<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] 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:
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2) Aggregate number of securities to which transaction applies:
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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):
<PAGE>
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
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 (the "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 April 4, 2000, at 3:00 p.m., Eastern Time. The purpose of the
Meeting is:
1. to approve or disapprove a new investment management agreement (the "New
Management Agreement") between the Fund and Touchstone Advisors, Inc.
(the "New Manager" or "Touchstone Advisors"), separately with respect to
each Portfolio;
2. (a) with respect to the Harris Bretall Sullivan & Smith Equity Growth
Portfolio, to approve or disapprove a new sub-advisory agreement
between the New Manager and Harris Bretall Sullivan & Smith, L.L.C.
("HBSS");
(b) with respect to the Scudder Kemper Value Portfolio, to approve or
disapprove a new sub-advisory agreement between the New Manager
and Scudder Kemper Investments, Inc. ("SKI");
(c) (1) with respect to the Zweig Asset Allocation Portfolio, to
approve or disapprove a new sub-advisory agreement between the New
Manager and Zweig/Glaser Advisers, LLC; and
(2) with respect to the Zweig Asset Allocation Portfolio, to
approve or disapprove the sub-advisory servicing agreement (the
"Servicing Agreement") by and among Zweig/Glaser Advisers, LLC,
certain of its affiliates and Zweig Consulting LLC ("Zweig
Consulting");
(d) (1) with respect to the Zweig Equity (Small Cap) Portfolio, to
approve or disapprove a new sub-advisory agreement between the New
Manager and Zweig/Glaser Advisers, LLC; and
(2) with respect to the Zweig Equity (Small Cap) Portfolio, to
approve or disapprove the Servicing Agreement by and among
Zweig/Glaser Advisers, LLC,
<PAGE>
certain of its affiliates and Zweig Consulting;
3. to elect a slate of five members to the Fund's Board of Directors to hold
office until their successors are duly elected and qualified;
4. to ratify or reject the selection of Ernst & Young LLP as the Fund's
independent accountants for the fiscal year ending June 30, 2000; and
5. 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
February 24, 2000 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,
/s/Kevin L. Howard
Kevin L. Howard
Secretary
March 3, 2000
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.
<PAGE>
THE LEGENDS FUND, INC.
515 West Market Street
Louisville, Kentucky 40202
----------------------------------------
PROXY STATEMENT
Special Meeting of Shareholders
April 4, 2000 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 April 4, 2000 at 3:00 p.m. As described in more detail below, the
Meeting is being called for the following purposes:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
PORTFOLIO(S) TO WHICH
SUMMARY OF PROPOSAL PROPOSAL APPLIES
- --------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. to approve or disapprove the new investment management agreement Each Portfolio, voting separately
(the "New Management Agreement") between the Fund and
Touchstone Advisors, Inc. (the "New Manager" or "Touchstone
Advisors");
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2. (a) to approve or disapprove a new sub-advisory agreement between Harris Bretall Sullivan & Smith
the New Manager and Harris Bretall Sullivan & Smith, L.L.C. Equity Growth Portfolio
("HBSS") as sub-adviser;
- --------------------------------------------------------------------------------------------------------------------------
(b) to approve or disapprove a new sub-advisory agreement between Scudder Kemper Value Portfolio
the New Manager and Scudder Kemper Investments, Inc. ("SKI") as
sub-adviser;
- --------------------------------------------------------------------------------------------------------------------------
(c)(1) to approve or disapprove a new sub-advisory agreement Zweig Asset Allocation Portfolio
between the New Manager and Zweig/Glaser Advisers, LLC as
sub-adviser;
- --------------------------------------------------------------------------------------------------------------------------
(c)(2) to approve or disapprove the sub-advisory servicing Zweig Asset Allocation Portfolio
agreement (the "Servicing Agreement") by and among Zweig Glaser
Advisers, certain of its affiliates and Zweig Consulting LLC ("Zweig
Consulting");
- --------------------------------------------------------------------------------------------------------------------------
(d)(1) to approve or disapprove a new sub-advisory agreement Zweig Equity (Small Cap) Portfolio
between the New Manager and Zweig/Glaser Advisers, LLC as
sub-adviser;
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(d)(2) to approve or disapprove the Servicing Agreement by and Zweig Equity (Small Cap) Portfolio
among Zweig Glaser Advisers, certain of its affiliates and Zweig
Consulting;
- --------------------------------------------------------------------------------------------------------------------------
3. to elect a slate of five members to the Fund's Board of Directors to All Portfolios, voting together as a
hold office until their successors are duly elected and qualified; single class
- --------------------------------------------------------------------------------------------------------------------------
4. to ratify or reject the selection of Ernst & Young LLP as the Fund's All Portfolios, voting together as a
independent accountants for the fiscal year ending June 30, 2000; and single class
- --------------------------------------------------------------------------------------------------------------------------
5. to transact such other matters as may properly come before the All Portfolios
Meeting or any adjournment thereof.
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
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 March 1, 2000 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 February 24, 2000 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 outstanding shares of the Portfolios were as follows:
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE PERCENTAGE
SHARES HELD PERCENTAGE SHARES HELD HELD BY
TOTAL BY 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>
Harris Bretall
Sullivan & Smith
Equity Growth 1,571,395.9 1,228,273.4 78% 343,122.5 22%
Scudder Kemper
Value 1,059,962.88 822,271.48 77.5% 237,691.4 22.5%
Zweig Asset
Allocation 863,876.58 711,665.68 82% 152,210.9 18%
Zweig Equity
(Small Cap) 411,783.57 289,011.77 70% 122,771.8 30%
Total Fund 3,907,018.93 3,051,222.33 78% 855,796.6 22%
</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. All costs of the meeting and soliciting
proxies will be borne by The Western and Southern Life Insurance Company
("Western & Southern") or one of 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,
<PAGE>
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.
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 and 2 and together as a single class with respect to Proposal
Nos. 3 and 4.
All information in the Proxy Statement about Integrity Capital Advisors,
Inc. (the "Current Manager") and ARM Securities Corporation ("ARM Securities" or
the "Current Distributor") has been provided by the Current Manager and Current
Distributor, respectively; all information about ARM Financial Group, Inc.
("ARM"), Integrity and National Integrity has been provided by ARM; all
information in the Proxy Statement about the New Manager, Touchstone Securities,
Inc. ("Touchstone Securities" or the "New Distributor") and Western & Southern
has been provided by the New Manager, the New Distributor and Western & Southern
respectively; and all information in the Proxy Statement about HBSS, SKI and
Zweig/Glaser Advisers, LLC (each a "Sub-Adviser," and collectively, the
"Sub-Advisers") has been provided by each respective Sub-Adviser.
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.
<PAGE>
PROPOSAL NO. 1: APPROVAL OF THE NEW MANAGEMENT AGREEMENT
HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO
SCUDDER KEMPER VALUE PORTFOLIO
ZWEIG ASSET ALLOCATION PORTFOLIO
ZWEIG EQUITY (SMALL CAP) PORTFOLIO
BACKGROUND
Each of the Current Manager, Integrity and National Integrity is a direct
or indirect wholly-owned subsidiary of ARM. In May 1999, ARM announced that it
was exploring strategic alternatives, including the sale of ARM's subsidiaries
or its businesses. Effective August 20, 1999, Integrity consented to an Order of
Supervision issued by the Director of Insurance of the State of Ohio (the "Ohio
Insurance Department"). ARM sought protection for Integrity following ratings
downgrades with respect to Integrity's claims paying ability, which were
primarily attributed to the potential inability of ARM to meet certain
contractual covenants related to its institutional business. Integrity has
reported that these ratings have no bearing on or relationship to the
performance of the separate accounts of Integrity or the Portfolios. The
regulatory action by the Ohio Insurance Department was intended to ensure an
orderly process for addressing the financial obligations of Integrity and to
protect the interests of its individual policyholders.
Subsequent to the issuance of the Order of Supervision, ARM continued to
explore the possible sale of Integrity and National Integrity, among other
strategic alternatives. On December 17, 1999, ARM announced that it had signed a
definitive agreement whereby Western & Southern would acquire the insurance
subsidiaries of ARM (the "Transaction"). The Transaction is expected to close
late in the first quarter of 2000 (the "Closing Date"). The Transaction is being
implemented pursuant to a chapter 11 bankruptcy case filed by ARM on December
20, 1999. In addition to approval by the bankruptcy court, the closing of the
Transaction is subject to the approval of various state departments of insurance
and other customary conditions to closing. The Current Manager is not being sold
in the Transaction. However, it is contemplated that upon consummation of the
Transaction, the Current Manager will cease operations as an investment adviser.
Therefore, as part of the Transaction, it is proposed that the investment
advisory agreement between the Current Manager and the Fund (the "Current
Management Agreement") be assigned to the New Manager, an advisory affiliate of
Western & Southern, subject to approval by the shareholders of each Portfolio.
Specifically, it is proposed that the Fund enter into the New Management
Agreement with the New Manager and that the New Manager enter into a new
sub-advisory agreement with each Sub-Adviser, each to become effective upon the
later of the Closing Date or the date shareholder approval is received. Each of
the sub-advisory agreements between the New Manager and a Sub-Adviser are
hereinafter referred to individually as a "New Sub-Advisory Agreement" and
collectively as the "New Sub-Advisory Agreements." The New Sub-Advisory
Agreements and the New Management Agreement are hereinafter collectively
referred to as the "New Advisory Agreements." For purposes of this Proxy
Statement, the New Sub-Advisory Agreements and the New Advisory Agreements
include the Servicing Agreement when referencing the Zweig Asset
<PAGE>
Allocation Portfolio and Zweig Equity (Small Cap) Portfolio (each, a "Zweig
Portfolio" and collectively, the "Zweig Portfolios").
The New Management Agreement is identical to the Current Management
Agreement, with the exception of the identity of the investment manager and the
effective date. A copy of the New Management Agreement is annexed to this Proxy
Statement as Exhibit A. The New Management Agreement is being submitted for
approval by shareholders of each Portfolio.
In addition, the New Sub-Advisory Agreements between the New Manager and
the respective Sub-Advisers on behalf of each Portfolio are identical to the
sub-advisory agreements that are in effect (the "Current Sub-Advisory
Agreements," and together with the Current Management Agreement, the "Current
Advisory Agreements"), with the exception of the identity of the New Manager and
the effective date.
