CAPITAL APPRECIATION FUND
SCHEDULE 14A INFORMATION
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OF THE SECURITIES EXCHANGE ACT OF 1934
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CAPITAL APPRECIATION FUND
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THE TRAVELERS LIFE AND ANNUITY COMPANY
THE TRAVELERS INSURANCE COMPANY
CITICORP LIFE INSURANCE COMPANY
FIRST CITICORP LIFE INSURANCE COMPANY
The Travelers Series Trust
Convertible Securities Portfolio
Disciplined Mid Cap Stock Portfolio
Equity Income Portfolio
Federated High Yield Portfolio
Federated Stock Portfolio
Large Cap Portfolio
Mondrian International Stock Portfolio
(formerly, Lazard International Stock Portfolio)
MFS Mid Cap Growth Portfolio
MFS Value Portfolio
Mercury Large Cap Core Portfolio
(formerly, Merrill Lynch Large Cap Core Portfolio)
Pioneer Fund Portfolio
Social Awareness Stock Portfolio
Travelers Quality Bond Portfolio
U.S. Government Securities Portfolio
Zero Coupon Bond Fund Portfolio (Series 2005)
Managed Assets Trust
Capital Appreciation Fund
High Yield Bond Trust
Money Market Portfolio
One Cityplace, Hartford, Connecticut 06103
May 18, 2005
Dear Variable Annuity Contract or
Variable Life Insurance Policy Owner:
Shares of the above-named portfolios (the "Portfolios") of The Travelers
Series Trust (the "Trust"), and the Managed Assets Trust, the Capital
Appreciation Fund, the High Yield Bond Trust, and/or the Money Market Portfolio
(such four funds the "Separate Funds," and, together with the Portfolios, the
"Funds") have been purchased at your direction by The Travelers Life and
Annuity Company, The Travelers Insurance Company, Citicorp Life Insurance
Company or First Citicorp Life Insurance Company (collectively, "TL&A") through
one or more of its separate accounts to fund benefits payable under your
variable annuity contract or variable life insurance policy (collectively, the
"variable contracts"). TL&A, as the
shareholder of record and legal owner of those separate accounts, has been
asked: (i) for each Fund, except for the Social Awareness Stock Portfolio of
the Trust, to approve a new investment advisory agreement between the Fund (or,
in the case of the Portfolios, the Trust, on behalf of each Portfolio) and
Travelers Asset Management International Company LLC ("TAMIC"), the investment
adviser to each Fund; (ii) to approve a proposal with respect to the future
operation of each Fund (except the Social Awareness Stock Portfolio of the
Trust) whereby TAMIC may from time to time, subject to approval by the Board of
Trustees and to the extent permitted by an exemption ("manager of managers
exemption") granted by the Securities and Exchange Commission, enter into new
or amended agreements with subadvisers with respect to the Fund without
obtaining shareholder approval of such agreements, and to permit such
subadvisers to manage the assets of the Fund pursuant to such subadvisory
agreements; (iii) to elect a new member to the Board of Trustees of the Trust
and each Separate Fund; and (iv) for the Mondrian International Stock Portfolio
(formerly, the Lazard International Stock Portfolio) of the Trust, to approve a
new subadvisory agreement between TAMIC and Mondrian Investment Partners Ltd.
("Mondrian"), the subadviser for that Portfolio.
As an owner of a variable contract with an interest in one or more of
those separate accounts, TL&A is asking you for instructions as to how to vote
the shares of each Fund that are attributable to your variable contract.
TAMIC is the investment adviser for each Fund, except for the Social
Awareness Stock Portfolio of the Trust. Citigroup Inc. ("Citigroup") has
reached an agreement with MetLife, Inc. ("MetLife") to sell TL&A to MetLife. As
part of this transaction, TAMIC, which is currently an indirect wholly owned
subsidiary of Citigroup, would become an indirect wholly owned subsidiary of
MetLife. A change of control of TAMIC may therefore be deemed to occur, which
in turn results in the assignment of TAMIC's investment advisory agreements
with the Funds, as well as its subadvisory agreements with the various
subadvisers, and the termination of those agreements by operation of law and
pursuant to the terms of those agreements, effective as of the closing date of
the sale of TL&A, which currently is scheduled to occur on June 30, 2005 or
soon thereafter. Therefore, shareholder approval of the new advisory agreements
is needed to enable TAMIC to continue to provide advisory services to the
Funds.
It is proposed that TAMIC will continue to provide advisory services to
the Funds at the same fee rates as currently apply. With respect to the
subadvisory agreements, upon becoming a subsidiary of MetLife, TAMIC would also
be able to utilize an exemption, if approved by the variable contract owners,
from the Securities and Exchange Commission that would allow TAMIC to operate
as a "manager of managers" to the Funds. As a manager of managers, TAMIC would
retain the responsibility for hiring and, when appropriate, replacing
subadvisers. TAMIC would be permitted, subject to certain conditions and Board
of Trustees approval, to enter into new subadvisory agreements for the Funds,
including new agreements with the current subadvisers of the Funds whose
current subadvisory
agreements will be terminated as a result of the sale of TL&A to MetLife. TAMIC
would not need, however, to obtain variable contract owner approval, which
would otherwise be required, to enter into a new agreement with the current
subadviser or a new subadviser.
The Funds' current trustee who is affiliated with Citigroup has informed
the Funds' Board of Trustees that if the sale of TL&A to MetLife is
consummated, he will resign as a Board member. Accordingly, it is being
proposed that contract owners elect, subject to consummation of the sale, a
trustee affiliated with MetLife to replace the current trustee affiliated with
Citigroup.
The approval of the new subadvisory agreement with Mondrian is in
connection with the decision of the Board of Trustees of the Trust to replace
Lazard Asset Management LLC as subadviser to the Mondrian International Stock
Portfolio (formerly, the Lazard International Stock Portfolio) with Mondrian
effective May 1, 2005.
After carefully considering the merits of the proposals, the Board of
Trustees of the Trust and the Separate Funds (the "Board") has determined that
approval of the proposals is in the best interests of each Fund's shareholders,
and indirectly the underlying contract owners of the Funds.
The Board recommends that you read the enclosed materials carefully and
then instruct TL&A to vote FOR the proposals. Please take a moment now to sign
and return the voting instruction form(s) in the enclosed postage-paid
envelope. For more information, please call TL&A at 1-800-842-9368.
Respectfully,
The Travelers Life and Annuity Company The Travelers Insurance Company
Citicorp Life Insurance Company First Citicorp Life Insurance Company
We urge you to sign and return the voting instruction form(s) in the
enclosed postage-paid envelope.
Your Vote is Important!
THE TRAVELERS SERIES TRUST
Convertible Securities Portfolio
Disciplined Mid Cap Stock Portfolio
Equity Income Portfolio
Federated High Yield Portfolio
Federated Stock Portfolio
Large Cap Portfolio
Mondrian International Stock Portfolio
(formerly, Lazard International Stock Portfolio)
MFS Mid Cap Growth Portfolio
MFS Value Portfolio
Mercury Large Cap Core Portfolio
(formerly, Merrill Lynch Large Cap Core Portfolio)
Pioneer Fund Portfolio
Social Awareness Stock Portfolio
Travelers Quality Bond Portfolio
U.S. Government Securities Portfolio
Zero Coupon Bond Fund Portfolio (Series 2005)
MANAGED ASSETS TRUST
CAPITAL APPRECIATION FUND
HIGH YIELD BOND TRUST
MONEY MARKET PORTFOLIO
One Cityplace
Hartford, Connecticut 06103
May 18, 2005
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of the Funds:
NOTICE IS HEREBY GIVEN THAT a Joint Special Meeting of the shareholders
(the "Shareholders") of the above-named portfolios of The Travelers Series
Trust (the "Trust"), and the Managed Assets Trust, the Capital Appreciation
Fund, the High Yield Bond Trust and the Money Market Portfolio (such four
funds, the "Separate Funds," and, together with the portfolios of the Trust,
the "Funds") will be held at One Cityplace, Hartford, Connecticut 06103, on
June 24, 2005 at 9:00 a.m. (Eastern time), for the following purposes:
ITEM 1. Except for the Social Awareness Stock Portfolio of the Trust,
to consider and approve new investment advisory agreements between each
Fund, or the Trust on behalf of a Fund, and Travelers Asset Management
International Company LLC ("TAMIC").
ITEM 2. To consider and approve a proposal with respect to the future
operation of each Fund (except for the Social Awareness Stock Portfolio of
the Trust) whereby TAMIC may from time to time, subject to approval by the
Board of Trustees and to the extent permitted by an exemption granted by
the Securities and Exchange Commission, enter into new or amended
agreements with subadvisers with respect to the Fund without obtaining
Shareholder approval of such agreements, and to permit such subadvisers to
manage the assets of the Fund pursuant to such subadvisory agreements.
ITEM 3. To elect a new member of the Board of Trustees.
ITEM 4. To consider and approve a new subadvisory agreement for the
Mondrian International Stock Portfolio of the Trust between TAMIC and
Mondrian Investment Partners Ltd., the subadviser of the Portfolio.
ITEM 5. To transact such other business as may properly come before
the Joint Special Meeting or any adjournment(s) thereof.
THE BOARD OF TRUSTEES OF THE FUNDS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN
FAVOR OF ITEMS 1, 2, 3 AND 4.
Shareholders of record as of the close of business on April 15, 2005 are
entitled to notice of, and to vote at, the Joint Special Meeting or any
adjournment(s) thereof.
Shareholders are requested to execute and return promptly in the enclosed
envelope the accompanying proxy, which is being solicited by the Board of
Trustees of the Trust and the Separate Funds. Proxies may be revoked at any
time before they are exercised by submitting a written notice of revocation or
subsequently executed voting instructions or by attending the Joint Special
Meeting and voting in person.
By Order of the Board of Trustees
-------------------------------------
Ernest J. Wright, Assistant Secretary
May 18, 2005
Hartford, Connecticut
THE TRAVELERS SERIES TRUST
Convertible Securities Portfolio
Disciplined Mid Cap Stock Portfolio
Equity Income Portfolio
Federated High Yield Portfolio
Federated Stock Portfolio
Large Cap Portfolio
Mondrian International Stock Portfolio
(formerly, Lazard International Stock Portfolio)
MFS Mid Cap Growth Portfolio
MFS Value Portfolio
Mercury Large Cap Core Portfolio
(formerly, Merrill Lynch Large Cap Core Portfolio)
Pioneer Fund Portfolio
Social Awareness Stock Portfolio
Travelers Quality Bond Portfolio
U.S. Government Securities Portfolio
Zero Coupon Bond Fund Portfolio (Series 2005)
MANAGED ASSETS TRUST
CAPITAL APPRECIATION FUND
HIGH YIELD BOND TRUST
MONEY MARKET PORTFOLIO
One Cityplace
Hartford, Connecticut 06103
(800) 842-9368
JOINT PROXY STATEMENT
This Joint Proxy Statement ("Proxy Statement") is being furnished in
connection with the solicitation of voting instructions by the Board of
Trustees (the "Board of Trustees" or the "Trustees") of The Travelers Series
Trust (the "Trust"), Managed Assets Trust ("MAT"), Capital Appreciation Fund
("CAF"), High Yield Bond Trust ("HYBT") and Money Market Portfolio ("MMP")
(MAT, CAF, HYBT, MMP, referred to collectively herein as the "Separate Funds"
and, together with the portfolios of the Trust, referred to collectively herein
as the "Funds") for use at the joint special meeting of the shareholders of the
Funds ("Shareholders") scheduled for June 24, 2005 at 9:00 a.m. (Eastern time),
and any adjournments thereof, at the offices of the Funds at the address set
forth above on this Proxy Statement (the "Meeting"). At the Meeting,
Shareholders of each Fund (except for the Social Awareness Stock Portfolio of
the Trust) will be asked to consider and approve (i) a new investment advisory
agreement between the Fund, or the Trust on behalf of the Fund, and Travelers
Asset Management International Company LLC ("TAMIC")
and (ii) a proposal (the "manager of managers proposal") with respect to the
future operation of the Fund whereby TAMIC may from time to time, subject to
the approval of the Board of Trustees of the Fund and to the extent permitted
by an exemption granted by the Securities and Exchange Commission ("SEC"),
enter into new or amended agreements with subadvisers with respect to the Fund
without obtaining shareholder approval of such subadvisory agreements, and to
permit such subadvisers to manage the assets of the Fund pursuant to such
subadvisory agreements. The Shareholders of each of the Separate Funds and of
the Trust will be asked to elect a new member of the Board of Trustees. In
addition, the shareholders of the Mondrian International Stock Portfolio of the
Trust will be asked to consider and approve a new subadvisory agreement between
TAMIC and Mondrian Investment Partners Ltd. ("Mondrian"), the subadviser for
that Portfolio (this proposal, together with the three proposals set forth
above, are collectively referred to herein as the "Proposals"). Shareholders of
each Fund will vote separately on the Proposals relating to their Fund for the
new investment advisory agreement and the managers of managers exemption.
Shareholders of each of the Separate Funds and the Trust will vote separately
on the election of a new Trustee. Only Shareholders of the Mondrian
International Stock Portfolio will vote on the approval of the new subadvisory
agreement with Mondrian. The Funds that will vote on each Proposal are set
forth in the table below.
Proposal to
approve new Proposal to
Proposal to investment approve new
approve manager advisory Election of subadvisory
of managers agreement new Trustee agreement
------------------- ------------------- --------------- ----------------
Funds voting All Funds, All Funds, Each Separate Mondrian
on Proposal except the Social except the Social Fund and the International
Awareness Stock Awareness Stock Trust, voting Stock Portfolio
Portfolio, voting Portfolio, voting separately
separately separately
This Proxy Statement describes more fully the Proposals. Forms of the new
investment advisory agreements are included as Appendices A-1 through A-5 of
this Proxy Statement. The form of the new subadvisory agreement with Mondrian
for the Mondrian International Stock Portfolio is included as Appendix B.
Shares of the Funds are not offered directly to the public but are sold
only to insurance companies and their separate accounts as the underlying
investment medium for owners of variable annuity contracts and variable life
insurance policies (collectively, the "variable contracts"). As of the record
date for the Meeting, The Travelers Insurance Company, The Travelers Life and
Annuity Company, and their affiliates (collectively, "TL&A"), on behalf of
separate accounts registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), unregistered separate accounts, and related
subaccounts (collectively, the "separate accounts"), are the legal owners of
100% of the shares of each Fund.
2
TL&A shall vote all shares of each Fund with respect to each Proposal
(for, against or abstain from voting) in the same proportion as the timely
instructions received from owners of variable contracts that had contract
values allocated on the record date to a separate account investing in shares
of the Fund (collectively, the "contract owners"). Accordingly, TL&A is
furnishing this Proxy Statement to contract owners in connection with the
solicitation of voting instructions from the contract owners regarding approval
of the Proposals.
The Meeting will be held on June 24, 2005 at 9:00 a.m. (Eastern time) at
the Funds' offices at One Cityplace, Hartford, Connecticut 06103. It is
expected that this Proxy Statement will be mailed on or about May 24, 2005.
Shareholders of record at the close of business on April 15, 2005 (the "Record
Date") are entitled to vote on the Proposals. At the Meeting, Shareholders will
consider and approve or disapprove each Proposal.
The chart below lists the number of shares of each Fund (rounded to the
nearest full share) that were outstanding as of the close of business on the
Record Date. Each share of a Fund is entitled to one vote, with proportionate
voting for fractional shares.
Total Number of
Shares Outstanding
Name of Portfolio as of April 15, 2005
- ------------------- ---------------------
Convertible Securities Portfolio ...................... 8,702,510
Disciplined Mid Cap Stock Portfolio ................... 9,730,896
Equity Income Portfolio ............................... 21,297,827
Federated High Yield Portfolio ........................ 9,911,543
Federated Stock Portfolio ............................. 1,891,256
Large Cap Portfolio ................................... 19,017,866
Mondrian International Stock Portfolio ................ 16,384,445
MFS Mid Cap Growth Portfolio .......................... 46,443,746
MFS Value Portfolio ................................... 4,643,225
Mercury Large Cap Core Portfolio ...................... 13,737,077
Pioneer Fund Portfolio ................................ 2,841,213
Social Awareness Stock Portfolio ...................... 3,868,821
Travelers Quality Bond Portfolio ...................... 16,456,254
U.S. Government Securities Portfolio .................. 19,084,560
Zero Coupon Bond Fund Portfolio (Series 2005) ......... 476,522
Managed Assets Trust .................................. 17,304,827
Capital Appreciation Fund ............................. 15,355,285
High Yield Bond Trust ................................. 11,313,527
Money Market Portfolio ................................ 324,098,895
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
EACH PROPOSAL.
3
COPIES OF EACH FUND'S MOST RECENT ANNUAL AND SEMIANNUAL REPORTS ARE
AVAILABLE UPON REQUEST AND WITHOUT CHARGE BY CALLING TL&A (TOLL-FREE) AT
1-800-842-9368 OR BY WRITING TL&A ANNUITY SERVICES, ONE CITYPLACE, 3CP,
HARTFORD, CT 06103.
The first three Proposals are related to the proposed sale of TL&A by
Citigroup Inc. ("Citigroup") to MetLife, Inc. ("MetLife") as described in
greater detail under Proposal 1 below. This sale is expected to close on or
about June 30, 2005 (the "MetLife Closing Date"). The approval of the new
subadvisory agreement with Mondrian (Proposal 4) is in connection with the
decision of the Board of Trustees of the Trust to replace Lazard Asset
Management LLC as subadviser to the Mondrian International Stock Portfolio
(formerly, the Lazard International Stock Portfolio) with Mondrian effective
May 1, 2005.
Proposal 1. APPROVAL OF INVESTMENT ADVISORY AGREEMENTS.
SUMMARY
TAMIC currently serves as investment adviser to each Fund (except the
Social Awareness Stock Portfolio) pursuant to a separate investment advisory
agreement between TAMIC and each Fund or the Trust on behalf of each of its
Portfolios (the "Current Advisory Agreements"). For certain of the Funds, TAMIC
has entered into subadvisory and sub-subadvisory agreements with other
investment advisers. As explained in more detail below, Shareholders are being
asked to approve new investment advisory agreements between TAMIC and each Fund
or the Trust (the "New Advisory Agreements"). THE NEW ADVISORY AGREEMENTS WILL
CONTAIN TERMS SUBSTANTIALLY THE SAME AS THOSE IN THE CURRENT ADVISORY
AGREEMENTS.
MetLife and Citigroup have announced an agreement for the sale of TL&A by
Citigroup to MetLife (the "MetLife Transaction") for $11.5 billion, subject to
closing adjustments. The MetLife Transaction includes the acquisition by
MetLife of TL&A's subsidiary, TAMIC, the investment adviser to the Funds. The
Shareholders of the Funds are not being asked to approve the MetLife
Transaction. However, given that the Funds' investment adviser will have a new
parent company (MetLife) and that under the 1940 Act, a change in control of
the investment adviser results in a termination of that adviser's investment
advisory contracts, the Current Advisory Agreements and current subadvisory and
sub-subadvisory agreements (the "Current Subadvisory and Sub-Subadvisory
Agreements") between TAMIC and the respective subadviser and/or sub-subadviser
of a Fund, if any, will terminate upon the effective date of the sale of TL&A.
Thus, the New Advisory Agreements must be submitted to a vote of the
Shareholders.
4
Under the terms of the MetLife Transaction, Citigroup will receive $1.0 to
$3.0 billion in MetLife equity securities and the balance in cash. The MetLife
Transaction is subject to certain domestic and international regulatory
approvals, as well as other customary conditions to closing. It is planned that
the closing of the MetLife Transaction will take place on June 30, 2005 or soon
thereafter.
MetLife, through its subsidiaries and affiliates, is a leading provider of
insurance and other financial services to individual and institutional
customers. In the United States, the MetLife companies serve individuals in
approximately 13 million households and provide benefits to 37 million
customers and their family members through their employee benefit plan
sponsors.
With respect to the Funds, MetLife has recommended and the Board of
Trustees has approved the retention of a current affiliate of TAMIC, Salomon
Brothers Asset Management Inc. ("Salomon"), as a temporary subadviser for those
Funds that are now managed directly by TAMIC without a subadviser, effective on
or about the MetLife Closing Date. Certain of the portfolio managers employed
by Salomon are also currently employees of TAMIC and are the current portfolio
managers of some of these Funds. Therefore, for certain of these Funds, there
is expected to be no change in the day-to-day portfolio manager, while in
certain other of these Funds there will be. Furthermore, MetLife may in the
future make or recommend to the Trustees such additional changes to any Funds,
including changes to the investment objectives, policies and restrictions of
the Funds or merging one or more Funds into other MetLife-sponsored funds, as
it determines are appropriate and as permitted by applicable law.
In connection with the closing of the MetLife Transaction, MetLife,
Citigroup and certain of their affiliates will enter into a Distribution
Agreement under which Citigroup-affiliated broker-dealers will, subject to the
terms and conditions of such Distribution Agreement, continue to offer certain
TL&A and MetLife insurance contracts for a period of ten years from the MetLife
Closing Date. In addition, MetLife, Citigroup and certain of their affiliates
will enter into an Investment Products Agreement under which, for a period of
five years after the MetLife Closing Date and subject to the other terms and
conditions of the Investment Products Agreement, certain TL&A and MetLife
insurance products will include certain Citigroup-sponsored funds as investment
options.
As reflected by Proposal 2, representatives of MetLife have recommended
that each Fund (except the Social Awareness Stock Portfolio) operate in the
future as a "manager of managers" fund. (Please see Proposal 2 for more
information.) Thus, if Proposal 2 is approved by the Shareholders of each Fund
at the Meeting, new subadvisory and sub-subadvisory agreements for the Funds
will be approved only by the Board of the Trust or the Separate Fund, as
permitted by the manager of managers proposal.
5
MetLife has agreed that it will satisfy certain conditions set forth in
Section 15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe
harbor, which allows an investment adviser to an investment company or any of
its affiliated persons to receive any amount or benefit in connection with a
change in control of the investment adviser so long as certain conditions are
met. One such provision provides that no "unfair burden" may be imposed upon
the investment company as a result of such a change-in-control transaction or
any express or implied terms, conditions or understandings applicable thereto.
The term "unfair burden" is defined in Section 15(f) to include any
arrangement, during the two-year period after the change in control, whereby
the investment adviser, or any interested person of such adviser, receives or
is entitled to receive any compensation, directly or indirectly, from the
investment company or its shareholders (other than fees for bona fide
investment advisory or other services) or from any person in connection with
the purchase or sale of securities or other property to, from or on behalf of
the investment company (other than bona fide ordinary compensation as principal
underwriter for such investment company).
The Funds have not been advised by MetLife or TAMIC of any circumstance
arising from the MetLife Transaction that might result in the imposition of an
"unfair burden" on the Funds as a result of the MetLife Transaction. Moreover,
MetLife has agreed that for a period of not less than two years after the
consummation of the MetLife Transaction, it will refrain from imposing an
"unfair burden" on the Funds in connection with the MetLife Transaction.
Proposal 1 assumes the consummation of the MetLife Transaction. Should the
MetLife Transaction fail to close, then there would be no change in control of
TAMIC, and no consequent termination of the Current Advisory Agreements. Thus,
there would be no new agreements to approve.
THE INVESTMENT ADVISORY AGREEMENTS
THE CURRENT ADVISORY AGREEMENTS
The following chart lists the date of each Current Advisory Agreement, the
date it was last considered and renewed or approved by the Trustees, the date
on which it was last approved by Shareholders subsequent to the commencement of
operations of the Fund, and the reason it was last submitted for Shareholder
approval.
