SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
FORTIS SERIES FUND,
INC.
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(Name of Registrant as Specified In Its Charter)
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(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):
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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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(4) Date Filed:
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[PRELIMINARY COPIES]
[LOGO]
THE GLOBAL BOND SERIES
OF
FORTIS SERIES FUND, INC.
500 Bielenberg Drive, Woodbury, Minnesota 55125
Mailing Address: P.O. Box 64284, St. Paul, Minnesota 55164
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NOTICE OF SPECIAL SHAREHOLDERS' MEETING
TO BE HELD ON JUNE 30, 1998
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To the Shareholders of
The Global Bond Series of Fortis Series Fund, Inc.:
A special meeting of shareholders of the Global Bond Series (the "Series")
of Fortis Series Fund, Inc. (the "Fund") will be held at the offices of the
Fund, 500 Bielenberg Drive, Woodbury, Minnesota on Tuesday, June 30, 1998, at
1:00 p.m. for the following purposes:
1. To approve a new investment sub-advisory agreement for the Series on
substantially the same terms as the most recent sub-advisory agreement
for the Series;
2. To transact such other business as may properly come before the meeting.
Shareholders of record on May 12, 1998 are the only persons entitled to
notice of and to vote at the meeting.
The costs of solicitation, including the costs of preparing and mailing this
Notice of Special Shareholders' Meeting and Proxy Statement, will be paid by the
sub-adviser to the Series, Mercury Asset Management International Ltd., and/or
its ultimate parent company, Merrill Lynch & Co., Inc.
Your attention is directed to the attached Proxy Statement. WHETHER OR NOT
YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE FILL IN, SIGN, DATE, AND MAIL
THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO SAVE ANY FURTHER
SOLICITATION EXPENSE. A return envelope is enclosed for your convenience.
Michael J. Radmer
SECRETARY
Dated: June 1, 1998
PROXY STATEMENT
THE GLOBAL BOND SERIES
OF
FORTIS SERIES FUND, INC.
500 Bielenberg Drive, Woodbury, Minnesota 55125
Mailing Address: P.O. Box 64284, St. Paul, Minnesota 55164
SPECIAL MEETING OF SHAREHOLDERS--JUNE 30, 1998
The enclosed proxy is solicited by the Board of Directors of Fortis Series
Fund, Inc. (the "Fund") in connection with the special meeting of shareholders
of the Global Bond Series (the "Series") to be held on June 30, 1998, and any
adjournments or postponements thereof. The costs of solicitation, including the
cost of preparing and mailing the Notice of Special Shareholders' Meeting and
this Proxy Statement, will be paid by Mercury Asset Management International
Ltd., the sub-adviser to the Series (the "Sub-Adviser"), and/or its ultimate
parent company, Merrill Lynch & Co., Inc. ("Merrill Lynch"), and such mailing
will take place on approximately June 1, 1998. Representatives of Fortis
Advisers, Inc. (the "Adviser"), the investment adviser and manager of the Fund
or its affiliates, may, without cost to the Series solicit proxies for the
management of the Fund by means of mail, telephone, or personal calls. The
address of the Adviser is that of the Fund as provided above.
A proxy may be revoked before the meeting by giving written notice of
revocation to the Secretary of the Fund, or at the meeting prior to voting.
Unless revoked, properly executed proxies in which choices are not specified by
the shareholders will be voted "for" each item for which no choice is specified,
in accordance with the recommendation of the Fund's Board of Directors. In
instances where choices are specified by the shareholders in the proxy, those
proxies will be voted or the vote will be withheld in accordance with the
shareholder's choice.
An "abstention" on the Proposal will be counted as present for purposes of
determining whether a quorum of shares is present at the meeting with respect to
the Proposal, but will be counted as a vote "against" the Proposal.
Only shareholders of record on May 12, 1998, may vote at the meeting or any
adjournments thereof. As of that date, there were [shares outstanding on record
date] issued and outstanding common shares, $.01 par value, of the Series. Each
shareholder of the Series is entitled to one vote for each share held. None of
the matters to be presented at the meeting will entitle any shareholder of the
Series to appraisal rights.
If a quorum is not present at the meeting, or if a quorum is present but
sufficient votes to approve the Proposal are not received, the persons named as
proxies may propose one or more adjournments of the meeting to permit further
solicitation of proxies. In determining whether to adjourn the meeting, the
following factors may be considered: the nature of the Proposal; the percentage
of votes actually cast; the percentage of negative votes actually cast; the
nature of any further solicitation; and the information to be provided to
shareholders with respect to the reasons for the solicitation. Any adjournment
will require the affirmative vote of a majority of those shares represented at
the meeting in person or by proxy.
Shares of the Fund are not offered directly to the public but are owned by
separate accounts of Fortis Benefits Insurance Company ("Fortis Benefits") and
First Fortis Life Insurance Company ("First Fortis"), which fund benefits under
variable life insurance policies and variable annuity contracts issued by Fortis
Benefits and variable annuity contracts issued by First Fortis (collectively,
"Contracts"). No shares are held by brokers on behalf of any customers. Fortis
Benefits and First Fortis will vote shares as to which it has received no timely
voting instructions from Contract owners, and any shares held other than
pursuant to the separate accounts, in the same proportion as instructions for
the Series that are received from persons holding the voting interest with
respect to all Fortis Benefits and First Fortis separate accounts participating
in the Series.
ANNUAL REPORT OF THE FUND
The Annual Report, including financial statements, for the fiscal year ended
December 31, 1997, of the Fund were mailed to Series shareholders on
approximately February 28, 1998. If you have not received a copy of the Annual
Report or would like to receive an additional copy, please call the Fund at
1-800-800-2638, extension 4579, and a copy will be sent to you, without charge,
by first class mail within three business days.
SHARE OWNERSHIP
The following table sets forth, as of [share ownership date], information
about the ownership of the Series' shares by each shareholder who holds of
record, or to the knowledge of management owns beneficially, more then 5% of the
outstanding shares of the Series. As of [share ownership date], no director of
the Fund owned any of the shares of the Series and no director owned any of the
Contracts. As of that date, shares (less than 1%) of the Series are
attributable to Contracts owned by the Fund's officers as a group; the officers
otherwise do not own any of the Fund's outstanding shares.
U.S. DIVERSIFIED
GOVERNMENT INCOME
GLOBAL BOND MONEY MARKET SECURITIES SHARES
SHARE OWNED SHARES OWNED SHARES OWNED OWNED
NAME OR IDENTITY NUMBER % NUMBER % NUMBER % NUMBER
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Separate Accounts of Fortis Benefits
Fortis Benefits
500 Bielenberg Drive
Woodbury, MN 55125
Separate Accounts of First Fortis
NAME OR IDENTITY %
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Separate Accounts of Fortis Benefits
Fortis Benefits
500 Bielenberg Drive
Woodbury, MN 55125
Separate Accounts of First Fortis
GROWTH &
GLOBAL ASSET INCOME
HIGH YIELD ASSET ALLOCATION ALLOCATION SHARES
SHARES OWNED SHARES OWNED SHARES OWNED OWNED
NAME OR IDENTITY NUMBER % NUMBER % NUMBER % NUMBER
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Separate Accounts of Fortis Benefits
Fortis Benefits
500 Bielenberg Drive
Woodbury, MN 55125
Separate Accounts of First Fortis
NAME OR IDENTITY %
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Separate Accounts of Fortis Benefits
Fortis Benefits
500 Bielenberg Drive
Woodbury, MN 55125
Separate Accounts of First Fortis
AGGRESSIVE
INTERNATIONAL GROWTH
GROWTH STOCK GLOBAL GROWTH STOCK SHARES
SHARE OWNED SHARES OWNED SHARES OWNED OWNED
NAME OR IDENTITY NUMBER % NUMBER % NUMBER % NUMBER
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Separate Accounts of Fortis Benefits
Fortis Benefits
500 Bielenberg Drive
Woodbury, MN 55125
Separate Accounts of First Fortis
NAME OR IDENTITY %
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Separate Accounts of Fortis Benefits
Fortis Benefits
500 Bielenberg Drive
Woodbury, MN 55125
Separate Accounts of First Fortis
2
PROPOSAL TO APPROVE
A NEW SUB-ADVISORY AGREEMENT
BETWEEN FORTIS ADVISERS, INC. AND
MERCURY ASSET MANAGEMENT INTERNATIONAL LTD.