Each of the New Advisory Agreements was approved by the Board of
Directors of the Fund, including the Directors who are not "interested persons"
of the Fund ("Independent Directors") on February 18, 2000. The Board of
Directors also approved a new distribution agreement with the New Distributor,
which will take effect on the Closing Date.
On February 18, 2000, in connection with the approval of the New Advisory
Agreements, the Board of Directors considered that the Transaction might close
and the Current Manager might cease operations prior to the date of this Meeting
and receipt of shareholder approval of the New Advisory Agreements. Accordingly,
the Board of Directors, including all the Independent Directors, approved an
interim management agreement ("Interim Management Agreement") with the New
Manager, which will take effect upon the Closing Date if shareholder approval of
the New Management Agreement has not yet been obtained, and may be in effect for
a period of up to 150 days. The Interim Management Agreement contains
substantially the same terms as the New Management Agreement. In addition, the
Board of Directors, including the Independent Directors, approved interim
sub-advisory agreements (each, an "Interim Sub-Advisory Agreement" and
collectively, the "Interim Sub-Advisory Agreements") relating to each of the
Portfolios containing substantially the same terms as the Current Sub-Advisory
Agreement between the Portfolio and its respective Sub-Adviser. Each of the
Sub-Advisers will serve pursuant to the Interim Sub-Advisory Agreements from the
Closing Date (if shareholder approval of the New Sub-Advisory Agreements has not
yet been obtained) for a period of up to 150 days. Both the Interim Management
Agreement and Interim Sub-Advisory Agreements require all management and
sub-advisory fees to be escrowed pending shareholder approval of the New
Advisory Agreements. (The Interim Sub-Advisory Agreements with respect to the
Zweig Portfolios include the Servicing Agreement.)
THE CURRENT AND NEW MANAGEMENT AGREEMENTS
The Current Management Agreement was last approved by shareholders on
July 10, 1998, in connection with a change in control of the Current Manager.
The following is a summary of the material terms of the New Management
Agreement, which are the same as the material terms of the Current Management
Agreement, except with respect to the identity of the
<PAGE>
investment manager and the effective date:
SERVICES. Pursuant to the New Management Agreement between the Fund and
the New Manager, the New Manager will be responsible for the management of the
Fund and administration of its business affairs. The New Manager will be
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 New Manager will enter into the New
Sub-Advisory Agreements with each of HBSS, SKI and Zweig/Glaser Advisers, LLC
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 New Manager will be
responsible, among other things, for general supervision of the respective
Sub-Advisers, subject to general oversight by the Board of Directors. In
addition, the New Manager will be obligated to keep certain books and records of
the Fund and administer the Fund's corporate affairs. In connection therewith,
the New Manager will furnish the Fund with office facilities, together with
those ordinary clerical and bookkeeping services that will not be furnished by
the Fund's custodian or transfer and dividend disbursing agent.
COMPENSATION FOR SERVICES. Each Portfolio will pay the New 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
New Manager will compensate each Sub-Adviser out of the Management Fee received
from the respective Portfolio. The New Manager will retain (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 under the Current
Management Agreement.
<TABLE>
<CAPTION>
PORTFOLIO MANAGEMENT FEE
PAYABLE BY PORTFOLIO
TO THE NEW MANAGER
<S> <C>
Harris Bretall Sullivan & Smith
Equity Growth Portfolio .65%
Scudder Kemper Value Portfolio .65%
Zweig Asset Allocation Portfolio .90%
Zweig Equity (Small Cap) Portfolio 1.05%
</TABLE>
The aggregate fees paid to the Current Manager by the Portfolios under
the Current Management Agreement for the fiscal year ended June 30, 1999 were
$337,482, including $106,330 paid by the Harris Bretall Sullivan & Smith Equity
Growth Portfolio; $112,727 paid by the Scudder Kemper Value Portfolio; $88,148
paid by the Zweig Asset Allocation Portfolio; and $30,277 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."
<PAGE>
PAYMENT OF EXPENSES. Each Portfolio will bear all expenses incurred in
its operation that are not specifically assumed by the New Manager or New
Distributor. 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 Board of Directors in such manner as the Board determines to be
fair and equitable.
The New Manager has agreed to voluntarily limit the expenses of the
Portfolios, other than for brokerage commissions and the management fee, to .50%
of average net assets on an annualized basis, for the fiscal year ending June
30, 2000. This is the same voluntary limit as had been agreed to by the Current
Manager. The reimbursement of Portfolio expenses results in an increase to each
Portfolio's yield and total return. There is no intent to change the terms of
this reimbursement plan at this time. For the fiscal year ended June 30, 1999,
the Current Manager reimbursed the Zweig Equity (Small Cap) Portfolio pursuant
to this voluntary limit in the amount of $12,007.
LIMITATION OF LIABILITY. Under the New Management Agreement, except as
may otherwise be required under the 1940 Act, the New 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 New 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 New 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").
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
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
At a regular meeting of the Board of Directors of the Fund held on
August 17, 1999, ARM management discussed with the Board the various strategic
alternatives that ARM was exploring, including the possible sale of ARM's
subsidiaries or businesses. Management explained that such subsidiaries could
potentially include Integrity, National Integrity and/or the Current Manager. As
part of this presentation, ARM management provided the Board with information
about the financial condition of ARM and the Current Manager. ARM assured the
Board that while it was exploring strategic alternatives, the Current Manager
would have the
<PAGE>
financial resources and personnel necessary to continue to render services to
the Fund of the same nature and quality as had been rendered in the past. The
Board appointed one of the Independent Directors to serve as the liaison with
ARM management to monitor the situation and to report to the other Independent
Directors as to the status of ARM and the Current Manager, and the Current
Manager's ability to continue to provide the Fund with the necessary services.
The Board held a special telephonic meeting on August 24, 1999 at which
ARM management updated the Independent Directors as to the status of the
strategic alternatives being pursued by ARM. Management also reported that
Integrity had consented to an Order of Supervision issued by the Ohio Insurance
Department and discussed with the Board the potential implications of such
Order. ARM management assured the Board that the Order of Supervision would not
affect the day-to-day operations of the Current Manager and that the Fund could
continue to expect to receive the same level and quality of services. In that
regard, ARM management stated that employee retention was not proving to be a
problem and that the Current Manager had sufficient staff to continue managing
the Fund efficiently and effectively. At the request of the Board, management
agreed to prepare and present to the Board a contingency plan for the continued
management of the Fund if the Board were to determine that the Current Manager's
ability to continue to provide high quality services to the Fund had become
impaired. Management also committed to continue to keep the Board informed as to
the status of ARM's condition, financial and otherwise, and of the strategic
alternatives being considered insofar as they could potentially affect
management of the Fund.
At a special telephonic meeting on September 17, 1999, ARM management
further updated the Board as to ARM's pursuit of strategic alternatives and the
development of contingency plans for ensuring continued management services for
the Fund. Management also informed the Board that it was negotiating with
Western & Southern with respect to the purchase of Integrity and National
Integrity. The Board held another special telephonic meeting on November 1, 1999
and an in-person meeting on November 17, 1999, during which the Board received
further information on the status of the proposed transaction with Western &
Southern, as well as other relevant matters relating to the condition of ARM and
the Current Manager.
At an in-person meeting of the Board held on February 18, 2000, ARM
management proposed that in connection with the Transaction, that the Board
approve the New Management Agreement with the New Manager and the New
Sub-Advisory Agreements with the Sub-Advisers. ARM management explained that,
following consummation of the Transaction, it was contemplated that the Current
Manager would cease operations, and that its key personnel would be employed by
the New Manager. A representative of Western & Southern and the New Manager
attended the meeting and made a detailed presentation to the Board about the
organization's resources, personnel, experience and commitment to the Fund.
Counsel to the Independent Directors was present at each of the meetings
described above.
Following the presentation by ARM management and Western & Southern, 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
<PAGE>
each respective Portfolio and its shareholders.
In determining to approve the New Management Agreement, the Directors
evaluated the factors they deemed relevant with respect to each Portfolio. Among
other things, the Board considered that the Current Manager would be going out
of business in connection with the sale of Integrity and National Integrity and
the bankruptcy of ARM. The Board considered that the New Manager will employ key
management personnel of the Current Manager and that, although the identity of
the investment manager will change, senior officers of Western & Southern and
the New Manager have assured the Board that there will be no change in the
nature or quality of services currently and historically provided to the Fund.
The officers of Western & Southern also provided assurances that they do not
foresee any changes in the day-to-day operations of the Fund as a result of the
Transaction and that the New Manager has the financial ability and other
resources to fulfill its commitment to the Fund under the New Management
Agreement. The Board also considered that Western & Southern was buying from ARM
the two insurance companies, the separate accounts of which are the sole
shareholders of the Fund and that it would be consistent with contract-holders'
likely expectation to retain as investment manager for the Fund an affiliate of
the insurance companies following the Transaction.
The Board also considered that the New Management Agreement is the same
as the Current Management Agreement in all material respects, including the rate
of management fee, and any waivers or reimbursements. The Board also considered
that the compensation to be paid by the New Manager to the Sub-Advisers under
the New Sub-Advisory Agreements would result in the New Manager being
compensated at the same rates as under the Current Advisory Agreements. The
Board 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 the same quality of services as is currently
provided.
In addition, the Board of Directors, including all the Independent
Directors, determined that the terms of the Interim Management Agreement are
fair and reasonable. In determining to approve the Interim Management Agreement,
the Board of Directors considered, among other things, that the compensation
earned under the Interim Management Agreement will be held in an
interest-bearing escrow account with the Fund's custodian and if a majority of
the Fund's outstanding voting securities approve the New Management Agreement by
the end of the 150 day period, the amount in escrow (including interest earned)
will be paid to the New Manager. The Board also took into account that if a
majority of the Fund's outstanding voting securities do not approve of the New
Management Agreement, the New Manager will be paid, out of the escrow account,
the lesser of: (a) any costs incurred while preforming the Interim Management
Agreement (plus interest earned on that amount while in escrow); or (b) the
total amount in the escrow account (plus interest earned).
RECOMMENDATION OF THE BOARD OF DIRECTORS
At an in-person meeting held on February 18, 2000, the Board of
Directors, including all of the Independent Directors, voted unanimously to
approve the New Management Agreement and to recommend to shareholders that they
vote "FOR" Proposal No. 1.
