EXHIBIT (d)(2)(R)
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this ____ day of _________, 1999, among The GCG Trust
(the "Trust"), a Massachusetts business trust, Directed Services, Inc.
(the "Manager"), a New York corporation, and Capital Guardian Trust
Company ("Portfolio Manager"), a California corporation.
WHEREAS, the Trust is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, management investment
company;
WHEREAS, the Trust is authorized to issue separate series, each of
which will offer a separate class of shares of beneficial interest, each
series having its own investment objective or objectives, policies, and
limitations;
WHEREAS, the Trust currently offers shares in multiple series, may
offer shares of additional series in the future, and intends to offer
shares of additional series in the future;
WHEREAS, pursuant to a Management Agreement, effective as of October
24, 1997, a copy of which has been provided to the Portfolio Manager, the
Trust has retained the Manager to render advisory, management, and
administrative services to many of the Trust's series;
WHEREAS, the Trust and the Manager wish to retain the Portfolio
Manager to furnish investment advisory services to one or more of the
series of the Trust, and the Portfolio Manager is willing to furnish such
services to the Trust and the Manager;
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust, the
Manager, and the Portfolio Manager as follows:
1. APPOINTMENT. The Trust and the Manager hereby appoint Capital
Guardian Trust Company to act as Portfolio Manager to the Series
designated on Schedule A of this Agreement (each a "Series") for the
periods and on the terms set forth in this Agreement. The Portfolio
Manager accepts such appointment and agrees to furnish the services
herein set forth for the compensation herein provided.
In the event the Trust designates one or more series other than the
Series with respect to which the Trust and the Manager wish to retain the
Portfolio Manager to render investment advisory services hereunder, they
shall promptly notify the Portfolio Manager in writing. If the Portfolio
Manager is willing to render such services, it shall so notify the Trust
and Manager in writing, whereupon such series shall become a Series
hereunder, and be subject to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of the
Trust's Board of Trustees and the Manager, the Portfolio Manager will
provide a continuous investment program for each Series' portfolio and
determine the composition of the assets of each Series' portfolio,
including determination of the purchase, retention, or sale of the
securities, cash, and other investments contained in the portfolio. The
Portfolio Manager will provide investment research and conduct a
continuous program of evaluation, investment, sales, and reinvestment of
each Series' assets by determining the securities and other investments
that shall be purchased, entered into, sold, closed, or exchanged for the
Series, when these transactions should be executed, and what portion of
the assets of each Series should be held in the various securities and
other investments in which it may invest, and the Portfolio Manager is
hereby authorized to execute and perform such services on behalf of each
Series. To the extent permitted by the investment policies of the
Series, the Portfolio Manager shall make decisions for the Series as to
foreign currency matters and make determinations as to and execute and
perform foreign currency exchange contracts on behalf of the Series. The
Portfolio Manager will provide the services under this Agreement in
accordance with the Series' investment objective or objectives, policies,
and restrictions as stated in the Trust's Registration Statement filed
with the Securities and Exchange Commission (the "SEC"), as from time to
time amended, copies of which shall be sent to the Portfolio Manager by
the Manager upon filing with the SEC. The Portfolio Manager further
agrees as follows:
(a) The Portfolio Manager shall (1) perform in accordance with the
requirements of Subchapter M (to the extent reasonably related to the
scope of its duties as Portfolio Manager as contemplated under this
Agreement); and (2) comply with the diversification requirements of
Section 817(h) of the Internal Revenue Code and regulations issued
thereunder in managing each Series. The Manager will notify the
Portfolio Manager promptly if the Manager believes that a Series is in
violation of any requirement specified in the first sentence of this
paragraph. The Manager or the Trust will notify the Portfolio Manager of
any pertinent changes, modifications to, or interpretations of Section
817(h) of the Internal Revenue Code and regulations issued thereunder and
of rules or regulations pertaining to investment vehicles underlying
variable annuity or variable life insurance policies.
(b) The Portfolio Manager will perform the following duties: (i)
manage the Series assets in accordance with the Series investment
objective(s) and policies as stated in the Prospectus and Statement of
Additional Information; (ii) make investment decisions for the Series;
and (iii) place purchase and sale orders for portfolio transactions on
behalf of the Series, pursuant to the 1940 Act and all rules and
regulations thereunder, all other applicable federal and state laws and
regulations, with any applicable procedures adopted by the Trust's Board
of Trustees of which the Portfolio Manager has been notified in writing,
and the provisions of the Registration Statement of the Trust under the
Securities Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented
or amended, of which the Portfolio Manager has received a copy
("Registration Statement"). The Manager or the Trust will notify the
Portfolio Manager of pertinent provisions of applicable state insurance
law with which the Portfolio Manager must comply under this Paragraph
2(b).
