SUB-ADVISORY AGREEMENT
The GCG Trust
Xxxxx 0, 0000
Xxxxxx Investment Management, Inc.
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Dear Sirs:
Directed Services, Inc. (the "Manager") and The GCG Trust (the "Fund")
confirm their agreement with Xxxxxx Investment Management, Inc. (the "Sub-
Adviser') with respect to the Managed Global Series and the Emerging Markets
Series (each a "Portfolio" of the Fund) as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Fund employs the Manager as the manager of the Portfolios pursuant to
a management agreement, dated August 13, 1996 (the "Management Agreement"),
and the Fund and the Manager desire to employ and hereby appoint the Sub-
Adviser to act as the sub-investment adviser to the Portfolios. The
investment objectives(s), policies and limitations governing each Portfolio
are specified in the prospectus (the "Prospectus") and the statement of
additional information (the "Statement") of the Fund filed with the Securities
and Exchange Commission ("SEC') as part of the Fund's Registration Statement
on Form N-1A, as amended or supplemented from time to time, and in the manner
and to the extent as may from time to time be approved by the Board of
Trustees of the Fund (the "Board"). Copies of the Prospectus and the
Statement have been or will be submitted to the Sub-Adviser. The Manager
agrees promptly to provide copies of all amendments and supplements to the
current Prospectus and the Statement to the Sub-Adviser on an on-going basis.
Until the Manager delivers any such amendment or supplement to the Sub-
Adviser, the Sub-Adviser shall be fully protected in relying on the Prospectus
and Statement of Additional Information as previously furnished to the Sub-
Adviser. The Sub-Adviser accepts the appointment and agrees to furnish the
services for the compensation, as set forth below.
2. SERVICES AS SUB-ADVISER
(a) Subject to the supervision, direction and approval of the Board and
the Manager, the Sub-Adviser shall conduct a continual program of investment,
evaluation and, if appropriate in the view of the Sub-Adviser, sale and
reinvestment of each Portfolio's assets. The Sub-Adviser is authorized, in
its sole discretion and without prior consultation with the Manager, to: (i)
manage each Portfolio's assets in accordance with the Portfolio's investment
objective(s) and policies as stated in the Prospectus and the Statement; (ii)
make investment decisions for each Portfolio; (iii) place purchase and sale
orders for portfolio transactions on behalf of each Portfolio; and (iv) employ
professional portfolio managers and securities analysts who provide research
services to each Portfolio. The Sub-Adviser shall not be responsible for the
administrative affairs of the Fund, including, but not limited to, accounting
for and pricing of the Portfolios.
1
The Sub-Adviser shall furnish the custodian and portfolio accounting
agent with daily information as reasonably necessary to enable the custodian
and portfolio accounting agent to perform administrative and recordkeeping
responsibilities. In addition, the Sub-Adviser shall furnish the Manager with
quarterly and annual reports concerning transactions and performance of each
Portfolio in such form as may be mutually agreed upon, and the Sub-Adviser
agrees to review each Portfolio and discuss the management of it from time to
time with the Manager and the Board.
(b) Unless the Manager gives the Sub-Adviser written instructions to the
contrary, the Sub-Adviser shall use its good faith judgment in a manner which
it reasonably believes best serves the interests of the Portfolio shareholders
to vote or abstain from voting all proxies solicited by or with respect to the
issuers of securities in which assets of a Portfolio may be invested
(c) The Sub-Adviser shall maintain and preserve such records related to
each Portfolio's transactions as are required of a Sub-Adviser under the
Investment Advisers Act of 1940, as amended. The Sub-Adviser shall timely
furnish to the Manager all information relating to the Sub-Adviser's services
hereunder reasonably requested by the Manager to keep and preserve the books
and records of each Portfolio. The request Sub-Adviser will promptly supply
to the Manager copies of any of such records upon request.
(d) The Sub-Adviser shall (1) use its best efforts to manage each
Portfolio so that it will qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, (2) use its best efforts to manage
each Portfolio so as to ensure compliance with the diversification
requirements of Section 817 (h) of the Internal Revenue Code and regulations
thereunder, (3) comply with applicable federal and state laws, rules and
regulations applicable to it as Sub-Adviser of the Portfolio, and (4) comply
with any procedure adopted by the Board, notice of which is delivered in
writing to the Manager. The Manager acknowledges and agrees that the Sub-
Adviser's compliance with its obligations under Sections 2(d) (1) and (2) will
be based on information supplied by the Manager as to each Portfolio,
including but not limited to, portfolio security lot allocation. Manager
agrees to supply all such information on a timely basis.
(e) The Sub-Adviser shall, upon request of the Manager, provide
reasonable assistance in enabling the Manager, the custodian or portfolio
accounting agent to determine the value of any portfolio securities or other
assets of a Portfolio.