SUMMARY
The purpose of the Meeting is for shareholders of the Series to consider a
new Investment Sub-Advisory Agreement (the "New Sub-Advisory Agreement") between
the Adviser and the Sub-Adviser. The prior Investment Sub-Advisory Agreement,
dated December 20, 1994, between the Adviser and the Sub-Adviser (the "Prior
Sub-Advisory Agreement") was terminated in connection with the Transaction (as
described below). In the Transaction the ultimate parent of the Sub-Adviser was
acquired by Merrill Lynch & Co., Inc. ("Merrill Lynch"). Under the Investment
Company Act of 1940, as amended ("1940 Act"), such acquisition may be deemed to
constitute an "assignment" of an investment advisory agreement. Pursuant to its
terms and the 1940 Act, the Prior Sub-Advisory Agreement was terminated because
of such assignment. Accordingly, for the Sub-Adviser to continue to provide
investment advisory services to the Series, the shareholders of the Series must
approve the New Sub-Advisory Agreement with the Sub-Adviser. The New
Sub-Advisory Agreement is substantially identical to the Prior Sub-Advisory
Agreement.
THE TRANSACTION
On November 19, 1997, the boards of directors of Merrill Lynch and Mercury
Asset Management Group Ltd., the ultimate parent of the Sub-Adviser ("MAM"),
announced that they had agreed on terms of a recommended cash offer (the
"Offer") pursuant to which Merrill Lynch, through its newly formed wholly owned
subsidiary ML Invest plc, would seek to acquire all of the issued share capital
of MAM (the "Transaction"). The Transaction has created one of the world's
largest asset management groups, with approximately $450 billion of assets under
management. It is intended that in connection with the Transaction, the existing
business of MAM will be combined with the worldwide institutional business of
Merrill Lynch Asset Management to form Merrill Lynch Mercury Asset Management.
Merrill Lynch Mercury Asset Management will be headquartered in London and,
within the United Kingdom, MAM's business will continue to be conducted under
its existing name.
The Offer commenced on November 24, 1997. On December 22, 1997 Merrill Lynch
acquired control of MAM. MAM is now 100% owned by Merrill Lynch.
1940 ACT CONSIDERATIONS
Section 15(a) of the 1940 Act prohibits any person from serving as an
investment adviser (or sub-adviser) to a registered investment company except
pursuant to a written contract that has been approved by the shareholders of the
registered investment company. Section 15(a) also provides for the automatic
termination of such agreements upon their assignment. An assignment is deemed to
include any change of control of such adviser; for example, Merrill Lynch's
acquisition of MAM. For the Sub-Adviser to continue to provide investment
advisory services to the Series, therefore, the shareholders of the Series must
approve the New Sub-Advisory Agreement.
EXEMPTIVE ORDER
Due to insufficient time to obtain approval of the shareholders of the
Series prior to the date that Merrill Lynch was deemed to control the issued
share capital of MAM (the "Assignment Date"), MAM, the Sub-Adviser and Merrill
Lynch applied for an order (the "Order") from the Securities and Exchange
Commission (the "SEC") exempting them from compliance with Section 15(a) of the
1940 Act pending approval of the New Sub-Advisory Agreement by shareholders of
the Series. The Order, which was issued on January 12, 1998 (the "Effective
Date"), permits the New Sub-Advisory Agreement to go into effect without
shareholder approval and allows the Sub-Adviser to collect fees with respect to
the Series at the rates
3
specified in the New Sub-Advisory Agreement commencing on the Effective Date.
Fees (and interest thereon) paid by the Series after the Effective Date will be
held in escrow with an unaffiliated financial institution pending shareholder
approval, which, pursuant to the terms of the Order, must be obtained no later
than July 11, 1998.
If the shareholders of the Series do not approve the New Sub-Advisory
Agreement prior to July 11, 1998, the Sub-Adviser's authority to act as such
will terminate and the amount held in escrow under the New Sub-Advisory
Agreement will be returned to the Series. Accordingly, to ensure continuity in
the sub-advisory services to the Series, shareholders of the Series are being
asked to approve the New Sub-Advisory Agreement.
During the interim period between the Assignment Date and the Effective
Date, the Sub-Adviser provided the Series services substantially similar to
those provided under the Prior Sub-Advisory Agreement at fees not in excess of
the Sub-Adviser's actual cost of performing the services. Fees payable during
this interim period have been paid directly to the Sub-Adviser and not held in
escrow.
THE PRIOR SUB-ADVISORY AGREEMENT AND THE NEW SUB-ADVISORY AGREEMENT
Prior to the Transaction, the Sub-Adviser provided services to the Series
pursuant to the Prior Sub-Advisory Agreement. The Prior Sub-Advisory Agreement,
which became effective on December 20, 1994, was presented to shareholders for
their initial approval on December 14, 1994 and was last reapproved by the Board
of Directors on December 11, 1997. For the fiscal year ended December 31, 1997,
the aggregate amount of fees paid to the Sub-Adviser by the Adviser was $69,898.
The New Sub-Advisory Agreement was approved by the Board of Directors on
December 11, 1997 and became effective, pursuant to its terms, on the Effective
Date of January 12, 1998, the date that the SEC granted the Exemptive Order
Application.
The Prior Sub-Advisory Agreement and the New Sub-Advisory Agreement are
substantially identical, except for dates of execution, dates of effectiveness
and escrow arrangements. A copy of the New Sub-Advisory Agreement is attached as
Appendix A to this proxy statement and is summarized below. The following
summary is qualified in its entirety by reference to the text of the New
Sub-Advisory Agreement.
SERVICES TO BE PERFORMED
Under the New Sub-Advisory Agreement, the Sub-Adviser is responsible for the
formulation and implementation of a continuing program for the management of the
Series' assets and resources. The Sub-Adviser is responsible for making all
determinations with respect to the investment of the assets of the Series and
for taking take all steps as may be necessary to implement the determinations,
including the placement of purchase and sale orders on behalf of the Series. The
Sub-Adviser's power to direct the investment and reinvestment of the assets of
the Series will be exercised in accordance with applicable law, the articles of
incorporation of the Fund, the investment objectives, policies and restrictions
of the Series and any other limitations that the Fund or Adviser may place on
the Sub-Adviser's investment decisions. The Sub-Adviser is responsible for
selecting brokers and dealers through whom transactions on behalf of the Series
will be executed and the markets on or in which such transactions would be
executed and placing, in the name of the Series or its nominee, all such orders,
provided the Sub-Adviser complies with the description of the process contained
in the prospectus for the Series.
Although the Sub-Adviser may employ, retain, or otherwise avail itself of
the services or the facilities of persons and entities within its own
organization or any other organization for the purposes of providing such
information, advice or assistance as the Sub-Adviser may deem necessary for the
discharge of its obligations under the New Sub-Advisory Agreement, the
Sub-Adviser may not delegate its investment advisory responsibilities as
Sub-Advisor to the Series.
4
EXPENSES AND SUB-ADVISORY FEES
Similar to the Prior Sub-Advisory Agreement, the New Sub-Advisory Agreement
provides that the Adviser pay the Sub-Adviser a monthly management fee at an
annual rate of .35% of the Series' first $100 million of average daily net
assets and .225% of the Series' average daily net assets in excess of $100
million.
OTHER INVESTMENT ADVISORY CLIENTS
Similar to the Prior Sub-Advisory Agreement, each of the parties to the New
Sub-Advisory Agreement acknowledge that other clients of the Sub-Adviser may
have investment objectives and policies similar to those of the Series and that
the Sub-Adviser may, from time to time, make recommendations that result in the
purchase (or sale) of a particular security by its other clients and the Series
during the same time period. Such purchases (or sales) may adversely effect the
price or quantity of a certain security. In such an event, the Sub-Adviser will
allocate the securities or investments in a manner that the Sub-Adviser
considers equitable and consistent with its obligations to the Series and the
Sub-Adviser's other clients.
LIMITATION OF LIABILITY
Similar to the Prior Sub-Advisory Agreement, the New Sub-Advisory Agreement
provides that the Sub-Adviser will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Series, its shareholders or
Contract owners in connection with the performance by the Sub-Adviser of its
duties thereunder, except a loss resulting from willful misfeasance, bad faith
or gross negligence on the part of the Sub-Adviser in the performance of its
duties or from reckless disregard by the Sub-Adviser of its duties under the New
Sub-Advisory Agreement.
DURATION AND TERMINATION
Similar to the Prior Sub-Advisory Agreement, the New Sub-Advisory Agreement
will remain in force for two years after the Effective Date and for successive
annual periods, but only so long as each such continuance is specifically
approved at least annually by (i) a majority of the directors of the Fund who
are not parties to the New Sub-Advisory Agreement or interested persons of such
parties or (ii) a vote of the holders of a majority (as defined in the 1940 Act)
of the outstanding shares of the Series. Besides automatic termination in the
event of its assignment (as defined in the 1940 Act), the New Sub-Advisory
Agreement will terminate at any time without the payment of a penalty by the
Series (i) by the Board of Directors of the Fund on 60 days' written notice to
the Adviser and the Sub-Adviser, (ii) by a vote of a majority of the Series's
outstanding voting securities or (iii) by the Sub-Adviser on 60 days' written
notice to the Adviser and the Fund. The New Sub-Advisory Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).