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(c) On occasions when the Portfolio Manager deems the purchase or
sale of a security to be in the best interest of a Series as well as of
other investment advisory clients of the Portfolio Manager or any of its
affiliates, the Portfolio Manager may, to the extent permitted by
applicable laws and regulations, but shall not be obligated to, aggregate
the securities to be so sold or purchased with those of its other clients
where such aggregation is not inconsistent with the policies set forth in
the Registration Statement. In such event, allocation of the securities
so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Portfolio Manager in a manner that is
fair and equitable in the judgment of the Portfolio Manager in the
exercise of its fiduciary obligations to the Trust and to such other
clients, subject to review by the Manager and the Board of Trustees.
(d) In connection with the purchase and sale of securities for a
Series, the Portfolio Manager will arrange for the transmission to the
custodian and portfolio accounting agent for the Series on a daily basis,
such confirmation, trade tickets, and other documents and information,
including, but not limited to, Cusip, Sedol, or other numbers that
identify securities to be purchased or sold on behalf of the Series, as
may be reasonably necessary to enable the custodian and portfolio
accounting agent to perform its administrative and recordkeeping
responsibilities with respect to the Series. With respect to portfolio
securities to be purchased or sold through the Depository Trust Company,
the Portfolio Manager will arrange for the automatic transmission of the
confirmation of such trades to the Trust's custodian and portfolio
accounting agent.
(e) The Portfolio Manager will assist the portfolio accounting
agent for the Trust in determining or confirming, consistent with the
procedures and policies stated in the Registration Statement for the
Trust, the value of any portfolio securities or other assets of the
Series for which the portfolio accounting agent seeks assistance from or
identifies for review by the Portfolio Manager, and the parties agree
that the Portfolio Manager shall not bear responsibility or liability for
the determination or accuracy of the valuation of any portfolio
securities and other assets of the Series except to the extent that the
Portfolio Manager exercises judgment with respect to any such valuation.
(f) The Portfolio Manager will make available to the Trust and the
Manager, promptly upon request, all of the Series' investment records and
ledgers maintained by the Portfolio Manager (which shall not include the
records and ledgers maintained by the custodian and portfolio accounting
agent for the Trust) as are necessary to assist the Trust and the Manager
to comply with requirements of the 1940 Act and the Investment Advisers
Act of 1940 (the "Advisers Act"), as well as other applicable laws. The
Portfolio Manager will furnish to regulatory authorities having the
requisite authority any information or reports in connection with such
services which may be requested in order to ascertain whether the
operations of the Trust are being conducted in a manner consistent with
applicable laws and regulations.
(g) The Portfolio Manager will provide reports to the Trust's Board
of Trustees for consideration at meetings of the Board on the investment
program for the Series and the issuers and securities represented in the
Series' portfolio, and will furnish the Trust's Board of Trustees
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with respect to the Series such periodic and special reports as the
Trustees and the Manager may reasonably request.
(h) In rendering the services required under this Agreement, the
Portfolio Manager may, from time to time, employ or associate with itself
such person or persons as it believes necessary to assist it in carrying
out its obligations under this Agreement. However, the Portfolio Manager
may not retain as subadviser any company that would be an "investment
adviser," as that term is defined in the 1940 Act, to the Series unless
the contract with such company is approved by a majority of the Trust's
Board of Trustees and a majority of Trustees who are not parties to any
agreement or contract with such company and who are not "interested
persons," as defined in the 1940 Act, of the Trust, the Manager, or the
Portfolio Manager, or any such company that is retained as subadviser,
and is approved by the vote of a majority of the outstanding voting
securities of the applicable Series of the Trust to the extent required
by the 1940 Act. The Portfolio Manager shall be responsible for making
reasonable inquiries and for reasonably ensuring that any employee of the
Portfolio Manager, any subadviser that the Portfolio Manager has employed
or with which it has associated with respect to the Series, or any
employee thereof has not, to the best of the Portfolio Manager's
knowledge, in any material connection with the handling of Trust assets:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor arising out of conduct involving embezzlement,
fraudulent conversion, or misappropriation of funds or securities,
involving violations of Sections 1341, 1342, or 1343 of Xxxxx 00,
Xxxxxx Xxxxxx Code, or involving the purchase or sale of any
security; or
(ii) been found by any state regulatory authority, within the last
ten (10) years, to have violated or to have acknowledged violation
of any provision of any state insurance law involving fraud, deceit,
or knowing misrepresentation; or
(iii) been found by any federal or state regulatory authorities,
within the last ten (10) years, to have violated or to have
acknowledged violation of any provision of federal or state
securities laws involving fraud, deceit, or knowing
misrepresentation.