Date Last Approved Date Last Approved
Date of Current or Renewed by by Shareholders and
Name of Portfolio Advisory Agreement Trustees Reasons for Submission
- ---------------------- -------------------- -------------------- -----------------------
Convertible May 1, 1998, as July 23, 2004 N.A.
Securities Portfolio last amended
October 31, 2003
6
Date Last Approved Date Last Approved
Date of Current or Renewed by by Shareholders and
Name of Portfolio Advisory Agreement Trustees Reasons for Submission
- ---------------------- --------------------- ------------------- -----------------------
Disciplined Mid January 1, 1997, as July 23, 2004 N.A.
Cap Stock last amended
Portfolio October 31, 2003
Equity Income August 1, 1996, as July 23, 2004 N.A.
Portfolio last amended
September 1, 2004
Federated High August 1, 1996 as July 23, 2004 N.A.
Yield Portfolio last amended
October 31, 2003
Federated Stock August 1, 1996 as July 23, 2004 N.A.
Portfolio last amended
October 31, 2003
Large Cap August 1, 1996, as July 23, 2004 N.A.
Portfolio last amended
September 1, 2004
Mondrian August 1, 1996, as July 23, 2004 N.A.
International Stock last amended
Portfolio May 1, 2005
MFS Mid Cap March 20, 1998, as July 23, 2004 N.A.
Growth Portfolio last amended
September 1, 2004
MFS Value July 20, 1998, as July 23, 2004 N.A.
Portfolio last amended
September 1, 2004
Mercury Large March 20, 1998, as July 23, 2004 N.A.
Cap Core Portfolio last amended
September 1, 2004
Pioneer Fund May 1, 2003, as October 29, 2004 April 22, 2003 (to
Portfolio last amended approve TAMIC as
December 1, 2004 the new investment
adviser to the
Portfolio)
Travelers Quality August 1, 1996, as July 23, 2004 N.A.
Bond Portfolio last amended
October 31, 2003
U.S. Government December 30, July 23, 2004 April 23, 1993 (in
Securities Portfolio 1992, as last connection with a
amended change of control of
October 31, 2003 TAMIC)
7
Date Last Approved Date Last Approved
Date of Current or Renewed by by Shareholders and
Name of Portfolio Advisory Agreement Trustees Reasons for Submission
- ------------------- -------------------- ------------------- -----------------------
Zero Coupon Bond July 1, 1995, as July 23, 2004 N.A.
Fund Portfolio last amended
(Series 2005) October 31, 2003
Managed Assets December 30, July 23, 2004 April 23, 1993 (in
Trust 1992, as last connection with a
amended change of control of
October 31, 2003 TAMIC)
Capital July 1, 1996, as July 23, 2004 April 23, 1993 (in
Appreciation Fund last amended connection with a
September 1, 2004 change of control of
TAMIC)
High Yield Bond December 30, July 23, 2004 April 23, 1993 (in
Trust 1992, as last connection with a
amended change of control of
October 31, 2003 TAMIC)
Money Market December 30, July 23, 2004 April 23, 1993 (in
Portfolio 1992, as last connection with a
amended change of control of
October 31, 2003 TAMIC)
The key terms, including fee rates, of the Current Advisory Agreements are
set out in detail under the heading "The New Advisory Agreements" below.
The following table sets forth the aggregate advisory fees paid by the
Funds to TAMIC for the fiscal year ended December 31, 2004.
Aggregate Advisory
Name of Portfolio Fees Paid (1)
- ----------------- -------------------
Convertible Securities Portfolio ...................... $ 561,951
Disciplined Mid Cap Stock Portfolio ................... $1,237,113
Equity Income Portfolio ............................... $2,383,119
Federated High Yield Portfolio ........................ $ 520,768
Federated Stock Portfolio ............................. $ 196,073
Large Cap Portfolio ................................... $1,848,132
Mondrian International Stock Portfolio ................ $1,264,681
MFS Mid Cap Growth Portfolio .......................... $1,593,939
MFS Value Portfolio ................................... $ 293,439
Mercury Large Cap Core Portfolio ...................... $ 920,627
Pioneer Fund Portfolio ................................ $ 217,848
Travelers Quality Bond Portfolio ...................... $ 642,159
U.S. Government Securities Portfolio .................. $ 680,899
Zero Coupon Bond Fund Portfolio (Series 2005) ......... $ 5,282
8
Aggregate Advisory
Name of Portfolio Fees Paid (1)
- ----------------- -------------------
Managed Assets Trust .............. $1,444,024
Capital Appreciation Fund ......... $ 455,866
High Yield Bond Trust ............. $ 440,316
Money Market Portfolio ............ $1,093,070
- ----------------
(1) Net of applicable expense caps.
THE NEW ADVISORY AGREEMENTS
The New Advisory Agreements are the same in all material respects as the
Current Advisory Agreements, except that for certain of the Agreements,
language will be added to make explicit the authority of TAMIC to hire and
oversee subadvisers. In addition, each New Advisory Agreement will reflect the
MetLife Closing Date as its new effective date. Forms of the New Advisory
Agreements for the Funds are attached to this Proxy Statement as Appendices A-1
through A-5. While the New Advisory Agreements may vary in certain respects
from Fund to Fund, the terms of the New Advisory Agreements set forth below are
included in substance in all such Agreements.
Under the New Advisory Agreements, TAMIC will continue to provide
investment advisory services to each Fund, including furnishing to the Fund
advice and assistance with respect to the acquisition, holding or disposal of
the Fund's investments in accordance with the investment objectives, policies
and restrictions of the Fund. The New Advisory Agreements explicitly authorize
TAMIC, subject to the approval of the Board of Trustees, to enter into
agreements with other investment advisers to provide investment advice or other
services to the Fund. The Agreements provide that TAMIC remains responsible for
ensuring that any such subadviser conducts its operations in a manner
consistent with the terms of the Agreement.
All services under the New Advisory Agreements must be provided in
accordance with the provisions of the 1940 Act and any rules or regulations
thereunder, the Securities Act of 1933 and any rules or regulations thereunder,
the Internal Revenue Code, any other applicable provision of law, the Agreement
and Declaration of Trust of the Fund or Trust, the by-laws of the Fund or
Trust, any policies adopted by the Trustees, and the investment policies of
each Fund as disclosed in the registration statement of the Fund or Trust on
file with the SEC, as amended from time to time.
As compensation for its services, TAMIC will be entitled to receive from
each Fund fees calculated as a percentage of each Fund's average daily net
assets (except for the MFS Mid Cap Growth Portfolio and MFS Value Portfolio,
where the fee is based on the combined assets of certain Funds). Fees under the
New Advisory Agreements will be calculated at the same rate as those incurred
under the Current Advisory Agreements. The annual rate paid by each Fund is set
forth below.
9
The table also shows any expense caps that are in place. Under an Expense Cap
Agreement, The Travelers Insurance Company has agreed to reimburse each of the
Funds for the amounts by which a Fund's aggregate annual expenses, including
investment advisory fees, but excluding brokerage commissions, interest charges
and taxes, exceeds the expense caps shown below for any year. The Travelers
Insurance Company may terminate the Expense Cap Agreement upon 60 days' notice.
Advisory Fee Paid to TAMIC
Fund (as a percentage of daily net assets) Expense Cap
- ---- --------------------------------------- ------------
Convertible Securities ............... 0.60% 0.80%
Disciplined Mid Cap Stock ............ 0.70% 0.95%
Equity Income ........................ 0.75% on the first $250 million; 0.95%
0.70% on the next $500 million;
0.65% over $750 million
Federated High Yield ................. 0.65% 0.95%
Federated Stock ...................... 0.625% 0.95%
Large Cap ............................ 0.75% on the first $250 million; 0.95%
0.70% on the next $500 million;
0.65% over $750 million
Mondrian International Stock ......... 0.775% on the first $100 million; 1.25%
0.65% over $100 million
MFS Mid Cap Growth+ .................. 0.7775% on the first $600 million; 1.00%
0.7525% on the next $300 million;
0.7275% on the next $600 million;
0.7025% on the next $1 billion and
0.6525% over $2.5 billion
MFS Value Portfolio+ ................. 0.750% on the first $600 million; 1.00%
0.725% on the next $300 million;
0.700% on the next $600 million;
0.675% on the next $1 billion;
0.625% over $2.5 billion
- ----------------
+ For the purposes of meeting the various asset levels and determining an
effective fee rate for the MFS Mid Cap Growth Portfolio and the MFS Value
Portfolio, the combined average daily net assets of such Funds and a
portfolio of another investment company for which an affiliate of TAMIC is
investment adviser and Massachusetts Financial Services Company is
subadviser is used. This method of calculating the fee for these Funds
went into effect on February 25, 2005.
10
Advisory Fee Paid to TAMIC
Fund (as a percentage of daily net assets) Expense Cap
- ---- --------------------------------------- ------------
Mercury Large Cap Core ............. 0.775% on the first $250 million; 1.00%
0.750% on the next $250 million;
0.725% on the next $500 million;
0.700% on the next $1 billion;
0.650% over $2 billion
Pioneer Fund Portfolio ............. 0.750% on the first $250 million; 1.25%
0.700% on the next $250 million;
0.675% on the next $500 million;
0.650% on the next $1 billion;
0.600% over $2 billion
Travelers Quality Bond ............. 0.3233% 0.75%
U.S. Government Securities ......... 0.3233% 1.25%
Zero Coupon Bond Fund Portfolio
(Series 2005) .................... 0.10% 0.15%
Managed Assets Trust ............... 0.50% 1.25%
Capital Appreciation Fund .......... 0.70% on the first $1.5 billion; 1.25%
0.65% over $1.5 billion
High Yield Bond Trust .............. 0.50% of the first $50 million; 1.25%
0.40% on the next $100 million;
0.30% on the next $100 million;
0.25% over $250 million
Money Market Portfolio ............. 0.3233% 0.40%
Contingent upon receipt of shareholder approval, the New Advisory
Agreements will be effective upon the MetLife Closing, and will continue in
effect until August 31, 2005, before which the annual review of such Agreements
for renewal has been planned independently of the MetLife Transaction.
Thereafter, each New Advisory Agreement will continue in effect as to any Fund
for successive annual periods, provided their continuance is approved at least
annually by (1) a majority vote, cast in person at a meeting called for that
purpose, of the Trustees or (2) a vote of the holders of a majority of the
outstanding voting securities (as defined by the 1940 Act) of the Fund and (3)
in either event by a majority of the Trustees who are not "interested persons,"
as defined in the 1940 Act, of TAMIC (the "Independent Trustees").
Under the New Advisory Agreements, TAMIC will continue to provide, at its
expense, office space, facilities and equipment for carrying out its
agreed-upon duties. TAMIC or an affiliate also bears the cost of reasonable
compensation, fees, and related expenses of the Trust's or Separate Fund's
officers and the Trustees that
11
are "interested persons" of the Trust or Separate Fund. Other expenses incurred
in the operation of a Fund are generally paid by such Fund.
The New Advisory Agreement for each Fund provides that it may be
terminated by the Trustees, a majority of Shareholders of the Fund, or TAMIC at
any time (although some of the Agreements limit TAMIC's ability to terminate),
without penalty, by giving the other party 60 days' written notice. The New
Advisory Agreements also provide that TAMIC shall not be liable for any error
of judgment or mistake of law, any loss arising out of any investment, or any
act or omission taken with respect to a Fund, except for willful misfeasance,
bad faith, or gross negligence in the performance of its duties, or by reason
of TAMIC's disregard of its obligations and duties thereunder.
TAMIC acts as investment adviser to two other investment companies with
investment objectives similar to the Travelers Quality Bond Portfolio of the
Trust. Specifically, the Travelers Managed Income Portfolio of the Travelers
Series Fund Inc. and The Travelers Quality Bond Account for Variable Annuities
are similar in investment objectives to the Travelers Quality Bond Portfolio.
TAMIC receives a management fee of 0.65% of the daily net assets of the
Travelers Managed Income Portfolio, and in turn pays 0.10% to another entity
owned by Citigroup for administrative services. As of December 31, 2004, the
total assets in the Travelers Managed Income Portfolio were $281,558,903.
TAMIC receives an advisory fee of 0.3233% of the daily net assets of The
Travelers Quality Bond Account for Variable Annuities. As of December 31, 2004,
the total assets in that Account were $101,206,514.
TRUSTEES' CONSIDERATIONS
In connection with making its determinations, the Board was provided with
information about MetLife and its purchase of TL&A from Citigroup. At a
telephonic meeting on March 17, 2005 and in-person meetings on March 29 and 30,
2005, the Trustees discussed with certain MetLife representatives MetLife's
intentions regarding the preservation and strengthening of TAMIC's business and
MetLife's intentions regarding staffing changes and executive leadership
changes at TAMIC. The MetLife representatives also discussed and provided the
Trustees with certain written information on MetLife's business and products,
including the experience of MetLife's advisory subsidiaries in overseeing
subadvised mutual funds. The Trustees also discussed the plans and anticipated
roles and responsibilities of certain TAMIC employees and officers after the
MetLife Transaction.
Among other things, the Trustees considered:
- the ability of TAMIC to continue its oversight of both the investment
and compliance operations of the subadvisers and sub-subadvisers after
the change in control;
12
- the intention of MetLife to integrate TL&A, including TAMIC, into
MetLife's current businesses to create a single business operation;
- anticipated changes to back office operations relating to the Funds,
including the provision of administrative and transfer agency services,
after the change in control; and
- the fact that the terms of each New Advisory Agreement, including the
fees, would be identical to the Current Advisory Agreement it is
replacing, except for the inception date and, for certain of the Funds,
the express authority for TAMIC to retain subadvisers.
The Trustees were also informed that, in light of personnel changes at
TAMIC that are expected to occur or on about the MetLife Closing Date, MetLife
intends to hire Salomon Brothers Asset Management Inc. ("Salomon"), currently
an affiliate of TAMIC (though Salomon will not be an affiliate after the
MetLife Closing Date), as temporary subadviser for those Funds that are now
managed directly by TAMIC without a subadviser, effective on or about the
MetLife Closing Date. They were told that certain of the portfolio managers to
be employed by Salomon to manage the Funds are also currently employees of
TAMIC and are the current portfolio managers of some of these Funds, so for
certain of these Funds, there is expected to be no change in the day-to-day
portfolio manager, while in certain other of these Funds there will be. The
Trustees were also told that after the MetLife Closing Date, MetLife's plan is
for TAMIC to conduct a formal search for candidates to act as subadviser on an
ongoing basis to those Funds, and to make a recommendation to the Board,
probably in the Fall of 2005.
The Board also considered the agreements between MetLife and Citigroup
entered into in connection with the MetLife Transaction under which
Citigroup-affiliated broker-dealers will continue to offer the existing TL&A
insurance contracts and such contracts will continue to include
Citigroup-sponsored funds as investment options, as discussed in more detail
under "Summary" above.
The Board also considered its plans to perform a full review of the New
Advisory Agreements pursuant to Section 15(c) of the 1940 Act at its regularly
scheduled July Board meeting, which will occur approximately three weeks after
the MetLife Closing Date. In light of the continuity of investment management
under the New Advisory Agreements, the short period between the effective date
of those Agreements and the upcoming full review, the information provided by
MetLife, and MetLife's plans to conduct a formal search for a subadviser for
the Funds for which Salomon would serve as temporary subadviser, the Board
considered the information provided to it sufficient for its consideration of
the New Advisory Agreements. Specifically, with respect to the nature, extent
and quality of the services provided by TAMIC and the investment performance of
the Funds, the Board noted that the performance of the Funds had generally been
good and that
13
TAMIC had taken steps to address situations where this was not the case,
including recommending the replacement of subadvisers where appropriate. As to
the profits realized by TAMIC from its relationship with the Funds, the Board
noted that it was satisfied that TAMIC's profits were not excessive in the
past, and that it was not possible to predict how the MetLife Transaction would
affect such profits. As to whether economies of scale would be realized as the
Funds grow and whether fee levels reflect any such economies of scale, the
Board noted that the investment advisory fee rates for most of the Funds
included "breakpoints" that reduced the fees payable at higher asset levels,
and noted its intention to explore the possibility of instituting breakpoints
for those Funds where they were not currently in place. The Trustees also
considered such additional factors they felt were relevant.
After carefully considering the information described above, the Trustees,
including the Independent Trustees, unanimously voted to approve the New
Advisory Agreement for each Fund and to recommend that each Fund's Shareholders
vote to approve the New Advisory Agreement for their Fund.
In the event that the Shareholders of any Fund have not approved the New
Advisory Agreement for their Fund by the MetLife Closing Date, TAMIC will,
pursuant to Rule 15a-4 under the 1940 Act, enter into an interim advisory
agreement with the Fund, or the Trust on behalf of a Fund, which will take
effect immediately following the closing of the MetLife Transaction. The
interim advisory agreement for a Fund will be in substantially the form of the
proposed New Advisory Agreement for the Fund but also will include certain
provisions required by Rule 15a-4. These provisions include a maximum term of
150 days, a provision that the Trustees or a majority of the Fund's
shareholders may terminate the agreement at any time without penalty on not
more than 10 days' written notice, and a provision that the compensation earned
by TAMIC thereunder will be held in an interest-bearing escrow account until
shareholder approval of the New Advisory Agreement is obtained, after which the
amount in the escrow account, together with any interest, will be paid to
TAMIC. If a Fund has not received the requisite shareholder approval for the
New Advisory Agreement within 150 days after the MetLife Closing Date, the
Trustees will consider other appropriate arrangements subject to approval in
accordance with the 1940 Act.
THE TRUSTEES, INCLUDING ALL OF THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMEND THAT YOU VOTE FOR APPROVAL OF EACH NEW ADVISORY AGREEMENT.
INVESTMENT ADVISER
TAMIC, a New York limited liability company, serves as investment adviser
to all of the Funds (except for the Social Awareness Stock Portfolio), as well
as to certain other registered investment companies or their series. TAMIC also
provides investment advice to individual and pooled pension and profit-sharing
accounts and
14
non-affiliated insurance companies. TAMIC is a registered investment adviser
that has provided investment advisory services since its incorporation in 1978.
TAMIC is currently an indirect wholly owned subsidiary of The Travelers
Insurance Company, which is an indirect wholly owned subsidiary of Citigroup.
TAMIC's principal offices are located at 242 Trumbull Street, Hartford,
Connecticut, 06103. The principal executive officer and directors of TAMIC are
set forth in the following table.
Officer or Director Principal Occupation Address
- --------------------- --------------------------------------- ---------------------
Peter J. Wilby Managing Director, Chief Investment 399 Park Avenue
Director Officer North American Fixed Income, New York, NY 10043
High Yield and Emerging Markets --
Citigroup Asset Management
James C. Zelter Chief Investment Officer -- Citigroup 390 Greenwich Street
Director Global Investments New York, NY 10013
David A. Torchia Managing Director -- Citigroup Asset 399 Park Avenue
Director Management New York, NY 10043
David P. Marks Chief Investment Officer -- Citigroup 242 Trumbull St
President Insurance Investments Hartford, CT 06103
The investment adviser for the Social Awareness Stock Portfolio is Smith
Barney Fund Management, 125 Broad Street, New York, New York 10004.
Brokerage
TAMIC's policy with respect to the selection of brokers to execute
transactions in the Funds' portfolio securities is set forth after Proposal 4.
OTHER SERVICES
Subject to review by each Board, the Funds are expected, at the time of or
shortly after the closing of the MetLife Transaction, to retain certain other
service providers that would involve changes from those currently providing
similar services to the Funds. Citicorp Trust Bank, fsb ("CTB"), a subsidiary
of Citigroup, serves as the transfer agent and PFPC Inc. serves as sub-transfer
agent for the Separate Funds and the Trust. With respect to the Funds that it
manages, TAMIC has entered into sub-administration agreements with Smith Barney
Fund Management LLC ("SBFM"), an indirect wholly-owned subsidiary of Citigroup,
under which SBFM performs pricing, bookkeeping, and other administrative
services for the Funds, and similar sub-administration agreements will be
entered into between TAMIC and SBFM with respect to the Funds. State Street
Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110
serves as the custodian for the Funds.
15
The arrangements with the Citigroup affiliates CTB and SBFM are expected
to be terminated at the time of or shortly after the closing of the MetLife
Transaction, subject to review by MetLife and each Board. In this regard,
MetLife intends to propose to each Board for its approval the replacement of
such service providers with the service providers generally used by other
MetLife investment companies. State Street serves as administrative agent for
one such investment company, while MetLife serves as transfer agent to such
companies. State Street serves as custodian for such companies, as it does for
the Funds.
Proposal 2. FUTURE SUBADVISORY AGREEMENTS WITHOUT
SHAREHOLDER VOTE.
Each Fund (except for the Social Awareness Stock Portfolio, which is not
managed by TAMIC) proposes, to the extent permitted by an exemption granted by
the SEC and subject to the approval of the Board of Trustees, to permit TAMIC
to enter into new or amended agreements with any subadviser with respect to the
Fund without obtaining shareholder approval of such agreements, and to permit
such subadvisers to manage the assets of the Fund pursuant to such subadvisory
agreements.
The 1940 Act generally provides that an investment adviser or subadviser
to a mutual fund may act as such only pursuant to a written agreement that has
been approved by a vote of the fund's shareholders, as well as by a vote of a
majority of the trustees of the fund who are not parties to such agreement or
interested persons of any party to such agreement. Certain MetLife
subsidiaries, which are registered with the SEC as "investment advisers,"
however, have received from the SEC an exemption from the shareholder approval
voting requirement in certain circumstances (the "SEC Exemption").
Upon becoming an indirect subsidiary of MetLife, the SEC exemption would
also apply to TAMIC and, subject to certain conditions, any Fund advised by
TAMIC. Under the SEC Exemption, TAMIC would be permitted, under specified
conditions, to enter into new and amended subadvisory agreements for the
management of a Fund, including agreements with new subadvisers and agreements
with existing subadvisers if there is a material change in the terms of the
subadvisory agreement, or if there is a change in control of the subadviser or
other event causing termination of the existing subadvisory agreement, without
obtaining the approval of the Fund's shareholders of such new or amended
subadvisory agreement. Such agreements must nevertheless be approved by the
Trustees, in accordance with the requirements of the 1940 Act. One of the
conditions of the SEC Exemption is that within 90 days after the hiring of any
new subadviser without shareholder approval, the Fund must provide to
shareholders an information statement setting forth substantially the
information that would be required to be contained in a proxy statement for a
meeting of shareholders to vote on the approval of the subadvisory agreement.
Furthermore, the Fund would still require shareholder
16
approval to materially amend its investment advisory agreement with TAMIC
(including any amendment to raise the management fee rate payable under such
agreement) or to enter into a new investment advisory agreement with TAMIC or
any other adviser.
The SEC has proposed a new Rule 15a-5 under the 1940 Act which would
codify the relief granted by the SEC Exemption. While the proposed rule
generally contains the same conditions as the SEC exemption obtained by
MetLife, there are some differences. The conditions of the new Rule would
likely supersede the conditions of the SEC exemption obtained by MetLife. As
proposed, the most significant difference in the conditions of the proposed new
Rule is that the name of each Fund must have the investment adviser's name
precede the name of the subadviser, if the subadviser's name is included in the
name of the Fund. To the extent that the Rule as finally adopted has this or
other different conditions, TAMIC and the Funds will likely have to comply with
this and any other different conditions contained in the final version of the
Rule as adopted by the SEC.