ESCROW ARRANGEMENTS
Unlike the Prior Sub-Advisory Agreement, the New Sub-Advisory Agreement
contains certain provisions relating to escrow arrangements which are necessary
to carry-out the transition from the Prior Sub-Advisory Agreement to the New
Sub-Advisory Agreement. Under the New Sub-Advisory Agreement, the Sub-Adviser
may collect fees with respect to the Series prior to shareholder approval at the
rates specified in the New Sub-Advisory Agreement commencing on the Effective
Date. Fees (and interest thereon) paid by the Series after the such date will be
held in escrow with an unaffiliated financial institution pending shareholder
approval. See "--Exemptive Order." If the shareholders of the Series do not
approve the New Sub-Advisory Agreement prior to July 11, 1998, the amount held
in escrow under the New Sub-Advisory Agreement will be returned to the Series.
5
DELIBERATION AND RECOMMENDATION OF BOARD OF DIRECTORS
The New Sub-Advisory Agreement was approved by the Board of Directors of the
Fund at a meeting held on December 11, 1997. At this meeting, the Board of
Directors of the Fund--including a majority of the Directors who are neither
parties to the Prior Sub-Advisory Agreement or to the New Sub-Advisory Agreement
nor are "interested persons," as that term is defined in the 1940 Act, of any
parties to the Prior Sub-Advisory Agreement or the New Sub-Advisory Agreement
(the "Independent Directors")--approved the New Sub-Advisory Agreement and
unanimously recommended approval of the New Sub-Advisory Agreement by the
shareholders of the Series. The Board of Directors of the Fund believes that the
terms and conditions of the New Sub-Advisory Agreement are fair to, and in the
best interest of, the Series and its shareholders.
In evaluating the New Sub-Advisory Agreement, the Board of Directors,
including the Independent Directors, considered a variety of factors they deemed
relevant including: (a) the fact that the Prior Sub-Advisory Agreement and the
New Sub-Advisory Agreement, including the terms relating to the services to be
provided thereunder by the Sub-Adviser and the fees and expenses payable by the
Series, are substantially identical, except for the dates of execution,
effectiveness and certain escrow provisions; (b) the strength of the
Sub-Adviser's services after the Transaction; (c) the absence of any diminution
in the quality of the investment advice currently provided by the Sub-Adviser;
(d) the fact that the Transaction has caused the Prior Sub-Advisory Agreement to
terminate and that the New Sub-Advisory Agreement must be approved for the
Sub-Adviser to continue to provide investment services to the Series.
The Board of Directors of the Fund believes that the terms and conditions of
the New Sub-Advisory Agreement are fair to, and in the best interest of, the
Series and its shareholders. As a result of their review and consideration of
the New Sub-Advisory Agreement, at the meeting on December 11, 1997, the Board
of Directors of the Fund, including a majority of the Independent Directors,
voted to approve, and recommends that the shareholders of the Series approve,
the New Sub-Advisory Agreement.
IF SHAREHOLDER APPROVAL NOT OBTAINED
In the event that shareholders of the Series do not approve the New
Sub-Advisory Agreement, the amount held in escrow for the Series will be
returned to the Series. Thereafter, the Board of Directors would either
negotiate a new investment sub-advisory agreement with an advisory organization
selected by the Board of Directors or make other appropriate arrangements, in
either event subject to approval of the shareholders of the Series.
REQUIRED VOTE
The New Sub-Advisory Agreement must be approved by the vote of a majority of
the outstanding voting securities of the Series. Under the 1940 Act, a majority
of a Series' outstanding voting securities is defined as the lesser of (i) 67%
of the outstanding shares represented at a meeting at which more than 50% of the
Series' outstanding shares are present in person or represented by proxy or (ii)
more than 50% of the Series' outstanding voting securities.
THE FUND'S BOARD OF DIRECTORS RECOMMEND THAT SHAREHOLDERS APPROVE THE NEW
SUB-ADVISORY AGREEMENT BETWEEN THE ADVISER AND THE SUB-ADVISER.
SUPPLEMENTAL INFORMATION ABOUT THE SUB-ADVISER AND ITS PARENT
MERCURY ASSET MANAGEMENT GROUP PLC AND ITS AFFILIATES
The information in this section has been provided by MAM.
MAM is a holding company based in London that, through its subsidiaries,
provides investment and related services on a global basis, operating in 19
offices around the world.
6
On September 30, 1997, MAM had approximately $169 billion (L104 billion)* of
funds under management, of which over $113 billion (L70 billion) was for United
Kingdom institutions and the remainder was divided between international
institutions and private investors.
MAM manages funds for over one-half of the companies that are members of the
FTSE-100 Index, the Financial Times Stock Exchange's list of the United
Kingdom's top 100 companies by market capitalization, and for over one-half of
the largest fifty Japanese corporate pension funds. Its clients include
approximately 900 UK pension funds, including five of the ten largest pension
funds in the world. MAM is a market leader in the UK defined contribution
pension market.
The Sub-Adviser is a wholly owned subsidiary of Mercury Asset Management
Ltd, one of the largest investment managers in Europe, headquartered in London,
England, at 33 King William Street, EC4R 9AS. 100% of MAM's stock is now owned
by ML Invest plc, headquartered in London, England, at Ropemaker Place, 25
Ropemaker Street, EC2Y, 9LY and a wholly owned subsidiary of ML Invest Holdings
Limited of the same address. ML Invest Holdings Limited, in turn, is a wholly
owned subsidiary of ML Invest, Inc. of 1209 Orange Street, Wilmington, Delaware
19801, which, in turn, is a wholly owned subsidiary of Merrill Lynch Group, Inc.
of World Financial Center, North Tower, 250 Vesey Street, New York, New York
10281 which, in turn, is a wholly owned subsidiary of Merrill Lynch & Co. Inc.
of 1209 Orange Street, Wilmington, Delaware 19801.
The Sub-Adviser is a corporation incorporated in 1981 under the Companies
Act of Great Britain. Its registered office and principal place of business is
at 33 King William Street, London EC4R 9AS, England. The Sub-Adviser provides
discretionary international investment portfolio management services to
individual and institutional clients wishing to participate in particular
markets outside North America or to maintain a worldwide investment program. The
Sub-Adviser is registered as an investment adviser with the SEC and is regulated
by the United Kingdom's Investment Management Regulatory Organization Ltd. The
Sub-Adviser's advisory clients include charitable organizations, corporations
and pension plans.
The Sub-Adviser also acts as investment adviser or investment manager for
other persons and entities and may, under agreement with the Series, act as
investment adviser or sub-adviser to other registered investment companies.
Mrs. C. Consuelo Brooke and Messrs. Peter Stormonth Darling, Peter J. Gibbs,
Steven W. Golann, J. Eric Nelson and David M.F. Scott are the directors of the
Sub-Adviser. The principal occupation of each director is as follows: Mrs.
Brooke and Mr. Scott are fund managers of the Sub-Adviser; Mr. Darling is
chairman of the Sub-Adviser and a non-executive director of MAM; Mr. Gibbs is
the principal executive officer of the Sub-Adviser and director of Mercury Asset
Management Ltd; and Messrs. Golann and Nelson are directors of the Sub-Adviser.
The address of Mrs. Brooke and Messrs. Darling, Gibbs and Scott is 33 King
William Street, London, EC4R 9AS, England. The address of Messrs. Golann and
Nelson is 780 Third Avenue, 34th Floor, New York, New York 10017.
No director, officer or employee of MAM is an officer or director of the
Fund.
MAM currently does not serve as investment adviser for any investment
company that has an investment objective similar to that of the Series.
MERRILL LYNCH & CO., INC. AND ITS AFFILIATES
The information in this section has been provided by Merrill Lynch.
- ------------------------
*All amounts denominated in pounds sterling have, for the purposes of this
background information, been converted into U.S. dollars at an exchange rate of
1 pounds sterling to $1.6223, the exchange rate on January 12, 1998.
7
Merrill Lynch, a Delaware corporation, is a holding company formed in 1973
that, through its subsidiaries and affiliates, provides investment, financing,
insurance and related services on a global basis. Such services include
securities brokering, trading and underwriting; investment banking and other
corporate finance advisory activities, including loan syndication; asset
management and other investment advisory services; trading of foreign exchange
instruments, futures, commodities and derivatives; securities clearance
services; banking, trust and lending services; and insurance sales. Those
services are provided to a large group of clients and customers, including
individual investors, corporations, governments and governmental agencies and
financial institutions.
Merrill Lynch conducts its business from its world headquarters in New York,
New York, from additional principal locations in New Jersey, London, Tokyo and
Hong Kong, from various regional facilities located in the United States and in
other countries, and from numerous retail sales and other offices throughout the
world. As of December 27, 1997, Merrill Lynch employed approximately 49,800
people.