3. BROKER-DEALER SELECTION. The Portfolio Manager is responsible
for decisions to buy and sell securities and other investments for each
Series' portfolio, broker-dealer selection, and negotiation of brokerage
commission rates. The Portfolio Manager's primary consideration in
effecting a security transaction will be to obtain the best execution for
the Series, taking into account the factors specified in the prospectus
and/or statement of additional information for the Trust, which include
price (including the applicable brokerage commission or dollar spread),
the size of the order, the nature of the market for the security, the
timing of the transaction, the reputation, the experience and financial
stability of the broker-dealer involved, the quality of the service, the
difficulty of execution, and the execution capabilities and operational
facilities of the firms involved, and the firm's risk in positioning a
block of securities. Accordingly, the price to the Series in any
transaction may be less favorable than that available from another broker-
dealer if the difference is reasonably justified, in the judgment of the
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Portfolio Manager in the exercise of its fiduciary obligations to the
Trust, by other aspects of the portfolio execution services offered.
Subject to such policies as the Board of Trustees may determine and
consistent with Section 28(e) of the Securities Exchange Act of 1934, the
Portfolio Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason
of its having caused the Series to pay a broker-dealer for effecting a
portfolio investment transaction in excess of the amount of commission
another broker-dealer would have charged for effecting that transaction,
if the Portfolio Manager or its affiliate determines in good faith that
such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such broker-dealer, viewed in
terms of either that particular transaction or the Portfolio Manager's or
its affiliate's overall responsibilities with respect to the Series and
to their other clients as to which they exercise investment discretion.
To the extent consistent with these standards, the Portfolio Manager is
further authorized to allocate the orders placed by it on behalf of the
Series to the Portfolio Manager if it is registered as a broker-dealer
with the SEC, to its affiliated broker-dealer, or to such brokers and
dealers who also provide research or statistical material, or other
services to the Series, the Portfolio Manager, or an affiliate of the
Portfolio Manager. Such allocation shall be in such amounts and
proportions as the Portfolio Manager shall determine consistent with the
above standards, and the Portfolio Manager will report on said allocation
regularly to the Board of Trustees of the Trust indicating the broker-
dealers to which such allocations have been made and the basis therefor.
4. DISCLOSURE ABOUT PORTFOLIO MANAGER. In order to assist the
Manager in reviewing and updating the Trust's Registration Statement
filed with the SEC, the Portfolio Manager shall upon request provide the
Manager with a description of its organization, the portfolio managers
assigned to manage the Series, the method, style and techniques by which
it intends to manage each Series, and any other relevant information
about the Portfolio Manager that the Manager may reasonably request. The
Portfolio Manager represents and warrants that such written information
provided shall be accurate and complete, but not necessarily tailored for
specific Registration Statement disclosure. Notwithstanding anything to
the contrary herein, it is understood that it is the responsibility of
the Manager and/or counsel to the Trust to meet all disclosure and other
requirements applicable to the Trust's Registration Statement. The
Portfolio Manager further represents and warrants that it is a duly
registered investment adviser under the Advisers Act, or alternatively
that it is not required to be a registered investment adviser under the
Advisers Act to perform the duties described in this Agreement, and that
it is a duly registered investment adviser in all states in which the
Portfolio Manager is required to be registered.