<PAGE>
VOTE REQUIRED FOR PROPOSAL NO. 1
Shareholders of each Portfolio vote separately on whether to approve
Proposal No. 1 with respect to that 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 BOARD WILL CONSIDER WHAT ACTION, IF ANY, SHOULD BE TAKEN TO OBTAIN THE
NECESSARY INVESTMENT MANAGEMENT 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
The Current Sub-Advisory Agreements are between the Current Manager and
each of the Sub-Advisers. Accordingly, in connection with the approval of the
New Management Agreement, the Board of Directors of the Fund approved the New
Sub-Advisory Agreements between the New Manager and each 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
Agreement between the New Manager and each of HBSS and SKI is annexed as Exhibit
B-1; a form of the New Sub-Advisory Agreement between the New Manager and
Zweig/Glaser Advisers, LLC is annexed as Exhibit B-2. The New Sub-Advisory
Agreements are each identical to the respective Current Sub-Advisory Agreements,
with the exception of the identity of the investment manager and the effective
date. It is proposed that the New Sub-Advisory Agreements will become effective
upon the later of the Closing Date or approval by shareholders.
THE CURRENT AND NEW SUB-ADVISORY AGREEMENTS
The Current Sub-Advisory Agreement between the Current Manager and HBSS
with respect to Harris Bretall Sullivan & Smith Equity Growth Portfolio was last
approved by shareholders on July 10, 1998, in connection with a change in
control of the Current Manager. The Current Sub-Advisory Agreement between the
Current Manager and SKI with respect to
<PAGE>
Scudder Kemper Value Portfolio was last approved by shareholders on November 20,
1998, in connection with a change in control of SKI. The Current Sub-Advisory
Agreements between the Current Manager and Zweig/Glaser Advisers, LLC with
respect to Zweig Asset Allocation Portfolio and Zweig Equity (Small Cap)
Portfolio were last approved by shareholders on March 30, 1999, in connection
with a change in control of Zweig/Glaser Advisers, LLC.
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 Current
Sub-Advisory Agreement, with the exception of the identity of the New Manager
and effective dates:
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. With respect
to the Zweig Portfolios, Zweig/Glaser Advisers, LLC may employ, retain or
otherwise avail itself of the services or facilities of other persons or
organizations, for the purpose of providing statistical and other factual
information, advice regarding economic factors and trends, advice as to
occasional transactions in specific securities or such other information, advice
or assistance as Zweig/Glaser Advisers, LLC may deem necessary, appropriate or
convenient for the discharging of its obligations as Sub-Adviser. This provision
authorizes Zweig/Glaser Advisers, LLC to enter into the Servicing Agreement with
certain of its affiliates and Zweig Consulting, which is described more fully
below under "Dr. Martin E. Zweig and the Servicing Agreement (Zweig Portfolios
Only)."
COMPENSATION FOR SERVICES. The New 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-ADVISO
SUB-ADVISER PORTFOLIO RY FEE RATE
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
HBSS Harris Bretall Sullivan & Smith Equity .40%
Growth Portfolio
- -------------------------------------------------------------------------------------------------
SKI Scudder Kemper Value Portfolio .40%
- -------------------------------------------------------------------------------------------------
Zweig/Glaser Advisers, LLC Zweig Asset Allocation Portfolio .65%
- -------------------------------------------------------------------------------------------------
Zweig/Glaser Advisers, LLC Zweig Equity (Small Cap) Portfolio .80%
- -------------------------------------------------------------------------------------------------
</TABLE>
The foregoing rates are the same as the rates in effect under the respective
Current Sub-Advisory Agreements. The sub-advisory fees for the fiscal year ended
June 30, 1999 paid to the Sub-Advisers by the Current Manager were $173,912 to
HBSS with respect to the Harris Bretall Sullivan & Smith Equity Growth
Portfolio; $185,015 to SKI with respect to the Scudder Kemper Value Portfolio;
$235,961 to Zweig/Glaser Advisers, LLC with respect to the Zweig Asset
Allocation Portfolio; and $99,442 to Zweig/ Glaser Advisers with respect to the
Zweig Equity (Small Cap) Portfolio.
<PAGE>
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 New 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.
DR. MARTIN E. ZWEIG AND THE SERVICING AGREEMENT (ZWEIG PORTFOLIOS ONLY)
The Servicing Agreement by and among Zweig/Glaser Advisers, LLC, certain
of its affiliates and Zweig Consulting, a New York limited liability company,
was approved by shareholders of each of the Zweig Portfolios on March 30, 1999.
The Servicing Agreement provides for its automatic termination upon the
termination of the Current Sub-Advisory Agreement with respect to each of the
Zweig Portfolios. It is anticipated that the Current Sub-Advisory Agreements
will terminate effective upon the Closing Date. The Board of Directors of the
Fund therefore re-approved the Servicing Agreement by and among Zweig/Glaser
Advisers, LLC, certain of its affiliates and Zweig Consulting, with respect to
each of the Zweig Portfolios. A copy of the Servicing Agreement is annexed to
this Proxy Statement as Exhibit C. The Servicing Agreement is being submitted
for approval by shareholders of the Zweig Portfolios only. If approved, it is
proposed that the Servicing Agreement will take effect concurrently with the New
Sub-Advisory Agreement, with respect to each of the Zweig Portfolios.
Under the Servicing Agreement, Zweig/Glaser Advisers, LLC and the Zweig
Portfolios will continue to receive the investment advisory services of Dr.
Martin E. Zweig and his research associates ("Associates"). Pursuant to the
Servicing Agreement, Dr. Zweig and his Associates will continue to devote their
skill and time, consistent with the practices of Dr. Zweig and his Associates,
to the business and affairs of Zweig/Glaser Advisers, LLC and its affiliates and
to the promotion of their interests, in particular, performing asset allocation
research analysis and
<PAGE>
providing advice thereon at a level and in a manner consistent with the past
practices of Dr. Zweig, his Associates, Zweig/Glaser Advisers, LLC and its
affiliates (the "Services"). Zweig Consulting also agrees not to provide
Services to any "competing business." Zweig/Glaser Advisers, LLC and its
affiliates and Zweig Consulting also agree to mutual confidentiality
provisions pursuant to the Servicing Agreement.
Zweig/Glaser Advisers, LLC may terminate the Servicing Agreement with
respect to either Zweig Portfolio immediately for cause, in the event of Dr.
Zweig's death or disability, or upon 30 days' notice. Unless terminated sooner,
the Servicing Agreement will continue in effect for two years, and thereafter
until March 30, 2002, provided that the continuation of the Servicing Agreement
and the terms thereof are specifically approved after the initial term at least
annually in accordance with the requirements of the 1940 Act by a majority of
the Portfolio's outstanding voting securities or by a majority of the Board,
and, in any event, by a majority of the Independent Directors. In addition, the
Servicing Agreement may be terminated with respect to either Zweig Portfolio at
any time, without payment of any penalty, by the Board or by vote of a majority
of the outstanding voting securities of the Portfolio, upon not less than sixty
(60) days' written notice. The Servicing Agreement with respect to a Zweig
Portfolio shall automatically terminate upon its assignment or the termination
of the respective New Sub-Advisory Agreement. The continuation of the New
Sub-Advisory Agreement with respect to a Zweig Portfolio, however, will not be
dependent on the continuation of the Servicing Agreement.
Zweig/Glaser Advisers, LLC, and not the Fund or the New Manager, will
be responsible for compensating Zweig Consulting for its Services. The Zweig
Portfolios will not incur any new or additional costs under the Servicing
Agreement. Zweig/Glaser Advisers, LLC and its affiliates have agreed on a joint
and several basis, to pay Zweig Consulting on a monthly basis, an annual
consulting fee of $2,500,000 ("Consulting Fees"). The Consulting Fees shall be
allocated among Zweig/Glaser Advisers, LLC and its affiliates based on the
assets of the investment companies managed by each of Zweig/Glaser Advisers, LLC
and its affiliates. Zweig Consulting also receives research benefits along with
Zweig/Glaser Advisers, LLC and its affiliates from the brokerage transactions
for the clients' accounts by Zweig/Glaser Advisers, LLC and its affiliates in
accordance with the provisions of Section 28(e) of the Exchange Act of 1934, as
amended. See "General Information--Affiliated Brokers" below.
BOARD CONSIDERATIONS
The Board of Directors, including all the Independent Directors,
determined that the terms of the New Sub-Advisory Agreements and Servicing
Agreement are fair and reasonable and that the approval of the New Sub-Advisory
Agreements and Servicing Agreement on behalf of the Fund and each applicable
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
and Servicing Agreement, the Board of Directors evaluated the factors they
deemed relevant with respect to each applicable Portfolio, including factors
described above with respect to the New Management Agreement. In addition, the
Board considered that it is anticipated that the Transaction will have no effect
with respect to the operations of any of the Sub-Advisers or Zweig Consulting,
since they are independent of both ARM and Western & Southern, and their
<PAGE>
affiliates.
In addition, the Board of Directors, including all the Independent
Directors, determined that the terms of the Interim Sub-Advisory Agreements
relating to each of the Portfolios are fair and reasonable. In determining to
approve the Interim Sub-Advisory Agreements, the Board of Directors considered,
among other things, that the compensation earned under each Interim Sub-Advisory
Agreement will be held in an interest-bearing escrow account with the Fund's
custodian and if a majority of the Fund's outstanding voting securities approve
the New Sub-Advisory Agreements by the end of the 150 day period, the amount in
escrow (including interest earned) will be paid to the respective Sub-Adviser.
The Board also took into account that if a majority of the Fund's outstanding
voting securities do not approve of the New Sub-Advisory Agreements, each
Sub-Adviser, on behalf of its respective Portfolio will be paid, out of the
escrow account, the lesser of: (a) any costs incurred while performing the
Interim Sub-Advisory Agreement (plus interest earned on that amount while in
escrow); or (b) the total amount in the escrow account (plus interest earned).
RECOMMENDATION OF THE BOARD OF DIRECTORS
At an in-person meeting held on February 18, 2000, the Board of
Directors, including all of the Independent Directors, voted unanimously to
approve the New Sub-Advisory Agreement with respect to each Portfolio and the
Servicing Agreement with respect to each Zweig Portfolio and to recommend that
shareholders of each Portfolio vote "FOR" the New Sub-Advisory Agreement and
that shareholders of each Zweig Portfolio vote "FOR" the Servicing Agreement.