Merrill Lynch conducts its worldwide business through a number of highly
integrated subsidiaries and affiliates that frequently participate in the
facilitation and consummation of a single transaction. Merrill Lynch, Pierce,
Fenner & Smith Incorporated, the principal subsidiary of Merrill Lynch and one
of the largest securities firms in the world, is a leading broker in securities,
options contracts, and commodity and financial futures contracts; a leading
dealer in options and in corporate and municipal securities; a leading
investment banking firm that provides advice to, and raises capital for, its
clients; and an underwriter of selected insurance products.
Merrill Lynch is also one of the largest asset managers in the world, with
approximately $278.7 billion of assets under management as of December 31, 1997.
Merrill Lynch's asset management activities are conducted through, or managed by
Merrill Lynch Asset Management, L.P., Fund Asset Management, L.P. and Hotchkis
and Wiley, and their affiliates (collectively, "MLAM"). MLAM constitutes the
investment management unit of Merrill Lynch and is one of the largest mutual
fund managers in the world. MLAM acts as the investment adviser for more than
153 registered investment companies as well as for various individual and
institutional investors. At the end of 1997, MLAM managed 240 portfolios
representing a wide variety of investment objectives ranging from money market
portfolios to long-term taxable and tax-exempt fixed income portfolios, along a
broad spectrum of quality ratings and maturities, as well as a wide variety of
equity portfolios that in the aggregate invest in more than 48 markets globally.
At the end of 1997, total assets under management by MLAM approximated $278
billion, as compared with $234 billion at year-end 1996.
SUPPLEMENTAL INFORMATION ABOUT THE ADVISER
The Adviser is a wholly owned subsidiary of Fortis, Inc., which is located
in New York, New York. Fortis, Inc. and is a wholly owned subsidiary of AMEV/VSB
1990 N.V. ("AMEV/VSB 1990").
AMEV/VSB 1990 is a corporation organized under the laws of The Netherlands
to serve as the holding company for all U.S. operations and is owned 50% by
Fortis AMEV and 50% by Fortis AG. AMEV/VSB 1990 owns a group of companies active
in insurance, banking and financial services and real estate development in The
Netherlands, the United States, Western Europe, Australia and New Zealand.
Fortis AMEV is a diversified financial services company headquartered in
Utrecht, The Netherlands, where its insurance operations began in 1947. Fortis
AG is a diversified financial services company headquartered in Brussels,
Belgium, where its insurance operations began in 1824.
Fortis AMEV and Fortis AG own a group of companies (of which AMEV/VSB 1990
is one) active in insurance, banking and financial services and real estate
development in The Netherlands, Belgium, the United States, Western Europe and
the Pacific Rim.
The address of Fortis, Inc. is One Chase Manhattan Plaza, New York, New
York. The address of AMEV/VSB 1990, and Fortis AMEV is Archimedeslaan 10, 3584
BA Utrecht, The Netherlands. The address of Fortis AG is Boulevard Emile
Jacqanin 53, 1000 Brussels, Belgium.
8
No officer or director of the Fund owns any securities of the Adviser. No
officer or director of the Fund or of the Adviser owns more than 1% of the
outstanding common stock of Fortis, Inc. or Fortis International, N.V. or
AMEV/VSB 1990 N.V.
Dean C. Kopperud, President and a director of the Fund, is the Chief
Executive Officer of the Adviser. Messrs. Kopperud, Gary N. Yalen and James S.
Byrd are the directors of the Adviser and their address is that of the Adviser.
Other than Mr. Kopperud, no director of the Fund is an officer, director of
employee of the Adviser. The principal occupation of Messrs. Yalen and Byrd are
set forth below.
The following officers of the Fund are also officers and employees of the
Adviser.
NAME POSITION WITH FUND POSITION WITH ADVISER
- ----------------------------- -------------------------------- ------------------------------------------------
Gary N. Yalen Vice President President, Chief Investment Officer and Director
Howard G. Hudson Vice President Executive Vice President and Head of Fixed
Income Investments
Lucinda S. Mezey Vice President Executive Vice President and Head of Equity
Investments
James S. Byrd Vice President Executive Vice President and Director
Nicholas L. M. de Peyster Vice President Vice President
Charles J. Dudley Vice President Vice President
Maroun M. Hayek Vice President Vice President
Robert C. Lindberg Vice President Vice President
Charles L. Mehlhouse Vice President Vice President
Kevin J. Michels Vice President Vice President
Christopher J. Pagano Vice President Vice President
Michael J. Rosenowski Vice President Vice President
Christopher J. Woods Vice President Vice President
Robert W. Beltz, Jr. Vice President Vice President--Securities Operations
Peggy L. Ettestad Vice President Senior Vice President, Operations
Dickson W. Lewis Vice President Senior Vice President, Marketing and Sales
Tamara L. Fagely Vice President and Treasurer Vice President
Scott R. Plummer Vice President Vice President, Associate General Counsel and
Assistant Secretary
Rhonda J. Schwartz Vice President Senior Vice President and General Counsel
Melinda S. Urion Vice President Senior Vice President and Chief Financial
Officer
The Adviser currently does not serve as investment adviser for any
investment company that has an investment objective similar to that of the
Series.
For the fiscal year ended December 31, 1997, the Series paid no brokerage
commissions to affiliated brokers.
SUPPLEMENTAL INFORMATION
ABOUT THE DISTRIBUTOR
Fortis Investors, Inc. is the distributor of the shares of the Fund, and its
business address is 500 Bielenberg Drive, Woodbury, Minnesota, and its mailing
address is P.O. Box 64284, St. Paul, Minnesota 55164.
9
OTHER MATTERS
Management does not intend to present any business at the meeting not
mentioned in this Proxy Statement and currently knows of no other business to be
presented. If any other matters are brought before the meeting, the persons
named as proxies will vote all proxies on such matters in accordance with their
judgment of the best interests of the Series.
10
PROPOSALS OF FUND SHAREHOLDERS
The Fund is not required to hold annual meetings of shareholders. Therefore,
an anticipated date of the next regular meeting cannot be provided. If a
shareholder has a proposal which such shareholder feels should be presented to
all shareholders, the shareholder should send the proposal to the Fund. The
proposal will be considered as appropriate at a meeting of the Board of
Directors as soon as practicable. Should it be a matter which would have to be
submitted to shareholders at an annual meeting, it will be presented at the next
special or regular meeting of shareholders. In addition, should it be a matter
which the Board of Directors deems of such significance as to require a special
meeting, such a meeting will be called.
Michael J. Radmer,
SECRETARY
Dated: June 1, 1998
11
APPENDIX A
INVESTMENT SUB-ADVISORY AGREEMENT
Agreement dated January 12, 1998 by and between Fortis Advisers, Inc., a
Minnesota Corporation (the "Manager") and Mercury Asset Management International
Ltd., a corporation organized under the Companies Act of England and Wales (the
"Sub-Adviser") the principal office of which is located at 33 King William
Street, London EC4R 9AS, England.
WHEREAS, the Manager serves as the investment adviser, manager, registrar,
transfer agent and dividend disbursing agent for Fortis Series Fund, Inc. (the
"Company"), an open-end, management investment company registered with the
Securities and Exchange Commission ("SEC") pursuant to the Investment Company
Act of 1940, as amended ("1940 Act"), that is comprised of a number of separate
series of investments that act as funding vehicles for various variable annuity
contracts and variable universal life insurance policies issued by Fortis
Benefits Insurance Company ("FBIC") and variable annuity contracts issued by
First Fortis Life Insurance Company ("First Fortis");
WHEREAS, the Manager desires to retain the Sub-Adviser to assist the Manager
in furnishing an investment program to one series of the Company, the Global
Bond Series (the "Portfolio");
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Manager and the Sub-Adviser agree as follows:
1. APPOINTMENT AND EXPENSES OF THE SUB-ADVISER. The Manager hereby
appoints the Sub-Adviser to serve as sub-adviser with respect to the assets of
the Portfolio and to perform the services hereinafter set forth and the
Sub-Adviser hereby accepts such appointment. The Sub-Adviser agrees, for the
compensation herein provided, to assume all obligations herein provided and bear
all its personnel and other expenses associated with the performance of its
services hereunder. The Company shall be responsible for the Portfolio's
administrative and other direct expenses, including, but not limited to: (a)
fees pursuant to any plan of distribution that the Portfolio may adopt; (b) the
Portfolio's brokerage and commission expenses, including all ordinary and
reasonable transaction costs; (c) fees and expenses of pricing services used by
the Company to determine the value of the Portfolio's holdings; (d) Federal,
state, local and foreign taxes, including issue and transfer taxes incurred by
or levied on the Portfolio; (e) interest charges on any Portfolio borrowings;
(f) the Company's organizational and offering expenses; (g) the cost of the
Company's personnel providing services to the Company; (h) fees and expenses of
registering the Company's shares under the appropriate Federal securities laws
and of qualifying the Company's shares under applicable state securities laws
and pursuant to any foreign laws; (i) expenses of printing and distributing
reports to the Company's shareholders, proxy materials, prospectuses and
distribution of dividends; (j) costs of the Company's shareholders' meetings and
proxy solicitation; (k) charges and expenses of the Company's custodian and
registrar, transfer agent and dividend disbursing agent; (l) compensation of the
Company's officers, directors and employees that are not "affiliated persons" or
"interested persons" (as defined in Section 2(a) of the 1940 Act and the rules,
regulations and releases relating thereto) of the Sub-Adviser; (m) the Company's
legal and auditing expenses; (n) cost of certificates representing shares of the
Portfolio; (o) the Company's costs of stationery and supplies; (p) the Company's
insurance expenses; (q) the Company's association membership dues; (r) travel
expenses of officers and employees of the Sub-Adviser to the extent such
expenses relate to the attendance of such persons at meetings at the request of
the Board of Directors of the Company (EXCEPT that a representative of the
Sub-Adviser will attend one Board meeting per year, at the Sub-Adviser's own
expense); and (s) travel expenses for attendance at Board of Directors meetings
by members of the Board of Directors of the Company who are not "interested
persons" or "affiliated persons" of the Sub-Adviser. The Sub-Adviser shall for
all purposes herein be deemed to be an independent
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contractor and shall, except as expressly provided or authorized (whether herein
or otherwise), have no authority to act for or on behalf of the Company in any
way or otherwise be deemed an agent of the Company.