5. EXPENSES. During the term of this Agreement, the Portfolio
Manager will pay all expenses incurred by it and its staff and for their
activities in connection with its portfolio management duties under this
Agreement. The Manager or the Trust shall be responsible for all the
expenses of the Trust's operations including, but not limited to:
(a) Expenses of all audits by the Trust's independent public
accountants;
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(b) Expenses of the Series' transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Series' custodial services including
recordkeeping services provided by the custodian;
(d) Expenses of obtaining quotations for calculating the value of
each Series' net assets;
(e) Expenses of obtaining Portfolio Activity Reports and Analyses
of International Management Reports (as appropriate) for each Series;
(f) Expenses of maintaining the Trust's tax records;
(g) Salaries and other compensation of any of the Trust's executive
officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or an affiliate of
the Portfolio Manager;
(h) Taxes levied against the Trust;
(i) Brokerage fees and commissions in connection with the purchase
and sale of portfolio securities for the Series;
(j) Costs, including the interest expense, of borrowing money;
(k) Costs and/or fees incident to meetings of the Trust's
shareholders, the preparation and mailings of prospectuses and reports of
the Trust to its shareholders, the filing of reports with regulatory
bodies, the maintenance of the Trust's existence, and the regulation of
shares with federal and state securities or insurance authorities;
(l) The Trust's legal fees, including the legal fees related to the
registration and continued qualification of the Trust's shares for sale;
(m) Costs of printing stock certificates representing shares of the
Trust;
(n) Trustees' fees and expenses to trustees who are not officers,
employees, or stockholders of the Portfolio Manager or any affiliate
thereof;
(o) The Trust's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(p) Association membership dues;
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(q) Extraordinary expenses of the Trust as may arise including
expenses incurred in connection with litigation, proceedings, and other
claims (unless the Portfolio Manager is responsible for such expenses
under Section 14 of this Agreement), and the legal obligations of the
Trust to indemnify its Trustees, officers, employees, shareholders,
distributors, and agents with respect thereto; and
(r) Organizational and offering expenses.
6. COMPENSATION. For the services provided, the Manager will pay
the Portfolio Manager a fee, payable as described in Schedule B.
7. SEED MONEY. The Manager agrees that the Portfolio Manager shall
not be responsible for providing money for the initial capitalization of
the Series.
8. COMPLIANCE.
(a) The Portfolio Manager agrees that it shall promptly notify the
Manager and the Trust (1) in the event that the SEC or other governmental
authority has censured the Portfolio Manager; placed limitations upon its
activities, functions or operations; suspended or revoked its
registration, if any, as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions,
(2) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, or (3) upon having a
reasonable basis for believing that the Series has ceased to comply with
the diversification provisions of Section 817(h) of the Internal Revenue
Code or the regulations thereunder. The Portfolio Manager further agrees
to notify the Manager and the Trust promptly of any material fact known
to the Portfolio Manager respecting or relating to the Portfolio Manager
that is not contained in the Registration Statement or prospectus for the
Trust, or any amendment or supplement thereto, and is required to be
stated therein or necessary to make the statements therein not
misleading, or of any statement contained therein that becomes untrue in
any material respect.
(b) The Manager agrees that it shall immediately notify the
Portfolio Manager (1) in the event that the SEC has censured the Manager
or the Trust; placed limitations upon either of their activities,
functions, or operations; suspended or revoked the Manager's registration
as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (2) upon having a
reasonable basis for believing that the Series has ceased to qualify or
might not qualify as a regulated investment company under Subchapter M of
the Internal Revenue Code, or (3) upon having a reasonable basis for
believing that the Series has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the
Regulations thereunder.
9. BOOKS AND RECORDS. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Portfolio Manager hereby agrees that all
records which it maintains for the Series are the property of the Trust
and further agrees to surrender promptly to the Trust any of
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such records upon the Trust's or the Manager's request, although the
Portfolio Manager may, at its own expense, make and retain a copy of
such records. The Portfolio Manager further agrees to preserve for the
periods prescribed by Rule 31a-2 under the 1940 Act the records required
to be maintained by Rule 31a-l under the 1940 Act and to preserve the
records required by Rule 204-2 under the Advisers Act for the period
specified in the Rule.
10. COOPERATION. Each party to this Agreement agrees to cooperate
with each other party and with all appropriate governmental authorities
having the requisite jurisdiction (including, but not limited to, the SEC
and state insurance regulators) in connection with any investigation or
inquiry relating to this Agreement or the Trust.