3. BROKERAGE
In selecting brokers or dealers to execute transactions on behalf of a
Portfolio, the Sub-Adviser will seek the best overall terms available. In
assessing the best overall terms available for any transaction, the Sub-
Adviser will consider factors it deems relevant, including, but not limited
to, the breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. In selecting brokers or dealers to execute a particular
transaction, and in evaluating the best overall terms available, the Sub-
Adviser is authorized to consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended) provided to a Portfolio and/or other accounts over which the
2
Sub-Adviser or its affiliates exercise investment discretion. Nothing in this
paragraph shall be deemed to prohibit the Sub-Adviser from paying an amount of
commission for effecting a securities transaction in excess of the amount of
commission another member of an exchange, broker, or dealer would have charged
for effecting that transaction, if the Sub-Adviser determined in good faith
that such amount of commission was reasonable in relation to the value of the
brokerage and research services provided by such member, broker, or dealer,
viewed in terms of either that particular transaction or its overall
responsibilities with respect to a Portfolio and/or other accounts over which
the Sub-Adviser or its affiliates exercise investment discretion.
4. COMPENSATION
In consideration of the services rendered pursuant to this Agreement, the
Manager will pay the Sub-Adviser an annual fee calculated at the rates set
forth in Exhibit A hereto of each Portfolio's average daily net assets; the
fee is calculated daily and paid monthly. The fee for the period from the
Effective Date (defined below) of the Agreement for a Portfolio to the end of
the month during which the Effective Date occurs shall be prorated according
to the proportion that such period bears to the full monthly period. Upon any
termination of this Agreement with respect to a Portfolio before the end of a
month, the fee for such part of that month for that Portfolio shall be
prorated according to the proportion that such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement . For the purpose of determining fees payable to the Sub-Adviser,
the value of a Portfolio's net assets shall be computed at the times and in
the manner specified in the Prospectus and/or the Statement.
5. EXPENSES
The Sub-Adviser shall bear all expenses (excluding brokerage costs,
custodian fees, auditors fees or other expense to be borne by the Portfolios)
in connection with the performance of its services under this Agreement. Each
Portfolio or the Manager will bear certain other expenses to be incurred in
its operation, including, but not limited to, investment advisory fees, sub-
advisory fees (other than sub-advisory fees paid pursuant to this Agreement)
and administration fees, fees for necessary professional and brokerage
services, costs relating to local administration of securities, fees for any
pricing service, the costs of regulatory compliance; and pro rata costs
associated with maintaining the Fund's legal existence and shareholder
relations. The Sub-Adviser shall only bear the expenses it has expressly
agreed to assume under this Agreement.
6. COMPLIANCE
The Sub-Adviser shall promptly notify the Manager and the Fund if (1) the
SEC has censured the Sub-Adviser; (2) it has reason to believe a Portfolio may
fail to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code; (3) it has reason to believe a Portfolio may cease to
comply with the diversification requirements of Section 817(h) of the Internal
Revenue Code; or (4) there is an untrue fact relating to the Sub-Adviser in
material in the Prospectus or Statement previously supplied for use by the
Sub-Adviser.
3
The Manager shall promptly notify the Sub-Adviser if (1) the SEC has
censured the Manager; (2) it has reason to believe a Portfolio may fail to
qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code; and (3) it has reason to believe a Portfolio may cease to comply
with the diversification requirements of Section 817(h) of the Internal
Revenue Code.
7. STANDARD OF CARE AND INDEMNIFICATION
(a) The Sub-Adviser shall exercise its best judgment and shall act in
good faith in rendering the services listed in paragraphs 2 and 3 above. The
Sub-Adviser shall not be liable for any error of judgment or mistake of law or
for any loss suffered by a Portfolio or the Manager in connection with the
matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect the Sub-Adviser
against any liability to the Manager, the Fund or to the shareholders of a
Portfolio to which the Sub-Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Sub-Adviser's reckless disregard
of its obligations and duties under this Agreement ("Disabling Conduct").
(b) Except for Disabling Conduct, the Manager shall indemnify and hold
the Sub-Adviser (and its officers, directors, employees, controlling persons,
shareholders and affiliates ("Indemnified Persons")) harmless from any
liability arising from the Sub-Adviser's conduct under this Agreement. The
Sub-Adviser shall indemnify and hold the Manager (and the Manager's
Indemnified Persons) harmless from any liability resulting from the Sub-
Adviser's Disabling Conduct or breach of the terms of this Agreement. The
Manager shall not be liable under this paragraph (b) with respect to any claim
made against the Sub-Adviser (and the Sub-Adviser's Indemnified Persons)
unless it received notice within a reasonable period of time after the Sub-
Adviser first received notice of the claim. The Sub-Adviser shall not be
liable under this paragraph (b) with respect to any claim made against the
Manager (and the Manager's Indemnified Persons) unless it received notice
within a reasonable period of time after the Manager first received notice of
the claim.