2. DUTIES OF THE SUB-ADVISER. The Sub-Adviser will deal in good faith and
with due diligence and will use professional skill, care and judgment in the
performance of its duties under this Agreement. In so doing, the Sub-Adviser
shall formulate and implement a continuing program for the management of the
assets of the Portfolio. The Sub-Adviser shall amend and update such program
from time to time as financial and other economic conditions warrant. The
Sub-Adviser shall make all determinations with respect to the investment of the
assets of the Portfolio and shall take such steps as may be necessary to
implement the same, including the placement of purchase and sale orders on
behalf of the Portfolio. The Manager shall be responsible for the administration
of the investment activities of the Company and the Portfolio, including
compliance with the requirements of the 1940 Act, except for the investment
management activities specifically delegated to the Sub-Adviser pursuant to this
Agreement.
3. POWERS OF THE SUB-ADVISER.
3.1 The Sub-Adviser's power to direct the investment and reinvestment of
the assets of the Portfolio shall be exercised in accordance with applicable
law, the Company's Articles of Incorporation and the investment objectives,
policies and restrictions set forth in the then-current Prospectus and
Statement of Additional Information (collectively the "Prospectus") relating
to the Portfolio contained in the Company's Registration Statement under the
1940 Act and the Securities Act of 1933, as amended. The Company and/or the
Manager may also place additional limitations on the Sub-Adviser's
investment decisions by written notice to the Sub-Adviser. The Company
agrees to provide promptly to the Sub-Adviser a copy of the documents
mentioned above and all changes made to such documents.
3.2 While the Sub-Adviser will have day-to-day responsibility for the
discretionary investment decisions to be made on behalf of the Portfolio,
the Sub-Adviser will be subject to oversight by the Manager. Such oversight,
however, shall not require prior approval of discretionary investment
decisions made by the Sub-Adviser except as may be required by applicable
law, the Portfolio's investment policies and restrictions and/or any
limitations imposed on the Sub-Adviser by the Company and/or the Manager
pursuant to the preceding paragraph. The Manager shall retain the right to
instruct the Sub-Adviser to effect any transactions necessary to ensure
compliance with the Portfolio's investment policies and restrictions as well
as the requirements of Subchapter M of the Internal Revenue Code and the
provisions of Section 817(h) of the Internal Revenue Code and the
regulations promulgated thereunder.
3.3 In the event the Sub-Adviser's compliance with any amendment of the
Portfolio's investment objectives, policies and restrictions or other
limitations placed on the Sub-Adviser's investment decisions with respect to
the Portfolio would interfere with the completion of any transaction
commenced on behalf of the Portfolio prior to the Sub-Adviser's knowledge of
such amendment, the Sub-Adviser may complete such transaction unless doing
so would violate any applicable law, rule or regulation. In such an event,
the Sub-Adviser will not be responsible for any loss that may result from
the completion of the transaction.
3.4 Further, and except as may be qualified elsewhere in this Agreement,
the Sub-Adviser is hereby authorized, for and on behalf of the Company, with
respect to the Portfolio, in its discretion to:
(a) exercise any conversion and/or subscription rights available in
connection with any securities or other investments held in the
Portfolio;
(b) maintain all or part of the Portfolio's assets uninvested in
short-term income-producing instruments for such periods of time as shall
be deemed reasonable and prudent by the Sub-Adviser;
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(c) instruct the Custodian, in accordance with the Custodian
Agreement, to deliver for cash received, securities or other cash and/or
securities instruments sold, exchanged, redeemed or otherwise disposed of
from the Portfolio, and to pay cash for securities or other cash and/or
securities instruments delivered to the Custodian and/or credited to the
Portfolio upon acquisition of the same for the Portfolio;
(d) determine how to vote all proxies received with respect to
securities held in the Portfolio and direct the Custodian as to the
voting of such proxies; and
(e) generally, perform any other act necessary to enable the
Sub-Adviser to carry out its obligations under this Agreement.
4. SELECTION OF BROKER-DEALERS. The Sub-Adviser shall select the brokers
and dealers through whom transactions on behalf of the Portfolio will be
executed and the markets on or in which such transactions will be executed and
shall place, in the name of the Portfolio or its nominee (or appropriate foreign
equivalent), all such orders. In selecting brokers and dealers to execute such
transactions, and in negotiating brokerage commissions, and in obtaining
research, statistical and other information from brokers and dealers in
connection with Portfolio transactions, the Sub-Adviser shall comply with the
description of the process contained in the Prospectus.
(a) It is understood that certain other clients (including other funds,
portfolios and accounts) of the Sub-Adviser may have investment objectives
and policies similar to those of the Portfolio and that the Sub-Adviser may,
from time to time, make recommendations that result in the purchase (or
sale) of a particular security by its other clients and the Portfolio during
the same period of time. If transactions on behalf of more than one client
during the same period increase the demand for securities being purchased or
the supply of securities being sold, there may be an adverse effect on price
or quantity. In such event, the Sub-Adviser shall allocate the securities or
investments to be purchased or sold, as well as the expenses incurred in the
transactions (including price) in a manner the Sub-Adviser considers
equitable and consistent with its obligations to the Portfolio and the
Sub-Adviser's other clients.
(b) The Sub-Adviser agrees that it will only enter into transactions
that are covered by Section 10(f) or Section 17(e) of the 1940 Act if it has
(i) complied with Rule 10f-3 or Rule 17e-1 thereunder, respectively, or the
terms of an appropriate exemptive order issued to the Company by the SEC,
and (ii) has complied with the procedures adopted thereunder by the Board of
Directors of the Company which may, pursuant to authority granted by the
Company, be supplemented by interpretive guidelines of the Manager. Aside
from parties that are known or should be known by the Sub-Adviser, the
Manager shall promptly notify the Sub-Adviser of any additional parties with
whom engaging in a transaction for the Portfolio would result in a violation
of the 1940 Act.
5. REPORTS AND INFORMATION TO BE PROVIDED BY THE SUB-ADVISER. The
Sub-Adviser shall furnish such information and reports relating to the
Portfolio, its holdings and transactions involving Portfolio securities as the
Manager and/or the Company may reasonably require to fulfill its or their legal
responsibilities or to meet regulatory requirements or discharge other duties
they may have. Among the subjects of the reports and information to be provided
by the Sub-Adviser are the following:
(a) Information required by the Manager to determine the Company's and
Portfolio's compliance with the 1940 Act, the Advisers Act, the Internal
Revenue Code, applicable federal and state securities and insurance laws and
other applicable laws and regulations or regulatory and taxing authorities
in the United States and other relevant countries;
(b) Information required by the Manager to meet the accounting and
operational requirements of the Portfolio. Specific examples of the types of
reports and information that will be needed by the Manager and the Company
are set forth in Exhibit A, attached hereto;
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(c) Information required by the Manager to satisfy its reporting
obligations to the Company arising from the Investment Advisory and
Management Agreement between the Manager and the Company;
(d) Information reasonably requested by the Manager to determine the
Portfolio's compliance with Rule 17f-5 under the 1940 Act, relating to
foreign custodians and sub-custodians;
(e) Information required by the Manager to determine the Sub-Adviser's
compliance with Rule 17j-1 under the 1940 Act with respect to the
Sub-Adviser's activities on behalf of the Portfolio;
(f) Information required by the Manager to determine compliance with
Rule 10f-3 and Rule 17e-1 under the 1940 Act with respect to the
Sub-Adviser's (or its affiliates') activities on behalf of the Portfolio;
and
(g) Information reasonably necessary to respond to specific inquiries
from the Company's management and/or Board of Directors.