11. REPRESENTATIONS RESPECTING PORTFOLIO MANAGER.
(a) During the term of this Agreement, the Trust and the Manager
agree to furnish to the Portfolio Manager at its principal offices prior
to use thereof copies of all Registration Statements and amendments
thereto, prospectuses, proxy statements, reports to shareholders, sales
literature or other material prepared for distribution to shareholders of
the Trust or any Series or to the public that refer or relate in any way
to the Portfolio Manager, Capital Guardian Trust Company, or any of its
affiliates (other than the Manager), or that use any derivative of the
name "Capital Guardian Trust Company" or any affiliate listed on Schedule
C or any logo associated therewith. The Trust and the Manager agree that
they will not use any such material without the prior consent of the
Portfolio Manager, which consent shall not be unreasonably withheld. In
the event of the termination of this Agreement, the Trust and the Manager
will furnish to the Portfolio Manager copies of any of the above-
mentioned materials that refer or relate in any way to the Portfolio
Manager;
(b) the Trust and the Manager will furnish to the Portfolio Manager
such information relating to either of them or the business affairs of
the Trust as the Portfolio Manager shall from time to time reasonably
request in order to discharge its obligations hereunder;
(c) the Manager and the Trust agree that neither the Trust, the
Manager, nor affiliated persons of the Trust or the Manager shall give
any information or make any representations or statements in connection
with the sale of shares of the Series concerning the Portfolio Manager or
the Series other than the information or representations contained in the
Registration Statement, prospectus, or statement of additional
information for the Trust, as they may be amended or supplemented from
time to time, or in reports or proxy statements for the Trust, or in
sales literature or other promotional material approved in advance by the
Portfolio Manager, except with the prior permission of the Portfolio
Manager.
(d) The Manager hereby warrants and represents to the Portfolio
Manager that (a) it has obtained all applicable licenses, permits,
registrations and approvals that may be required in order to serve in its
designated capacities with respect to the Series, and shall continue to
keep current such licenses, permits, registrations and approvals for so
long as this Agreement is in effect; (b) it is not prohibited by the 1940
Act or other applicable laws and regulations from
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performing the services contemplated by this Agreement; (c) it will
immediately notify the Portfolio Manager of the occurrence of any
event that would disqualify it from serving in its designated capacities
with respect to the Series; and (d) this Agreement has been duly and
validly authorized, executed and delivered on behalf of the Manager
and is valid and binding Agreement of the Manager enforceable in
accordance with its terms.
(e) The Portfolio Manager hereby warrants and represents to the
Manager that (a) it has obtained all applicable licenses, permits,
registrations and approvals that may be required in order to serve in its
designated capacities with respect to the Series, and shall continue to
keep current such licenses, permits, registrations and approvals for so
long as this Agreement is in effect; (b) it is not prohibited by the 1940
Act or other applicable laws and regulations from performing the services
contemplated by this Agreement; (c) it will immediately notify the
Manager of the occurrence of any event that would disqualify it from
serving in its designated capacities with respect to the Series; and (d)
this Agreement has been duly and validly authorized, executed and
delivered on behalf of the Portfolio Manager and is valid and binding
Agreement of the Portfolio Manager enforceable in accordance with its
terms.
12. CONTROL. Notwithstanding any other provision of the Agreement,
it is understood and agreed that the Trust shall at all times retain the
ultimate responsibility for and control of all functions performed
pursuant to this Agreement and reserve the right to direct, approve, or
disapprove any action hereunder taken on its behalf by the Portfolio
Manager.
13. SERVICES NOT EXCLUSIVE. It is understood that the services of
the Portfolio Manager are not exclusive, and nothing in this Agreement
shall prevent the Portfolio Manager (or its affiliates) from providing
similar services to other clients, including investment companies
(whether or not their investment objectives and policies are similar to
those of the Series) or from engaging in other activities.
14. LIABILITY. Except as may otherwise be required by the 1940 Act
or the rules thereunder or other applicable law, the Trust and the
Manager agree that the Portfolio Manager, any affiliated person of the
Portfolio Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls the Portfolio Manager shall not be
liable for, or subject to any damages, expenses, or losses in connection
with, any act or omission connected with or arising out of any services
rendered under this Agreement, except by reason of willful misfeasance,
bad faith, or gross negligence in the performance of the Portfolio
Manager's duties, or by reason of reckless disregard of the Portfolio
Manager's obligations and duties under this Agreement.
15. INDEMNIFICATION.
(a) The Portfolio Manager shall indemnify and hold harmless the
Trust and the Manager (and its affiliated companies and their respective
officers, directors and employees) from any and all claims, losses,
liabilities or damages (including reasonable attorney's fees and other
related
9
expenses) arising out of or in connection with the willful
misfeasance, bad faith, gross negligence, or reckless disregard of
obligations or duties hereunder of the Portfolio Manager.
(b) The Manager shall indemnify and hold harmless the Portfolio
Manager (and its affiliated companies and their respective officers,
directors and employees) from and against any and all claims, losses,
liabilities or damages (including reasonable attorney's fees and other
related expenses) arising out of any matter which does not require the
Portfolio Manager to provide an indemnity under the preceding paragraph,
including without limitation, any claim that is based upon any untrue and
alleged untrue statement contained in the Series' Prospectus or Statement
of Additional Information, any registration statement of the Trust or
Manager, any sales literature or materials for the sale or distribution
of the Series' shares, or any omission or alleged omission to state any
required statement or disclosure necessary to make the statements in any
such document not misleading.