The Trust and the Separate Funds are requesting shareholder approval of
this Proposal for several reasons. As described under Proposal 1, the Trust and
the Separate Funds each generally utilize an adviser/subadviser management
structure, where TAMIC acts as each Fund's investment adviser (except for the
Social Awareness Stock Portfolio), delegating the day-to-day portfolio
management to a subadviser. Under such a structure, the Fund's subadviser acts
in a capacity similar to that of the portfolio manager in a more traditional
structure that does not involve a subadviser. Specifically, each Fund's
subadviser, like a portfolio manager in a more traditional mutual fund advisory
structure, manages the Fund under the oversight and supervision of the Fund's
adviser. If the Fund were to change subadvisers, TAMIC would continue in its
role as adviser and would continue to exercise oversight and supervision of the
Fund's investment affairs as conducted by the new subadviser. Changing the
Fund's subadviser is, therefore, analogous to the adviser's replacing the
portfolio manager of a single-manager managed fund who is employed by the
adviser, which does not require shareholder approval under the 1940 Act.
In addition, given the Fund's management structure, the shareholder
approval requirement under the 1940 Act may cause a Fund's shareholders to
incur unnecessary expenses and could hinder the prompt implementation of
subadvisory changes that are in the best interest of the shareholders, such as
prompt removal of a subadviser if circumstances warrant such removal. The
Trustees believe that without the ability to promptly employ or re-employ a
subadviser, investors' expectations may be frustrated and a Fund and its
shareholders could be disadvantaged under certain circumstances. These
circumstances include: (a) where a subadviser has been terminated because its
performance was unsatisfactory or its retention was otherwise deemed
inadvisable, (b) where a subadviser has resigned and (c) where there has been
an "assignment" (i.e., a change in the actual control or
17
management of a subadviser) or other event causing the termination of a
subadvisory agreement.
In the absence of an exemption, to obtain the shareholder approval
required by the 1940 Act for a subadvisory agreement, a Fund would need to
convene a shareholder's meeting, which invariably involves considerable delay
and expense. Where TAMIC, as adviser, has recommended replacement of a
subadviser, and the Trustees have determined that such replacement is necessary
or appropriate, the Fund could receive less than satisfactory subadvisory
services prior to the time that an agreement with a new subadviser is approved
by shareholders. Also, in that situation or where there has been an unexpected
resignation or change in control of a subadviser (events which, in many cases,
are beyond the control of the Fund), the Fund may be forced to operate with a
less than satisfactory subadviser for some period of time. In such
circumstances, without the ability to engage a new subadviser promptly, TAMIC,
as the adviser, might have to assume direct responsibility on a temporary basis
for management of the assets previously assigned to a subadviser.
If this manager of managers Proposal is approved by the Shareholders at
the Meeting, it is the present intention of MetLife and TAMIC to use the
authority granted by the exemption to retain the present subadvisers and
sub-subadvisers of the Funds, and, as previously discussed, hire Salomon to be
the subadviser for those Funds which currently are managed directly by TAMIC
without a subadviser.
If the MetLife Transaction is not consummated, then TAMIC will not have
the authority to enter into new or amended agreements without shareholder
approval, since the SEC Exemption only applies to affiliates of MetLife.
However, TAMIC would have the ability, subject to Board approval, to apply to
the SEC for its own exemption as well as the ability to utilize proposed Rule
15a-5 if and when it is actually adopted, without seeking any additional
shareholder approval.
If the Shareholders of a Fund do not approve this Proposal, the Trustees
of the Fund will consider such alternative actions as may be in the best
interests of the Fund.
THE TRUSTEES, INCLUDING ALL OF THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND VOTE TO APPROVE THE PROPOSED GRANT
OF AUTHORITY TO PERMIT TAMIC TO ENTER INTO NEW OR AMENDED AGREEMENTS WITH
SUBADVISERS WITH RESPECT TO THE FUND WITHOUT OBTAINING SHAREHOLDER APPROVAL OF
SUCH AGREEMENTS, AND TO PERMIT SUCH SUBADVISERS TO MANAGE THE ASSETS OF THE
FUND PURSUANT TO SUCH SUBADVISORY AGREEMENTS.
18
Proposal 3. ELECTION OF NEW TRUSTEE.
Ms. Elizabeth Forget, the President of Met Investors Advisory LLC, a
subsidiary of MetLife, has been nominated by the Board of Trustees, pursuant to
a recommendation of the Nominating and Administration Committee of the Board,
to serve as a member of the Board of Trustees of each Separate Fund and the
Trust, effective on the MetLife Closing Date. If elected by the contract owners
at the Meeting, Ms. Forget will replace Mr. Jay Gerken, who, in connection with
the sale of TAMIC to MetLife described in Proposal 1 above, will resign as a
member of the Board. Ms. Forget will serve until her successor is elected and
qualified. It is expected that if so elected, Ms. Forget would also replace Mr.
Gerken as Chairman, President and CEO of the Separate Funds and the Trust. Ms.
Forget's current principal occupation and other relevant circumstances are set
forth in the table below.
If the MetLife Transaction is not consummated, then this Proposal will not
take effect. In that event, Ms. Forget will not become a Trustee or officer of
the Separate Funds or the Trust.
For the year ended December 31, 2004, the Board of Trustees met five
times. Each member of the Board attended at least seventy-five percent of the
Board meetings.
Shareholders of the Fund can send communications to the Board of Trustees
by submitting them to the Board in care of the Secretary to the Board listed
below, using the address on the cover page of this Proxy Statement.
The following tables give information about each Trustee and the officers
of the Funds. As with Mr. Gerken, it is expected that the Board of Trustees of
the Funds will be replacing the current officers with new officers affiliated
with MetLife as part of the transactions described above in Proposal 1.
19
OFFICERS AND INTERESTED TRUSTEES
Number of Other
Portfolios Directorships
Term of in Fund of Public
Position(s) Office and Complex Companies
Held with Length of Principal Occupation Overseen Held by
Name, Address and Age Funds Time Served During Last Five Years by Trustee Trustee
- ----------------------- ------------- ------------- -------------------------- ------------ --------------
*R. Jay Gerken Chairman, Since 2002 Managing Director (1989 N/A N/A
399 Park Avenue President, to present) of Citigroup
New York, NY CEO and Global Markets Inc.;
Age 54 Trustee Chairman, President and
CEO of Smith Barney
Fund Management LLC;
Travelers Investment
Adviser, Inc. and
CitiFund Management
Inc. Chairman, Chief
Executive Officer and
President, Board of
Managers
(2002-present), six
Variable Annuity
Separate Accounts of
The Travelers Insurance
Company+.
*Elizabeth Forget Nominee as New President (2000 to 66++ None
260 Madison Avenue Trustee present) of Met Investors
11th Floor Advisory LLC;
New York, NY Executive Vice President
Age 38 (2000 to present) and
Chief Marketing Officer
(2003 to present) of
MetLife Investors Group,
Inc; Senior Vice
President of Equitable
Distributors, Inc. and
Vice President of
Equitable Life Assurance
Society of the United
States (1996 to 2000).
Ernest J. Wright Assistant Since 2004 Vice President and N/A N/A
One Cityplace Secretary Secretary (1996-present),
Hartford, Connecticut Assistant Secretary
Age 65 (1994-1996), Counsel
(1987-present), The
Travelers Insurance
Company; Secretary
(1994 to 2004), Assistant
Secretary (2004 to
present), six Variable
Annuity Separate
Accounts of The
Travelers Insurance
Company+.
20
Number of Other
Portfolios Directorships
Term of in Fund of Public
Position(s) Office and Complex Companies
Held with Length of Principal Occupation Overseen Held by
Name, Address and Age Funds Time Served During Last Five Years by Trustee Trustee
- ----------------------- ---------------- ------------- -------------------------- ------------ --------------
Kathleen A. McGah Secretary Since 2004 Deputy General Counsel N/A N/A
One Cityplace (1999-present), Assistant
Hartford, Connecticut Secretary (1995-present),
Age 54 The Travelers Insurance
Company; Assistant
Secretary (1995 to 2004),
Secretary (2004 to
present), six Variable
Annuity Separate
Accounts of The
Travelers Insurance
Company+; Assistant
Secretary, (1995 to
2004); Prior to
January 1995, Counsel,
ITT Hartford Life
Insurance Company.
Andrew B. Shoup Senior Vice Since 2004 Director of Citigroup N/A N/A
125 Broad Street President Asset Management;
New York, New York and Chief Treasurer of certain
Age 49 Administrative mutual funds associated
Officer with Citigroup. Head of
International Funds
Administration of CAM
(2001-2003); Director of
Global Funds
Administration of CAM
from 2000-2001; Head
of U.S. Citibank Funds
Administration of CAM
(1998-2000).
Kaprel Ozsolak Treasurer Since 2004 Vice President of N/A N/A
125 Broad Street Citigroup Global
New York, New York Markets Inc.
Age 39
21
Number of Other
Portfolios Directorships
Term of in Fund of Public
Position(s) Office and Complex Companies
Held with Length of Principal Occupation Overseen Held by
Name, Address and Age Funds Time Served During Last Five Years by Trustee Trustee
- ----------------------- ------------- ------------- -------------------------- ------------ --------------
Andrew Beagley Chief Since 2002 Director of Citigroup N/A N/A
399 Park Avenue Anti-Money Global Markets, Inc.
New York, New York Laundering (since 2000); Director of
Age 42 Compliance Compliance, North
Officer America, Citigroup Asset
Management (since
2000); Chief Anti-Money
Laundering Compliance
Officer and Vice
President of certain
mutual funds associated
with Citigroup; Director
of Compliance, Europe,
the Middle East and
Africa, Citigroup Asset
Management (from 1999
to 2000); Compliance
Officer, Salomon
Brothers Asset
Management Limited,
Smith Barney Global
Capital Management
Inc., Salomon Brothers
Asset Management Asia
Pacific Limited (from
1997 to 1999.
William D. Wilcox Chief Since 2004 Counsel and Chief N/A N/A
One Cityplace Compliance Compliance Officer
Hartford, CT Officer (1999-present); The
Age 40 Travelers Insurance
Company.
22
INDEPENDENT TRUSTEES
Number of Other
Portfolios in Directorships
Term of Fund of Public
Position(s) Office and Complex Companies
Held with Length of Principal Occupation Overseen by Held by
Name Address and Age Funds Time Served During Last Five Years Trustee Trustee
- ----------------------- ------------- ------------- -------------------------- --------------- ----------------
Robert E. McGill, III Trustee Since 1991 Retired manufacturing 39++ None
295 Hancock Street (Trust and executive. Director
Williamstown, MA Separate (1995-2000), Chemfab
Age 74 Funds) Corporation (specialty
materials manufacturer);
Director (1999-2001),
Ravenwood Winery, Inc.;
Director (1999-2003),
Lydall Inc. (manufacturer
of fiber materials);
Member, Board of
Managers
(1974-present), six
Variable Annuity
Separate Accounts of
The Travelers Insurance
Company+.
Lewis Mandell Trustee Since 1991 Professor of Finance and 39++ Director
Trustee (Trust) Managerial Economics, (2000-present),
160 Jacobs Hall Trustee Since 1990 University at Buffalo Delaware
Buffalo, NY (Separate since 1998. Dean, School North Corp.
Age 62 Funds) of Management (hospitality
(1998-2001), University business)
at Buffalo; Member,
Board of Managers
(1990-present), six
Variable Annuity
Separate Accounts of
The Travelers Insurance
Company+.
Frances M. Hawk, Trustee Since 1991 Private Investor 39++ None
CFA, CFP (Trust and (1997-present). Member,
Trustee Separate Board of Managers
108 Oxford Hill Lane Funds) (1991-present), six
Downingtown, PA Variable Annuity
Age 57 Separate Accounts of
The Travelers Insurance
Company+.
- ----------------
* Mr. Gerken is an "interested person" within the meaning of the 1940 Act, as
amended, by virtue of his position as Managing Director of Citigroup
Global Markets Inc., an indirect wholly owned subsidiary of Citigroup, and
his ownership of shares and options to purchase shares of Citigroup, the
indirect parent of The Travelers Insurance Company. Ms. Forget, if elected
as a Trustee,
23
will be an "interested person" by virtue of her position as President of
Met Investors Advisory LLC.
+ The six Variable Annuity Separate Accounts are: The Travelers Growth and
Income Stock Account for Variable Annuities, The Travelers Quality Bond
Account for Variable Annuities, The Travelers Money Market Account for
Variable Annuities, Tactical Growth and Income Stock Account for Variable
Annuities, Tactical Short-Term Bond Account for Variable Annuities and
Tactical Aggressive Stock Account for Variable Annuities.
++ Seven of these portfolios have not yet commenced operations.
The Independent Trustees will continue to be independent after the MetLife
Closing Date.
Effective January 1, 2003, Mr. Knight Edwards retired from his position on
the Board. He remains as an Emeritus Trustee. An Emeritus Trustee is permitted
to attend meetings, but has no voting powers.
COMMITTEES
To operate more efficiently, the Board has established two operating
committees. The Nominating and Administration Committee recommends candidates
for the nomination as independent members of the Board The Committee also
periodically reviews Board governance procedures, composition of the Board, and
compensation for the Board of Trustees, and the Committee monitors the
performance of legal counsel employed by the Funds and the Independent
Trustees.
The Nominating and Administration Committee will consider nominees
recommended by shareholders. Such recommendations should be submitted to the
Fund in care of The Travelers Insurance Company, using the address on the cover
page of this Proxy Statement. Biographical and occupational information about
the candidate must be included, as well as the written consent of the candidate
to serve on the Board if elected.
In addition to shareholder recommendations, recommendations for candidates
for Independent Trustee may be made by any of the Trustees or by management of
the Separate Fund or Trust. In evaluating any candidates for nomination to the
Board of Trustees as Independent Trustees, the Nominating and Administration
Committee requires that the candidate be independent in terms of both the
letter and spirit of the 1940 Act. The Committee will consider the effect of
any relationships beyond those set forth in the 1940 Act that might impair
independence. The Committee will consider whether it may be appropriate to add
individuals with different backgrounds or skill sets from those on the Board
already.
For the year ended December 31, 2004, the Nominating and Administration
Committee met one time. The charter of the Committee is attached hereto as
Appendix C. It is not available on any website.
24
The Audit Committee monitors the appointment, compensation and termination
of the Funds' independent auditors. The Committee also monitors the overall
quality of the Funds' financial reports and other financial information, the
independence and audit work of the Funds' independent auditors and the Funds'
financial reporting policies, practices and internal controls. For the year
ended December 31, 2004, the Audit Committee met two times.
For the year ended December 31, 2004, the members of the Nominating and
Administration Committee and the Audit Committee were Robert E. McGill III,
Lewis Mandell, and Frances M. Hawk.
COMPENSATION
Members of the Board who are also officers or employees of Citigroup or
its subsidiaries (after the MetLife Closing Date, of MetLife or its
subsidiaries) are not entitled to any fee for their services to the Fund.
Effective May 1, 2005, Independent Trustees receive an annual retainer of
$36,000 for service on the Boards of the Trust and Separate Funds and the six
Variable Annuity Separate Accounts established by The Travelers Insurance
Company. They also receive a fee of $3,000 for each in-person meeting of such
Boards attended and $750 for each telephonic meeting. The Chair of the Audit
Committee receives an additional annual fee of $5,000, the Chair of the
Nominating and Administration Committee receives an additional fee of $3,000,
and the lead Independent Trustee will receive an additional fee of $10,000
(when an Independent Trustee assumes the position of lead Trustee). Other than
the Chairs of the Committees, Trustees do not receive any additional
compensation for their committee services. Board Members with 10 years of
service may agree to provide services as an emeritus trustee at age 72. Upon
reaching 80 years of age, a Trustee must elect status as a emeritus trustee. An
emeritus trustee will receive 50% of the annual retainer and 50% of meeting
fees, if attended, but in no event for more than 10 years. The chart below
shows the compensation paid to Board Members for the year ended December 31,
2004. Mr. Knight Edwards, as Emeritus Trustee, was paid $10,585 for the year
ended December 31, 2004.
COMPENSATION TABLE
Interested Trustees
Pension or Retirement Total Compensation
Benefits Accrued From Fund and
Name of Aggregate Compensation As Part of Fund Complex
Person, Position From Each Fund(1) Fund Expenses Paid to Trustees
- -------------------------- ------------------------ ----------------------- -------------------
Elizabeth Forget ......... N/A N/A N/A
Chairman and Trustee
25
Independent Trustees
Pension or Retirement Total Compensation
Benefits Accrued From Fund and
Name of Aggregate Compensation As Part of Fund Complex
Person, Position From Each Fund(1) Fund Expenses Paid to Trustees
- --------------------------- ------------------------ ----------------------- -------------------
Robert E. McGill, III ..... $2,634.62 N/A $68,500(2)
Trustee
Lewis Mandell ............. $1,923.08 N/A $50,000
Trustee
Frances M. Hawk, .......... $2,096.15 N/A $54,500
CFA, CFP Trustee
- ----------------
(1) No compensation was deferred for any Trustee or Officer under a deferred
compensation plan.
(2) Mr. McGill received additional compensation for attending meetings of a
task force of the directors, trustees and managers of the various
Citigroup sponsored investment companies as a representative of the
Independent Trustees of the Funds.
The table below sets forth the dollar range of equity securities in the
Funds beneficially owned by a Trustee, and, on an aggregate basis, in all
registered investment companies overseen by a Trustee in the complex of funds,
as of December 31, 2004.
Aggregate Dollar Range
of Equity Securities in all
Registered Investment
Companies overseen by
Dollar Range of Equity Trustees in Family of
Trustee Securities in the Funds Investment Companies
- ----------------------------------- ------------------------- ----------------------------
Elizabeth Forget .............. None None
Robert E. McGill, III ......... None None
Lewis Mandell ................. None None
Frances M. Hawk ............... None None
Proposal 4. APPROVAL OF SUBADVISORY AGREEMENT FOR
MONDRIAN INTERNATIONAL STOCK PORTFOLIO
(FORMERLY, LAZARD INTERNATIONAL
STOCK PORTFOLIO).
The new subadvisory agreement for the Mondrian International Stock
Portfolio (the "Mondrian Fund") will reflect a new subadviser for such Fund.
Specifically, the Board of Trustees determined to replace Lazard Asset
Management LLC ("Lazard") with Mondrian Investment Partners Ltd. ("Mondrian")
as the subadviser for the Mondrian Fund effective May 1, 2005, subject to
subsequent approval by the Shareholders of the Mondrian Fund. In connection
with this change, the name of the
26
Mondrian Fund was changed from the Lazard International Stock Portfolio to the
Mondrian International Stock Portfolio.
The date of the prior sub-investment advisory agreement between TAMIC and
Lazard was August 1, 1996, as last amended on September 1, 2004. It was last
approved or renewed by the Board of Trustees of the Trust on July 23, 2004. The
prior subadvisory agreement was not submitted for approval to the shareholders
of the Mondrian Fund since the commencement of operations of the Fund. The
aggregate subadvisory fee paid by TAMIC to Lazard for the fiscal year ended
December 31, 2004 was $317,337.
A copy of the new subadvisory agreement with Mondrian is included as
Appendix B. Except for the identity of the subadviser, the inception date of
the new agreement, and the reduced subadvisory fee, there are no material
differences between the old subadvisory agreement with Lazard and the new
subadvisory agreement with Mondrian.
Under the new subadvisory agreement, Mondrian will provide subinvestment
advisory services to the Mondrian Fund, including a continual program of
investment, evaluation and, if appropriate in its view, the sale and
reinvestment of the Fund's assets. Mondrian makes all determinations with
respect to the purchase and sale of the portfolio securities (subject to the
Mondrian Fund's investment objective, policies, and restrictions and to the
supervision of the Board of Trustees of the Trust and TAMIC) and places, in the
Fund's name, all orders for execution of the portfolio transactions.
As compensation for its services, Mondrian is entitled to receive from
TAMIC fees calculated as a percentage of the Mondrian Fund's average daily net
assets. Such fee is 0.425% of the first $100 million of the assets of the Fund,
and 0.30% of assets in excess of $100 million. As compensation for its
services, Lazard was entitled to receive fees from TAMIC at a rate of 0.475% of
the first $100 million of the average daily net assets of the Fund, 0.425% of
assets between $100 million and $500 million, 0.375% of assets between $500
million and $1 billion, and 0.35% of assets over $1 billion. While the
subadvisory fees that are payable to Mondrian and that were payable to Lazard
are and were paid by TAMIC and not by the Mondrian Fund directly, TAMIC has
passed on the benefit of the reduced subadvisory fees to the Mondrian Fund
through a corresponding reduction in the advisory fee payable by the Mondrian
Fund to TAMIC.
All services under the new subadvisory agreement must be provided in
accordance with the provisions of the 1940 Act and any rules or regulations
thereunder, the Securities Act of 1933 and any rules or regulations thereunder,
the Internal Revenue Code, any other applicable provision of law, the Trust's
Agreement and Declaration of Trust and by-laws, any policies adopted by the
Trustees, and the
27
investment policies of the Mondrian Fund as disclosed in the Trust's
registration statement on file with the SEC, as amended from time to time.
The new subadvisory agreement became effective on May 1, 2005, and will,
contingent upon receipt of shareholder approval, continue in effect until
August 31, 2006. Thereafter, the new subadvisory agreement will continue in
effect as to the Fund for successive annual periods, provided its continuance
is approved at least annually by (1) a majority vote, cast in person at a
meeting called for that purpose, of the Trustees or (2) a vote of the holders
of a majority of the outstanding voting securities (as defined by the 1940 Act)
of the Mondrian Fund and (3) in either event by a majority of the Independent
Trustees.
The new subadvisory agreement for the Mondrian Fund provides that it may
be terminated by the Trustees, by a majority of shareholders of the Fund, by
Mondrian, or by TAMIC at any time, without penalty, by giving the other party
60 days' written notice. The new subadvisory agreement also provides that
Mondrian shall not be liable for any error of judgment or mistake of law, any
loss arising out of any investment, or any act or omission taken with respect
to the Fund, except for willful misfeasance, bad faith, or gross negligence in
the performance of its duties, or by reason of Mondrian's reckless disregard of
its obligations and duties thereunder.
While from time to time, Mondrian may act as investment adviser to other
investment companies with investment objectives similar to the Mondrian Fund,
Mondrian at the present time is not an investment adviser to any such
investment companies.
With Mondrian as subadviser, the Mondrian Fund will continue to invest at
least 80% of its assets in equity securities, and to use a value approach to
invest primarily in equity securities of non-U.S. domiciled companies located
in developed markets. However, Mondrian selects securities for investment in a
somewhat different manner than does Lazard. Lazard uses a traditional,
bottom-up value approach to evaluate stocks demonstrating potential capital
growth based on the following characteristics: low price-to-earnings ratio,
inexpensive markets worldwide, potential for management change, potential to
improve profitability, unrecognized assets, strong financial position, strong
cash flow, established industry position, industry with positive growth
outlook, and healthy balance sheet with low corporate debt.
Mondrian uses a value driven dividend discount methodology designed to
isolate value across country boundaries. This approach centers on future
anticipated dividends and discounts the value of those dividends back to what
they would be worth if paid at present. Comparisons of the values of different
possible investments are then made. Mondrian also considers the effects of
currency adjustment on dollar-based, U.S. investors. This approach attempts to
identify the amount of goods and services that a dollar will buy in the U.S.
and compares that to the amount of a
28
foreign currency required to buy the same amount of goods and services in
another country. When the dollar buys less, the foreign currency may be
overvalued and, conversely, the foreign currency may be undervalued when the
dollar buys more. Mondrian believes that securities available in an undervalued
currency may be attractive investments.