6. NON-EXCLUSIVE SERVICES, CONFLICTS OF INTEREST AND MATERIAL NONPUBLIC
INFORMATION. The Manager understands that the Sub-Adviser and its affiliates
may furnish investment management and advisory services to others, and that the
Sub-Adviser and its affiliates shall be at all times free, in their discretion,
to make recommendations to, and investments for, others which may or may not
correspond to investments made for the Portfolio. The Manager further
understands that the Sub-Adviser, its affiliates, and any officer, director,
stockholder, employee or any member of their families may or may not have an
interest in the securities whose purchase and sale the Sub-Adviser effects for
the Portfolio. Actions taken by the Sub-Adviser on behalf of the Portfolio may
be the same as, or different from, actions taken by the Sub-Adviser on its own
behalf or for others or from actions taken by the Sub-Adviser's affiliates,
officers, directors, partners, employees of the Sub-Adviser or its affiliates,
or the family members of such persons or other investors. The Sub-Adviser
represents that it has in effect a code of ethics that complies with Rule 17j-1
under the 1940 Act and has procedures in place that, taken together, provide
reasonable enforcement of the code's provisions. Similarly, the Sub-Adviser
represents that, with respect to the use of nonmaterial nonpublic information,
it has complied, and will continue to comply, with Section 204A of the
Investment Advisers Act of 1940, as amended ("Advisers Act") and any rules
thereunder.
7. DISCLOSURE OF INFORMATION AND CONFIDENTIALITY.
7.1 The Sub-Adviser, the Company and the Manager, either during or after
the termination of this Agreement, are authorized with respect to matters
arising out of this Agreement to make any disclosures and/or participate in
any conduct required by any applicable law, rule, regulation,
self-regulating organization, investment exchange or any other body having
regulatory or enforcement responsibility with respect to any investment
business conducted by the Sub-Adviser on behalf of the Portfolio.
7.2 Subject to the preceding paragraph, the Sub-Adviser agrees that all
information which has or will come into its possession or knowledge
concerning the Portfolio or its investments in connection with this
Agreement shall be held by the Sub-Adviser in confidence. The Sub-Adviser
shall make no use of such information other than for the performance of this
Agreement, shall disclose such information only to the directors, officers
or employees of the Sub-Adviser or its affiliated firms or of any third
party appointed pursuant to this Agreement requiring such information and
shall not disclose such information to any other person without the written
consent of the Company; provided, however, that to the extent the
investments for the Portfolio are similar to investments for other clients
of the Sub-Adviser, the Sub-Adviser may disclose such investments without
direct reference to the Portfolio. The Sub-Adviser may also include the name
of the Portfolio in a representative client list.
7.3 Subject to the preceding paragraph, the Company and the Manager
agree that all information which has or will come into their possession or
knowledge concerning the operations and procedures of the Sub-Adviser shall
be held by the Company and the Manager in confidence. The Company and the
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Manager shall make no use of such information other than for the performance
of this Agreement, shall disclose such information only to their directors,
officers or employees or those of its affiliated firms and shall not
disclose such information to any other person without the written consent of
the Sub-Adviser.
7.4 The Manager and the Company agree not to refer to Mercury Asset
Management International Ltd. or its affiliates in any advertisement or
other document without prior consent of the Sub-Adviser. Similarly, Mercury
Asset Management International Ltd. and its affiliates shall not refer to
the Manager, the Company, the Portfolio, or other Fortis affiliates in any
advertisement or other document without the Manager's prior consent.
However, the Parties to this Agreement agree that they may reference one
another as necessary in regulatory and other legal filings. Further, the
parties agree that they will not unreasonably withhold permission to use
their names or otherwise reference them in materials used to describe the
Portfolio and/or the Company.
8. DEALINGS WITH THE CUSTODIAN. The Manager shall notify the Sub-Adviser
of the appointment of the custodian(s) ("Custodian") for all or any portion of
the Portfolio's assets, shall provide the Sub-Adviser with a true and complete
copy of each agreement with the Custodian that deals with the Portfolio's assets
("Custodian Agreements"), and shall provide the Sub-Adviser with the names of
persons authorized to act on behalf of the Custodian and such other information
as the Sub-Adviser shall reasonably require. The Sub-Adviser agrees to give
instructions in accordance with the terms of the applicable Custodian
Agreements. The Company agrees to provide promptly to the Sub-Adviser a copy of
all relevant Custodian Agreements, and all changes made to such documents.
9. DELEGATION OF THE SUB-ADVISER'S RESPONSIBILITIES. The Sub-Adviser may
not delegate its investment advisory responsibilities as Sub-Adviser to the
Portfolio. However, the Sub-Adviser may employ, retain or otherwise avail itself
of the services and facilities of persons and entities within its own
organization or any other organization for the purpose of providing the
Sub-Adviser, the Manager or the Portfolio with such information, advice or
assistance, including but not limited to advice regarding economic factors and
trends and advice as to transactions in specific securities, as the Sub-Adviser
may deem necessary, appropriate or convenient for the discharge of its
obligations hereunder or as may otherwise be helpful to the Manager or the
Portfolio, or in the discharge of the Sub-Adviser's overall responsibilities
with respect to the other accounts for which it serves as investment manager or
investment adviser. The Sub-Adviser's acquisition of information, advice or
assistance pursuant to this paragraph shall be at the Sub-Adviser's own expense
and shall not relieve the Sub-Adviser of any of its obligations under this
Agreement.
10. COMPENSATION.
10.1 For the services to be rendered under this Agreement and the
facilities to be furnished, the Manager shall pay to the Sub-Adviser for
each fiscal year of the Company, a monthly management fee at the annual rate
of .35 of 1% of the Portfolio's first $100 million of average daily net
assets and .225 of 1% of the Portfolio's average daily net assets in excess
of $100 million. The monthly management fee shall be paid to the Sub-Adviser
not later than the tenth business day of the month following the month in
which such services were rendered and shall be based upon the average net
asset values of all the issued and outstanding shares of the Portfolio as
determined as of the close of each business day of the month pursuant to the
Articles of Incorporation, Bylaws and currently effective Prospectus of the
Portfolio. Payments of the monthly management fee will be accompanied by
documentation that verifies the calculation of such fee. If the management
of the Portfolio by the Sub-Adviser commences or terminates at any time
other than the beginning or end of a month, the management fee shall be
prorated for that portion of such month during which this Agreement was in
force.
10.2 Any fees payable by the Manager pursuant to Clause 10.1 during
the period commencing on the later of (a) the first date that Merrill Lynch
& Co., Inc. ("Merrill Lynch") controls Mercury Asset Management Group plc
("MAM") (the "Assignment Date") and (b) the date on which the SEC grants the
exemptive order application of Merrill Lynch, MAM, Mercury Asset Management
International Channel Islands Ltd. and the Sub-Adviser filed with the SEC on
December 10, 1997 seeking an
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exemption from compliance with certain provisions of Section 15(a) of the
1940 Act (the "Issuance Date") and ending on the date of the initial
approval of this Agreement by a majority of the outstanding voting
securities of the Portfolio shall be paid into an interest-bearing account
with an unaffiliated financial institution, as the Sub-Adviser and Manager
may establish, to be released to the Sub-Adviser only upon such initial
approval of this Agreement, or, if such approval shall not occur prior to
the earlier of (i) the 150th day following the Assignment Date and (ii) July
15, 1998, to the Portfolio.
11. REPRESENTATIONS OF THE SUB-ADVISER. The Sub-Adviser represents and
agrees that:
(a) The Sub-Adviser is registered as an "investment adviser" under the
Advisers Act and is currently in compliance in all material respects and
shall at all times continue to comply in all material respects with the
requirements imposed upon it by the Advisers Act, the 1940 Act, the Internal
Revenue Code, state securities laws and all applicable rules and regulations
thereunder as they relate to the services provided under this Agreement. The
Sub-Adviser will immediately notify the Manager if it becomes aware of the
occurrence of any event that would disqualify the Sub-Adviser from serving
as an investment adviser of an investment company pursuant to Section 9 of
the 1940 Act or any other applicable law or regulation.
(b) The Sub-Adviser will maintain, keep current and accurate, and
preserve all records with respect to the Portfolio as are required of it
under the Advisers Act and the 1940 Act, in the manner provided by such Acts
and the rules thereunder. The Sub-Adviser agrees that such records are the
property of the Company, and following termination of this Agreement will be
surrendered to the Company promptly upon request except to the extent that
they are required to be retained by the Sub-Adviser under applicable law.