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 each Portfolio requires the affirmative vote of a
majority of the outstanding voting securities of that Portfolio for the New
Sub-Advisory Agreement. Approval of Proposal No. 2 with respect to each Zweig
Portfolio also requires the affirmative vote of a majority of the outstanding
voting securities of the Portfolio with respect to the Servicing Agreement. This
means that a vote AGAINST either the (1) New Sub-Advisory Agreement or (2)
Servicing Agreement with respect to a Zweig Portfolio will constitute a vote
AGAINST both the (1) New Sub-Advisory Agreement and (2) Servicing Agreement for
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 BOARD WILL CONSIDER WHAT OTHER ACTION, IF ANY, SHOULD BE TAKEN TO OBTAIN
ADVISORY SERVICES WITH RESPECT TO SUCH PORTFOLIO. 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.
<PAGE>
PROPOSAL NO. 3: ELECTION OF DIRECTORS
ALL PORTFOLIOS
At the Meeting, a slate of five nominees, including four who are not
interested persons of the Fund, will be elected to serve as Directors of the
Fund, to hold office until their successors are duly elected and qualified. It
is the intention of the persons named in the accompanying form of proxy to vote
for the election of each of the nominees named below, each of whom has consented
to be a nominee. The nominees consist of the four incumbent Directors and one
other individual, Irvin W. Quesenberry, Jr.
If any of the nominees become unavailable for election as a Director
before the Meeting, proxies will be voted for the other persons that the
Directors recommend.
<PAGE>
INFORMATION REGARDING NOMINEES - PRINCIPAL OCCUPATION AND OTHER INFORMATION
None of the following nominees owns any shares of any Portfolios.
<TABLE>
<CAPTION>
NAME, AGE AND ADDRESS OTHER BUSINESS ACTIVITIES IN PAST FIVE YEARS
- --------------------- --------------------------------------------
<S> <C>
John R. Lindholm (51)* President of Integrity since November 1993; President of
515 West Market Street National Integrity since September 1997; Executive Vice
Louisville, KY 40202 President - Chief Marketing Officer of ARM since 1993; Director
of the Fund since October 1993; Chairman and Director of the
mutual funds in the State Bond Group of mutual funds from June
1995 to December 1996.
Chris LaVictoire Mahai CEO AisleFive, interactive marketing firm; President, Clavm,
(44) Inc., a consulting and project management firm; Fellow, the
244 North First Avenue Poynter Institute for Media Studies; Board Member (Cowles
Minneapolis, MN 55401 Media) Star Tribune Foundation from September 1992 to June
1998; Senior Vice President, Cowles Media Company/Star
Tribune from August 1993 to June 1998; Director of the Fund
since October 1997; Director of the mutual funds in the State
Bond Group of mutual funds from June 1984 to December 1996.
William B. Faulkner (72) President, William Faulkner & Associates (business and
240 East Plato Blvd. institutional adviser) since 1986; Director of the Fund since
St. Paul, MN 55107 November 1995; Director of the mutual funds in the State Bond
Group of mutual funds from June 1984 to December 1996.
John Katz (61) Investment banker since January 1991; Director of the Fund since
10 Hemlock Road November 1992; Director of the mutual funds in the State Bond
Hartsdale, NY Group of mutual funds from June 1995 to December 1996.
Irvin W. Quesenberry, Jr. Retired Founder and Managing Director of National Asset
(51) Management, an investment counseling firm from 1979 to
2939 Rainbow Drive 1995**; Board member of Louisville Water Company since 1986;
Louisville, KY 40206 Member, Louisville Community Foundation Investment Committee.
</TABLE>
The Directors met five times during the fiscal year ended June 30, 1999.
The incumbents attended 100% of the aggregate number of meetings of the
Directors. The Board has an audit committee consisting of Messrs. Katz and
Faulkner and Ms. Mahai. The Board's audit committee, which selects and oversees
the Fund's independent accountants, met once during the fiscal year ended June
30, 1999 and all of the members attended. The Board has no standing nominating
or compensating committees.
- -------------------------
*Mr. Lindholm is an interested person of the Fund and the Current Manager
as defined in the 1940 Act, by virtue of his positions with ARM.
**Mr. Quesenberry no longer has any interest in National Asset Management.
<PAGE>
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE FUND
NAME (AGE) POSITION WITH THE FUND EXPERIENCE DURING THE PAST FIVE
YEARS
<S> <C> <C>
Edward J. Haines (53) President Senior Vice President of Marketing of
ARM since December 1993.
Kevin L. Howard (35) Secretary Senior Vice President and Counsel of
ARM since October 1998; Assistant
General Counsel of ARM from
January 1994 until October 1998.
Don W. Cummings (36) Controller Chief Financial Officer, Retail
Business Division of ARM since
November, 1996; Strategic Initiatives
Officer of ARM from April 1996 until
November 1996; Controller of ARM
from November 1993 until April 1996.
Meredith Hettinger (28) Assistant Secretary Financial Manager- Corporate
Controllers department of ARM since
April 1998; Financial Analyst-
Corporate Controllers department
from June 1995 until April 1998; Tax
Accountant - Ernst and Young, LLP
from August 1993 until May 1995.
Hope Oliver (24) Assistant Secretary Financial Analyst of ARM since
August 1998; Staff Accountant of
McCauley, Nicolas & Company LLC
from December 1995 until August
1998.
Kay Dieterlen (37) Assistant Secretary Legal Specialist of ARM since
November 1993.
</TABLE>
All officers of the Fund have been elected to serve until their
successors are elected and qualified. Each officer's address is 515 West Market
Street, Louisville, KY.
REMUNERATION OF DIRECTORS AND OFFICERS
The Fund pays Directors who are not interested persons of the Fund fees
for serving as Directors. During the fiscal year ended June 30, 1999 the Fund
paid the Directors who are not interested persons of the Fund a combined total
of $44,000 exclusive of expenses. Because the Current Manager and the
Sub-Advisers perform substantially all of the services necessary for the
operation of the Fund, the Fund requires no employees. No officer, director or
employee of the Current Manager, Integrity, National Integrity or a Sub-Adviser
receives any compensation from the Fund for acting as a Director or officer.
<PAGE>
The following table sets forth for the fiscal year ended June 30, 1999,
compensation paid by the Fund to the disinterested Directors. Directors who are
interested persons, as defined in the 1940 Act, receive no compensation from the
Fund.
<TABLE>
<CAPTION>
NAME OF DIRECTOR AGGREGATE PENSION OR ESTIMATED TOTAL
COMPENSATION RETIREMENT ANNUAL COMPENSATION
FROM FUND BENEFITS BENEFITS FROM FUND
ACCRUED AS PART UPON PAID TO
OF FUND RETIREMENT DIRECTORS
EXPENSES
<S> <C> <C> <C> <C>
William B. Faulkner $15,000 None N/A $15,000
John Katz $15,000 None N/A $15,000
Chris L. Mahai $14,000 None N/A $14,000
</TABLE>
VOTE REQUIRED FOR PROPOSAL NO. 3
The nominees receiving the affirmative vote of a majority of the votes
cast for the election of Directors at the Meeting will be elected, provided a
quorum is present. Shares of all Portfolios of the Fund vote together as a
single class for the Directors of the Fund.
BOARD RECOMMENDATION
At an in-person meeting held on February 18, 2000, the Board of
Directors, including all of the Independent Directors, voted unanimously to
nominate the five individuals named in this Proxy Statement to serve as
Directors of the Fund and to recommend to shareholders that they vote in favor
of all of the nominees.
<PAGE>
PROPOSAL NO. 4: RATIFICATION OF THE SELECTION OF
INDEPENDENT ACCOUNTANTS
ALL PORTFOLIOS
Under Proposal No. 4, shareholders of the Fund are being asked to
ratify the Board's selection of independent accountants for the Fund for the
fiscal year ending June 30, 2000. The firm of Ernst & Young LLP has extensive
experience in investment company accounting and auditing and has served as
independent accountants to the Fund since 1994. The financial statements
included in the Fund's Annual Report, dated June 30, 1999, have been examined
by Ernst & Young LLP. It is not expected that a representative of Ernst &
Young LLP will be present in the Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
At an in-person meeting held on February 18, 2000, the Board of
Directors, including all of the Independent Directors, voted unanimously to
ratify the Board's selection of independent accountants and to recommend to
shareholders that they vote "FOR" Proposal No. 4.
GENERAL INFORMATION
INFORMATION ABOUT THE NEW MANAGER
Touchstone Advisors, Inc., 311 Pike Street, Cincinnati, Ohio 45202, and
its 111-year-old parent company, Western & Southern, 400 Broadway, Cincinnati,
Ohio 45202, are part of The Western-Southern Enterprise-Registered Trademark-
(the "Enterprise"), which is a family of companies that provides life
insurance, annuities, mutual funds, asset management and other related
financial services for millions of consumers nationwide. (Touchstone Advisors
is 100% owned by IFS Financial Services, Inc., 311 Pike Street, Cincinnati,
Ohio 45202, which is 100% owned by Western-Southern Life Assurance Company,
400 Broadway, Cincinnati, Ohio 45202, a direct subsidiary of Western &
Southern.) Through its seven companies, more than 4,800 associates, and more
than 50,000 individuals who sell its products, the Enterprise offers
consumers a broad array of products and services to meet their financial
security needs. As of December 31, 1999, the Enterprise owned or managed
assets of approximately $20 billion and Touchstone Advisors managed assets of
approximately $440 million (on a consolidated basis). Touchstone Advisors
also serves as investment adviser to other investment companies having
similar investment objectives to the Portfolios as indicated in Exhibit D.
The following chart lists the name, address and principal
occupation of the principal executive officers and each director of
Touchstone Advisors. The address of each, as it relates to his or her duties
with respect to Touchstone Advisors, is the same as that of Touchstone
Advisors.
