portfolio only)
(c) To approve or disapprove the interim advisory agreement between the / / / / / /
Fund and Zweig/Glaser (Zweig Asset Allocation Portfolio only)
(d) To approve or disapprove the interim advisory agreement between the / / / / / /
Fund and Zweig/Glaser (Zweig Equity (Small Cap) Portfolio only)
4 To transact such other matters as may properly come before the meeting / / / / / /
or any adjournment thereof.
<PAGE>
<CAPTION>
<S><C>
PLEASE MARK YOUR VOTING INSTRUCTIONS CARD, DATE AND SIGN IT WHERE INDICATED, AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
INTEGRITY LIFE INSURANCE COMPANY
THESE VOTING INSTRUCTIONS ARE SOLICITED BY INTEGRITY LIFE INSURANCE COMPANY IN CONNECTION WITH A SOLICITATION OF PROXIES BY THE
DIRECTORS OF THE LEGENDS FUND, INC. A VOTING INSTRUCTIONS CARD IS PROVIDED FOR THE PORTFOLIOS IN WHICH YOUR CONTRACT VALUES WERE
INVESTED AS OF JUNE 4, 1998.
The undersigned hereby instructs Integrity Life Insurance Company to vote the shares of The Legends Fund, Inc. (the "Fund")
attributable to his or her variable annuity contract at the Special Meeting of Shareholders to be held at the Fund's offices, 515
West Market Street, Louisville, Kentucky 40202 at 3:00 p.m., Eastern Time, July 10, 1998, and any adjournments thereof, As
indicated on the reverse side.
Dated:
PLEASE SIGN IN BOX BELOW
If a contract is held jointly, each contract owner should sign. If only one signs, his or her signature will be binding. If the
contract owner is a corporation, the President or a Vice President should sign in his or her own name, indicating title. If the
contract owner is a partnership, a partner should sign in his or her own name, indicating that he or she is a partner.
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Signature(s) Title(s), if applicable
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<CAPTION>
<S><C>
PLEASE MARK YOUR VOTING INSTRUCTIONS CARD, DATE AND SIGN IT WHERE INDICATED, AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
NATIONAL INTEGRITY LIFE INSURANCE COMPANY
THESE VOTING INSTRUCTIONS ARE SOLICITED BY NATIONAL INTEGRITY LIFE INSURANCE COMPANY IN CONNECTION WITH A SOLICITATION OF PROXIES BY
THE DIRECTORS OF THE LEGENDS FUND, INC. A VOTING INSTRUCTIONS CARD IS PROVIDED FOR THE PORTFOLIOS IN WHICH YOUR CONTRACT VALUES
WERE INVESTED AS OF JUNE 4, 1998.
The undersigned hereby instructs National Integrity Life Insurance Company to vote the shares of The Legends Fund, Inc. (the "Fund")
attributable to his or her variable annuity contract at the Special Meeting of Shareholders to be held at the Fund's offices, 515
West Market Street, Louisville, Kentucky 40202 at 3:00 p.m., Eastern Time, July 10, 1998, and any adjournments thereof, As
indicated on the reverse side.
Dated:
PLEASE SIGN IN BOX BELOW
If a contract is held jointly, each contract owner should sign. If only one signs, his or her signature will be binding. If the
contract owner is a corporation, the President or a Vice President should sign in his or her own name, indicating title. If the
contract owner is a partnership, a partner should sign in his or her own name, indicating that he or she is a partner.
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Signature(s) Title(s), if applicable
</TABLE>