Further, such records shall be open to inspection by the Company. The
Sub-Adviser will also assure that the Company will have the same access as
the Sub-Adviser has to records relating to the Portfolio that are held by
relevant third parties. Such inspections will be at reasonable times during
business hours and only upon reasonable notice of the Company's desire to
make an inspection.
(c) The Sub-Adviser agrees to advise the Manager of any developments,
such as the reassignment of a portfolio manager, that would require
Prospectus disclosure and to provide any necessary information related to
such developments.
(d) The Sub-Adviser has provided the Manager and the Company with a copy
of its most recent and complete Form ADV and will promptly furnish them with
copies of any material amendments to the Form.
(e) If the Sub-Adviser's performance of its obligations under this
Agreement takes place in the United Kingdom, the Sub-Adviser shall be and
shall remain during the effectiveness of this Agreement, a member of the
Investment Management Regulatory Organisation, Ltd. ("IMRO") and thereby
regulated in the conduct of Investment Business (as defined in IMRO's rules)
by the IMRO. The Company and the Manager will be treated as a Non-Private
Customer (as defined in IMRO's rules) of the Sub-Adviser.
(f) The Sub-Adviser shall furnish the Manager with a certificate, signed
by a duly authorized officer of the Sub-Adviser that designates the officers
or employees of the Sub-Adviser having authority to act for and on behalf of
the Sub-Adviser in connection with this Agreement. The Sub-Adviser agrees
that, until such time as the Manager is otherwise informed in writing by a
duly authorized officer of the Sub-Adviser, the Manager shall be authorized
and entitled to rely on any notice, instruction, request, order or other
communication, given either in writing or orally, and reasonably believed by
the Manager in good faith to be given by an authorized representative of the
Sub-Adviser.
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12. REPRESENTATIONS OF THE MANAGER. The Manager represents and agrees that:
(a) The Manager is registered as an "investment adviser" under the
Advisers Act and has provided to the Sub-Adviser a copy of its most recent
and complete Form ADV, along with a copy of the Investment Advisory and
Management Agreement between the Manager and the Company and the current
Company Prospectus regarding the Portfolio. After any amendment to the
documents referenced in this paragraph, the Manager will promptly furnish a
copy of such amended document to the Sub-Adviser. In addition, the Manager
will provide the Sub-Adviser with notice of proposed changes in the
Prospectus and the opportunity to review and comment upon such changes
before they are finalized, wherever possible.
(b) The Manager and the Company are currently in material compliance and
shall at all times continue to be in material compliance with the relevant
requirements of the Advisers Act, the 1940 Act, all applicable state
securities and insurance laws, and the rules thereunder, as they pertain to
the Portfolio.
(c) The Manager shall furnish the Sub-Adviser with a certificate, signed
by a duly authorized officer of the Manager that designates the officers or
employees of the Manager having authority to act for and on behalf of the
Manager in connection with this Agreement. The Manager agrees that, until
such time as the Sub-Adviser is otherwise informed in writing by a duly
authorized officer of the Manager, the Sub-Adviser shall be authorized and
entitled to rely on any notice, instruction, request, order or other
communication, given either in writing or orally, and reasonably believed by
the Sub-Adviser in good faith to be given by an authorized representative of
the Manager.
13. LIABILITY, INDEMNIFICATION AND FORCE MAJEURE.
13.1 The Sub-Adviser, its affiliated firms or its or their employees,
officers, or directors will not be liable for any error of judgment or
mistake of law or for any loss suffered by the Portfolio, its shareholders
or FBIC or First Fortis contract owners in connection with the performance
of their duties under this Agreement, except for loss resulting from willful
misfeasance, bad faith or negligence on their part in the performance of
their duties or from reckless disregard by them of their duties under this
Agreement.
13.2 The Manager shall indemnify the Sub-Adviser against all claims
which may be made against the Sub-Adviser in connection with the exercise of
the powers and discretions conferred upon it pursuant to this Agreement,
EXCEPT insofar as such claims allege or are the result of the willful
misfeasance, bad faith or negligence of the Sub-Adviser or any of its
affiliated firms or its or their employees, officers or directors or its or
their breach of this Agreement or violation of applicable law. Conversely,
the Sub-Adviser shall indemnify the Manager and the Company against all
claims alleging or resulting from the willful misfeasance, bad faith or
negligence of the Sub-Adviser or any of its affiliated firms or its or their
employees, officers or directors or its or their breach of this Agreement or
violation of applicable law.
13.3 Neither party shall be held responsible for their non-performance
of any of their obligations under this Agreement by reason of any cause
beyond their control, including any breakdown or failure of transmission,
communication or computer facilities, postal or other strikes or similar
industrial action and the failure of any relevant exchange, clearing house
and/or broker for any reason to perform its obligations.
14. TERM, RENEWAL AND TERMINATION.
14.1 This Agreement shall, with respect to the Portfolio, become
effective on the later of the Assignment Date and the Issuance Date and
shall remain in force for two years thereafter, and for successive annual
periods thereafter but only so long as each such continuance is specifically
approved at least annually by (1) a majority of the Directors of the Company
who are not parties to this
A-7
Agreement or interested persons of any such parties (other than as Directors
of the Company), by vote cast in person at a meeting called for the purpose
of voting on such approval; or (2) a vote of the holders of a majority of
the outstanding voting securities (as defined in the 1940 Act) of such
Portfolio. It shall be the duty of the Directors of the Company to request
and evaluate, and the duty of the Manager and Sub-Adviser to furnish, such
information as may be reasonably necessary to evaluate the terms of this
Agreement and any renewal hereof.
14.2 This Agreement may be terminated with respect to the Portfolio at
any time without the payment of any penalty by the Portfolio (1) by a vote
of a majority of the entire Board of Directors of the Company on sixty (60)
days' written notice to the Manager and the Sub-Adviser; (2) by vote of the
holders of a majority of the outstanding voting securities of such Portfolio
(as defined in the 1940 Act); or (3) by the Sub-Adviser on 60 days' written
notice to the Manager and the Company.
14.3 This Agreement shall automatically terminate in the event of its
assignment, as that term is defined in Section 2(a)(4) of the 1940 Act and
the rules thereunder.
14.4 On the effective date of any termination of this Agreement or as
close to such date as is reasonably possible, the Sub-Adviser shall provide
the Manager with a final report for the Portfolio which will include the
fair market value for each of the Portfolio's investments.
14.5 Upon the Manager's receipt or service of any notice given by or
to the Company concerning the termination of the Manager's appointment as
the investment adviser to the Company, the Manager shall immediately forward
a copy of such notice to the Sub-Adviser and the Sub-Adviser's appointment
under this Agreement shall terminate on the same date as the termination of
the Manager's appointment.
15. AMENDMENT. No amendment to or modification of this Agreement shall be
effective unless and until it is set forth in a written amendment signed by the
Manager and the Sub-Adviser and approved by the vote of a majority of the
outstanding shares of the Portfolio, as defined in the 1940 Act.
16. AUTHORITY AND ENFORCEABILITY.
16.1 Each of the parties to this Agreement hereby represents that it
is duly authorized and empowered to execute, deliver, and perform this
Agreement and that such actions do not conflict with or violate any
provision of law, rule, regulation, other legal requirement, contract or
other instrument to which it is a party or to which it is subject and that
this Agreement constitutes a valid and binding obligation, inuring to the
benefit of the Manager and the Sub-Adviser and their respective successors,
enforceable in accordance with its terms.
16.2 If any provision of this Agreement shall be held or made invalid
or unenforceable by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby and any such
invalid or unenforceable provision shall be deemed to be replaced with a
valid and enforceable provision that most closely reflects the intention of
the parties.
17. APPLICABLE LAW. To the extent that state law is not preempted by the
provisions of any law of the United States heretofore or hereafter enacted, as
the same may be amended from time to time, this Agreement shall be administered,
construed and enforced according to the laws of the State of Minnesota.
A-8
18. NOTICES. All notices hereunder shall be in writing and shall be
delivered in person or by facsimile (followed by delivery in person) to the
parties at the addresses set forth below:
If to the Manager: Fortis Advisers, Inc.
500 Bielenberg Drive
St. Paul, MN 55125
Fax #: 612-738-5262
Attn: Legal Department
If to the Sub-Adviser: Mercury Asset Management International Ltd.
33 King William Street
London EC4R 9AS, England
Fax #: 011-44-71-280-2820
or such other name or address as may be given in writing to the other party.
Unless specifically provided elsewhere, notice given as provided above shall
be deemed to have been given, if by personal delivery, on the day of such
delivery, and if by facsimile and mail, on the date on which such facsimile is
sent.
19. EXECUTION. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their duly authorized officers.
FORTIS ADVISERS, INC.
By:
-----------------------------------------
Attest: -------------------------
SECRETARY
MERCURY ASSET MANAGEMENT INTERNATIONAL LTD.