In making the determination to change subadvisers for the Mondrian Fund,
the Board of Trustees, at meetings held on January 19, 2005 and March 29 and
30, 2005, considered the disappointing performance of the Fund, both since its
inception in 1996 and over more recent periods, relative to other similar
investment companies and its benchmark index, the Morgan Stanley Capital
International Europe, Australia and Far East GDP Index. In this regard, the
Trustees considered the extent to which such disappointing performance could be
attributed to the stated management style of the Fund as opposed to poor
investment decision-making, but nonetheless concluded that retaining a new
subadviser for the Fund was appropriate in light of such performance. In
approving Mondrian as the new subadviser for the Mondrian Fund, the Trustees
considered information regarding the nature, extent, and quality of the
services to be provided by Mondrian, specifically seeking assurances from
representatives of Mondrian and TAMIC that they are comfortable that
administrative or compliance issues will not arise because Mondrian is a
non-U.S. entity that does not currently manage other U.S. registered investment
companies. The Trustees considered Mondrian's and its portfolio managers'
performance in managing similar international securities portfolios, including
when such portfolio managers had been employed by Delaware International
Advisers Limited, an indirect subsidiary of Lincoln National Corporation.
Because the Fund had not been managed by Mondrian, the Board did not review
profitability information regarding Mondrian. As to whether economies of scale
would be realized as the Fund grows and whether fee levels would reflect any
such economies of scale, the Board noted the "breakpoints" in the investment
advisory and subadvisory fees for the Fund that would reduce the fees payable
at higher asset levels. Finally, the Board considered that, except for the
subadviser and the inception date, the new subadvisory agreement for the
Mondrian Fund is substantially identical to the agreement with Lazard,
including the subadvisory fees payable by TAMIC to the subadviser.
If the Mondrian Fund does not receive the requisite Shareholder approval
for the new subadvisory agreement at the Meeting, the Board of Trustees of the
Trust will consider other appropriate arrangements subject to approval in
accordance with the 1940 Act.
MONDRIAN
Mondrian is located at 80 Cheapside, 3rd Floor, London, England, EC2V 6EE.
Prior to September 24, 2004, Mondrian was known as Delaware International
Advisers Limited. Mondrian currently manages assets of $303 million in the
29
concentrated large cap value equity style as of March 31, 2005. Fifty-seven
percent of the outstanding voting securities of Mondrian is currently owned by
members of Mondrian's management. Forty-three percent of the outstanding voting
securities is owned by a private equity fund affiliated with Hellman & Friedman
LLC.
The principal executive officer and directors of Mondrian are set forth in
the following table.
Officer or Director Principal Occupation Address
- ---------------------- -------------------------------- --------------------------
David G. Tilles Managing Director, Chief 80 Cheapside, 3rd Floor
Investment Officer -- Mondrian London, England, EC2V 6EE
Clive A. Gillmore Deputy Managing Director, 80 Cheapside, 3rd Floor
Head of Emerging Markets and London, England, EC2V 6EE
Small Cap Team -- Mondrian
Elizabeth A. Desmond Director, Co-Chief Investment 80 Cheapside, 3rd Floor
Officer, Developed Markets -- London, England, EC2V 6EE
Mondrian
Nigel May Director, Co-Chief Investment 80 Cheapside, 3rd Floor
Officer, Developed Markets -- London, England, EC2V 6EE
Mondrian
Hamish O. Parker Director, Developed Equity 80 Cheapside, 3rd Floor
Markets -- Mondrian London, England, EC2V 6EE
Graham Roger Director -- Mondrian 80 Cheapside, 3rd Floor
Heywood Kitson London, England, EC2V 6EE
Christopher A. Moth Director, Chief Investment 80 Cheapside, 3rd Floor
Officer -- Mondrian London, England, EC2V 6EE
John Kirk Director -- Mondrian 80 Cheapside, 3rd Floor
London, England, EC2V 6EE
THE TRUSTEES OF THE TRUST, INCLUDING ALL OF THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR APPROVAL OF THE NEW SUBADVISORY
AGREEMENT FOR THE MONDRIAN FUND.
BROKERAGE
The policy of TAMIC and the subadvisers for the Funds, including Mondrian
(collectively, the "advisers") in selecting brokers to execute transactions in
the Funds' portfolio securities, is to seek best execution of orders at the
most favorable prices. The determination of what may constitute best execution
and price in the
30
execution of a securities transaction by a broker involves a number of
considerations, including, without limitation:
o the overall direct net economic result to the Funds, involving both
price paid or received and any commissions and other cost paid;
o the efficiency with which the transaction is effected;
o the ability to effect the transaction at all where a large block is
involved;
o the availability of the broker to stand ready to execute potentially
difficult transactions in the future; and
o the financial strength and stability of the broker.
Such considerations are judgmental and are weighed by the advisers in
determining the overall reasonableness of brokerage commissions paid. In
addition to the foregoing, one factor in the selection of brokers is the
receipt of research services, analyses and reports concerning issuers,
industries, securities, economic factors and trends, and other statistical and
factual information. The brokerage commission paid by a Fund for a transaction
may be greater than the commission that would have been charged by another
broker if the difference is determined in good faith to be justified in light
of the brokerage and information provided. The cost, value and specific
application of such information may not be determinable, and it is not
practical to allocate these costs, values or specific applications among the
Funds and other clients of the advisers. Accordingly, the advisers or their
other clients may indirectly benefit from the availability of such information.
This situation may create a conflict of interest for the advisers. Similarly,
the Funds may indirectly benefit from information made available as a result of
transactions for other clients of the advisers.
Purchases and sales of bonds and money market instruments usually are
principal transactions and normally are purchased directly from the issuer or
from the underwriter or market maker for the securities. There usually are no
brokerage commissions paid for such purchases. Purchases from the underwriters
include the underwriting commission or concession, and purchases from dealers
serving as market makers include the spread between the bid and asked prices.
The advisers' policies with respect to brokerage are and will be reviewed
by the Board of Trustees periodically. Because of the possibility of further
regulatory developments affecting the securities exchanges and brokerage
practices generally, or due to other appropriate factors, the foregoing
practices may be changed, modified or eliminated.
VOTING INFORMATION
TL&A is the record owner of all of the shares of each Fund. TL&A will vote
a Fund's shares at the Meeting in accordance with the timely instructions
received
31
from persons entitled to give voting instructions under the variable contracts.
Contract owners and certain annuitants and/or beneficiaries have the right to
instruct TL&A as to the number of shares (and fractional shares) attributable
to their variable contract's value on the Record Date allocated to the separate
account that holds shares of a Fund.
TL&A will vote shares attributable to variable contracts as to which no
voting instructions are received in the same proportion (for, against, or
abstain) to those for which timely instructions are received. In other words,
TL&A is entitled to vote shares for which no instructions are received, but
will do so in the same proportion as shares for which instructions have been
received from contract owners. TL&A will seek a sample of the units for which
voting instructions may be provided that it reasonably considers to provide a
fair representation of the views of contract owners on the proposals, although
the specific proportion of the outstanding units that will be required will
vary depending on the specific circumstances, and such proportion of contract
owner units may be less than the one-fourth proportion that constitutes a
quorum of Fund shareholders (as discussed below).
If a Voting Instruction Form is received that does not provide any
instructions as to one or more of the Proposals, TL&A will consider its timely
receipt as an instruction to vote in favor of the Proposal(s).
Contract owners may submit Voting Instruction Forms by simply enclosing
the executed Voting Instruction Form in the postage-paid envelope found within
the voting instruction package.
In certain circumstances, TL&A has the right to disregard voting
instructions from certain owners. TL&A does not believe that these
circumstances exist with respect to matters currently before shareholders and
contract owners. Contract owners may revoke previously submitted voting
instructions given to TL&A by notifying TL&A in writing at any time before 5:00
p.m. (Eastern time) on June 23, 2005 or by attending and voting in person at
the Meeting. The expenses of soliciting voting instructions will be borne 50%
by MetLife and 50% by Citigroup and/or its affiliates, and not by the Funds.
The solicitation will be made primarily by mail, but TL&A and its affiliates
may make telephone, electronic, or oral communications to contract owners.
One-fourth of the outstanding shares of a Fund represented in person or by
proxy must be present at the Meeting to constitute a quorum. As the record
owner of all of the shares of each Fund, TL&A's presence at the Meeting will be
sufficient to constitute a quorum. If a quorum is not present at the Meeting,
or if a quorum is present but, at the Meeting, sufficient votes to approve the
Proposals are not received, the persons with proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies. Any
adjournment will require the affirmative vote of a majority of the shares
represented at the Meeting in person or by proxy. Based on voting instructions
received, proxies will vote in favor of such
32
adjournment those instructions that are in favor of a Proposal, will vote
against any adjournments those instructions that are against the Proposal, and
will abstain from voting with respect to any adjournment those instructions
that are marked to abstain in connection with the Proposal.
Except for the election of the new Trustee, approval of a Proposal by a
Fund's Shareholders requires the affirmative vote of the holders of the lesser
of (a) 67% or more of the voting securities present at the Meeting or
represented by proxy if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy or (b) more than 50% of the
outstanding voting securities of the Fund. Shareholders of record are entitled
to one vote for each full share owned, with a fractional vote for each
fractional share. With respect to the election of a new Trustee, under the
terms of the Agreement and Declaration of Trust for each of the Separate Funds,
the affirmative vote of a plurality of the shares of the Fund entitled to vote
is required to elect a Trustee. Under the terms of the Agreement and
Declaration of Trust for the Trust, the affirmative vote of a majority of the
shares of the Trust entitled to vote is required to elect a Trustee. Each
Separate Fund votes separately as to the election of the new Trustee, and the
Portfolios of the Trust vote in the aggregate, not separately for each
Portfolio.
The Board of Trustees has fixed April 15, 2005 as the Record Date for
determining Shareholders entitled to receive notice of and to vote at the
Meeting. To be counted, TL&A must receive an owner's properly executed Voting
Instruction Form at the its office by 5:00 p.m. Eastern time on June 23, 2005.
To the knowledge of TL&A and the Funds, no person owned beneficially more
than 5% of a Fund as of the Record Date. The Trustees and officers of the Trust
and the Separate Funds beneficially owned in the aggregate less than 1% of each
Fund.
OTHER INFORMATION
None of the Funds has a principal underwriter.
Independent Registered Public Accounting Firm
KPMG LLP ("KPMG") currently serves as the independent registered public
accounting firm for the Trust and the Separate Funds. As a result of insurance
services provided to KPMG by MetLife and other business relationships, KPMG is
not considered independent of MetLife and will not be permitted to serve as the
independent registered public accounting firm for the Trust or the Separate
Funds after the MetLife Transaction. The Board of Trustees of the Trust and of
each of the Separate Funds intends to select a successor accounting firm in the
near future.
KPMG has no direct or material indirect interest in a Fund.
Representatives of KPMG will not be present at the Meeting.
33
To the extent required by applicable regulations, pre-approval by the
Audit Committee of the Board is needed for all audit and permissible non-audit
services rendered by KPMG to each Fund and all permissible non-audit services
rendered by KPMG to TL&A and any entity controlling, controlled by or under
common control with TL&A that provides ongoing services to a Fund (each, a
"Service Affiliate") if the services relate directly to the operations and
financial reporting of such Fund. Pre-approval is currently on an
engagement-by-engagement basis.
Schedule A attached hereto sets forth for each Fund, for each Fund's two
most recent fiscal years, the fees billed by KPMG for (a) all audit and
non-audit services provided directly to the Fund and (b) those non-audit
services provided to the Fund's Service Affiliates that relate directly to the
Fund's operations and financial reporting under the following captions:
(i) Audit Fees -- fees related to the audit and review of the financial
statements included in annual reports and registration statements, and
other services that are normally provided in connection with statutory
and regulatory filings or engagements.
(ii) Audit-Related Fees -- fees related to assurance and related services
that are reasonably related to the performance of the audit or review
of financial statements, but not reported under "Audit Fees,"
including accounting consultations, agreed-upon procedure reports,
attestation reports, comfort letters and internal control reviews not
required by regulators.
(iii) Tax Fees -- fees associated with tax compliance, tax advice and tax
planning, including services relating to the filing or amendment of
federal, state or local income tax returns, regulated investment
company qualification reviews and tax distribution and analysis
reviews.
(iv) All Other Fees -- fees for products and services provided to the Fund
by KPMG other than those reported under "Audit Fees," "Audit-Related
Fees" and "Tax Fees."
Schedule A attached hereto also sets forth the aggregate fees billed by
KPMG, for each Fund's two most recent fiscal years, for non-audit services
rendered to each Fund and to each Fund's Service Affiliates.
The Audit Committee has considered whether the provision by KPMG of
non-audit services to the Fund's Service Affiliates that were not pre-approved
by the Audit Committee (because such services were provided prior to the
effectiveness of SEC rules requiring pre-approval or because such services did
not relate directly to the operations and financial reporting of the Fund) was
compatible with maintaining the independence of KPMG as the Fund's principal
auditor.
34
OTHER BUSINESS
The Board knows of no other business to be brought before the Meeting.
However, if any other matters come before the Meeting, it is the Board's
intention that, except where contract owners' Voting Instruction Forms contain
specific restrictions to the contrary, proxies will vote on such matters in
accordance with the judgment of the proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to a Separate Fund or to the Trust
in writing at the address on the cover page of this Proxy Statement or by
telephoning 1-800-842-9368.
* * *
Shareholders who do not expect to be present at the Meeting are requested
to date and sign the enclosed Voting Instructions Form(s) and return it in the
enclosed envelope. No postage is required if mailed in the United States.
35
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APPENDIX A-1
(FORM OF NEW INVESTMENT ADVISORY AGREEMENT FOR ALL THE PORTFOLIOS OF THE
TRAVELERS SERIES TRUST EXCEPT FOR THE PIONEER FUND, U.S. GOVERNMENT SECURITIES
AND ZERO COUPON BOND FUND PORTFOLIOS.)
INVESTMENT ADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY LLC
AND THE TRAVELERS SERIES TRUST
This Investment Advisory Agreement (the "Agreement") is entered into as of
June 30, 2005 by and between The Travelers Series Trust (the "Trust") by itself
and on behalf of [NAME OF PORTFOLIO] Portfolio (the "Portfolio") and Travelers
Asset Management International Company, a limited liability company duly
organized and existing under the law of the state of New York ("TAMIC").
WHEREAS, the Trust desires that TAMIC provide certain investment
management and advisory services for the Portfolio; and
WHEREAS, TAMIC desires to accept such appointment to provide advisory
services to the Portfolio in the manner and on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and TAMIC agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its capital relating to the Portfolio by
investing and reinvesting in investments of the kind and in accordance with the
investment objective(s), policies and limitations authorized by its Board of
Trustees (the "Board") and as specified in the prospectus (the "Prospectus")
and the statement of additional information (the "SAI") filed with the
Securities and Exchange Commission as part of the Trust's Registration
Statement on Form N-1A as may be periodically amended. Copies of the Prospectus
and the SAI have been and will be (following amendments) forwarded to TAMIC.
The Trust desires to employ and accordingly appoints TAMIC to act as investment
adviser to the Portfolio. TAMIC accepts the appointment, and subject to the
supervision of the Board, agrees to furnish the services contemplated herein
for the compensation set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision, direction and approval of the Board, TAMIC
will manage the investment operations of the Portfolio and will furnish or
cause to be furnished to the Trust advice and assistance with respect to the
acquisition, holding or disposal of the Portfolio's investments, in accordance
with the investment objectives, policies and restrictions as communicated to it
by the Board and as are
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contained in the Prospectus and SAI. It is expressly understood and the Trust,
subject to the approval of the Board, hereby agrees that TAMIC may enter into
agreements, pursuant to which a duly organized investment adviser (the
"Sub-Adviser") may be appointed to provide investment advice or other services
to the Portfolio. TAMIC shall remain responsible for ensuring that each
Sub-Adviser conducts its operations in a manner consistent with the terms of
this Agreement.
3. INFORMATION PROVIDED TO THE COMPANY
TAMIC shall keep the Board and the Trust informed of developments
materially affecting the Portfolio. In this regard, TAMIC shall provide such
periodic reports concerning the obligations assumed under this agreement as the
Trust and the Board may from time to time reasonably request. Additionally,
TAMIC shall ensure that the Sub-Adviser, at least quarterly, will provide the
Board with a written certification that the Portfolio is in compliance with the
Portfolio's investment objectives and practices.
4. STANDARD OF CARE
TAMIC shall exercise its best judgment and shall act in good faith in
rendering the services contemplated herein. TAMIC shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Trust 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
TAMIC against any liability to the Trust or the shareholders of the Portfolio
to which TAMIC would otherwise be subject by reason of its willful misfeasance,
bad faith, or gross negligence on its part in the performance of its duties or
by reason of TAMIC's disregard of its obligations and duties under this
Agreement.
5. COMPENSATION
In consideration of the services rendered pursuant to this Agreement, the
Trust will pay TAMIC [INSERT FEE SCHEDULE]. The parties understand that the fee
will be calculated daily and paid monthly. The fee for the period from the
Effective Date (defined below) of the Agreement 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 before the end of a month, the fee for such part of that month 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 TAMIC, the value of
the Portfolio's net assets shall be computed at the times and in the manner
specified in the Prospectus and/or the SAI.
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6. EXPENSES
TAMIC shall bear all expenses (excluding brokerage costs, custodian fees,
auditors fees or other expenses to be borne by either the Portfolio or the
Trust) in connection with the performance of its services under this Agreement
and shall pay: (a) any sub-investment adviser fee to the Portfolio under any
and all Subadvisory Agreement(s), and (b) any other fees required to be paid to
any Sub-Adviser. The Trust will bear certain other expenses to be incurred in
its operation, including, but not limited to, (i) interest and taxes; (ii)
brokerage commissions and other costs in connection with the purchase or sale
of securities and other investment instruments; (iii) fees and expenses of the
Trust's trustees other than those who are "interested persons" of the Trust;
(iv) legal and audit expenses; (v) custodian, registrar and transfer agent fees
and expenses; (vi) fees and expenses related to the registration and
qualification of the Trust and the Portfolio's shares for distribution under
state and federal securities laws; (vii) expenses of printing and mailing
reports and notices and proxy material to shareholders of the Portfolio; (viii)
all other expenses incidental to holding meetings of the Portfolio's
shareholders, including proxy solicitations therefor; (ix) insurance premiums
for fidelity bond and other coverage; (x) investment management fees; (xi)
expenses of typesetting for printing prospectuses and statements of additional
information and supplements thereto; (xii) expense of printing and mailing
prospectuses and statements of additional information and supplements thereto;
and (xiii) such non-recurring or extraordinary expenses as may arise, including
those relating to actions, suits or proceedings to which the Portfolio is a
party and legal obligation that the Portfolio may have to indemnify the Trust's
trustees, officers and/or employees or agents with respect thereto. The Trust
will bear all other expenses that TAMIC has not specifically assumed hereunder.
7. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that TAMIC 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, and the Trust has no objection to TAMIC's so acting, provided that
whenever the Trust or the Portfolio and one or more other investment companies
or accounts managed or advised by TAMIC have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or account. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for an affected Portfolio. The Trust also understands
that the persons employed by TAMIC to assist in the performance of TAMIC's
duties under this Agreement may not devote their full time to such service and
nothing contained in this Agreement shall be deemed to limit or restrict the
right of TAMIC or any affiliate of TAMIC to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
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8. TERM OF AGREEMENT
This Agreement shall become effective June 30, 2005 (the "Effective Date")
and shall continue thereafter so long as such continuance is specifically
approved at least annually as required by the Investment Company Act of 1940,
as amended (the "1940 Act"). This Agreement is terminable, without penalty, on
60 days' written notice, by the Board or by vote of holders of a majority (as
defined in the 1940 Act and the rules thereunder) of the outstanding voting
securities of the Trust, or upon 60 days' written notice, by TAMIC. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act and the rules thereunder).
9. REPRESENTATIONS
The Trust represents that a copy of the Declaration of Trust is on file
with the Secretary of the State of Massachusetts. The Trust further represents
that it shall maintain compliance with applicable regulatory mandates and
requirements, including but not limited to compliance with any reporting
required or information requested by the California Commissioner of Insurance.
TAMIC also represents that it shall maintain compliance with applicable
regulatory mandates including periodic reporting requirements, including but
not limited to compliance with any reporting or information requested by the
California Commissioner of Insurance.
10. MISCELLANEOUS
This Agreement may be signed in more than one counterpart. It shall be
governed by the laws of the state of Connecticut.
11. COOPERATION WITH INVESTIGATIONS
TAMIC and the Trust each agree to cooperate with each other in the event
that either should become involved in any investigation, legal proceeding,
claim, suit, or other similar action arising from the performance of the
obligations described in this Agreement.
12. COMPLIANCE WITH APPLICABLE LAW
TAMIC agrees to conduct itself in a manner consistent with applicable laws
and regulation, including but not limited to Sections 2a-7, 5(b), 12, 17, 18,
and 36 of the 1940 Act. Additionally, TAMIC shall assume responsibility for
ensuring compliance with the applicable investment diversification requirements
set forth in both the 1940 Act and Section 817(h) of the Internal Revenue Code
of 1986, as amended. TAMIC shall also ensure that its activities are conducted
in a manner consistent with a Code of Ethics maintained pursuant to Section
17j-1 of the 1940 Act. TAMIC agrees to use good faith efforts to ensure that
any sub-adviser appointed shall adopt and follow a similar Code of Ethics.
TAMIC also agrees that it shall conduct its activities in a manner consistent
with any No-Action Letter, order or rule promulgated by the SEC applicable to
the Trust or the Portfolio.
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13. LIMITATION OF LIABILITY
Except as may otherwise be prohibited by the Investment Company Act of
1940 or other applicable federal securities law, neither TAMIC nor any of its
officers, directors, employees or agents shall be subject to any liability to
the Trust or any shareholder of the Trust for any error or judgment, mistake of
law, or any loss arising out of any investment or other act or omission in the
course of, connected with, or arising out of any services to be rendered under
this Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties under this Agreement. To the extent permitted
under federal and state law, the Trust shall hold harmless and indemnify TAMIC
for any loss, liability, cost, damage or expense (including reasonable
attorneys fees and costs) arising from any claim or demand by any past or
present shareholder of the Trust that is not based upon TAMIC's willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement.
14. DELEGATION OF PROXY VOTING RESPONSIBILITY
TAMIC shall be responsible for voting proxies on securities held by the
Portfolio for delegating such responsibility to a Sub-Adviser appointed
pursuant to this Agreement. TAMIC represents that it or its delegee has adopted
and implemented written policies and procedures reasonably designed to ensure
that it will vote proxies in the best interest of the Portfolio and its
shareholders, which policies and procedures describe how TAMIC or its delegee
addresses material conflicts of interest between its interests and those of the
Portfolio with respect to proxy voting. TAMIC shall furnish the Trust with such
information reasonably requested by the Trust, in such form as may be
requested, as is necessary (1) for a summary description of TAMIC's or its
delegee's proxy voting policies and procedures to be included in the
registration statement with respect to the Trust, and (2) for the proxy voting
record for the Portfolio to be filed with the SEC in accordance with the
requirement of Form N-PX (or any successor form).
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Agreement to be signed by their respective officials thereto duly authorized as
of the day and year first above written.
Travelers Asset Management International
Company LLC
By:
-------------------------------
Its:
-------------------------------
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The Travelers Series Trust
By:
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Its:
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A-1-6
APPENDIX A-2
(FORM OF NEW INVESTMENT ADVISORY AGREEMENT FOR PIONEER FUND PORTFOLIO)
INVESTMENT ADVISORY AGREEMENT
ENTERED INTO BETWEEN
THE TRAVELERS SERIES TRUST
AND
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL COMPANY LLC
This Investment Advisory Agreement (the "Agreement") is entered into as of
June 30, 2005 by and between The Travelers Series Trust, a Massachusetts
business trust (the "Trust"), and Travelers Asset Management International
Company LLC, a limited liability company duly organized and existing under the
law of the state of New York ("TAMIC").