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<S> <C>
Jill Tripp McGruder Director, President & Chief Executive Officer
Teresa Siegel Chief Financial Officer
<PAGE>
Patricia Wilson Chief Compliance Officer
Donald J. Wuebbling Director, Secretary & Chief Legal Officer
William F. Ledwin Director
James N. Clark Director
Edwin S. Heenan Vice President & Comptroller
Richard K. Taulbee Vice President
James J. Vance Vice President & Treasurer
Robert F. Morand Assistant Secretary
David E. Dennison Assistant Treasurer
Robert A. Dressman Assistant Treasurer
Timothy D. Speed Assistant Treasurer
</TABLE>
None of the principal executive officers or Directors of the New Manager
is affiliated with the Fund.
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 individual partners of HBSS and Value Asset Management of Westport, CT. The
firm provides investment management services to institutions and high-net worth
individuals, and as of December 31, 1999, had assets under management of
approximately $5.8 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 E.
<PAGE>
The following chart lists the names, addresses and principal occupation
of the principal officers and directors of HBSS. The address of each, as it
relates to his or her duties with respect to HBSS is the same as that of HBSS.
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<S> <C>
W. Graeme Bretall, CFA President
Henry B. Dunlap Smith, CFA Partner
John J. Sullivan, CFA Partner
Gordon J. Ceresino Partner
Susan A. Foley, CFA Partner
David S. Post, CFA Partner
Joseph N. Calderazzo Senior Vice President
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 June 30, 1999, SKI managed over $230 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 F.
The following chart lists the names, addresses and principal occupation
of the principal officers and directors of SKI:
<TABLE>
<CAPTION>
Name Address Principal Occupation
---- ------- --------------------
<S> <C> <C>
Lynn Birdsong 345 Park Avenue Managing Director and Corporate
New York, New York 10154 Vice President of SKI
Lawrence Cheng Mythenquai 2 Senior Partner, Capital Z Partners
8002 Zurich, Switzerland (a private investment firm)
Rolf Hueppi Mythenquai 2 Chairman and Chief Executive
8002 Zurich, Switzerland Officer, Zurich; Chairman of the
Board of Directors of SKI
Markus Rohrbasser Mythenquai 2 Chief Financial Officer and
8002 Zurich, Switzerland Member of Corporate Executive
Board, Zurich
Cornelia Small 345 Park Avenue Managing Director and Corporate
New York, New York 10154 Vice President of SKI
Edmond Villani 345 Park Avenue President and Chief Executive
New York, New York 10154 Officer of SKI
</TABLE>
ZWEIG/GLASER ADVISERS, LLC, 900 Third Avenue, New York, New York 10022,
serves as the Sub-Adviser for Zweig Asset Allocation Portfolio and Zweig Equity
(Small Cap) Portfolio. As of June 30, 1999, Zweig/Glaser managed approximately
$2.2 billion in assets. Zweig/Glaser is a wholly-owned subsidiary of Phoenix
Investment Partners, Ltd. ("Phoenix"). Phoenix is located at 56 Prospect Street,
Hartford, Connecticut 06115, and is one of the largest publicly traded money
management firms in the United States. As of June 30, 1999, Phoenix managed
<PAGE>
approximately $50 billion in assets. 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 G.
The following chart lists the names and principal occupations of the
principal executive officers and shareholders of the corporate partners of
Zweig/Glaser Advisers, LLC. The address of each, as it relates to his or her
duties with Zweig/Glaser Advisers, LLC, is the same as that of Zweig/Glaser
Advisers, LLC, with the exception of Messrs. McLoughlin and Haylon, Ms. Curtiss,
and Ms. Engberg, whose addresses are the same as that of Phoenix.
<TABLE>
<CAPTION>
Name Principal Occupation
---- --------------------
<S> <C>
Phil McLoughlin Chairman and Chief Executive Officer, Phoenix Investment Partners, Ltd.
Executive Vice President, Investments, Phoenix Home Life Mutual Insurance
Company. Director/Trustee and President, Phoenix Funds. Trustee and
President, Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps
Institutional Mutual Funds. Director, Duff & Phelps Utilities Tax-Free Income Inc.
and Duff & Phelps Utility and Corporate Bond Trust Inc. Chairman, Phoenix
Investment Counsel, Inc. Director and President, Phoenix Equity Planning
Corporation. Chairman, President and Chief Executive Officer, Zweig/Glaser
Advisers LLC and Euclid Advisers LLC. Director, PXRE Corporation and World
Trust Fund. Director and Executive Vice President, Phoenix Life and Annuity
Company. Director and Executive Vice President, PHL Variable Insurance
Company. Director, Phoenix Charter Oak Trust Company. Director and Vice
President, PM Holdings, Inc. Director, W.S. Griffith & Co., Inc. Director, PHL
Associates, Inc.
Michael Haylon Director and Executive Vice President--Investments, Phoenix Investment
Partners, Ltd. President, Phoenix Investment Counsel, Inc. Director, Phoenix
Equity Planning Corporation. Executive Vice President, Phoenix Funds,
Phoenix-Aberdeen Series Fund and Phoenix Duff & Phelps Institutional Mutual
Funds. Formerly Senior Vice President, Securities Investments, Phoenix Home
Life Mutual Insurance Company.
Jeffrey Lazar Senior Vice President, Zweig/Glaser Advisers, LLC. Vice President and
Treasurer, Zweig Fund, Inc. and Zweig Total Return Fund, Inc. Former Executive
Vice President, Treasurer and Secretary, Zweig Advisors, Inc. and Zweig Total
Return Advisors, Inc. and Director, Zweig Fund, Inc. and Zweig Total Return
Fund, Inc.
Carlton Neel Senior Vice President, Euclid Advisors LLC. Senior Vice President,
Phoenix-Zweig Trust and Phoenix-Euclid Funds. Former Vice President, Zweig
Advisors Inc. and Zweig Total Return Advisors, Inc. Formerly, Vice President,
J.P. Morgan & Co., Inc.
Sung Chung Vice President, Zweig/Glaser Advisers LLC and First Vice President, Euclid
Advisors LLC. Vice President, Phoenix-Euclid Funds and Phoenix-Zweig Trust.
Formerly, Vice President, Mitchell Hutchins Asset Management and Senior
Associate, Scudder Kemper.
Nancy Engberg Vice President and Counsel, Phoenix Investment Partners, Ltd. and Phoenix
Investment Counsel, Inc. Vice President and Secretary, Zweig/Glaser Advisers
LLC and Euclid Advisors LLC. Formerly Counsel and Second Vice President,
Phoenix Home Life Mutual Insurance Company.
<PAGE>
Nancy Curtiss Vice President, Fund Accounting and Treasurer, Phoenix Equity Planning
Corporation. Vice President and Chief Financial Officer, Zweig/Glaser Advisers
LLC and Euclid Advisors LLC. Treasurer, Phoenix Funds, Phoenix-Aberdeen
Series Fund and Phoenix Duff & Phelps Institutional Mutual Funds. Formerly
Second Vice President and Treasurer, Fund Accounting, Phoenix Home Life
Mutual Insurance Company.
</TABLE>
INFORMATION CONCERNING ZWEIG CONSULTING LLC
Zweig Consulting is a New York limited liability company. The principal
controlling owner is Dr. Zweig. The address of Zweig Consulting is 900 Third
Avenue, New York, New York 10022. Dr. Zweig determines the asset allocation
strategy for each Zweig Portfolio pursuant to the Servicing Agreement. Dr. Zweig
has provided investment advisory and portfolio management services for over 27
years. As of June 30, 1999, Zweig Consulting advised or sub-advised
approximately $6 billion in assets, of which approximately half are in publicly
traded closed-end investment companies and open-end investment companies (mutual
funds). Zweig Consulting serves as a consultant to Zweig/Glaser Advisers, LLC,
which serves as an 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 G.
The following chart lists the names and principal occupations of the
principal executive officers of Zweig Consulting. The address of each, as it
relates to his duties with respect to Zweig Consulting, is the same as that of
Zweig Consulting.
<TABLE>
<CAPTION>
Position with
Name Zweig Consulting Principal Occupation
---- ---------------- --------------------
<S> <C> <C>
Martin E. Zweig President Managing Director, Zweig-DiMenna Associates LLC; President
and Director, Gotham Advisors, Inc.; Chairman, President and
Director, The Zweig Fund and the Zweig Total Return Fund,
Inc.; and President, Zweig Associates, Inc., Phoenix Zweig
Series Trust, and Phoenix-Euclid Mutual Fund
Anthony R. Berkman Senior Vice Research Analyst, Zweig Associates, Inc. and Zweig-DiMenna
President International Managers, Inc.
Andrew A. Salamy Senior Vice Research Analyst, Zweig Associates, Inc. and Zweig-DiMenna
President International Managers, Inc.
Michael N. Schaus Senior Vice Research Analyst, Zweig Associates, Inc., Gotham Advisors,
President Inc. and Zweig-DiMenna International Managers, Inc.
</TABLE>
AFFILIATED BROKERS
Zweig/Glaser Advisers, LLC is affiliated with one or more registered
broker-dealers. From time to time, a portion of each Zweig Portfolio's brokerage
transactions may be conducted with such broker-dealers, subject to policies
established by the Fund's Board to ensure that all brokerage commissions paid to
such broker-dealers by the Portfolios with which they are affiliated are fair
and reasonable. For the fiscal year ended June 30, 1999, the Fund paid $68 in
brokerage commissions with respect to the Zweig Equity (Small Cap) Portfolio to
PXP
<PAGE>
Securities Corp. ("PXP Securities"), a registered broker-dealer, which is under
common control with Zweig/Glaser Advisers, LLC and, therefore, is an affiliated
person of Zweig/Glaser Advisers, LLC. For the fiscal year ended June 30, 1999,
the brokerage commissions paid to PXP Securities as a percentage of the
aggregate brokerage commissions paid by the Zweig Equity (Small Cap) Portfolio
was approximately .279%.
DISTRIBUTOR
ARM Securities acts without remuneration as the Fund's Distributor
pursuant to the Current 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. It is contemplated that the Fund will terminate the
Current Distribution Agreement with ARM Securities upon consummation of the
Transaction and enter into the New Distribution Agreement with Touchstone
Securities, 311 Pike Street, Cincinnati, Ohio 45202, effective upon the Closing
Date. The New Distribution Agreement was approved by the Board of Directors of
the Fund, including the Independent Directors, at an in-person meeting held on
February 18, 2000.
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 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
<PAGE>
with applicable federal and state laws.