(c) The Manager shall not be liable under this Section 15 with
respect to any claim made against the Portfolio Manager unless Portfolio
Manager shall have notified the Manager in writing within a reasonable
time after the summons, notice, or other first legal process or notice
giving information of the nature of the claim shall have been served upon
Portfolio Manager (or after such Portfolio Manager shall have received
notice of such service on any designated agent), but failure to notify
the Manager of any such claim shall not relieve the Manager from any
liability which it may have to the Portfolio Manager against whom such
action is brought otherwise than on account of this Section 15. In case
any such action is brought against the Portfolio Manager, the Manager
will be entitled to participate, at its own expense, in the defense
thereof or, after notice to the Portfolio Manager, to assume the defense
thereof, with counsel satisfactory to the Portfolio Manager. If the
Manager assumes the defense of any such action and the selection of
counsel by the Manager to represent both the Manager and the Portfolio
Manager would result in a conflict of interests and therefore, would not,
in the reasonable judgment of the Portfolio Manager, adequately represent
the interests of the Portfolio Manager, the Manager will, at its own
expense, assume the defense with counsel to the Manager and, also at its
own expense, with separate counsel to the Portfolio Manager, which
counsel shall be satisfactory to the Manager and to the Portfolio
Manager. The Portfolio Manager shall bear the fees and expenses of any
additional counsel retained by it, and the Manager shall not be liable to
the Portfolio Manager under this Agreement for any legal or other
expenses subsequently incurred by the Portfolio Manager independently in
connection with the defense thereof other than reasonable costs of
investigation. The Manager shall not have the right to compromise on or
settle the litigation without the prior written consent of the Portfolio
Manager if the compromise or settlement results, or may result in a
finding of wrongdoing on the part of the Portfolio Manager.
(d) The Portfolio Manager shall not be liable under this Section 15
with respect to any claim made against the Manager unless Manager shall
have notified the Portfolio Manager in writing within a reasonable time
after the summons, notice, or other first legal process or notice giving
information of the nature of the claim shall have been served upon
Manager (or after Manager shall have received notice of such service on
any designated agent), but failure to notify the Portfolio Manager of any
such claim shall not relieve the Portfolio Manager from any liability
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which it may have to the Manager against whom such action is brought
otherwise than on account of this Section 15. In case any such action is
brought against the Manager, the Portfolio Manager will be entitled to
participate, at its own expense, in the defense thereof or, after notice
to the Manager, to assume the defense thereof, with counsel satisfactory
to the Manager. If the Portfolio Manager assumes the defense of any such
action and the selection of counsel by the Portfolio Manager to represent
both the Portfolio Manager and the Manager would result in a conflict of
interests and therefore, would not, in the reasonable judgment of the
Manager, adequately represent the interests of the Manager, the Portfolio
Manager will, at its own expense, assume the defense with counsel to the
Portfolio Manager and, also at its own expense, with separate counsel to
the Manager which counsel shall be satisfactory to the Portfolio Manager
and to the Manager. The Manager shall bear the fees and expenses of any
additional counsel retained by it, and the Portfolio Manager shall not be
liable to the Manager under this Agreement for any legal or other
expenses subsequently incurred by the Manager independently in connection
with the defense thereof other than reasonable costs of investigation.
The Portfolio Manager shall not have the right to compromise on or settle
the litigation without the prior written consent of the Manager if the
compromise or settlement results, or may result in a finding of
wrongdoing on the part of the Manager.
(e) The Manager shall not be liable under this Section 15 to
indemnify and hold harmless the Portfolio Manager and the Portfolio
Manager shall not be liable under this Section 15 to indemnify and hold
harmless the Manager with respect to any losses, claims, damages,
liabilities, or litigation that first become known to the party seeking
indemnification during any period that the Portfolio Manager is, within
the meaning of Section 15 of the 1933 Act, a controlling person of the
Manager.