WHEREAS, the Trust is a series-type, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of several series, including the Pioneer Fund Portfolio
(the "Portfolio"); and
WHEREAS, the Trust desires to retain TAMIC to provide or to arrange to
provide investment management and advisory services to the Portfolio, in the
manner and on the terms and conditions set forth in this Agreement; and
WHEREAS, TAMIC is willing to provide or to arrange to provide such
services to the Portfolio, in the manner and on the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, the Trust and TAMIC agree as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Trust desires to employ its capital relating to the Portfolio by
investing and reinvesting in investments of the kind and in accordance with the
investment objective(s), policies and limitations authorized by its Board of
Trustees (the "Board") and as specified in the prospectus (the "Prospectus")
and the statement of additional information (the "SAI") filed with the
Securities and Exchange Commission as part of the Trust's Registration
Statement on Form N-1A, as may be periodically amended. Copies of the
Prospectus and the SAI have been and will be (following amendments) forwarded
to TAMIC. The Trust hereby appoints TAMIC to provide investment advisory
services for the Portfolio. Pursuant to this Agreement and subject to the
oversight and supervision by the Board, TAMIC shall manage the investment and
reinvestment, or arrange for the investment and reinvestment, of the
A-2-1
Portfolio's assets. TAMIC hereby accepts the appointment by the Trust in the
foregoing capacity and agrees, at TAMIC's own expense, to render the services
set forth herein and to provide the office space, furnishings, equipment, and
personnel required by TAMIC to perform these services on the terms and for the
compensation provided in this Agreement.
(b) The Trust agrees to provide TAMIC promptly with copies of all
amendments and supplements to the current Prospectus and the SAI, and copies of
any procedures and guidelines adopted by the Board applicable to the Portfolio
and any amendments thereto (the "Board Procedures"), on an on-going basis.
Until the Trust delivers any such amendment or supplement or Board Procedures,
TAMIC shall be fully protected in relying on the last Prospectus and SAI and
any Board Procedures, , previously furnished to TAMIC. In addition, the Trust
shall furnish TAMIC with a certified copy of any financial statement or report
prepared for the Trust with respect to the Portfolio by certified or
independent auditors, and with copies of any financial statements or reports
made by the Trust to shareholders or to any state or federal regulatory agency.
The Trust shall also inform TAMIC of the results of any audits or examinations
by regulatory authorities pertaining to TAMIC's responsibilities for the
Portfolio. The Trust further agrees to furnish TAMIC with any materials or
information that TAMIC may reasonably request to enable it to perform its
functions under this Agreement.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision, direction and approval of the Board, TAMIC
will manage the investment operations of the Portfolio and will furnish or
cause to be furnished to the Trust advice and assistance with respect to the
acquisition, holding or disposal of the Portfolio's investments in accordance
with the investment objective, policies and restrictions as communicated to it
by the Board and as are set forth in the Prospectus and SAI. TAMIC shall not
delegate any of the Adviser's duties under this Agreement to any other duly
organized investment adviser (a "Subadviser") until the Board and a majority of
those trustees who are not parties to this Agreement or "interested persons" of
any party have approved said Subadviser; PROVIDED, that, in the event that
TAMIC is authorized to delegate any of its duties under this Agreement to a
Subadviser, TAMIC shall retain overall responsibility for these delegated
powers and functions and any and all obligations and liabilities in connection
therewith, and TAMIC shall remain responsible for ensuring that each Subadviser
conducts its operations in a manner consistent with the terms of this
Agreement.
3. INFORMATION TO BE PROVIDED TO THE TRUST
TAMIC shall keep the Board and the Trust informed of developments
materially affecting the Portfolio. In this regard, TAMIC shall provide to the
Board and the Trust's officers such periodic reports concerning the obligations
assumed
A-2-2
under this Agreement as the Trust and the Board may from time to time
reasonably request. Additionally, TAMIC shall, or shall ensure that any
Subadviser shall, at least quarterly, provide the Board with a written
certification that the Portfolio is in compliance with the Portfolio's
investment objectives and practices, the 1940 Act and applicable rules and
regulations under the 1940 Act, and the requirements of Subchapter M and
Section 817(h) under the Internal Revenue Code of 1986, as amended (the
"Code").
4. STANDARD OF CARE
TAMIC shall exercise its best judgment and shall act in good faith in
rendering the services contemplated herein. TAMIC and any of its officers,
directors, employees, agents, representatives, or persons controlled by it (the
"Related Parties") shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Trust or the Portfolio in connection with
the matters to which this Agreement relates, provided that TAMIC shall be
liable to the Trust, the Portfolio and the Portfolio's shareholders for conduct
that constitutes willful misfeasance, bad faith, or gross negligence on its
part in the performance of its duties or by reason of TAMIC's disregard of its
obligations and duties under this Agreement.
5. TAMIC'S DUTIES REGARDING PORTFOLIO TRANSACTIONS
(a) PLACEMENT OF ORDERS. TAMIC shall take all actions that it considers
necessary to implement the investment policies of the Portfolio, and, in
particular, to place all orders for the purchase or sale of securities or other
investments for the Portfolio with brokers or dealers TAMIC selects. To that
end, TAMIC is authorized as the Trust's agent to give instructions to the
Trust's custodian as to deliveries of securities or other investments and
payments of cash for the Portfolio's account. In connection with the selection
of brokers or dealers and the placement of purchase and sale orders, TAMIC is
directed at all times to seek to obtain best execution and price within the
policy guidelines determined by the Board and set forth in the Trust's current
Prospectus and SAI, subject to provisions (b), (c), and (d) of this Section 5.
(b) SELECTION OF BROKERS AND DEALERS. To the extent permitted by the
policy guidelines set forth in the Trust's current Prospectus and SAI, in the
selection of brokers and dealers to execute portfolio transactions, TAMIC is
authorized to consider not only the available prices and rates of brokerage
commissions, but also other relevant factors, which may include, without
limitation: the execution capabilities of the brokers and dealers; the
research, custody, and other services provided by the brokers and dealers that
TAMIC believes will enhance its general portfolio management capabilities; the
size of the transaction; the difficulty of execution; the operational
facilities of these brokers and dealers; the risk to a broker or dealer of
positioning a block of securities; and the overall quality of
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brokerage and research services provided by the brokers and dealers. In
connection with the foregoing, TAMIC is specifically authorized to pay those
brokers and dealers who provide brokerage and research services to TAMIC a
higher commission than that charged by other brokers and dealers if TAMIC
determines in good faith that the amount of the commission is reasonable in
relation to the value of the services in terms of either the particular
transaction or in terms of TAMIC's overall responsibilities with respect to the
Portfolio and to any other client accounts or portfolios that TAMIC advises.
The execution of such transactions shall not be considered to represent an
unlawful breach of any duty created by this Agreement or otherwise.
(c) SOFT DOLLAR ARRANGEMENTS. On an ongoing basis, but not less often than
annually, TAMIC shall identify and provide a written description to the Trust
of all "soft dollar" arrangements that TAMIC maintains with respect to the
Portfolio or with brokers or dealers that execute transactions for the
Portfolio. Prior to the commencement of the active management of the Portfolio,
and periodically thereafter, but not less often than annually, TAMIC shall
provide the Trust with a written description of all arrangements with third
parties and other individuals, entities, brokers, or money management firms
that have or may receive or share in the payment of fees for services in
connection with securing or continuing this Agreement.
(d) AGGREGATED TRANSACTIONS. TAMIC is authorized to aggregate purchase and
sale orders for securities held (or to be held) by the Portfolio with similar
orders being made on the same day for other client accounts or portfolios that
TAMIC manages. When an order is so aggregated: (a) the actual prices applicable
to the aggregated transaction will be averaged, and the Portfolio and each
other account or portfolio participating in the aggregated transaction shall be
treated as having purchased or sold the Portfolio's portion of the securities
at this average price; and (b) all transaction costs incurred in effecting the
aggregated transaction shall be shared on a pro-rata basis among the accounts
or portfolios (including the Portfolio) participating in the transaction. When
recommending or effecting a transaction in a particular security or investment
for more than one client account or portfolio (including the Portfolio), TAMIC
may allocate the recommendations or transactions among all accounts and
portfolios for whom the recommendation is made or transaction is effected on a
basis that TAMIC considers equitable. The Portfolio and TAMIC each recognize
that in some cases this procedure may adversely affect the size of the position
obtainable for the Portfolio.
A-2-4
6. COMPENSATION
In consideration of the services rendered, the facilities furnished, and
the expenses assumed pursuant to this Agreement, the Trust will pay TAMIC an
amount equivalent on an annual basis to the following:
Annual Aggregate Net Asset
Management Fee Value of the Portfolio
- ------------------------------------ -----------------------
0.750% of the first $ 250,000,000
0.700% of the next $ 250,000,000
0.675% of the next $ 500,000,000
0.650% of the next $ 1,000,000,000
0.600% of amounts over $ 2,000,000,000
The parties understand that the fee will be calculated daily and paid
monthly. The fee for the period from the Effective Date (defined below) of the
Agreement 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 before the end of a
month, the fee for such part of that month 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 TAMIC, the value of the Portfolio's net assets
shall be computed at the times and in the manner specified in the Prospectus
and the SAI, and on days on which the net assets are not so determined, the net
asset value computation to be used shall be as determined on the immediately
preceding day on which the net assets were determined.
7. EXPENSES
TAMIC shall bear all expenses (excluding brokerage costs, custodian fees,
auditor fees and other expenses to be borne by either the Portfolio or the
Trust) in connection with the performance of its services under this Agreement
and shall pay: (a) any subadviser fee incurred under any and all Subadvisory
Agreement(s) with respect to the Portfolio, and (b) any other fees required to
be paid to any Subadviser. The Trust will bear certain other expenses to be
incurred in its operation, including, but not limited to: (i) interest and
taxes; (ii) brokerage commissions and other costs in connection with the
purchase or sale of securities and other investment instruments; (iii) fees and
expenses of the Trust's trustees other than those who are "interested persons"
of the Trust; (iv) legal and audit expenses; (v) custodian, registrar and
transfer agent fees and expenses; (vi) fees and expenses related to the
registration and qualification of the Trust and the Portfolio's shares for
distribution under state and federal securities laws; (vii) expenses of
printing and mailing reports and notices and proxy material to shareholders of
the Portfolio; (viii) all other expenses incidental to holding meetings of the
Portfolio's shareholders, including
A-2-5
proxy solicitations therefor; (ix) insurance premiums for fidelity bond and
other coverage; (x) investment management fees; (xi) expenses of typesetting
for printing prospectuses and statements of additional information and
supplements thereto; (xii) expenses of printing and mailing prospectuses and
statements of additional information and supplements thereto; and (xiii) such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Portfolio is a party and legal
obligation that the Portfolio may have to indemnify the Trust's trustees,
officers and/or employees or agents with respect thereto. The Trust will bear
all other expenses that TAMIC has not specifically assumed hereunder.
8. SERVICES TO OTHER COMPANIES OR ACCOUNTS
(a) The Trust understands that TAMIC 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, and the Trust has no objection to TAMIC's so acting, PROVIDED, that,
whenever the Trust or the Portfolio and one or more other investment companies
or accounts managed or advised by TAMIC have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each company or account. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Portfolio. The Trust also understands that the
persons employed by TAMIC to assist in the performance of TAMIC's duties under
this Agreement may not devote their full time to such service and that nothing
contained in this Agreement shall be deemed to limit or restrict the right of
TAMIC or any affiliate of TAMIC to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature. This
Agreement shall not in any way limit or restrict TAMIC or any of its directors,
officers, employees, or agents from buying, selling or trading any securities
or other investment instruments for its or their own account or for the account
of others for whom it or they may be acting, provided that such activities will
not adversely affect or otherwise impair the performance by TAMIC of its duties
and obligations under this Agreement.
(b) Moreover, by reason of investment banking and other activities, TAMIC
or its affiliates may from time to time acquire privileged and confidential
information about corporations or other entities and their securities, The
Trust recognizes and acknowledges that TAMIC or it affiliates will not be free
to divulge such information to the Trust or to act upon such information.
9. DELEGATION OF PROXY VOTING RIGHTS
The Trust delegates to TAMIC the Trust's discretionary authority to
exercise voting rights with respect to the securities and other investments
held by the Portfolio. TAMIC shall exercise these voting rights unless and
until the Trust
A-2-6
revokes this delegation in writing. The Trust may revoke this delegation at any
time without cause. TAMIC shall provide the Trust with a written copy of its
proxy voting guidelines. TAMIC shall maintain and preserve a record, in an
easily accessible place for a period of not less than five (5) years or other
such period under Rule 204-2 of the Advisers Act, of TAMIC's voting procedures,
and of TAMIC's actual votes with respect to those securities and other
investments including all information and data required to be filed on Form
N-PX by the Trust, and TAMIC shall supply this record to the Trust, or any
authorized representative of the Trust, periodically, but at least quarterly,
provided that the Trust shall receive a record of all proxy votes and other
information and data necessary to complete Form N-PX for each fiscal year
ending June 30 reasonably thereafter, but no later than the July 31st following
said June 30th in accordance with the 1940 Act rules and regulations governing
proxy votes.
10. AFFILIATED BROKERS AND TRANSACTIONS
(a) Affiliated Brokers. TAMIC or any of its affiliates may act as broker
in connection with the purchase or sale of securities or other investments for
the Portfolio, subject to: (a) the requirement that TAMIC seek to obtain best
execution and price within the policy guidelines determined by the Board and
set forth in the Trust's current prospectus and SAI; (b) the provisions of the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); (c) the
provisions of the Securities Exchange Act of 1934, as amended, including, but
not limited to, Section 11(a) thereof and any exchange on which a security may
be listed or traded; and (d) other provisions of applicable law. These
brokerage services are not within the scope of the duties of TAMIC under this
Agreement. Subject to the requirements of applicable law and any procedures
adopted by the Board, TAMIC or its affiliates may receive brokerage
commissions, fees or other remuneration from the Portfolio or the Trust for
these services in addition to TAMIC's fees for services under this Agreement.
(b) Affiliated Transactions. Provided that the Trust has approved
procedures under an applicable exemptive rule of the 1940 Act and subject to
said procedures, TAMIC is hereby authorized to engage in agency cross
transactions with other registered investment companies or clients advised by
TAMIC.
11. CUSTODY
Nothing in this Agreement shall require TAMIC to take or receive physical
possession of cash, securities, or other investments of the Portfolio.
12. REGISTRATION AS INVESTMENT ADVISER
TAMIC is registered as an investment adviser with the U.S. Securities and
Exchange Commission ("SEC") under the Advisers Act. TAMIC shall remain so
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registered throughout the term of this Agreement and shall notify the Trust
immediately if TAMIC ceases to be so registered as an investment adviser.
13. CODE OF ETHICS
TAMIC certifies that it has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act, and that it has
instituted procedures reasonably necessary to prevent Access Persons (as
defined under Rule 17j-1) from violating its code of ethics. TAMIC will provide
the Trust with a copy of that code, together with evidence of the code's
adoption. At each quarterly Board meeting during the time that this Agreement
remains in effect, the president or a vice president of TAMIC shall certify to
the Trust that TAMIC has complied with the requirements of Rule 17j-1 during
the previous quarter and that there have been no violations of its code of
ethics or, if a violation has occurred, that appropriate action has been taken
in response to the violation; PROVIDED, that, no less frequently than annually,
the appropriate officer of TAMIC shall furnish a written report to the Trust
that complies with the requirements of Rule 17j-1 with respect to these reports
regarding issues, material violations, and any related sanctions in connection
with the administration of the code of ethics, or as otherwise required
pursuant to Rule 17j-1. Upon written request of the Trust, TAMIC shall permit
representatives of the Trust to examine the reports (or summaries of the
reports) required to be made by Rule 17j-1(d)(1) relating to enforcement of the
code of ethics.
14. TERM OF AGREEMENT; TERMINATION OF AGREEMENT; AMENDMENT OF AGREEMENT
(a) TERM. This Agreement shall become effective June 30, 2005 (the
"Effective Date"), and shall continue thereafter so long as such continuance is
specifically approved at least annually as required by the 1940 Act.
(b) TERMINATION. This Agreement may be terminated, without penalty, (1) by
the Board or by vote of holders of a majority of the outstanding shares of the
Portfolio upon sixty (60) days' written notice to TAMIC, or (2) by TAMIC upon
60 days' written notice to the Trust. This Agreement will also terminate
automatically in the event of its assignment.
(c) AMENDMENT. This Agreement may be amended by the parties only if the
amendment is specifically approved by: (1) a majority of those trustees who are
not parties to this Agreement or "interested persons" of any party cast in
person at a meeting called for the purpose of voting on the Agreement's
approval; and (2) if required by applicable law, the vote of a majority of
outstanding shares of the Portfolio.
15. REPRESENTATIONS AND COVENANTS OF THE TRUST
(a) The Trust represents that a copy of the Declaration of Trust is on
file with the Secretary of State of the Commonwealth of Massachusetts and the
clerk of the
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City of Boston. The Trust further represents and covenants that it shall
maintain compliance with applicable regulatory mandates and requirements,
including but not limited to compliance with any reporting required or
information requested by the California Commissioner of Insurance.
(b) The Trust represents and covenants that it is duly organized and
validly existing under Massachusetts law with the power to own and possess the
Trust's assets and carry on the Trust's business as this business is now being
conducted;
(c) The Trust represents and covenants that it has the authority to enter
into and perform the services contemplated by this Agreement; and
(d) The Trust represents and covenants that it is (and during the term of
this Agreement, will remain) registered as an open-end management investment
company under the 1940 Act and that the Trust's shares representing an interest
in the Portfolio are (and during the term of this Agreement will remain)
registered under the Securities Act of 1933 and under any applicable state
securities laws.
16. REPRESENTATIONS AND COVENANTS OF TAMIC
(a) TAMIC represents and covenants that it: (1) is duly organized and
validly existing under New York law with the power to own and possess TAMIC's
assets and carry on TAMIC's business as this business is now being conducted;
(2) has the authority to enter into and perform the services contemplated by
this Agreement; (3) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (4) has met, and shall
continue to seek to meet for the duration of this Agreement, any other
applicable federal or state requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency, necessary to be met in order to
perform the services contemplated by this Agreement; and (5) shall promptly
notify the Trust of the occurrence of any event that would disqualify it from
serving as an investment adviser to an investment company pursuant to Section
9(a) of the 1940 Act. TAMIC also represents and covenants that it shall
maintain compliance with applicable regulatory mandates and requirements,
including but not limited to compliance with any reporting required or
information requested by the California Commissioner of Insurance.
(b) TAMIC represents and covenants that it shall be responsible for the
management of the Portfolio in accordance with the Prospectus and SAI and in
compliance with the requirements applicable to a regulated investment company
under Subchapter M of the Code. TAMIC shall also comply with the
diversification requirements for variable annuity, life insurance, or endowment
contracts pursuant to Section 817(h) of the Code and United States Treasury
Regulation Section 1.817-5, each as may be amended from time to time. TAMIC
shall promptly inform the Trust if any information in the Prospectus or SAI, or
if any action relating to TAMIC or its services to the Portfolio is (or will
become) inaccurate, incomplete, or
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no longer compliant with Section 817(h) of the Code or Treasury Regulation
Section 1.817-5, if applicable.
(c) TAMIC represents that it shall carry out its responsibilities under
this Agreement in compliance with (1) federal and state law, including
securities law, governing its activities; (2) the Portfolio's investment
objective, policies, and restrictions, as set forth in the Prospectus and SAI,
as amended from time to time; and (3) any policies or directives as the Board
may from time to time establish or issue and communicate to the Adviser in
writing. The Trust shall promptly notify TAMIC in writing of changes to (2) or
(3) above, which shall be implemented as soon as reasonably possible.
(d) TAMIC represents and covenants that it shall conduct its activities
under this Agreement in a manner consistent with its code of ethics maintained
pursuant to Rule 17j-1 under Section 17(j) of the 1940 Act. TAMIC also agrees
to require that any Subadviser shall adopt and follow a similar code of ethics
and that such Subadviser shall be obligated to provide a copy of said code,
together with certifications of its adoption and other matters pursuant to Rule
17j-1, to the Trust.
(f) TAMIC represents and covenants that it shall conduct its activities in
a manner consistent with any no-action letter, order or rule promulgated by the
SEC applicable to the Trust or the Portfolio, provided that the Trust has given
copies of such no-action letters and orders to TAMIC.
17. COOPERATION WITH INVESTIGATIONS
TAMIC and the Trust each agree to cooperate with each other in the event
that either should become involved in any investigation, legal proceeding,
claim, suit or other similar action arising from the performance of the
obligations described in this Agreement.
18. RECORDS
(a) MAINTENANCE OF RECORDS. TAMIC hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the 1940
Act, all records relating to the Portfolio's investments that are required to
be maintained by the Trust pursuant to the requirements of paragraphs (b)(5),
(b)(6), (b)(7), (b)(9), (b)(10), and (f) of Rule 31a-1 under the 1940 Act.
(b) OWNERSHIP OF RECORDS. TAMIC agrees that all books and records which
TAMIC maintains for the Portfolio or the Trust are the Trust's property and
further agrees to surrender promptly to the Trust any books, records, or
information upon the Trust's request; PROVIDED, HOWEVER, that TAMIC may retain
copies of the records at its own cost. All the requested books and records
shall be made available, within five (5) business days of a written request, to
the Trust's accountants or auditors during regular business hours at TAMIC's
offices. The Trust or the Trust's authorized representatives shall have the
right to copy any records in
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TAMIC's possession that pertain to the Portfolio or the Trust. These books,
records, information, or reports shall be made available to properly authorized
government representatives consistent with state and federal law and/or
regulations. In the event of the termination of this Agreement, all these
books, records, or other information shall be returned to the Trust. TAMIC
agrees that the policies and procedures it has established for managing the
Portfolio, including, but not limited to, all policies and procedures designed
to ensure compliance with federal and state regulations governing the
adviser/client relationship and management and operation of the Portfolio,
shall be made available for inspection by the Trust or either of their
authorized representatives not less frequently than annually.
19. LIMITATION OF LIABILITY
Except as may otherwise be prohibited by the 1940 Act or other applicable
federal securities law, TAMIC and/or its Related Parties shall not be liable to
the Trust or any shareholder of the Trust for any error or judgment, mistake of
law, or any loss arising out of any investment or other act or omission in the
course of, connected with, or arising out of any services to be rendered under
this Agreement, except that TAMIC or its Related Parties shall be liable by
reason of conduct that constitutes willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties under this Agreement. To the extent permitted
under federal and state law, the Trust shall hold harmless and indemnify TAMIC
and its Related Parties for any loss, liability, cost, damage or expense
(including reasonable attorneys fees and costs) arising from any claim or
demand by any past or present shareholder of the Trust except if the loss,
liability, cost, damage or expense (including reasonable attorneys fees and
costs) is based upon TAMIC's or a Related Party's willful misfeasance, bad
faith, or gross negligence in the performance of its duties or the reckless
disregard of its obligations and duties under this Agreement.
20. GOVERNING LAW
This Agreement shall be governed by, construed under and interpreted and
enforced in accordance with the laws of the State of New York, without regard
to principles of conflicts of laws.
21. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby.