Respectfully Submitted,
Kevin L. Howard
Secretary
Dated: March 3, 2000
CONTRACT HOLDERS ARE REQUESTED TO FILL IN, DATE AND SIGN THE VOTING INSTRUCTIONS
CARD AND RETURN IT PROMPTLY IN THE ENCLOSED PREPAID ENVELOPE.
<PAGE>
EXHIBIT A
FORM OF NEW MANAGEMENT AGREEMENT
THE LEGENDS FUND. INC.
MANAGEMENT AGREEMENT
Agreement, made this ___ day of _________, 2000 between The Legends Fund,
Inc., a Maryland corporation (the FUND), and Touchstone Advisors, Inc., an Ohio
corporation (the MANAGER).
W I T N E S S E T 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
<PAGE>
thereunder. For each Portfolio for which the Manager has entered into a
Sub-Advisory 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
2
<PAGE>
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 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
4
<PAGE>
that particular transaction or the Manager's overall responsibilities
with respect to such 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.
5
<PAGE>
(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.
(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
6
<PAGE>
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):
(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
7
<PAGE>
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 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
8
<PAGE>
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).
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.
15. 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
--------------------------------
TOUCHSTONE ADVISORS, INC.
By
--------------------------------
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EXHIBIT B-1
FORM OF NEW SUB-ADVISORY AGREEMENT
(HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO AND
SCUDDER KEMPER VALUE PORTFOLIO)
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT, made this __ day of ____ , 2000, between Touchstone Advisors, Inc.
(MANAGER), a Delaware corporation, and Harris Bretall Sullivan & Smith L.L.C., a
Delaware limited liability corporation.
WHEREAS, Manager, a wholly-owned subsidiary of Western and Southern Life
Insurance Company, 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.
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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.
(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
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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 records which the Sub-Adviser maintains for
the Portfolio are the property of the Fund and further agrees to
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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.
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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 registration is current, complete and in full
compliance with all material applicable provisions of the Advisers Act and the
rules and regulations thereunder;
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(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 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.
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Manager acknowledges that "_____________________" (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.
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
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 an initial
two-year period 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.
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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 of the day and year first written above.
TOUCHSTONE ADVISORS, INC.
-------------------------------
By: By:
-------------------------------- ----------------------------
Attest: Attest:
-------------------------------- ------------------------
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EXHIBIT B-2
FORM OF NEW SUB-ADVISORY AGREEMENT
(ZWEIG ASSET ALLOCATION PORTFOLIO AND
ZWEIG EQUITY (SMALL CAP) PORTFOLIO)
FORM OF
SUB-ADVISORY AGREEMENT
AGREEMENT, made this ___ day of __________, 2000, between Touchstone Advisors,
Inc. (MANAGER), a Delaware corporation, and Zweig/Glaser Advisers, a New York
partnership (the SUB-ADVISER).
WHEREAS, Manager, a wholly-owned subsidiary of Western and Southern Life
Insurance Company, 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 __________, 2000 (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 _________________________ 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
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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.
Subject to the requirements of the 1940 Act, the Sub-Adviser is authorized to
employ, retain or otherwise avail itself of the services or facilities of other
persons or organizations, for the purpose of providing the Sub-Adviser or the
Portfolio with such statistical and other factual information, such advice
regarding economic factors and trends, such advice as to occasional transactions
in specific securities or such other information, advice or assistance as the
Sub-Adviser may deem necessary, appropriate or convenient for the discharge of
the Sub-Adviser's responsibilities hereunder or otherwise helpful to the
Portfolio or in the discharge of the Sub-Adviser's overall responsibilities with
respect to other accounts that the Sub-Adviser or its affiliates serve as
portfolio manager. To the extent the Sub-Adviser employs, retains or otherwise
avails itself of the services or facilities of other persons or organizations in
connection with the performance of the Sub-Adviser's responsibilities with
respect to the Portfolio, the Sub-Adviser shall remain fully liable hereunder as
though it had performed such services or provided such facilities itself, and
its responsibilities and obligations hereunder shall in no way be reduced.
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
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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 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
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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 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 _____% 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.
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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.
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.
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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;
(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
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<PAGE>
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.
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 NAME) is distinctive in connection with
investment advisory and related services provided by the Sub-Adviser, the Name
is a property right of the Sub-Adviser, the individual whose name includes the
Name and/or an affiliate of the Sub-Adviser or such individual (collectively,
the OWNER), and the Sub-Adviser represents that the Name in the name of the
Portfolio is understood to be used by the Fund with the Owner's consent. The
Sub-Adviser hereby represents that the Fund is granted the non-exclusive license
to use the 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
Owner or any of its successors or assigns from using or permitting the use of
the 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.
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Manager acknowledges that the Fund shall use the Name 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 Owner and that the Fund's rights in the 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 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
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
(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 Sub-Adviser or the Owner all rights which the
Fund may have to the 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 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
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 an initial
two-year period 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 vote of a
majority of the Directors of the Fund or by vote of a majority of the
outstanding voting securities of the Portfolio (as defined in the 1940 Act), as
well as, in either case, by vote of 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.
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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 of the day and year first written above.
TOUCHSTONE ADVISORS, INC.
By:
----------------------------------
Attest:
------------------------------
ZWEIG/GLASER ADVISERS
By:
----------------------------------
Attest:
------------------------------
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EXHIBIT C
SERVICING AGREEMENT
(ZWEIG ASSET ALLOCATION PORTFOLIO AND
ZWEIG EQUITY (SMALL CAP) PORTFOLIO)
SERVICING AGREEMENT
THIS SERVICING AGREEMENT is made and entered into as of this
____day of __________, 2000 by and among Zweig/Glaser Advisers, a New York
general partnership, Zweig Total Return Advisors, Inc., a Delaware
corporation, and Zweig Advisors Inc., a Delaware corporation (collectively,
the "Company"), and Zweig Consulting LLC, a New York limited liability
company ("Zweig").
WHEREAS Phoenix Investment Partners, Ltd., a Delaware corporation
("Phoenix"), has entered into an Acquisition Agreement (the "Acquisition
Agreement") with Zweig/Glaser Advisers, a New York general partnership, Euclid
Advisors LLC, a New York limited liability company, Zweig Advisors Inc., a
Delaware corporation, Zweig Total Return Advisors, Inc., a Delaware corporation,
and Zweig Securities Corp., a New York corporation (collectively, the
"Sellers"), and the Equityholders named therein providing for, among other
things, the acquisition of all of the capital stock and partnership interests of
the Companies by Phoenix and/or one or more wholly-owned subsidiaries of Phoenix
(capitalized terms defined in the Acquisition Agreement and not otherwise
defined herein are used herein with such defined meanings);
WHEREAS Zweig has heretofore performed services to the Company and
the Company is desirous of obtaining certain services and Martin E. Zweig, as
the President of Zweig (the "President"), has indicated to the Company that he
and his designated research associates (the "Associates") will provide the
Company and its Affiliates with such services as are specified in this
Agreement; and
WHEREAS the Company and Zweig have provided investment advisory
services to investment companies registered under the Investment Company Act of
1940 (each a "Fund" and collectively "Funds") and desire to continue to provide
those investment advisory services;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto, intending to be legally bound, agree as follows:
1. SERVICES
1.1 For this engagement, the President and the Associates will
devote their skill and approximately one-half of their full working time
consistent with the practices of Zweig prior to the Closing Date, to the
business and affairs of the Company and its Affiliates and to the promotion of
its and their interests, in particular, performing asset allocation research and
analysis and providing advice thereon at a level and in a manner consistent with
the practices of Zweig and the Company prior to the Closing Date (the
"Services"). The Services will be performed by the President and the Associates
in a manner and at a level consistent with the practices of Zweig and the
Company prior to the Closing Date. This Agreement shall be effective as of the
Closing Date for the term described in Section 2 below.
1.2 The Services will be provided to the Company and its
Affiliates during normal business hours at the offices of the Company in New
York City or at such other times and places mutually agreed upon and reasonably
convenient to both parties, taking into account the nature, exigencies and
reasons for the assistance required.
1.3 Notwithstanding Section 1.2, but subject to all of the other
terms and conditions of this Agreement, including in particular Sections 4 and
13, Zweig may continue to provide consulting services (whether in a managerial,
employee, consultant or other capacity) to the Affiliated Investment Partnership
Management Companies and the related investment partnerships and Watermark
Securities, Inc. and their successor or affiliate entities, as may
<PAGE>
exist from time to time; PROVIDED, HOWEVER, that in no event may Zweig provide
services to any "Competing Business" as defined in the
Noncompetition/Nonsolicitation Agreement dated the date hereof between the
President and Phoenix (the "Noncompetition/Nonsolicitation Agreement"). The
President shall also continue to be permitted to serve as the President of Zweig
Series Trust, The Zweig Fund, Inc. and The Zweig Total Return Fund, Inc.
2. TERM
2.1 This Agreement shall be effective as of the Closing Date and
shall continue until the third anniversary thereof (the "Term") or such earlier
date as provided in Section 2.2; and with respect to any Fund, unless sooner
terminated, this Agreement shall continue in effect for two years, and
thereafter until terminated, provided that the continuation of this Agreement
and the terms thereof are specifically approved annually in accordance with the
requirements of the Investment Company Act of 1940 by a majority of such Fund's
outstanding voting securities or a majority of its board of directors or
trustees, and, in any event, by a majority of the directors or trustees who are
not "interested persons", as defined in the Investment Company Act of 1940, cast
in person at a meeting called for the purpose of voting on such approval.
2.2 The Company may terminate this Agreement immediately for
Cause and in the event of the President's death or Disability, and upon 30 days'
notice in the event of termination without Cause; and with respect to any Fund,
this Agreement may be terminated at any time, without payment of any penalty, by
the board of directors or trustees of that Fund, or by a vote of a majority (as
defined in the Investment Company Act of 1940) of the outstanding voting
securities of the Fund to which this Agreement is applicable, upon not less than
sixty (60) days' written notice. With respect to any Fund, this Agreement shall
automatically terminate in the event of its assignment, within the meaning of
the Investment Company Act of 1940, unless such automatic termination shall be
prevented by an exemptive order of the Securities and Exchange Commission, and
shall automatically terminate upon the termination of the Fund's investment
advisory agreement with the company that serves as its investment adviser.