By:
-----------------------------------------
Attest: -------------------------
SECRETARY
A-9
EXHIBIT A
EXAMPLES OF THE ROUTINE ACCOUNTING AND OPERATIONAL
INFORMATION AND DOCUMENTATION REQUIREMENTS OF THE PORTFOLIO
TO BE SATISFIED BY THE SUB-ADVISER
The following information is to be provided to:
Fortis Series Fund, Inc.
ATTN: Fund Accounting
P.O. Box 64284
St. Paul, MN 55164
FAX: (612) 738-0996
PHONE: (612) 738-4568, 5517 or 5606
1. DOCUMENTATION OF TRADES. On a daily basis, via facsimile, a listing of
that day's executed trades. At the end of each week, by mail, hard copies of
documentation for that week's executed trades. The signature or initials of the
portfolio manager or duly authorized officer or employee of the Sub-Adviser
should be placed on the trade tickets to validate the authenticity of the
trading information.
2. PORTFOLIO HOLDINGS. On a weekly basis, via facsimile and mail, a list
of the Portfolio's holdings. The list should include the following information
for each of the Portfolio's holdings, where applicable: long description,
cusip/sedol number, maturity date, par/principal amounts, market value, market
price, coupon rate and bond rating.
3. SECURITY PRICING. On a daily basis, by telephone or facsimile: (I)
review with the Company's Fund Accounting Department (the "Department") the
prices of the Portfolio's securities, which shall be provided by the Department;
(ii) inform the Department of its agreement or disagreement with such prices;
(iii) provide the Department with the basis for any disagreement it may have
with respect to a particular security's price and its opinion (along with
outside broker quotes) as to what that security's price should be; and (iv) in
any instance where the pricing services utilized by the Department do not
provide a price for a security held by the Portfolio, provide the Department
with reasonable assistance in determining a price for such security.
1
GLOBAL BOND SERIES
OF
FORTIS SERIES FUND, INC.
500 Bielenberg Drive, Woodbury, Minnesota 55125
Mailing Address: P.O. Box 64284, St. Paul, Minnesota 55164
PROXY FOR SPECIAL SHAREHOLDERS' MEETING
TO BE HELD ON JUNE 30, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Michael J. Radmer, Scott R. Plummer, Tamara L.
Fagely and Robert W. Beltz, Jr. and each of them with power to act without the
other and with all the right of substitution in each, the proxies of the
undersigned to vote all shares of Global Bond Series (the "Series") of Fortis
Series Fund, Inc. (the "Fund") held by the undersigned on May 12, 1998, at the
Special Shareholders' Meeting of the Series, to be held at the offices of the
Fund, on Tuesday, June 30, 1998, at 1:00 p.m. and any adjournment thereof, with
all powers the undersigned would possess if present in person. All previous
proxies given with respect to the meeting are revoked.
THIS PROXY WILL BE VOTED AS INSTRUCTED ON THE MATTERS ON THE REVERSE SIDE.
IT IS UNDERSTOOD THAT IF NO CHOICE IS SPECIFIED ON THE REVERSE SIDE, THIS PROXY
WILL BE VOTED "FOR" ALL ITEMS. UPON ALL OTHER MATTERS THE PROXIES SHALL VOTE AS
THEY DEEM IN THE BEST INTERESTS OF THE SERIES.
Receipt of Notice of Special Shareholders' Meeting and Proxy Statement is
acknowledged by your execution of this proxy. Mark, sign, date, and return this
proxy in the addressed envelope--no postage required. Please mail promptly to
save further solicitation expenses.
GLOBAL BOND SERIES
OF
FORTIS SERIES FUND, INC.
P R O X Y
THE PROXIES ARE INSTRUCTED TO VOTE MY SHARES AS FOLLOWS:
1. Proposal to approve a new investment sub-advisory agreement for the Series
on substantially the same terms as the most recent sub-advisory agreement
for the Series:
/ / FOR / / AGAINST / / ABSTAIN
2. To vote with discretionary authority upon such other matters as may come
before the meeting.
----------------------------------------------
(Please sign name(s) exactly as registered)
----------------------------------------------
(If there are co-owners, both should sign)
----------------------------------------------
Telephone Number
Dated
----------------------------------------, 1998
Month Day
FIRST FORTIS LIFE INSURANCE COMPANY
220 Salina Meadows Parkway, Suite 225
Mailing Address: Box 3209
Syracuse, New York 13220
VOTING INSTRUCTIONS
FOR
FIRST FORTIS LIFE INSURANCE COMPANY SEPARATE ACCOUNTS
THESE VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF
FIRST FORTIS LIFE INSURANCE COMPANY
The undersigned hereby instructs First Fortis Life Insurance Company (the
"Company") to represent and vote the number of shares of Global Bond Series (the
"Series") of Fortis Series Fund, Inc. (the "Fund") represented by the number of
votes attributable to the undersigned Variable Insurance Product at the Special
Shareholders' Meeting of the Series, to be held at the offices of the Fund, on
Tuesday, June 30, 1998, at 1:00 p.m. and any adjournment thereof, upon matters
on the reverse side and as set forth in the Notice of Special Shareholders'
Meeting and Proxy Statement for the Series, receipt of which the undersigned
acknowledges.
VOTES OF CONTRACT AND POLICY OWNERS FOR WHICH NO VOTING INSTRUCTIONS ARE
RECEIVED WILL BE VOTED BY THE COMPANY IN THE SAME PROPORTION A THE VOTED OF
CONTRACT AND POLICY OWNERS FOR WHICH VOTING INSTRUCTIONS ARE RECEIVED. UPON ALL
OTHER MATTERS THE COMPANY WILL VOTE AS IT DEEMS IN ITS BEST INTEREST.
Mark, sign, date, and return these voting instructions in the addressed
envelope. No postage is required. Please mail promptly to save further
solicitation expenses.
GLOBAL BOND SERIES
OF
FORTIS SERIES FUND, INC.
FORTIS VARIABLE ANNUITY CONTRACTS
VOTING INSTRUCTIONS
1. Proposal to approve a new investment sub-advisory agreement for the Series
on substantially the same terms as the most recent sub-advisory agreement
for the Series:
/ / FOR / / AGAINST / / ABSTAIN
2. To vote with discretionary authority upon such other matters as may come
before the meeting.
THE COMPANY RECOMMENDS VOTING "FOR" ITEM 1.
Dated: ------------------------------------, 1998
Month Day
-------------------------------------------------
Signature of Contract or Policy Owner
FORTIS BENEFITS INSURANCE COMPANY
500 Bielenberg Drive
Woodbury, Minnesota 55125
Mailing Address: P.O. Box 64272
St. Paul, Minnesota 55164
VOTING INSTRUCTIONS
FOR
FORTIS BENEFITS INSURANCE COMPANY SEPARATE ACCOUNTS
THESE VOTING INSTRUCTIONS ARE SOLICITED ON BEHALF OF
FORTIS BENEFITS INSURANCE COMPANY
The undersigned hereby instructs Fortis Benefits Insurance Company (the
"Company") to represent and vote the number of shares of Global Bond Series (the
"Series") of Fortis Series Fund, Inc. (the "Fund") represented by the number of
votes attributable to the undersigned Variable Insurance Product at the Special
Shareholders' Meeting of the Series, to be held at the offices of the Fund, on
Tuesday, June 30, 1998, at 1:00 p.m. and any adjournment thereof, upon matters
on the reverse side and as set forth in the Notice of Special Shareholders'
Meeting and Proxy Statement for the Series, receipt of which the undersigned
acknowledges.
VOTES OF CONTRACT AND POLICY OWNERS FOR WHICH NO VOTING INSTRUCTIONS ARE
RECEIVED WILL BE VOTED BY THE COMPANY IN THE SAME PROPORTION A THE VOTED OF
CONTRACT AND POLICY OWNERS FOR WHICH VOTING INSTRUCTIONS ARE RECEIVED. UPON ALL
OTHER MATTERS THE COMPANY WILL VOTE AS IT DEEMS IN ITS BEST INTEREST.
Mark, sign, date, and return these voting instructions in the addressed
envelope. No postage is required. Please mail promptly to save further
solicitation expenses.
GLOBAL BOND SERIES
OF
FORTIS SERIES FUND, INC.
FORTIS VARIABLE ANNUITY CONTRACTS
VOTING INSTRUCTIONS
1. Proposal to approve a new investment sub-advisory agreement for the Series
on substantially the same terms as the most recent sub-advisory agreement
for the Series:
/ / FOR / / AGAINST / / ABSTAIN
2. To vote with discretionary authority upon such other matters as may come
before the meeting.
THE COMPANY RECOMMENDS VOTING "FOR" ITEM 1.
Dated: ------------------------------------, 1998
Month Day
-------------------------------------------------
Signature of Contract or Policy Owner