22. DEFINITIONS
The terms "assignment," "affiliated person," and "interested person," when
used in this Agreement, shall have the respective meanings specified in Section
2(a) the 1940 Act. The term "majority of the outstanding shares" means the
lesser of
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(a) sixty-seven percent (67%) or more of the shares present at a meeting if
more than fifty percent (50%) of these shares are present or represented by
proxy, or (b) more than fifty percent (50%) of the outstanding shares.
23. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, and all of such counterparts together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
THE TRAVELERS SERIES TRUST
By:
----------------------------
Name:
Title:
TRAVELERS ASSET MANAGEMENT INTERNATIONAL
COMPANY LLC
By:
-----------------------------
Name:
Title:
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APPENDIX A-3
(FORM OF NEW INVESTMENT ADVISORY AGREEMENT FOR
THE U.S. GOVERNMENT SECURITIES PORTFOLIO)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT made as of this 30th day of June, 2005,
between Travelers Asset Management International Company LLC a limited
liability company duly organized and existing under the law of the state of New
York (hereinafter "TAMIC") and the U.S. Government Securities Portfolio
(hereinafter the "Portfolio"), a separate series of the Travelers Series Trust
(the "Trust"), a Massachusetts business trust established in Massachusetts by
an Agreement and Declaration of Trust dated October 11, 1991, as amended and/or
restated from time to time (the "Declaration of Trust").
WITNESSETH:
WHEREAS, the Portfolio and TAMIC wish to enter into an agreement setting
forth the terms upon which TAMIC will perform certain services for the
Portfolio.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein contained, the parties hereto agree as follows:
1. The Portfolio hereby employs TAMIC to manage the investment and reinvestment
of the assets of the Portfolio and to perform the other services herein set
forth, subject to the supervision of the Board of Trustees of the Trust
(hereinafter the "Board") for the period and on the terms herein set forth.
TAMIC hereby accepts such employment and agrees during such period, at its own
expense, to render the services and to assume the obligations herein set forth
for the compensation herein provided.
2. In carrying out these obligations to manage the investment and reinvestment
of the assets of the Portfolio, TAMIC shall:
a. obtain and evaluate pertinent economic, statistical and financial
data and other information relevant to the investment policy of the
Portfolio, affecting the economy generally and individual companies or
industries, the securities of which are held by the Portfolio or are
under consideration for inclusion therein;
b. be authorized to purchase supplemental research and other services
from brokers at additional cost to the Portfolio;
c. regularly furnish to the Board recommendations with respect to any
investment program for approval, modification or rejection by the
Board;
d. take such steps as are necessary to implement the investment
program approved by the Board;
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e. regularly report to the Board with respect to implementation of the
approved investment program and any other activities in connection
with the administration of the assets of the Portfolio; and
f. vote proxies on securities held by the Portfolio or delegate such
responsibility to a sub-adviser appointed pursuant to this Agreement.
TAMIC represents that it or its delegee has adopted and implemented
written policies and procedures reasonably designed to ensure that it
will vote proxies in the best interest of the Portfolio and its
shareholders, which policies and procedures describe how TAMIC or its
delegee addresses material conflicts of interest between its interests
and those of the Portfolio with respect to proxy voting. TAMIC shall
furnish the Trust with such information reasonably requested by the
Trust, in such form as may be requested, as is necessary (1) for a
summary description of TAMIC's or its delegee's proxy voting policies
and procedures to be included in the registration statement with
respect to the Trust, and (2) for the proxy voting record for the
Portfolio to be filed with the SEC in accordance with the requirement
of Form N-PX (or any successor form).
3. TAMIC may engage a sub-adviser to furnish investment management information
and advice to assist TAMIC in carrying out its responsibilities under this
Agreement. TAMIC shall remain responsible for ensuring that each sub-adviser
conducts its operations in a manner consistent with the terms of this
Agreement.
4. Any investment program undertaken by TAMIC pursuant to this Agreement and
any other activities undertaken by TAMIC on behalf of the Portfolio shall at
all times be subject to any directives of the Board or any duly constituted
committee thereof acting pursuant to like authority.
5. For the services rendered hereunder, TAMIC will receive an amount equivalent
on an annual basis to 0.3233% of the average daily net assets of the Portfolio,
such fees to be deducted on each valuation date.
6. The services of TAMIC to the Portfolio hereunder are not to be deemed
exclusive and TAMIC shall be free to render similar services to others so long
as its services hereunder are not impaired or interfered with thereby.
7. If approved by a vote of a majority of the outstanding voting securities of
the Portfolio (as defined in the Investment Company Act of 1940), this
Investment Advisory Agreement:
a. may not be terminated by TAMIC, without the prior approval of a new
Investment Advisory Agreement by a vote of a majority of the
outstanding voting securities of the Portfolio, and shall be subject
to termination, without the payment of any penalty, upon sixty days'
written notice to the
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investment adviser, by the Board of Trustees or by a vote of a
majority of the outstanding voting securities of the Portfolio;
b. shall not be amended without prior approval of a majority of the
outstanding voting securities of the Portfolio;
c. shall automatically terminate upon assignment by either party; and
d. shall continue in effect for a period of more than two years from
the date of its execution, only so long as such continuance is
specifically approved (i) at least annually by a vote of a majority of
the Board of Trustees who are not parties to, or interested persons of
any party to, such agreement, cast in person at a meeting called for
the purpose of voting on such approval and at which the Board has been
furnished such information as may be reasonably necessary to evaluate
the terms of said agreement, or (ii) by a vote of a majority of the
outstanding voting securities of the Portfolio.
8. This Agreement is made on behalf of the Portfolio by an officer or Trustee
of the Trust, not individually, but solely as an officer or Trustee under the
Declaration of Trust, and the obligations under this Agreement are not binding
upon, nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust personally, but shall
bind only the Trust's property.
9. TAMIC agrees that it shall furnish to the California Commissioner of
Insurance any information or reports concerning the Portfolio as the
Commissioner, in the performance of his or her duties, may request.
10. TAMIC hereby acknowledges that all books and records relating to the
services provided to the Portfolio hereunder are the property of the Trust and
subject to its control; provided, however, that during the term of the
Agreement, the Trust shall not exercise such control so as to interfere with
the performance of TAMIC's duties hereunder.
11. This Investment Advisory Agreement is subject to the provisions of the
Investment Company Act of 1940, as amended, and the rules and regulations of
the Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be signed by their respective officials thereunto duly authorized
and seals to be affixed, in the case of TAMIC, as of the day and year first
above written.
U.S. GOVERNMENT SECURITIES PORTFOLIO OF THE
TRAVELERS SERIES TRUST
By:
---------------------------
Chairman, Board of Trustees
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WITNESS:
- ----------------------------
Secretary, Board of Trustees
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL COMPANY LLC
By:
----------------------------------
President
ATTEST: (Seal)
- ----------------------------
Corporate Secretary
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APPENDIX A-4
FORM OF
NEW INVESTMENT ADVISORY AGREEMENT
FOR ZERO COUPON BOND FUND PORTFOLIO (SERIES 2005)
Travelers Asset Management International Company LLC
One Cityplace
Hartford, Connecticut 06103
Dear Sirs:
The Travelers Series Trust (the Trust) a business trust organized under
the laws of the Commonwealth of Massachusetts, confirms its agreement with
Travelers Asset Management International Company LLC (the Adviser) as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Zero Coupon Bond Fund Portfolios (Series 2005) of The Travelers Series
Trust (the "Portfolio") desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in its Prospectus (the Prospectus) and Statement of Additional
Information (the Statement) filed with the Securities and Exchange Commission
as part of the Trust's Registration Statement on Form N-1A, as amended 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 Trust. Copies of the Trust's
Prospectus and the Statement have been or will be submitted to the Adviser. The
Trust desires to employ and hereby appoints the Adviser to act as its
investment adviser. The Adviser accepts the appointment and agrees to furnish
the services for the compensation set forth below.
2. SERVICES AS INVESTMENT ADVISER
Subject to the supervision and direction of the Board of Trustees of the
Trust, the Adviser will (a) manage the portfolio accordance with the
Portfolio's investment objective and policies as stated in the Prospectus and
the Statement; (b) make investment decisions for the Portfolio; (c) place
purchase and sale orders for portfolio transactions for the Portfolio; and (d)
employ professional portfolio managers and securities analysts who provide
research services to the Portfolio. In providing those services, the Adviser
will conduct a continual program of investment, evaluation and, if appropriate,
sale and reinvestment of the Portfolio's assets.
It is expressly understood and the Trust, subject to the approval of the
Board, hereby agrees that TAMIC may enter into agreements, pursuant to which a
duly organized investment adviser (the "Sub-Adviser") may be appointed to
provide investment advice or other services to the Portfolio. TAMIC shall
remain responsible for ensuring that each Sub-Adviser conducts its operations
in a manner consistent with the terms of this Agreement.
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3. COMPLIANCE WITH INTERNAL REVENUE CODE REQUIREMENTS
Adviser represents and warrants that the Portfolio will at all time be
invested in such a manner as to ensure compliance with section 817(h) of the
Internal Revenue Code of 1986, as amended (the Code) and Treasury Regulations
Section 1.817-5, relating to the diversification requirements for variable
annuity, endowment, or life insurance contracts and any amendments or other
modifications to such Section or Regulation. Adviser will be relieved of this
obligation and shall be held harmless when direction from the Trust causes
non-compliance with Section 817(h) and/or Regulation Section 1.817-5. Adviser
agrees to provide quarterly reports to the life insurance company that issues
the variable annuity, endowment or life insurance contracts (the Life Company),
executed by a duly authorized officer of Adviser, within fifteen (15) days of
the close of each calendar quarter certifying as to compliance with such
Section or Regulations. In addition to the quarterly reports, Life Company may
request and Adviser agrees to provide Section 817 diversification compliance
reports at more frequent intervals, as reasonably requested by Life Company.
Adviser also represents and warrants that it shall manage the investment and
reinvestment of the assets of the Portfolio in compliance with the annual gross
income qualification requirements of Section 851(b)(2) and 851(b)(3) of the
Code, and with the diversification requirements of Section 851(b)(4) of the
Code.
Adviser agrees to indemnify and hold harmless the Trust and the Life
Company and each of their directors and officers and each person, if any, who
controls the Trust or Life Company within the meaning of Section 15 of the
Securities Act of 1933 (collectively, the Indemnified Parties for purposes of
this Paragraph 3) against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties, or any of them, may become subject under any statute, at
common law or otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements arise out of or
result from any material breach of the representation and warranty contained in
this Paragraph 3, resulting from gross negligence, willful misfeasance, bad
faith, or reckless disregard of duties of Adviser including a failure to comply
with the diversification requirements described in this Paragraph 3. Adviser,
may rely on Treasury Regulation Section 1.817-5(a)(2) in the event of a
material breach of diversification requirements under Section 817(h) as
described this Paragraph 3.
4. BROKERAGE
In selecting brokers or dealers to execute transactions on behalf of the
Portfolio, the Adviser will seek the best overall terms available. In assessing
the best overall terms available for any transaction, the 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
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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 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 the Portfolio and/or other
accounts over which the Adviser or its affiliates exercise investment
discretion.
5. INFORMATION PROVIDED TO THE TRUST
The Adviser will keep the Trust informed of developments materially
affecting the Portfolio's portfolio, and will, on its own initiative, furnish
the Trust from time to time with whatever information the Adviser believes is
appropriate for this purpose.
6. STANDARD OF CARE
The Adviser shall exercise its best judgment in rendering the services
listed in paragraph 2 above. Except as provided in paragraph 3 above, Adviser
shall not be liable for any error of judgment or mistakes of law or for any
loss suffered by the Portfolio or the Trust 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 Adviser against any liability, to
the Trust or to its shareholders to which the 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 Adviser's reckless
disregard of its obligations and duties under this Agreement.
7. COMPENSATION
In consideration of the services rendered pursuant to this Agreement, the
Trust will pay the Adviser on the first business day of each week a fee for the
prior week which is an amount equivalent on an annual basis to .10% of the
average daily net assets of the Portfolio.
The fee for the period from the date the Portfolio commences its
investment operations to the end of the month during which the Portfolio
commences its investment operations shall be prorated according to the
proportion that such period bears to the full weekly period. Upon any
termination of this Agreement before the end of a month, the fee for such part
of that month shall be prorated according to the proportion that such period
bears to the full weekly period and shall be payable upon the date termination
of this Agreement. For the purpose of determining fees payable to the Adviser,
the value of the Portfolio's net assets shall be computed at the times and in
the manner specified in the Trust's Prospectus and/or the Statement.
8. EXPENSES
The Adviser will bear all expenses in connection with performance of its
services under this Agreement. The Trust will bear certain other expenses to be
incurred in its
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operation, including, but not limited to, investment advisory, sub-investment
advisory and administration fees; fees for necessary professional and brokerage
services; fees for any pricing service; the costs regulatory compliance; and
costs associated with maintaining the Trust's legal existence and shareholder
relations.
9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
The Trust understands that the Adviser now acts, will continue to act and
may act in the future as investment adviser to fiduciary and other managed
accounts, and as investment adviser to other investment companies, and the
Trust has no objection to the Adviser's so acting, provided that whenever the
Portfolio and one or more other investment companies or other clients advised
by the Adviser have available funds for investment, transactions in such
securities will generally be allocated daily among the clients pro rata in
relation to the size of the order, using the daily average price. The Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Portfolio; however, Adviser agrees that the
Portfolio shall not be disadvantaged in relation to other clients of Adviser
when the same or similar advice or decisions are made for more than one client.
In addition, the Trust understands that the persons employed by the Adviser to
assist in the performance of the 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 Adviser or any affiliate
of the Adviser to engage in and devote time and attention to other businesses
or to render services of whatever kind or nature.
10. TERM OF AGREEMENT
This Agreement shall become effective as of the date the Portfolio
commences its investment operations and continue for an initial two-year term
and shall continue thereafter so long such continuance is specifically approved
at least annually by the Board of Trustees of the Trust or (ii) a vote of a
majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act") of the Portfolio's outstanding voting on securities, provided that
in either event the continuance is also approved by a majority of the Board of
Trustees who are not interested persons (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting such approval. This agreement is terminable, without penalty
on 60 days written notice, by the board of Trustees of the Trust or by vote of
holders of a majority of assignment (as defined in the 1940 Act). This
agreement will also terminate automatically in the event of its assignment; (as
defined in the 1940 Act). This Agreement may not be terminated by Adviser
without the prior approval of a new Investment Advisory Agreement by a vote of
a majority of the outstanding voting securities of the Portfolio.
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11. REPRESENTATION BY THE TRUST
The Trust represents that a copy of the Trust's Agreement and Declaration
of Trust is on file with the Secretary of the Commonwealth of Massachusetts and
with the City of Boston.
12. LIMITATION OF LIABILITY
The Trust and the Adviser agree that the obligations of the Trust under
this Agreement shall not be binding upon any of the Trustees, shareholders,
nominees, officers, employees or agents, whether past, present or future, of
the Trust individually, but are binding only upon the assets and property of
the Trust as provided in the Agreement and Declaration of Trust. The execution
and delivery of this Agreement have been authorized by the Trustees, and signed
by an authorized officer of the Trust acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the assets and
property of the Trust as provided in the Agreement and Declaration of Trust.
13. INFORMATION AND REPORTS TO CALIFORNIA COMMISSIONER
Adviser agrees that it shall furnish to the California Commissioner of
Insurance any information or reports concerning the Trust or the Portfolio as
the Commissioner, in the performance of his or her duties, may reasonably
request.
14. BOOKS AND RECORDS
Adviser acknowledges that all books and records which it maintains for the
Trust in performing its duties under this Agreement are the property of the
Trust and subject to its control; provided, however, that during the term of
this Agreement the Trust shall not exercise such control so as to interfere
with the performance of the Adviser's duties hereunder.
15. DELEGATION OF PROXY VOTING RESPONSIBILITY
TAMIC shall be responsible for voting proxies on securities held by the
Portfolio for delegating such responsibility to a Sub-Adviser appointed
pursuant to this Agreement. TAMIC represents that it or its delegee has adopted
and implemented written policies and procedures reasonably designed to ensure
that it will vote proxies in the best interest of the Portfolio and its
shareholders, which policies and procedures describe how TAMIC or its delegee
addresses material conflicts of interest between its interests and those of the
Portfolio with respect to proxy voting. TAMIC shall furnish the Trust with such
information reasonably requested by the Trust, in such form as may be
requested, as is necessary (1) for a summary description of TAMIC's or its
delegee's proxy voting policies and procedures to be included in the
registration statement with respect to the Trust, and
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(2) for the proxy voting record for the Portfolio to be filed with the SEC in
accordance with the requirement of Form N-PX (or any successor form).
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,
ZERO COUPON BOND FUND PORTFOLIO
(SERIES 2005) OF THE TRAVELERS SERIES
TRUST
By:
--------------------------
Accepted:
Travelers Asset Management
International Company LLC
By:
----------------------------
A-4-6
APPENDIX A-5
(FORM OF NEW INVESTMENT ADVISORY AGREEMENT FOR
THE SEPARATE FUNDS)
INVESTMENT ADVISORY AGREEMENT
INVESTMENT ADVISORY AGREEMENT made as of this 30th day of June, 2005,
between Travelers Asset Management International Company LLC a limited
liability company duly organized and existing under the law of the state of New
York (hereinafter "TAMIC") and [NAME OF SEPARATE FUND] (hereinafter the
"Trust"), a Massachusetts business trust established in Massachusetts by a
Declaration of Trust dated [DATE OF DECLARATION], as amended and/or restated
from time to time (the "Declaration of Trust").
WITNESSETH:
WHEREAS, the Trust and TAMIC wish to enter into an agreement setting forth
the terms upon which TAMIC will perform certain services for the Trust.
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein contained, the parties hereto agree as follows:
1. The Trust hereby employs TAMIC to manage the investment and reinvestment of
the assets of the Trust and to perform the other services herein set forth,
subject to the supervision of the Board of Trustees of the Trust (hereinafter
the "Board") for the period and on the terms herein set forth. TAMIC hereby
accepts such employment and agrees during such period, at its own expense, to
render the services and to assume the obligations herein set forth for the
compensation herein provided.
2. In carrying out these obligations to manage the investment and reinvestment
of the assets of the Trust, TAMIC shall:
a. obtain and evaluate pertinent economic, statistical and financial
data and other information relevant to the investment policy of the
Trust, affecting the economy generally and individual companies or
industries, the securities of which are included in the Trust's
portfolio or are under consideration for inclusion therein;
b. be authorized to purchase supplemental research and other services
from brokers at additional cost to the Trust;
c. regularly furnish to the Board recommendations with respect to any
investment program for approval, modification or rejection by the
Board;
d. take such steps as are necessary to implement the investment
program approved by the Board;
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e. regularly report to the Board with respect to implementation of the
approved investment program and any other activities in connection
with the administration of the assets of the Trust; and
f. vote proxies on securities held by the Trust or delegate such
responsibility to a sub-adviser appointed pursuant to this Agreement.
TAMIC represents that it or its delegee has adopted and implemented
written policies and procedures reasonably designed to ensure that it
will vote proxies in the best interest of the Trust and its
shareholders, which policies and procedures describe how TAMIC or its
delegee addresses material conflicts of interest between its interests
and those of the Trust with respect to proxy voting. TAMIC shall
furnish the Trust with such information reasonably requested by the
Trust, in such form as may be requested, as is necessary (1) for a
summary description of TAMIC's or its delegee's proxy voting policies
and procedures to be included in the registration statement with
respect to the Trust, and (2) for the proxy voting record for the
Trust to be filed with the SEC in accordance with the requirement of
Form N-PX (or any successor form).
3. TAMIC may engage a sub-adviser to furnish investment management information
and advice to assist TAMIC in carrying out its responsibilities under this
Agreement. TAMIC shall remain responsible for ensuring that each sub-adviser
conducts its operations in a manner consistent with the terms of this
Agreement.
4. Any investment program undertaken by TAMIC pursuant to this Agreement and
any other activities undertaken by TAMIC on behalf of the Trust shall at all
times be subject to any directives of the Board or any duly constituted
committee thereof acting pursuant to like authority.
5. For the services rendered hereunder, TAMIC will receive an amount equivalent
on an annual basis to [INSERT FEE SCHEDULE], such fees to be deducted on each
valuation date.
6. The services of TAMIC to the Trust hereunder are not to be deemed exclusive
and TAMIC shall be free to render similar services to others so long as its
services hereunder are not impaired or interfered with thereby.
7. If approved by a vote of a majority of the outstanding voting securities of
the Trust (as defined in the Investment Company Act of 1940), this Investment
Advisory Agreement:
a. may not be terminated by TAMIC, without the prior approval of a new
Investment Advisory Agreement by a vote of a majority of the
outstanding voting securities of the Trust, and shall be subject to
termination, without the payment of any penalty, upon sixty days'
written notice to the
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investment adviser, by the Board of Trustees or by a vote of a
majority of the outstanding voting securities of the Trust;
b. shall not be amended without prior approval of a majority of the
outstanding voting securities of the Trust;
c. shall automatically terminate upon assignment by either party; and
d. shall continue in effect for a period of more than two years from
the date of its execution, only so long as such continuance is
specifically approved (i) at least annually by a vote of a majority of
the Board of Trustees who are not parties to, or interested persons of
any party to, such agreement, cast in person at a meeting called for
the purpose of voting on such approval and at which the Board has been
furnished such information as may be reasonably necessary to evaluate
the terms of said agreement, or (ii) by a vote of a majority of the
outstanding voting securities of the Trust.
8. This Agreement is made on behalf of the Trust by an officer or Trustee of
the Trust, not individually, but solely as an officer or Trustee under the
Declaration of Trust, and the obligations under this Agreement are not binding
upon, nor shall resort be had to the private property of, any of the Trustees,
shareholders, officers, employees or agents of the Trust personally, but shall
bind only the Trust's property.
9. TAMIC agrees that it shall furnish to the California Commissioner of
Insurance any information or reports concerning the Trust as the Commissioner,
in the performance of his or her duties, may request.
10. TAMIC hereby acknowledges that all books and records relating to the
services provided to the Trust hereunder are the property of the Trust and
subject to its control; provided, however, that during the term of the
Agreement, the Trust shall not exercise such control so as to interfere with
the performance of TAMIC's duties hereunder.
11. This Investment Advisory Agreement is subject to the provisions of the
Investment Company Act of 1940, as amended, and the rules and regulations of
the Securities and Exchange Commission.
IN WITNESS WHEREOF, the parties hereto have caused this Investment Advisory
Agreement to be signed by their respective officials thereunto duly authorized
and seals to be affixed, in the case of TAMIC, as of the day and year first
above written.
[NAME OF FUND]
By:
----------------------------
Chairman, Board of Trustees
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WITNESS:
- ----------------------------
Secretary, Board of Trustees
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL COMPANY LLC
By:
-------------------------
President
ATTEST:(Seal)
- ----------------------------
Corporate Secretary
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APPENDIX B
(FORM OF NEW SUBADVISORY AGREEMENT FOR
MONDRIAN INTERNATIONAL STOCK PORTFOLIO.)
INVESTMENT SUBADVISORY AGREEMENT
ENTERED INTO BETWEEN
TRAVELERS ASSET MANAGEMENT INTERNATIONAL COMPANY LLC
AND
MONDRIAN INVESTMENT PARTNERS, LIMITED
This Investment Subadvisory Agreement (the "Agreement") is entered into as
of May 1, 2005, by and between Travelers Asset Management International Company
LLC, a limited liability company duly organized and existing under the laws of
the State of New York ("TAMIC"), and Mondrian Investment Partners, Limited
("Mondrian"), a limited partnership duly organized and existing under the laws
of England and Wales (the "Subadviser").