2.3 Upon termination of this Agreement by the Company for Cause
or in the event of the President's death or Disability, the Company's payment to
Zweig of fees earned to the date of such termination shall be in full
satisfaction of all claims against the Company under this Agreement. If Zweig's
engagement with the Company hereunder is terminated by the Company other than
for Cause or the President's death or Disability, the Company shall continue to
pay to Zweig the Consulting Fees at a rate equal to the average of the monthly
Consulting Fees for the six months immediately preceding the month in which such
termination occurred (or for the number of months in the Term that have elapsed
as of the date of termination, if fewer) for the remainder of the Term.
2.4 (i) For purposes of this Agreement, a termination of Zweig's
engagement hereunder is for "Cause" if the termination is evidenced by a
reasonable determination made by the Chief Executive Officer of Phoenix that:
(a) Zweig has willfully neglected its assigned duties with the Company, which
neglect has continued for a period of at least thirty (30) days after a written
notice of such neglect was delivered to the President specifying the claimed
neglect, (b) the President has been enjoined (other than temporary suspensions
of not more than ninety-one (91) days) by the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. or any other
industry regulatory authority from working in the investment advisory or
securities industry, (c) the President has been convicted by a court of
competent jurisdiction of, or has pleaded guilty or NOLO CONTENDERE to, any
felony or misdemeanor involving an investment or investment-related business,
(d) Zweig has engaged in a continuing violation of a material provision of this
Agreement, which violation has continued for a period of at least thirty (30)
days after a written notice of such violation was delivered to the President
specifying the claimed violation, or (e) the President has breached the
Noncompetition/Nonsolicitation Agreement.
(ii) For purposes of this Agreement, "Disability" means the
President's inability to perform the services he is required to perform under
this Agreement by reason of sickness, accident, injury, illness or any similar
event and which condition has existed for at least 180 consecutive days, or for
such shorter periods aggregating 180 days during any twelve month period.
2
<PAGE>
3. COMPENSATION
3.1 During the Term, for the Services to be provided by Zweig
under this Agreement, the Company agrees, on a joint and several basis, to pay
Zweig an annual consulting fee of $2,500,000 (the "Consulting Fees"). The
Consulting Fees shall be payable monthly in arrears on the fifth day of each
month. The Company shall allocate the Consulting Fees among the advisers
comprising the Company based on assets of each Fund managed by such advisers.
3.2 The Company shall provide or share with Zweig research
information, benefits and services, as defined in Section 28(e) of the
Securities Exchange Act of 1934, that results from brokerage transactions
implemented by the Company for the benefit of its clients.
3.3 The Company shall not have any liability with respect to the
compensation of employees retained by Zweig or by any affiliated entities.
3.4 Subject to the provisions of Section 2.3 hereof, upon
termination of this engagement for any reason, the Company shall have no further
obligations under this Agreement, but Zweig shall continue to be bound by
Section 4 and the Company shall continue to be bound by Section 5 hereof.
4. CONFIDENTIALITY OF ZWEIG
4.1 Zweig shall not at any time during the period of its
engagement with the Company hereunder or after the termination thereof directly
or indirectly divulge, furnish, use, publish or make accessible to any person or
entity any Confidential Information (as hereinafter defined) except in
connection with the performance of its duties hereunder. Any records of
Confidential Information prepared by Zweig or which come into its possession
during the term of this Agreement are and remain the property of the Company or
its Affiliates, as the case may be, and upon termination of the engagement all
such records and copies thereof shall be either left with or returned to such
entity. Confidential Information may be shared among the President and the
Associates or other employees of entities controlled by the President on a need
to know basis for purposes of providing the Services to the Company and its
Affiliates hereunder. Such Associates and any other employees shall be informed
of the confidential nature of such Confidential Information, the President shall
direct such Associates and any other employees to treat such information
confidentially and the President will be responsible for any breach of this
Section 4.1 by himself and by any persons to whom the President provides any
Confidential Information. Notwithstanding anything contained herein to the
contrary, the Company acknowledges that services overlapping or similar to the
Services provided by Zweig, the President and the Associates hereunder are also
performed on behalf of the Affiliates of Zweig and such Services are often not
exclusively performed by Zweig, the President and the Associates for the
Company. Consequently, the work product resulting from the Services is often
generated on behalf of both the Company and its Affiliates and the Affiliates of
Zweig and is shared among the employees of these entities (the "Shared Work
Product"). The Company further acknowledges that the Confidential Information
that generates such Shared Work Product may become known to the employees of
Zweig's Affiliates. The Company hereby agrees that the disclosure of
Confidential Information to the employees of the Zweig Affiliates who shall be
deemed employees covered by the fourth sentence of this Section 4.1, to the
extent such disclosure is necessary to generate any Shared Work Product, and the
use of Shared Work Product by the employees of the Zweig Affiliates, shall in no
event be deemed a breach of this Agreement.
4.2 The term "Confidential Information" includes, but is not
limited to, the following items, whether existing now or created in the future
and whether or not subject to trade secret or other statutory protection: (a)
all knowledge or information concerning the business, operations and assets of
the Company and its Affiliates which is not readily available to the public,
such as: internal operating procedures; investment strategies; sales data and
customer and client lists; financial plans, projections and reports; and
investment company programs, plans and products; (b) all property owned,
licensed and/or developed for the Company and/or its Affiliates or any of their
respective clients and not readily available to the public, such as computer
systems, programs and software devices, including information about the design,
methodology and documentation therefor; (c) information about or personal
3
<PAGE>
to the Company's and/or its Affiliates' clients; (d) information, materials,
products or other tangible or intangible assets in the Company's and/or its
Affiliates' possession or under any of their control which is proprietary to, or
confidential to or about, any other person or entity; and (e) records and
repositories of all of the foregoing, in whatever form maintained.
The foregoing notwithstanding, the following shall not be considered
Confidential Information: (aa) general skills and experience gained by providing
service to the Company; (bb) information publicly available or generally known
within the Company's trade or industry; (cc) information independently developed
by the President or the Associates other than in the course of the performance
of their duties which are exclusive to the Company hereunder; and (dd)
information which becomes available to the President or the Associates on a
non-confidential basis from sources other than the Company or its Affiliates,
PROVIDED the President or the Associates do not know or have reason to know that
such sources are prohibited by contractual, legal or fiduciary obligation from
transmitting the information. Failure to mark any material or information
"confidential" shall not affect the confidential nature thereof. All the terms
of this Section 4 shall survive the termination of this Agreement. The
obligations hereunder shall be in addition to, and not in limitation of, any
other obligations of confidentiality the President or the Associates may have to
the Company.
4.3 At any time when so requested, and upon termination of the
engagement under this Agreement for any reason whatsoever and irrespective of
whether such termination is voluntary on Zweig's part or not, Zweig will deliver
to the Company all information in its possession (whether or not Confidential
Information) pertaining exclusively to the Company or any of its Affiliates and,
to the extent any such information is Shared Work Product, shall provide copies
to the Company with the understanding that Zweig and its Affiliates shall also
retain copies of such information.
5. CONFIDENTIALITY OF THE COMPANY
5.1 The Company and its Affiliates and their respective employees
shall not at any time during the period of Zweig's engagement with the Company
hereunder or after the termination thereof directly or indirectly divulge,
furnish, use, publish or make accessible to any person or entity any Zweig
Confidential Information (as hereinafter defined). It is expressly understood
that Shared Work Product may be shared among the Company and its Affiliates and
their respective employees. The Company and its Affiliates and their respective
employees shall be informed of the confidential nature of the Zweig Confidential
Information, the Company shall direct such employees to treat such information
confidentially and the Company will be responsible for any breach of this
Section 5.1 by its employees.
5.2 The term "Zweig Confidential Information" includes, but is
not limited to, the following items, whether existing now or created in the
future and whether or not subject to trade secret or other statutory protection:
(a) all knowledge or information concerning the business, operations and assets
of Zweig and its Affiliates which is not readily available to the public, such
as: internal operating procedures; investment strategies; sales data and
customer and client lists; financial plans, projections and reports; and
investment company programs, plans and products; (b) all property owned,
licensed and/or developed for Zweig and/or its Affiliates or any of their
respective clients and not readily available to the public, such as computer
systems, programs and software devices, including information about the design,
methodology and documentation therefor; (c) information about or personal to
Zweig's and/or its Affiliates' clients; (d) information, materials, products or
other tangible or intangible assets in Zweig's and/or its Affiliates' possession
or under any of their control which is proprietary to, or confidential to or
about, any other person or entity; and (e) records and repositories of all of
the foregoing, in whatever form maintained.
The foregoing notwithstanding, the following shall not be considered
Zweig Confidential Information: (aa) general skills and experience gained by
providing service to the Company and its Affiliates; (bb) information publicly
available or generally known within Zweig's trade or industry; (cc) information
independently developed by the Company and its Affiliates and their respective
employees; and (dd) information which becomes available to the Company and its
Affiliates and their respective employees on a non-confidential basis from
sources
4
<PAGE>
other than Zweig, provided the Company and its Affiliates and their respective
employees do not know or have reason to know that such sources are prohibited by
contractual, legal or fiduciary obligation from transmitting the information.
All the terms of this Section 5 shall survive the termination of this Agreement.
6. OWNERSHIP OF DOCUMENTS
All memoranda, papers, letters, notes, notebooks and all copies
thereof relating exclusively to the business or affairs of the Company that are
generated by Zweig or that come into its possession, in each case in connection
with its performance of Services to the Company under this Agreement, shall be
held by Zweig as the Company property and shall be delivered by Zweig to the
Company as the Company may request. To the extent any such memoranda, papers,
letters, notes and notebooks are the product of Zweig Confidential Information
or are Shared Work Product, the Company understands and agrees that Zweig and
its Affiliates shall also retain copies of such documentation and information.
7. PRIOR NEGOTIATIONS AND AGREEMENTS
This Agreement contains the complete agreement concerning the
servicing arrangement between the parties. This Agreement may only be altered,
amended or rescinded by a duly executed written agreement.
8. JURISDICTION
This Agreement shall be construed in accordance with and governed by
the laws of the State of New York governing contracts entered into and to be
performed entirely within New York without regard to any conflict of law rules
and both parties consent to the jurisdiction of the courts of New York.