8. TERM OF AGREEMENT
This Agreement shall become effective for each Portfolio on March 1, 1997
(the "Effective Date") and shall continue for an initial two-year term and
shall continue thereafter so long as such continuance is specifically approved
at least annually as required by the 1940 Act. This Agreement is terminable,
with respect to a Portfolio without penalty, on 60 days' written notice, by
the Manager, the Board or by vote of holders of a majority (as defined in the
1940 Act and the rules hereunder) of the outstanding voting securities of
such Portfolio, or upon 60 days' written notice, by the Sub-Adviser. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act and the rules thereunder).
9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Manager understands that the Sub-Adviser now acts, will continue to
act and may act in the future as investment manager or adviser to fiduciary
and other managed accounts, and as investment manager or adviser to other
investment companies, including any offshore entitled, or accounts, and the
4
Manager has no objection to the Sub-Adviser's so acting, provided that
whenever a Portfolio and one or more other investment companies or accounts
managed or advised by the Sub-Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to equitable to each company and account. The
Manager recognizes that in some cases this procedure may adversely affect the
size of the position obtainable for a Portfolio. In addition, the Manager
understands that the persons employed by the Sub-Adviser to assist in the
performance of the Sub-Adviser's duties under this Agreement will not devote
their full time to such service and nothing contained in this Agreement shall
be deemed to limit or restrict the right of the Sub-Adviser or any affiliate
of the Sub-Adviser to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
10. REPRESENTATION
Each of the parties hereto represents that the Agreement has been duly
authorized, executed and delivered by all required corporate action.
11. USE OF NAME
(a) The Manager may use (and shall cause any of its affiliates including
the Fund to use) the name "Xxxxxx Investment Management, Inc.", "Xxxxxx
Investment Management", "Xxxxxx Management" or "Xxxxxx" only for so long as
this Agreement or any extension, renewal, or amendment hereof remains in
effect. At such times as this agreement shall no longer be in effect, the
Manager shall cease (and shall cause its affiliate to cease using) to use such
a name or any other name indicating that it is advised by or otherwise
connected with the Sub-Advisor and shall promptly change its name accordingly.
(b) The Manager will not, and will cause its affiliates to not, refer to
the Sub-Adviser or any affiliate in any prospectus, proxy statement or sales
literature except with the written permission of the Sub-Adviser.
(c) It will permit the Portfolio to be used as a funding vehicle only
for Policies issued by Golden American Life or any of its affiliates, except
with the permission of the Sub-Adviser.
(d) It will not (and will cause its affiliates to not) engage in
marketing programs (written or otherwise) directed toward Xxxxxx Capital
Manager annuity contract ("PCM") which solicit transfers from PCM to the
Manager's products or those of its affiliates. The Manager will not (and will
cause its affiliates to not) create or use marketing materials which provide
direct comparisons between PCM and the Manager's products or those of any of
its affiliates. The Manager will not (and will cause its affiliates to not)
reimburse voluntarily, or enter into any contract or policy after the date
hereof providing for the reimbursement of, any deferred sales charges to
encourage the transfer of assets from PCM to the Manager's products or those
of any affiliate.
12. DECLARATION OF TRUST
A copy of the Amended and Restated Agreement and Declaration of Trust for
the Fund is on file with the Secretary of the Commonwealth of Massachusetts.
The Amended and Restated Agreement and Declaration of Trust has been executed
on behalf of the Fund by the Trustees of the Fund in their capacity as
5
Trustees of the Fund and not individually. The obligations of this Agreement
shall be binding upon the assets and property of the Fund and shall not be
binding upon any Trustee, officer, or shareholder of the Fund individually.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the
enclosed copy of this Agreement.
Very truly yours,
DIRECTED SERVICES, INC.
By:/s/Xxxxx X. Xxxxxxx
----------------------------
THE GCG TRUST
By:/s/Xxxxx X. Xxxxxxx
----------------------------
Accepted:
XXXXXX INVESTMENT MANAGEMENT, INC.
By:/s/Xxxxxx X. Silver
----------------------------
6
EXHIBIT A
SUB-ADVISORY FEES
For the period from the commencement of the Sub-Adviser's services under this
Sub-Advisory Agreement until such time as different fees are approved by the
shareholders of the Managed Global Series and the Emerging Markets Series at a
Special Meeting of Shareholders, the Sub-Advisory fees shall be the following
fees, payable monthly, based on the average daily net assets of each Portfolio
(Manager undertakes to use its best efforts to cause such fees to be approved
in a timely fashion):
PORTFOLIO ANNUAL RATE
--------- -----------
Managed Global Series 1st $500m 0.60%
over $500m 0.50%
Emerging Markets Series all assets 0.75%
Upon approval by shareholders of the Managed Global Series and the Emerging
Markets Series, the Sub-Advisory fees shall be as follows:
PORTFOLIO ANNUAL RATE
--------- -----------
Managed Global Series 1st $300m 0.70%
over $300m 0.60%
Emerging Market Series 1st $150m 1.00%
next $150m 0.95%
over $300m 0.85%
7