WHEREAS, TAMIC and The Travelers Series Trust, an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act") and organized as a Massachusetts business trust (the
"Trust"), have entered into an Investment Advisory Agreement dated March 20,
1998, (the "Investment Advisory Agreement"), a copy of which is attached as
Exhibit A hereto;
WHEREAS, pursuant to the Investment Advisory Agreement, TAMIC has agreed
to provide investment management and advisory services to the Mondrian
International Stock Portfolio (formerly Lazard International Stock Portfolio),
a series of the Trust (the "Portfolio"); and
WHEREAS, the Investment Advisory Agreement provides that TAMIC may engage
a duly organized subadviser, to furnish investment information, services and
advice to assist TAMIC in carrying out its responsibilities under the
Investment Advisory Agreement, provided that TAMIC obtains the consent and
approval of the Board of Trustees of the Trust (the "Board") and a majority of
those trustees who are not parties to the Investment Advisory Agreement or
"interested persons" of any party thereto in accordance with the requirements
of the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, TAMIC desires to retain the Subadviser to render investment
advisory services to TAMIC in the manner and on the terms set forth in this
Agreement, and the Subadviser desires to provide such services.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, TAMIC and the Subadviser agree as follows:
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1. INVESTMENT DESCRIPTION; APPOINTMENT
(a) INVESTMENT DESCRIPTION. The Trust desires to employ its capital
relating to the Portfolio by investing and reinvesting in investments of the
kind and in accordance with the investment objective(s), policies and
limitations specified in the prospectus (the "Prospectus") and the statement of
additional information (the "SAI") filed with the Securities and Exchange
Commission (the "SEC") as part of the Trust's Registration Statement on Form
N-lA, as may be periodically amended. TAMIC agrees to provide promptly copies
of all amendments and supplements to the current Prospectus and the SAI, and
copies of any procedures adopted by the Board applicable to the Subadviser and
any amendments thereto (the "Board Procedures"), to the Subadviser on an
on-going basis. Until TAMIC delivers any such amendment or supplement or Board
Procedures, the Subadviser shall be fully protected in relying on the last
Prospectus and SAI and any Board Procedures, if any, previously furnished to
the Subadviser. TAMIC shall also promptly inform the Subadviser of the results
of any audits or examinations by regulatory authorities pertaining to the
Subadviser's responsibilities for the Portfolio. TAMIC shall also promptly
inform the Subadviser of any litigation, injunction, action or proceeding
pertaining to the Subadviser's responsibilities for the Portfolio. TAMIC
further agrees to furnish the Subadviser with any materials or information that
the Subadviser may reasonably request to enable it to perform its functions
under this Agreement.
(b) APPOINTMENT OF SUBADVISER. TAMIC hereby engages the services of the
Subadviser in connection with the investment and reinvestment of the
Portfolio's assets. Pursuant to this Agreement and subject to the oversight and
supervision by TAMIC and the Board, the Subadviser shall manage the investment
and reinvestment of the Portfolio's assets. Subject to the terms and conditions
of this Agreement, the Subadviser hereby accepts the engagement by TAMIC in the
foregoing capacity and agrees, at the Subadviser's own expense, to render the
services set forth herein and to provide the office space, furnishings,
equipment, and personnel required by the Subadviser to perform these services
on the terms and for the compensation provided in this Agreement. Except as
specified herein, the Subadviser agrees that it shall not delegate any material
obligation assumed pursuant to this Agreement to any third PARTY without first
obtaining the written consent of both the Trust and TAMIC.
2. SERVICES AS SUBADVISER
Subject to the supervision, direction and approval of the Board and TAMIC,
the Subadviser shall conduct a continual program of investment, evaluation,
sale, and reinvestment of the Portfolio's assets. The Subadviser is authorized,
in its sole discretion and without prior consultation with TAMIC, to: (a)
obtain and evaluate pertinent economic, financial, and other information
affecting the economy generally and certain companies as such information
relates to securities which are purchased
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for or considered for purchase in the Portfolio; (b) manage the Portfolio's
assets in accordance with the Portfolio's investment objectives and policies as
stated in the Prospectus and the SAI, rules and regulations under the 1940 Act;
(c) make investment decisions for the Portfolio; (d) place purchase and sale
orders for portfolio transactions on behalf of the Portfolio and manage
otherwise uninvested cash assets of the Portfolio; (e) price such Portfolio
securities as TAMIC and Subadviser shall mutually agree upon from time to time;
(f) execute account documentation, agreements, contracts and other documents as
the Subadviser shall be requested by brokers, dealers, counterparties and other
persons in connection with its management of the assets of the Portfolio (in
such respect, and only for this limited purpose, the Subadviser shall act as
TAMIC's and the Trust's agent and attorney-in-fact); and (g) employ
professional portfolio managers and securities analysts who provide research
services to the Portfolio. The Subadviser shall in general take such action as
is appropriate to effectively manage the Portfolio's investment practices. In
addition,
(i) The Subadviser shall furnish TAMIC routinely with daily information
concerning portfolio transactions and other reports as agreed upon from time to
time concerning transactions and performance of the Portfolio, in such form and
frequency as may be mutually agreed upon from time to time. The Subadviser
agrees to review the Portfolio and discuss the management of the Portfolio with
TAMIC and the Board as either or both shall from time to time reasonably
request.
(ii) The Subadviser shall maintain and preserve the records specified in
Section 17 of this Agreement and any other records related to the Portfolio's
transactions as are required under any applicable state or federal securities
law or regulation including: the 1940 Act, the Securities Exchange Act of 1934,
as amended (the "1934 Act"), and the Investment Advisers Act of 1940, as
amended (the "Advisers Act"). TAMIC and the Trust shall maintain and preserve
all other books and records for the Portfolio as required under such rules. The
Subadviser shall furnish to TAMIC all information relating to the Subadviser's
services hereunder reasonably requested by TAMIC within a reasonable period of
time after TAMIC makes such request.
(iii) The Subadviser shall comply with Board Procedures and any amendments
thereto provided to the Subadviser by TAMIC or the Trust.
(iv) The Subadviser shall maintain a written code of ethics (the "Code of
Ethics") that it reasonably believes complies with the requirements of Rule
204A-1 under the Investment Advisers Act of 1940 and Rule 17j-1 under the 1940
Act, a copy of which will be provided to TAMIC and the Trust, and shall
institute procedures reasonably necessary to prevent Access Persons (as defined
in Rules 204A-1 and 17j-1) from violating its Code of Ethics. The Subadviser
shall follow such Code of Ethics in performing its services under this
Agreement. Further, the Subadviser represents that it has policies and
procedures regarding the detection and
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prevention of the misuse of material, nonpublic information by the Subadviser
and its employees as required by the Insider Trading and Securities Fraud
Enforcement Act of 1988, a copy of which it will provide to TAMIC and the Trust
upon any reasonable request.
(v) The Subadviser shall manage the investment and reinvestment of the
assets of the Portfolio in a manner consistent with the requirements of
Subchapter M and the diversification requirements of Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code"). TAMIC shall promptly
provide the Subadviser with copies of the requirements of Subchapter M and the
diversification requirements of Section 817(h) of the Code and any changes or
modification to such provisions. The Subadviser will also manage the
investments of the Portfolio in a manner consistent with any and all applicable
investment restrictions (including diversification requirements) contained in
the 1940 Act and the rules and regulations thereunder, any SEC no-action letter
or order applicable to the Trust, and any applicable state securities law or
regulation. TAMIC shall provide Subadviser with copies of any such SEC
no-action letter or order.
3. INFORMATION AND REPORTS
(a) The Subadviser shall keep the Trust and TAMIC informed of developments
relating to its duties as subadviser of which the Subadviser has, or should
have, knowledge that would materially affect the Portfolio. In this regard, the
Subadviser shall provide the Trust, TAMIC, and their respective officers with
such periodic reports concerning the obligations the Subadviser has assumed
under this Agreement as the Trust and TAMIC may from time to time reasonably
request. Additionally, prior to each Board meeting, the Subadviser will provide
TAMIC and the Board with reports regarding the Subadviser's management of the
Portfolio during the most recently completed quarter, to include written
certifications that the Portfolio is in compliance with the Portfolio's
investment objectives and practices, the 1940 Act and applicable rules and
regulations under the 1940 Act, and the requirements of Subchapter M and the
diversification requirements of Section 817(h) under the Code, and otherwise in
such form as may be mutually agreed upon by the Subadviser and TAMIC. The
Subadviser also shall certify quarterly to the Trust and TAMIC that it and its
"advisory persons" (as defined in Rule 17j-1) have complied materially with the
requirements of Rule 17j-1 during the previous quarter or, if not, explain what
the Subadviser has done to seek to ensure such compliance in the future.
Annually, the Subadviser shall furnish a written report, which complies with
the requirements of Rule 17j-1, concerning the Subadviser's Code of Ethics to
the Trust and TAMIC. Upon written request of the Trust or TAMIC with respect to
violations of the Code of Ethics directly affecting the Portfolio, the
Subadviser shall permit representatives of the Trust or TAMIC to examine
reports (or summaries of the reports) required to be made by Rule 17j-1(d)(1)
relating to enforcement of the Code of Ethics.
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(b) Each of TAMIC and the Subadviser will provide the other party with a
list, to the best of TAMIC's or the Subadviser's respective knowledge, of each
affiliated person (and any affiliated person of such an affiliated person) of
TAMIC or the Subadviser, as the case may be, and each of TAMIC and the
Subadviser agrees promptly to update such list whenever TAMIC or the Subadviser
becomes aware of any changes that should be added to or deleted from the list
of affiliated persons.
(c) The Subadviser will also provide TAMIC with any information reasonably
requested regarding its management of the Portfolio required for any
shareholder report, amended registration statement, or prospectus supplement to
be filed by the Trust with the SEC.
4. RULE 38a-1 COMPLIANCE
The Subadviser represents, warrants and agrees that it has adopted and
implemented, and throughout the term of this Agreement will maintain in effect
and implement, policies and procedures reasonably designed to prevent, detect
and correct violations by the Subadviser and its supervised persons, and, to
the extent the activities of the Subadviser in respect of the Trust could
affect the Trust, by the Trust, of "federal securities laws" (as defined in
Rule 38a-1 under the 1940 Act), and that the Subadviser has provided the Trust
with true and complete copies of its policies and procedures (or summaries
thereof) and related information requested by the Trust. The Subadviser agrees
to cooperate with periodic reviews by the Trust's compliance personnel of the
Subadviser's policies and procedures, their operation and implementation and
other compliance matters and to provide to the Trust from time to time such
additional information and certifications in respect of the Subadviser's
policies and procedures, compliance by the Subadviser with federal securities
laws and related matters as the Trust's compliance personnel may reasonably
request. Subadviser agrees to promptly notify TAMIC of any material compliance
violations which affect the Portfolio.
5. STANDARD OF CARE
The Subadviser shall exercise its reasonable judgment and shall act in
good faith and use reasonable care and in a manner consistent with applicable
federal and state laws and regulations in rendering the services it agrees to
provide under this Agreement.
6. SUBADVISER'S DUTIES REGARDING PORTFOLIO TRANSACTIONS
(a) Placement of Orders. The Subadviser shall take all actions that it
considers necessary to implement the investment policies of the Portfolio, and,
in particular, to place all orders for the purchase or sale of securities or
other investments for the Portfolio with brokers or dealers the Subadviser
selects. To that end, the Subadviser is authorized as the Trust's agent to give
instructions to the Trust's custodian as to deliveries of securities or other
investments and payments of cash for the Portfolio's
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account. In connection with the selection of brokers or dealers and the
placement of purchase and sale orders, the Subadviser is directed at all times
to seek to obtain best execution and price within the policy guidelines
determined by the Board and set forth in the Trust's current Prospectus and
SAI, subject to provisions (b), (c) and (d) of this Section 5.
(b) Selection of Brokers and Dealers. To the extent permitted by the
policy guidelines set forth in the Trust's current Prospectus and SAI, in the
selection of brokers and dealers to execute portfolio transactions, the
Subadviser is authorized to consider not only the available prices and rates of
brokerage commissions, but also other relevant factors, which may include,
without limitation: the execution capabilities of the brokers and dealers; the
research, custody, and other services provided by the brokers and dealers that
the Subadviser believes will enhance its general portfolio management
capabilities; the size of the transaction; the difficulty of execution; the
operational facilities of these brokers and dealers; the risk to a broker or
dealer of positioning a block of securities; and the overall quality of
brokerage and research services provided by the brokers and dealers. In
connection with the foregoing, the Subadviser is specifically authorized to pay
those brokers and dealers who provide brokerage and research services to the
Subadviser a higher commission than that charged by other brokers and dealers
if the Subadviser determines in good faith that the amount of the commission is
reasonable in relation to the value of the services in terms of either the
particular transaction or in terms of the Subadviser's overall responsibilities
with respect to the Portfolio and to any other client accounts or portfolios
that the Subadviser advises. The execution of such transactions shall not be
considered to represent an unlawful breach of any duty created by this
Agreement or otherwise.
(c) Soft Dollar Arrangements. On an ongoing basis, but not less often than
annually, the Subadviser shall identify and provide a written description to
the Trust and TAMIC of all "soft dollar" arrangements that the Subadviser
maintains with respect to the Portfolio or with brokers or dealers that execute
transactions for the Portfolio, and of all research and other services provided
to Subadviser by a broker or dealer (whether prepared by such broker or dealer
or by a third party) as a result, in whole or in part, of the direction of
Portfolio transactions to the broker or dealer. Prior to the commencement of
the active management of the Portfolio, and periodically thereafter, but not
less often than annually, the Subadviser shall provide the Trust and TAMIC with
a written description of all arrangements with third parties and other
individuals, entities, brokers, or money management firms that have or may
receive or share in the payment of fees for services under this Agreement.
(d) Aggregated Transactions. On occasions when the Subadviser deems the
purchase or sale of a security or futures contract to be in the best interest
of the Portfolio as well as other clients, the Subadviser is authorized, but
not required, to aggregate purchase and sale orders for securities or futures
contracts held (or to be
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held) by the Portfolio with similar orders being made on the same day for other
client accounts or portfolios that the Subadviser manages. When an order is so
aggregated, the Subadviser may allocate the recommendations or transactions
among all accounts and portfolios for whom the recommendation is made or
transaction is effected on a basis that the Subadviser reasonably considers
equitable and consistent with its fiduciary obligations to the Portfolio and
its other clients. The Subadviser, TAMIC and the Trust recognize that in some
cases this procedure may adversely affect the size of the position obtainable
for the Portfolio.
7. COMPENSATION
In consideration of the services rendered, the facilities furnished, and
the expenses assumed pursuant to this Agreement, TAMIC will pay the Subadviser
a fee at the annual rate of 0.425% of the Portfolio's average daily net assets
for the first $100 million and 0.30% of the Portfolio's average daily net
assets over $100 million. The parties understand that the fee will be
calculated daily and paid monthly. The Subadviser shall have no right to obtain
compensation directly from the Trust or the Portfolio for services provided
hereunder and agrees to look solely to TAMIC for payment of fees due. The fee
for the period from the Effective Date (defined below) of the Agreement 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 before the end of a month, the fee for
such part of that month 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 Subadviser, the value of the Portfolio's net assets shall be computed at
the times and in the manner specified in the Prospectus and the SAI, and on
days on which the net assets are not so determined, the net asset value
computation to be used shall be as determined on the immediately preceding day
on which the net assets were determined.
8. EXPENSES
The Subadviser shall bear all expenses (excluding expenses to be borne by
either the Portfolio or the Trust as described in the following sentence) in
connection with the performance of its services under this Agreement. The Trust
will bear certain other expenses to be incurred in its operation, including,
but not limited to, (i) interest and taxes; (ii) brokerage commissions and
other costs in connection with the purchase or sale of securities and other
investment instruments; (iii) fees and expenses of the Trust's trustees who are
not "interested persons" of the Trust; (iv) legal and audit expenses; (v)
custodian, registrar and transfer agent fees and expenses; (vi) fees and
expenses related to the registration and qualification of the Trust and the
Portfolio's shares for distribution under state and federal securities laws;
(vii) expenses of printing and mailing reports and notices and proxy material
to shareholders of the Portfolio; (viii) all other expenses incidental to
holding
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meetings of the Portfolio's shareholders, including proxy solicitations
therefor; (ix) insurance premiums for fidelity bond and other coverage; (x)
investment management fees; (xi) expenses of typesetting for printing
prospectuses and statements of additional information and supplements thereto;
(xii) expenses of printing and mailing prospectuses and statements of
additional information and supplements thereto; and (xiii) such non-recurring
or extraordinary expenses as may arise, including those relating to actions,
suits or proceedings to which the Portfolio is a party and legal obligations
that the Portfolio may have to indemnify the Trust's trustees, officers and/or
employees or agents with respect thereto.
9. SERVICES TO OTHER COMPANIES OR ACCOUNTS
TAMIC understands that the Subadviser and its affiliates now act, will
continue to act and may act in the future as investment manager or adviser to
fiduciary and other managed accounts, and as an investment manager or adviser
to other investment companies, including any offshore entities or private
accounts. TAMIC has no objection to the Subadviser and its affiliates so
acting, PROVIDED, that, whenever the Portfolio and one or more other investment
companies or accounts managed or advised by the Subadviser and its affiliates
have available funds for investment, investments suitable and appropriate for
each will be allocated in accordance with a formula reasonably believed to be
equitable to each such company and account. TAMIC represents that the Trust
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Portfolio and that the Trust also understands
that the persons employed by the Subadviser to assist in the performance of the
Subadviser's duties under this Agreement may not devote their full time to such
service, and that nothing contained in this Agreement shall be deemed to limit
or restrict the right of the Subadviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
This Agreement shall not in any way limit or restrict the Subadviser or any of
its directors, officers, employees, or agents from buying, selling or trading
any securities or other investment instruments for its or their own account or
for the account of others for whom it or they may be acting, provided that such
activities will not adversely affect or otherwise impair the performance by the
Subadviser of its duties and obligations under this Agreement.
10. DELEGATION OF PROXY VOTING RIGHTS
The Subadviser shall be responsible for voting proxies on securities held
by the Portfolio. The Subadviser represents that is has adopted and implemented
written policies and procedures that are, and are reasonably designed to ensure
that the Subadviser will vote proxies, in compliance with the 1940 Act and the
rules and regulations thereunder. The Subadviser shall provide the Trust in a
timely manner with (1) such records of its proxy voting on behalf of the
Portfolio as necessary for the Trust to comply with the requirements of Form
N-PX, or any successor law, rule, regulation, or SEC position, and (2) such
information as necessary for a summary
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description of the Subadviser's proxy voting policies and procedures to be
included in the registration statement with respect to the Trust.
11. AFFILIATED BROKERS
The Subadviser or any of its affiliates may act as broker in connection
with the purchase or sale of securities or other investments for the Portfolio,
subject to: (a) the requirement that the Subadviser seek to obtain best
execution and price within the policy guidelines determined by the Board and
set forth in the Trust's current prospectus and SAI; (b) the provisions of the
1940 Act and the Advisers Act; (c) the provisions of the 1934 Act, including,
but not limited to, Section 11(a) thereof; and (d) other provisions of
applicable law. These brokerage services are not within the scope of the duties
of the Subadviser under this Agreement. Subject to the requirements of
applicable law and any procedures adopted by the Board, the Subadviser or its
affiliates may receive brokerage commissions, fees or other remuneration from
the Portfolio or the Trust for these services in addition to the Subadviser's
fees for services under this Agreement.
12. CUSTODY
Nothing in this Agreement shall require the Subadviser to take or receive
physical possession of cash, securities, or other investments of the Portfolio.
13. TERM OF AGREEMENT; TERMINATION OF AGREEMENT; AMENDMENT OF AGREEMENT
(a) TERM. This Agreement shall become effective May 1, 2005 (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.
(b) TERMINATION. This Agreement may be terminated, without penalty, (i) by
the Board or by vote of holders of a majority of the outstanding shares of the
Portfolio upon sixty (60) days' written notice to TAMIC and Subadviser, (ii) by
TAMIC upon 60 days' written notice to the Trust and Subadviser, or (iii) by
Subadviser upon 60 days' written notice to the Trust and TAMIC. This Agreement
will also terminate automatically in the event of its assignment or in the
event of the assignment or termination of the Investment Advisory Agreement.
(c) AMENDMENT. This Agreement may be amended by the parties only if the
amendment is specifically approved by: (i) a majority of those trustees who are
not parties to this Agreement or "interested persons" of any party cast in
person at a meeting called for the purpose of voting on the Agreement's
approval; and (ii) if required by applicable law, the vote of a majority of
outstanding shares of the Portfolio.
B-9
14. REPRESENTATIONS AND COVENANTS OF TAMIC
TAMIC represents and covenants to Subadviser as follows:
(a) It is duly organized and validly existing under New York law with the
power to own and possess its assets and carry on its business as the business
is now being conducted.
(b) The execution, delivery and performance by TAMIC of this Agreement are
within TAMIC's powers and have been duly authorized by all necessary limited
liability company action and by the Board of Trustees of the Trust, and no
action by or in respect of, or filing with, any governmental body, agency or
official is required on the part of TAMIC for the execution, delivery and
performance of this Agreement by the parties hereto, and the execution,
delivery and performance of this Agreement by the parties hereto does not
contravene or constitute a default under (i) any provision of applicable law,
rule or regulation, (ii) TAMIC's governing instruments, or (iii) any agreement,
judgment, injunction, order, decree or other instruments binding upon TAMIC.
(c) It is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement.
(d) It has met, and shall continue to seek to meet for the duration of
this Agreement, any other applicable federal or state requirements, or the
applicable requirements of any regulatory of industry self-regulatory agency,
necessary to be met by TAMIC in order to perform the services contemplated by
this Agreement.
(e) It (i) is registered with the SEC as an investment adviser under the
Advisers Act, (ii) is registered and licensed as an investment adviser under
the laws of all jurisdictions in which its activities require it to be so
licensed, and (iii) shall promptly notify the Subadviser of the occurrence of
any event that would disqualify TAMIC from serving as an investment adviser to
an investment company pursuant to Section 9(a) of the 1940 Act.
(f) It acknowledges that it has received a copy of the Subadviser's Form
ADV and the Form ADV for [Mondrian Investment Partners (U.S.), Inc.] [what will
this entity be doing?, Would we need to appoint them as a sub-adviser as well?]
at least 48 hours prior to the execution of this Agreement and has delivered a
copy of the same to the Trust.
(g) The Trust is registered as an open-end management investment company
under the 1940 Act and that the Trust's shares representing interests in the
Portfolio are registered under the Securities Act of 1933 and under any
applicable state securities laws.
(h) It shall carry out its responsibilities under this Agreement in
compliance with (i) federal and state law, including securities law, governing
its activities;
B-10
(ii) the Portfolio's investment objective, policies, and restrictions, as set
forth in the Prospectus and SAI, as amended from time to time; and (iii) any
policies or directives as the Board may from time to time establish or issue
and communicate to TAMIC in writing. The Trust shall promptly notify TAMIC in
writing of changes to (ii) or (iii) above, and upon receipt of such notice,
TAMIC shall promptly notify the Subadviser in writing of such changes to (ii)
or (iii) above.
15. REPRESENTATIONS AND COVENANTS OF THE SUBADVISER
The Subadviser represents and covenants to TAMIC as follows:
(a) It is duly organized and validly existing under the laws of England
and Wales with the power to own and possess its assets and carry on its
business as this business is now being conducted.