16. DURATION AND TERMINATION. This Agreement shall become
effective on the date first indicated above. Unless terminated as
provided herein, the Agreement shall remain in full force and effect for
two (2) years from such date and continue on an annual basis thereafter
with respect to each Series; provided that such annual continuance is
specifically approved each year by (a) the vote of a majority of the
entire Board of Trustees of the Trust, or by the vote of a majority of
the outstanding voting securities (as defined in the 0000 Xxx) of each
Series, and (b) the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons (as such term is defined
in the 0000 Xxx) of any such party to this Agreement cast in person at a
meeting called for the purpose of voting on such approval. The Portfolio
Manager shall not provide any services for such Series or receive any
fees on account of such Series with respect to which this Agreement is
not approved as described in the preceding sentence. However, any
approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 0000 Xxx) of a Series shall be
effective to continue this Agreement with respect to such Series
notwithstanding (i) that this Agreement has not been approved by the
holders of a majority of the outstanding shares of any other Series or
(ii) that this agreement has not been approved by the vote of a majority
of the outstanding shares of the Trust, unless such approval shall be
required by any other applicable law or otherwise. Notwithstanding the
foregoing, this Agreement may be terminated for each or any Series
hereunder: (a) by the Manager at any time without penalty, upon sixty
(60) days' written notice to the Portfolio Manager and the Trust, (b)
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at any time without payment of any penalty by the Trust, upon the vote of
a majority of the Trust's Board of Trustees or a majority of the
outstanding voting securities of each Series, upon sixty (60) day's
written notice to the Manager and the Portfolio Manager, or (c) by the
Portfolio Manager at any time without penalty, upon sixty (60) days
written notice to the Manager and the Trust. In addition, this Agreement
shall terminate with respect to a Series in the event that it is not
initially approved by the vote of a majority of the outstanding voting
securities of that Series at a meeting of shareholders at which approval
of the Agreement shall be considered by shareholders of the Series. In
the event of termination for any reason, all records of each Series for
which the Agreement is terminated shall promptly be returned to the
Manager or the Trust, free from any claim or retention of rights in such
records by the Portfolio Manager, although the Portfolio Manager may, at
its own expense, make and retain a copy of such records. The Agreement
shall automatically terminate in the event of its assignment (as such
term is described in the 1940 Act). In the event this Agreement is
terminated or is not approved in the manner described above, the Sections
or Paragraphs numbered 2(f), 9, 10, 11, 14, 15, and 18 of this Agreement
shall remain in effect, as well as any applicable provision of this
Section 16.
17. AMENDMENTS. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective until approved by an affirmative vote of (i)
the holders of a majority of the outstanding voting securities of the
Series, and (ii) the Trustees of the Trust, including a majority of the
Trustees of the Trust who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting
on such approval, if such approval is required by applicable law.
18. USE OF NAME.
(a) It is understood that the name "Directed Services, Inc." or any
derivative thereof or logo associated with that name is the valuable
property of the Manager and/or its affiliates, and that the Portfolio
Manager has the right to use such name (or derivative or logo) only with
the approval of the Manager and only so long as the Manager is Manager to
the Trust and/or the Series. Upon termination of the Management
Agreement between the Trust and the Manager, the Portfolio Manager shall
as soon as is reasonably possible cease to use such name (or derivative
or logo).
(b) It is understood that the name "Capital Guardian Trust Company"
or any affiliate listed on Schedule C or any derivative thereof or logo
associated with that name is the valuable property of the Portfolio
Manager and its affiliates and that the Trust and/or the Series have the
right to use such name (or derivative or logo) in offering materials of
the Trust with the approval of the Portfolio Manager and for so long as
the Portfolio Manager is a portfolio manager to the Trust and/or the
Series. Upon termination of this Agreement between the Trust, the
Manager, and the Portfolio Manager, the Trust shall as soon as is
reasonably possible cease to use such name (or derivative or logo).
12
19. AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST. A
copy of the Amended and Restated Agreement and Declaration of Trust for
the Trust is on file with the Secretary of the Commonwealth of
Massachusetts. The Amended and Restated Agreement and Declaration of
Trust has been executed on behalf of the Trust by Trustees of the Trust
in their capacity as Trustees of the Trust and not individually. The
obligations of this Agreement shall be binding upon the assets and
property of the Trust and shall not be binding upon any Trustee, officer,
or shareholder of the Trust individually.
20. NOTICES
All notices and other communications hereunder shall be in writing
(including telex or similar writing) and shall be deemed given if
delivered in person or by messenger, certified mail, cable, telegram or
telex or facsimile transmission or by a reputable overnight delivery
service which provides evidence of receipt to the parties at the
following addresses or telex or facsimile transmission numbers (or at
such other address or number for a party as shall be specified by like
notice):
(a) if to the Portfolio Manager, to:
Capital Guardian Trust Company
000 Xxxxx Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Facsimile transmission number: (000) 000-0000
Attention: Treasurer
(b) if to the Manager, to:
Xxxxx X. Xxxxxxx
Directed Services, Inc.