9. PERFORMANCE WAIVERS
Waiver of performance of any obligation by either party shall not
constitute a waiver of performance of any other obligations or constitute future
waiver of the same obligation.
10. SEVERABILITY
If any section, subsection, clause or sentence of this Agreement
shall be deemed illegal, invalid or unenforceable under any applicable law,
actually applied by any court of competent jurisdiction, such illegality,
invalidity or unenforceability shall not affect the legality, validity and
enforceability of this Agreement or any other section, subsection, clause or
sentence thereof. Where, however, the provisions of any applicable law may be
waived, they are hereby waived by the parties to the full extent permitted by
such law to the end that this Agreement shall be a valid and binding agreement
enforceable in accordance with its terms.
11. ASSIGNMENT
This Agreement shall inure to the benefit of and be binding upon the
Company and its successors (whether direct or indirect, by purchase, merger,
consolidation or otherwise) and assigns, and upon Zweig and its successors and
assigns (whether direct or indirect, by purchase, merger, consolidation or
otherwise). Except as provided in Section 2.2, this Agreement shall not be
assignable by Zweig other than with the express written consent of the Company
which shall not be unreasonably denied. The reorganization of Zweig and its
affiliated entities, such that the Services of the President and the Associates
are provided through an affiliated entity, shall not constitute a breach,
assignment or termination of this Agreement by Zweig.
5
<PAGE>
12. NOTICES
All notices under this Agreement shall be in writing and shall be
deemed to have been given at the time when mailed by registered or certified
mail, addressed to the address below stated of the party to which notice is
given, or to such changed address as such party may have fixed by notice:
To the Company: Zweig/Glaser Advisers
900 Third Avenue
New York, New York 10022
Attention: Eugene Glaser
and Phoenix Investment Partners, Ltd.
56 Prospect Street
Hartford, Connecticut 06115-0480
Attention: Thomas N. Steenburg, Esq.
Senior Vice President and General Counsel
To Zweig: Zweig Consulting LLC
900 Third Avenue
New York, New York 10022
Attention: Martin E. Zweig
PROVIDED, HOWEVER, that any notice of change of address shall be effective only
upon receipt.
13. MISCELLANEOUS
The President hereby represents and warrants that this Agreement (i)
is valid, binding and enforceable in accordance with its terms and (ii) does not
conflict with any other agreement to which he is a party, including any
agreement with the Affiliated Investment Partnership Management Companies and
the related investment partnerships and Watermark Securities, Inc.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
Very truly yours,
ZWEIG/GLASER ADVISERS
By:
----------------------------
Name:
Title:
ZWEIG TOTAL RETURN ADVISORS, INC.
By:
----------------------------
Name:
Title:
ZWEIG ADVISORS INC.
By:
----------------------------
Name:
Title:
ACCEPTED AND AGREED TO:
ZWEIG CONSULTING LLC
By:
------------------------------
Name: Martin E. Zweig
Title: President
ACCEPTED AND AGREED TO AS
TO SECTIONS 4.1 and 13:
- ---------------------------------
Martin E. Zweig
7
<PAGE>
EXHIBIT D
OTHER MUTUAL FUNDS MANAGED BY THE NEW MANAGER WITH A SIMILAR INVESTMENT
OBJECTIVE TO THAT OF THE PORTFOLIOS
<TABLE>
<CAPTION>
ANNUAL FEE NET ASSETS OF
RETAINED BY OTHER FUND
PORTFOLIO OTHER FUND ANNUAL FEE RATE NEW MANAGER (IN MILLIONS)
- --------- ---------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Harris Bretall Sullivan & -- -- -- --
Smith Equity Growth
Scudder Kemper Value Touchstone Value .75% .30% $32.4
Plus Fund
Zweig Asset Allocation -- -- -- --
Zweig Equity (Small Cap) Touchstone Emerging .80% Approximately $15.7
Growth Fund .325%
</TABLE>
(1) As of December 31, 1999.
<PAGE>
EXHIBIT E
OTHER MUTUAL FUNDS ADVISED BY HBSS WITH A SIMILAR INVESTMENT OBJECTIVE TO THAT
OF THE HARRIS BRETALL SULLIVAN & SMITH EQUITY GROWTH PORTFOLIO
<TABLE>
<CAPTION>
ANNUAL NET ASSETS OF OTHER
FEE RATE FUND
OTHER FUND -------- (IN MILLIONS)(1)
---------- -------------
<S> <C> <C>
Saratoga Advantage Trust - Large
Cap Growth Fund .40% $149
Jones Heward American Fund .42% $46
Harris Bretall Sullivan & Smith
Growth Equity Fund .75% $26
</TABLE>
(1) As of December 31, 1999.
<PAGE>
EXHIBIT F
OTHER MUTUAL FUNDS ADVISE 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 $273
Kemper Contrarian Fund(2) .72% next $750M
.70% next $1.5B
.68% next $2.5B
.65% next $2.5B
.64% next $2.5B
.63% next $2.5B
.62%thereafter
Kemper-Dreman High Return Equity Fund(2) $3,800
Kemper Small Cap Value Fund(2) $612
.75% to $500M $2,339
Scudder Large Company Value Fund .65% next $500M
(formerly Scudder Capital Growth Fund) .60% next $500M
.55% thereafter
Scudder Value Fund .70% of net assets $471
Scudder Small Company Value Fund .75% of net assets(3) $223
</TABLE>
(1) As of December 31, 1999.
(2) A portfolio of Kemper Value Fund, Inc.
(3) Subject to waivers and/or expense limitations.
<PAGE>
EXHIBIT G
OTHER MUTUAL FUNDS ADVISED BY ZWEIG/GLASER WITH A SIMILAR INVESTMENT OBJECTIVE
TO THAT OF THE ZWEIG ASSET ALLOCATION PORTFOLIO
<TABLE>
<CAPTION>
ANNUAL NET ASSETS OF OTHER
OTHER FUND FEE RATE FUND(1) (IN MILLIONS)
- ---------- -------- -------------------
<S> <C> <C>
Zweig Strategy Fund 0.75% $661
OTHER MUTUAL FUNDS ADVISED BY ZWEIG/GLASER WITH A SIMILAR INVESTMENT OBJECTIVE
TO THAT OF THE ZWEIG EQUITY (SMALL CAP) PORTFOLIO
<CAPTION>
ANNUAL NET ASSETS OF OTHER
OTHER FUND FEE RATE FUND(1) (IN MILLIONS)
- ---------- -------- -------------------
<S> <C> <C>
Zweig Appreciation Fund 1.00% $341
</TABLE>
(1) As of February 11, 2000.
<PAGE>
<TABLE>
<S><C>
--PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.--
PORTFOLIO NAME PRINTS HERE VOTING INSTRUCTION CARD
PLEASE MARK YOUR VOTING INSTRUCTION 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.
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 INSTRUCTION CARD IS PROVIDED FOR THE PORTFOLIOS IN WHICH YOUR CONTRACT
VALUES WERE INVESTED AS OF FEBRUARY 24, 2000.
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, APRIL 4, 2000, 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.
---------------------------------------------------
---------------------------------------------------
SIGNATURE(S)
TITLE(S), IF APPLICABLE
<PAGE>
--PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING.--
PORTFOLIO NAME PRINTS HERE VOTING INSTRUCTION CARD
PLEASE MARK YOUR VOTING INSTRUCTION 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.
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 INSTRUCTION CARD IS PROVIDED FOR THE PORTFOLIOS IN WHICH YOUR CONTRACT
VALUES WERE INVESTED AS OF FEBRUARY 24, 2000.
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, APRIL 4, 2000, 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.
---------------------------------------------------
---------------------------------------------------
SIGNATURE(S)
TITLE(S), IF APPLICABLE
<PAGE>
INDICATE YOUR VOTE BY FILLING IN THE APPROPRIATE BOXES IN THIS MANNER /X/ USING
BLUE OR BLACK INK OR DARK PENCIL.
PLEASE DO NOT USE RED INK
-- PLEASE FOLD AND DETACH CARD AT PERFORATION BEFORE MAILING --
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 the new management agreement between the Fund and Touchstone
Advisors, Inc. (the "New Manager"). / / / / / /
2.(a) To approve the new sub-advisory agreement between the New Manager and / / / / / /
Harris Bretall Sullivan & Smith, LLC ("HBSS")(Harris Bretall Sullivan &
Smith Equity Growth Portfolio only).
(b) To approve the new sub-advisory agreement between the New Manager and / / / / |_ / /
Scudder Kemper Investments, Inc. ("SKI")(Scudder Kemper Value Portfolio
only).
(c) (1) To approve the new sub-advisory agreement between the New Manager and / / / / / /
Zweig/Glaser Advisers, LLC (Zweig Asset Allocation Portfolio only).
(2) To approve the sub-advisory servicing agreement (the "Servicing / / / / / /
Agreement") by and among Zweig/Glaser Advisers, LLC, certain of its
affiliates and Zweig Consulting LLC ("Zweig Consulting")(Zweig Asset
Allocation Portfolio only).
(d) (1) To approve the new sub-advisory agreement between the New Manager and / / / / / /
Zweig/Glaser Advisers, LLC (Zweig Equity (Small Cap) Portfolio only).
(2) To approve the Servicing Agreement by and among Zweig/Glaser Advisers, / / / / / /
LLC, certain of its affiliates and Zweig Consulting (Zweig Equity (Small
Cap) Portfolio only).
3. To elect a slate of five members to the Fund's Board of Directors to hold FOR ALL WITHHOLD
office until their successors are duly elected and qualified: NOMINEES LISTED AUTHORITY TO VOTE
(EXCEPT AS NOTED FOR ALL NOMINEES
IN SPACE PROVIDED) LISTED
/ / / /
[A] John R. Lindholm [C] William B. Faulkner [E] Irvin W. Quesenberry, Jr.
[B] Chris LaVictaire Mahai [D] John Katz |_ |_ |_
YOU MAY WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE BY WRITING THAT NOMINEE(S)
NAME(S) IN THE SPACE PROVIDED BELOW.
FOR AGAINST ABSTAIN
- -------------------------------------------------------------------------------------
4. To ratify the selection of Ernst & Young LLP as the Fund's independent / / / / / /
accountants for the fiscal year ending June 30, 2000.
5. To transact such other matters as may properly come before the Meeting or any
adjournment thereof.
LEGENDS-NILCO
</TABLE>