(b) The execution, delivery and performance by the Subadviser of this
Agreement are within the Subadviser's powers and have been duly authorized by
all necessary action on the part of its board of directors, and no action by or
in respect of, or filing with, any governmental body, agency or official is
required on the part of the Subadviser for the execution, delivery and
performance of this Agreement by the parties hereto, and the execution,
delivery and performance of this Agreement by the parties hereto does not
contravene or constitute a default under (i) any provision of applicable law,
rule or regulation, (ii) the Subadviser's governing instruments, or (iii) any
agreement, judgment, injunction, order, decree or other instruments binding
upon the Subadviser.
(c) It is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement.
(d) It has met, and shall continue to seek to meet for the duration of
this Agreement, any other applicable federal or state requirements, or the
applicable requirements of any regulatory or industry self-regulatory agency,
necessary to be met in order to perform the services contemplated by this
Agreement.
(e) It (i) is registered with the SEC as an investment adviser under the
Advisers Act, (ii) is registered or licensed as an investment adviser under the
laws of jurisdictions in which its activities require it to be so registered or
licensed, and (iii) shall promptly notify the Trust of the occurrence of any
event that would disqualify it from serving as an investment adviser to an
investment company pursuant to Section 9(a) of the 1940 Act.
(f) It has provided TAMIC with a copy of its Form ADV as most recently
filed with the SEC and will, promptly after filing any amendment to its Form
ADV with the SEC, furnish a copy of such amendments to TAMIC. The information
contained in the Subadviser's Form ADV is accurate and complete in all material
respects and does not omit to state any material fact necessary in order to
make the statements made, in light of the circumstances under which they were
made, not misleading.
B-11
(g) It shall carry out its responsibilities under this Agreement in
compliance with (i) federal and state law, including securities law, governing
its activities; (ii) the Portfolio's investment objective, policies, and
restrictions, as set forth in the Prospectus and SAI, as amended from time to
time; and (iii) any policies or directives as the Board may from time to time
establish or issue and that are communicated to the Subadviser in writing. The
Trust or TAMIC shall promptly notify the Subadviser in writing of changes to
(ii) or (iii) above.
16. COOPERATION WITH REGULATORY AUTHORITIES OR OTHER ACTIONS
The parties to this Agreement each agree to cooperate in a reasonable
manner with each other in the event that any of them should become involved in
a legal, administrative, judicial or regulatory action, claim, or suit as a
result of performing its obligations under this Agreement.
17. RECORDS
(a) MAINTENANCE OF RECORDS. The Subadviser hereby undertakes and agrees to
maintain, in the form and for the period required by Rule 31a-2 under the 1940
Act, all records relating to the Portfolio's investments that are required to
be maintained by the Trust pursuant to the requirements of paragraphs (b)(5),
(b)(6), (b)(7), (b)(9), (b)(10), and (f) of Rule 31a-1, as such may be amended
from time to time, under the 1940 Act with respect to the Subadviser's
responsibilities hereunder for the Portfolio (the "Portfolio's Books and
Records").
(b) OWNERSHIP OF RECORDS. The Subadviser agrees that the Portfolio's Books
and Records are the Trust's property and further agrees to surrender promptly
to the Trust or TAMIC the Portfolio's Books and Records upon the request of the
Trust or TAMIC; PROVIDED, HOWEVER, that the Subadviser may retain copies of the
records at its own cost. The Portfolio's Books and Records shall be made
available, within two (2) business days of a written request, to the Trust's
accountants or auditors during regular business hours at the Subadviser's
offices. The Trust, TAMIC or their respective authorized representatives shall
have the right to copy any records in the Subadviser's possession that pertain
to the Portfolio or the Trust. These books, records, information, or reports
shall be made available to properly authorized government representatives
consistent with state and federal law and/or regulations. In the event of the
termination of this Agreement, the Portfolio's Books and Records shall be
returned to the Trust or TAMIC. The Subadviser agrees that the policies and
procedures it has established for managing the Portfolio, including, but not
limited to, all policies and procedures designed to ensure compliance with
federal and state regulations governing the adviser/client relationship and
management and operation of the Portfolio, shall be made available for
inspection by the Trust, TAMIC or their respective authorized representatives
upon reasonable written request within not more than two (2) business days.
B-12
18. CONFIDENTIALITY.
(a) NON-DISCLOSURE BY SUBADVISER. The Subadviser agrees that the
Subadviser will not disclose or use any records or confidential information
obtained pursuant to this Agreement in any manner whatsoever, except as
authorized in this Agreement or specifically by TAMIC or the Portfolio or
Trust, or if this disclosure or use is required by federal or state regulatory
authorities, the regulatory bodies of the Untied Kingdom or by a court of the
United States, England and Wales or any other jurisdiction.
(b) NON-DISCLOSURE EXCEPTIONS. The Subadviser may disclose the investment
performance of the Portfolio; PROVIDED that the disclosure does not reveal the
identity of TAMIC, the Portfolio, or the Trust. The Subadviser may also
disclose that TAMIC, the Trust and Portfolio are the Subadviser's clients,
PROVIDED that the disclosure does not reveal the investment performance or the
composition of the Portfolio.
19. LIMITATION OF LIABILITY; INDEMNIFICATION
(a) LIMITATION OF LIABILITY. Except as provided herein and as may
otherwise be provided by the 1940 Act or other federal securities laws, TAMIC
and its respective officers, directors, employees, agents, representatives or
persons controlled by them (collectively, the "Related Parties") on the one
hand, and the Subadviser and the Subadviser Related Parties on the other hand,
shall not be liable to each other, the Trust or any shareholder of the Trust
for any error or judgment, mistake of law, or any loss arising out of any
investment or other act or omission in the course of, connected with, or
arising out of any services to be rendered under this Agreement, except that
TAMIC, the Subadviser and any respective Related Party shall be so liable by
reason of conduct that constitutes willful misfeasance, bad faith, or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties under this Agreement.
(b) SUBADVISER INDEMNITY TO TAMIC. The Subadviser agrees to indemnify and
defend TAMIC and TAMIC's Related Parties for any loss, liability, cost, damage,
or expenses (including reasonable investigation and defense costs and
reasonable attorneys fees and costs) arising out of any claim, demand, action,
suit, or proceeding arising out of (i) the Subadviser's conduct that
constitutes willful misfeasance, bad faith, or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties under this Agreement, or (ii) any actual or alleged material
misstatement or omission in the Trust's registration statement, any proxy
statement, or communication to current or prospective investors in the
Portfolio relating to disclosure about the Subadviser or the Subadviser's
management of the Portfolio provided in writing to TAMIC or the Trust by the
Subadviser or which has been reviewed and approved by the Subadviser.
B-13
(c) TAMIC INDEMNITY TO SUBADVISER. TAMIC agrees to indemnify and defend
the Subadviser and the Subadviser's Related Parties for any loss, liability,
cost, damage, or expenses (including reasonable investigation and defense costs
and reasonable attorneys fees and costs) arising out of any claim, demand,
action, suit, or proceeding arising out of (i) TAMIC's conduct that constitutes
willful misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of reckless disregard of its obligations and duties under
this Agreement, or (ii) any actual or alleged material misstatement or omission
in the Trust's registration statement, any proxy statement, or other
communication to current or prospective investors in the Portfolio (other than
a misstatement or omission relating to disclosure about the Subadviser or the
Subadviser's management of the Portfolio provided in writing to TAMIC or the
Trust by the Subadviser or which has been reviewed and approved by the
Subadviser).
(d) INDEMNIFICATION PROCEDURES. Promptly after receipt of notice of the
commencement of any action by a party seeking to be indemnified under this
Section 19 (the "Indemnified Party"), the Indemnified Party shall, if a claim
in respect thereof is to be made against a party against whom indemnification
is sought under this Section 19 (the "Indemnifying Party"), notify the
Indemnifying Party in writing of the commencement thereof; PROVIDED, HOWEVER,
that the omission to notify the Indemnifying Party shall not relieve the
Indemnifying Party from any liability which it may have to any Indemnified
Party otherwise than under the provisions hereof, and shall relieve it from
liability hereunder only to the extent that such omission results in the
forfeiture by the Indemnifying Party of rights or defenses with respect to such
action. In any action or proceeding, following provision of proper notice by
the Indemnified Party of the existence of such action, the Indemnifying Party
shall be entitled to participate in any such action and, to the extent that it
shall wish, participate jointly with any other Indemnifying Party similarly
notified, to assume the defense thereof, with counsel of its choice (unless any
conflict of interest requires the appointment of separate counsel), and after
notice from the Indemnifying Party to such Indemnified Party of its election to
assume the defense of the action, the Indemnifying Party shall not be liable to
such Indemnified Party hereunder for any legal expense of the other counsel
subsequently incurred without the Indemnifying Party's consent. The Indemnified
Party shall cooperate in the defense or settlement of claims so assumed. The
Indemnifying Party shall not be liable hereunder for the settlement by the
Indemnified Party for any claim or demand unless the Indemnifying Party has
previously approved the settlement or it has been notified of such claim or
demand and has failed to provide a defense in accordance with the provisions
hereof. In the event that any proceeding involving the Indemnifying Party shall
be commenced by the Indemnified Party in connection with the Agreement, or the
transactions contemplated hereunder, and such proceeding shall be finally
determined by a court of competent jurisdiction in favor of the Indemnifying
Party, the Indemnified Party shall be liable to the
B-14
Indemnifying Party for any reasonable attorney's fees and direct costs relating
to such proceedings. The indemnifications provided in this Section 19 shall
survive the termination of this Agreement.
20. SURVIVAL
All representations and warranties made by the Subadviser and TAMIC herein
shall survive for the duration of this Agreement and the parties hereto shall
notify each other in writing immediately upon becoming aware, but in no event
later than five (5) days after becoming aware, that any of the foregoing
representations and warranties are no longer true.
21. USE OF NAME
The Trust and TAMIC, together with its subsidiaries and affiliates may use
the names "Mondrian Investment Partners Limited" or "Mondrian" or any
derivative thereof or logo associated therewith in offering materials of the
Portfolio only with the prior written approval of the Subadviser and only for
so long as this Agreement or any extension, renewal, or amendment hereof
remains in effect, provided that the Trust and TAMIC agree that "Limited" or
"Ltd." shall also be used when the name "Mondrian Investment Partners" is used.
At such time as this Agreement shall no longer be in effect, the Trust and
TAMIC together with its subsidiaries and affiliates each agree that they shall
cease to use such names or any other name indicating that it is advised by or
otherwise connected with the Subadviser (except to the extent that the Trust
and TAMIC may be required by law to disclose the former name and/or subadviser
of the Portfolio or disclosure of such former name and/or subadviser is
reasonably necessary to avoid investor confusion), and shall promptly change
its name accordingly. The Trust acknowledges that it has adopted the name
"Mondrian Investment Partners Limited", or "Mondrian" or any derivative thereof
or logo associated therewith in offering materials of the Portfolio only with
the prior approval of the Subadviser and through permission of the Subadviser,
and agrees that the Subadviser reserves to itself and any successor to its
business the right to grant the non-exclusive right to use the aforementioned
names or any similar names to any other corporation or entity, including but
not limited to any investment company of which the Subadviser or any subsidiary
or affiliate thereof or any successor to the business of any thereof shall be
the investment adviser or subadviser.
22. LIMITATION ON CONSULTATION
In accordance with Rule 17a-10 under the 1940 Act and any other applicable
law, the Subadviser shall not consult with any other subadviser to the
Portfolio or any subadviser to any other portfolio of the Trust or to any other
investment company or investment company series for which TAMIC serves as
investment adviser concerning transactions for the Portfolio in securities or
other assets, other
B-15
than for purposes of complying with conditions of paragraphs (a) and (b) of
Rule 12d3-1 under the 1940 Act.
23. GOVERNING LAW
This Agreement shall be governed by, construed under and interpreted and
enforced in accordance with the laws of the state of New York, without regard
to principles of conflicts of laws.
24. SEVERABILITY
If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule, or otherwise, the remainder of this Agreement
shall not be affected thereby.
25. DEFINITIONS
The terms "assignment," "affiliated person," and "interested person," when
used in this Agreement, shall have the respective meanings specified in Section
2(a) the 1940 Act. The term "majority of the outstanding shares" means the
lesser of (a) sixty-seven percent (67%) or more of the shares present at a
meeting if more than fifty percent (50%) of these shares are present or
represented by proxy, or (b) more than fifty percent (50%) of the outstanding
shares.
26. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, and all of such counterparts together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
TRAVELERS ASSET MANAGEMENT
INTERNATIONAL COMPANY, LLC
By:
------------------------------
Name:
Title:
MONDRIAN INVESTMENT
PARTNERS, LIMITED
By:
------------------------------
Name:
Title:
B-16
APPENDIX C
CAPITAL APPRECIATION FUND
MONEY MARKET PORTFOLIO
HIGH YIELD BOND TRUST
MANAGED ASSETS TRUST
THE TRAVELERS SERIES TRUST
NOMINATING AND ADMINISTRATION COMMITTEE CHARTER
(a) Nominating and Administration Committee Membership
The Nominating and Administration Committee shall be composed entirely of
non-interested and independent Trustees*.
(b) Board Nominations and Functions
1. The Committee shall nominate and elect candidates for
"non-interested" Trustee membership on the Board of Trustees
("Board"). The Committee shall evaluate candidates'
qualifications for Board membership as non-interested Trustees
and their independence from the Funds' manager and other
principal service providers. Persons selected must be
non-interested and independent in terms of both the letter and
the spirit of the Investment Company Act of 1940. The Committee
shall also consider the effect of any relationships beyond those
delineated in the 1940 Act that might impair independence, e.g.,
business, financial or family relationships with managers or
service providers.
2. The Committee shall periodically review Board governance
procedures and shall recommend any appropriate changes to the
full Board.
3. The Committee shall periodically review the composition of the
Board to determine whether it may be appropriate to add
individuals with different backgrounds or skill sets from those
already on the Board.
4. The Committee shall periodically review Trustee compensation and
shall recommend any appropriate changes to the non-interested and
independent Trustees as a group.
(c) Committee Nominations and Functions
- ----------------
* "Trustee" shall refer to both trustees and managers.
C-1
1. The Committee shall make nominations for membership on all
committees and shall review committee assignments at least
annually.
2. The Committee shall review as necessary the responsibilities of
any committees of the Board, whether there is a continuing need
for each committee, whether there is a need for additional
committees of the Board, and whether committees should be
combined or reorganized. The Committee shall make recommendations
for any such action to the full Board.
(d) Other Powers and Responsibilities
1. The Committee shall monitor the performance of legal counsel
employed by the Funds and the non-interested and independent
Trustees, and shall be responsible for the supervision of counsel
for the non-interested and independent Trustees.
2. The Committee shall have the resources and authority appropriate
to discharge its responsibilities, including authority to retain
special counsel and other experts or consultants at the expense
of the appropriate Fund(s).
3. The Committee shall review this Charter at least annually and
recommend any changes to the full Board.
C-2
SCHEDULE A
Independent Registered Public Accounting Firm Fees
Fees billed by KPMG for services provided directly to each Fund during
each of the last two fiscal years:
Fund Year Ended Audit Fees Tax Fees
- ---- ------------------- ------------ ---------
Convertible Securities Portfolio .............. December 31, 2004 $12,500 $2,200
December 31, 2003 $12,500 $2,200
Disciplined Mid Cap ........................... December 31, 2004 $18,000 $2,300
Stock Portfolio December 31, 2003 $18,000 $2,300
Equity Income Portfolio ....................... December 31, 2004 $19,500 $2,500
December 31, 2003 $19,500 $2,500
Federated High Yield Portfolio ................ December 31, 2004 $17,500 $2,200
December 31, 2003 $17,500 $2,200
Federated Stock Portfolio ..................... December 31, 2004 $17,500 $2,300
December 31, 2003 $17,500 $2,300
Large Cap Portfolio ........................... December 31, 2004 $19,500 $2,500
December 31, 2003 $19,500 $2,500
Mondrian International ........................ December 31, 2004 $19,000 $2,500
Stock Portfolio December 31, 2003 $19,000 $2,500
MFS Mid Cap Growth Portfolio .................. December 31, 2004 $19,500 $2,300
December 31, 2003 $19,500 $2,300
MFS Value Portfolio ........................... December 31, 2004 $12,500 $2,200
December 31, 2003 $12,500 $2,200
Mercury Large Cap Core Portfolio .............. December 31, 2004 $19,500 $2,300
December 31, 2003 $19,500 $2,300
Pioneer Fund Portfolio ........................ December 31, 2004 $17,500 $2,200
December 31, 2003 $17,500 $2,200
Social Awareness Stock Portfolio .............. December 31, 2004 $17,500 $2,100
December 31, 2003 $17,500 $2,100
Travelers Quality Bond Portfolio .............. December 31, 2004 $18,000 $2,100
December 31, 2003 $18,000 $2,100
U.S. Government Securities Portfolio .......... December 31, 2004 $18,500 $2,100
December 31, 2003 $18,500 $2,100
Zero Coupon Bond Fund Portfolio ............... December 31, 2004 $10,000 $2,000
(Series 2005) December 31, 2003 $10,000 $2,000
C-3
Fund Year Ended Audit Fees Tax Fees
- ----------------------------------- ------------------- ------------ ---------
Managed Assets Trust .............. December 31, 2004 $25,000 $2,100
December 31, 2003 $25,000 $2,100
Capital Appreciation Fund ......... December 31, 2004 $28,000 $2,100
December 31, 2003 $28,000 $2,100
High Yield Bond Trust ............. December 31, 2004 $17,000 $2,100
December 31, 2003 $17,000 $2,100
Money Market Portfolio ............ December 31, 2004 $16,000 $2,100
December 31, 2003 $16,000 $2,100
For each Fund's last two fiscal years, no fees were billed by KPMG for
services provided to any Fund that would be required to be disclosed under the
captions "Audit-Related Fees" and "All Other Fees." Furthermore, for those two
fiscal years, KPMG has not billed any Service Affiliate of a Fund for any fees
for non-audit services that relate directly to the operations and financial
reporting of the Funds.
For periods prior to May 6, 2003, the amounts shown above under "Tax Fees"
relate to permitted non-audit services that would have been subject to
pre-approval if the SEC rules relating to pre-approval of non-audit services
had been in effect. During the periods indicated in the table above, no
services described under "Tax Fees" were approved pursuant to the de minimis
exception set forth in paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
Aggregate fees billed by KPMG for each Fund's two most recent fiscal years
for non-audit services rendered to each Fund and to each Fund's Service
Affiliates:
Aggregate Fees Paid Aggregate Fees Paid
for fiscal year ended for fiscal year ended
Fund December 31, 2003 December 31, 2004
- ---- ----------------------- ----------------------
Convertible Securities Portfolio ......... $2,200 $77,200
Disciplined Mid Cap Stock Portfolio ...... $2,300 $77,300
Equity Income Portfolio .................. $2,500 $77,500
Federated High Yield Portfolio ........... $2,200 $77,200
Federated Stock Portfolio ................ $2,300 $77,300
Large Cap Portfolio ...................... $2,500 $77,500
Mondrian International ................... $2,500 $77,500
Stock Portfolio
MFS Mid Cap Growth Portfolio ............. $2,300 $77,300
MFS Value Portfolio ...................... $2,200 $77,200
Mercury Large Cap Core Portfolio ......... $2,300 $77,300
Pioneer Fund Portfolio ................... $2,200 $77,200
Social Awareness Stock Portfolio ......... $2,100 $77,100
Travelers Quality Bond Portfolio ......... $2,100 $77,100
U.S. Government Securities Portfolio ..... $2,100 $77,100
C-4
Aggregate Fees Paid Aggregate Fees Paid
for fiscal year ended for fiscal year ended
Fund December 31, 2003 December 31, 2004
- ---- ----------------------- ----------------------
Zero Coupon Bond Fund Portfolio ........ $2,000 $77,000
(Series 2005)
Managed Assets Trust ................... $2,100 $77,100
Capital Appreciation Fund .............. $2,100 $77,100
High Yield Bond Trust .................. $2,100 $77,100
Money Market Portfolio ................. $2,100 $77,100
C-5
THE TRAVELERS INSURANCE COMPANY
THE TRAVELERS LIFE AND ANNUITY COMPANY CITICORP
LIFE INSURANCE COMPANY
FIRST CITICORP LIFE INSURANCE COMPANY
INSTRUCTION CARD FOR THE
MEETING TO BE HELD ON
JUNE 24, 2005
Voting Instructions are being solicited by The Travelers Insurance Company, The
Travelers Life and Annuity Company, Citicorp Life Insurance Company, and First
Citicorp Life Insurance Company (the "Life Insurance Companies") in connection
with a solicitation of proxies by the Board of Trustees of The Travelers Series
Trust, Capital Appreciation Fund, Money Market Portfolio, Managed Assets Trust
and High Yield Bond Trust, (each a "Trust") for a Joint Special Meeting of
Shareholders of the above-referenced Portfolio (the "Portfolio") of the Trust to
be held on June 24, 2005.
I hereby instruct the Life Insurance Companies, as appropriate, to vote the
shares of the Portfolio of the Trust as to which I am entitled to give
instructions at the Joint Special Meeting of Shareholders of the Portfolio to be
held on June 24, 2005 at 9:00 a.m. Eastern Time, at One Cityplace, Hartford,
Connecticut 06103, or any adjournment(s) thereof. I hereby revoke any and all
voting instructions with respect to such shares previously given by me. I
acknowledge receipt of the Proxy Statement dated May 18, 2005. I realize that if
I return this form without providing any instructions regarding the proposals,
my timely returning of this form will be deemed to be an instruction to vote in
favor of the proposals.
Date: _________________________
These voting instructions may be revoked prior to the
special meeting by notifying the secretary of Travelers Life
& Annuity or the secretary of the Trust, in writing by 5:00
p.m. on June 23, 2005, or by attending and voting in person
at the meeting.
------------------------------------------------------------
------------------------------------------------------------
Signature(s) and title(s) (Sign in the Box)
If the contract is held jointly, each contract owner should
sign. If only one signs, his or her signature will be
binding. If the contract owner is a corporation, the
President or a Vice President should sign in his or her own
name, indicating title. If the contract owner is a
partnership, a partner should sign in his or her own name,
indicating that he or she is a "Partner." If the contract
owner is a trust, the trustee should sign in his or her own
name, indicating that he or she is a "Trustee."
TST - lp/gm - R
Please fill in box as shown using black or blue ink or number 2 pencil. |X|
PLEASE DO NOT USE FINE POINT PENS.
THIS INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES. THE BOARD
OF TRUSTEES RECOMMENDS A VOTE FOR THE PROPOSALS. THE SHARES REPRESENTED HEREBY
WILL BE VOTED BY THE PROXIES IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
BENEFICIAL OWNER. IF NO DIRECTION IS MADE, THIS INSTRUCTION CARD WILL BE VOTED
FOR THE PROPOSALS.
FOR AGAINST ABSTAIN
1. To approve a new investment advisory agreement for the 0 0 0
Portfolio (except for the Social Awareness Stock
Portfolio).
2. To approve a proposal to permit TAMIC to enter into new 0 0 0 0
or amended agreements with subadvisers without 0
obtaining shareholder approval (except for the Social
Awareness Stock Portfolio).
3. Election of Director: FOR WITHHOLD
Elizabeth Forget has been nominated by the Board of 0 0
Trustees of the Fund to serve until her successor is
elected and qualified.
4. To approve a new subinvestment advisory agreement for FOR AGAINST ABSTAIN
the Portfolio (only for the Mondrian International 0 0 0
Stock Portfolio.)
PLEASE SIGN AND DATE ON THE REVERSE SIDE.
TST - lp/gm - R