0000 Xxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Facsimile transmission number: (000) 000-0000
if to the Trust, to:
Xxxxx X. Xxxxxxx
The GCG Trust
0000 Xxxxxxxx Xxxxx
Xxxx Xxxxxxx, XX 00000
Facsimile transmission number: (000) 000-0000
Each such notice or other communication shall be effective (i) if given
by telex or facsimile transmission, when such telex or facsimile is
transmitted to the number specified in this section and the appropriate
answer back or confirmation is received, and (ii) if given by any other
means, when delivered at the address specified in this section.
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21. MISCELLANEOUS.
(a) This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, provided that nothing herein shall be
construed in a manner inconsistent with the 1940 Act, the Advisers Act or
rules or orders of the SEC thereunder. The term "affiliate" or
"affiliated person" as used in this Agreement shall mean "affiliated
person" as defined in Section 2(a)(3) of the 0000 Xxx.
(b) The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
(c) To the extent permitted under Section 16 of this Agreement,
this Agreement may only be assigned by any party with the prior written
consent of the other parties.
(d) If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby, and to this extent, the
provisions of this Agreement shall be deemed to be severable.
(e) Nothing herein shall be construed as constituting the Portfolio
Manager as an agent of the Manager, or constituting the Manager as an
agent of the Portfolio Manager.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed as of the day and year first above written.
THE GCG TRUST
Attest_____________________ By:___________________________
Title:_____________________ Title:________________________
DIRECTED SERVICES, INC.
Attest_____________________ By:___________________________
Title:_____________________ Title:________________________
CAPITAL GUARDIAN TRUST
COMPANY
Attest_____________________ By:___________________________
Title:_____________________ Title:________________________
14
SCHEDULE A
The Series of The GCG Trust, as described in Section 1 of the
attached Portfolio Management Agreement, to which Capital Guardian Trust
Company shall act as Portfolio Manager are as follows:
Large Cap Growth Series
Large Cap Value Series
15
SCHEDULE B
COMPENSATION FOR SERVICES TO SERIES
For the services provided by Capital Guardian Trust Company
("Portfolio Manager") to the following Series of The GCG Trust, pursuant
to the attached Portfolio Management Agreement, the Manager will pay the
Portfolio Manager a fee, computed daily and payable monthly, based on the
average daily net assets of the Series at the following annual rates of
the average daily net assets of the Series:
Large Cap Value Series: .50% of first $150 million
.45% of next $150 million
.35% of next $200 million
.30% thereafter
Large Cap Growth Series: .50% of first $150 million
.45% of next $150 million
.35% of next $200 million
.30% thereafter
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SCHEDULE B
CAPITAL GUARDIAN TRUST COMPANY'S AFFILIATES
1. AFD American Funds Distributors, Inc.
2. AFS American Funds Service Company
3. CGC Capital Group Companies, Inc.
4. CGII Capital Group International, Inc.
5. CGRI Capital Group Research, Inc.
6. CGCI Capital Guardian (Canada), Inc.
7. CGRC Capital Guardian Research Company
8. CGTC Capital Guardian Trust Company
9. CGTN Capital Guardian Trust Company, a Nevada Corporation
10. CIAC Capital International Advisory Company S.A.
11. CIACFMC Capital International All Countries Fund
Management Company S.A.
12. CIAPMC Capital International Asia Pacific Management
Company
13. CIEFMC Capital International Europe Fund Management
Company
14. CIGSMC Capital International Global Small Cap Fund
Management Company S.A.
15. CII Capital International, Inc.
16. CIKK Capital International K.K.
17. CIKFMC Capital International Kokusai Fund Management
Company S.A.
18. CIL Capital International Limited
19. CIL-B Capital International Limited (Bermuda)
20. CIMC Capital International Management Company S.A.
21. CIPSA Capital International Perspective S.A.
22. CIRI Capital International Research, Inc.
23. CISA Capital International S.A.
24. CMS Capital Management Services, Inc.
25. CRC Capital Research Company
26. CRMC Capital Research and Management Company
27. CSR Capital Strategy Research, Inc.
28. CIHACFMC CIHAC Fund Management Company S.A
29. -------- American Funds Group
17
