[Equitable Logo]EQUITABLE
Member of the Global AXA Group [LOGO]
February ,7, 1997
Dear Client:
Equitable has been offering innovative forms of variable annuity and
variable life insurance dating back to the late '60's and mid '70's
respectively. If you've had your Equitable variable annuity or variable life
insurance contract for some time, you'll recall that we periodically ask you
to tell us how you would like us to represent your interests at meetings of
shareholders of The Hudson River Trust. The Hudson River Trust is the family
of funds underlying the investment options in your Equitable variable annuity
or variable life insurance contract. The issues that are considered at
shareholder meetings generally have to do with the management of the Trust.
The proposals for your consideration at the upcoming meeting are designed to
position the Trust for the next several decades.
Included in this booklet is information about the upcoming Shareholder's
meeting:
o A NOTICE TO POLICYHOLDERS OF A SPECIAL MEETING OF THE SHAREHOLDERS OF THE
HUDSON RIVER TRUST. The notice explains, in summary format, the issues for
which you are being asked to provide voting instructions;
o AN INFORMATION STATEMENT, which outlines the voting procedures;
o THE HUDSON RIVER TRUST PROXY STATEMENT, which provides comprehensive
information on the issues being considered at the Special Meeting.
ALSO ENCLOSED ARE YOUR BALLOT AND A POSTAGE-PAID RETURN ENVELOPE.
We encourage you to review each of these items thoroughly. Once you've
determined how you wish to vote, please mark your preferences on your ballot,
making sure that you sign and date your ballot before mailing it in the
postage-paid envelope. A prompt response on your part will help to ensure
that your interests are represented.
Sincerely,
/S//s/ Joseph J. Melone
/S/Joseph J. Melone
Chairman
/s/ James M. Benson
Joseph J. Melone James M. Benson
Chairman
President & CEO
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
--------------------------------------------
NOTICE
OF A SPECIAL MEETING OF THE
SHAREHOLDERS OF THE HUDSON RIVER TRUST
---------------------------------------------
To be held on March 17, 1997
Dear Equitable Client:
The net premiums or contributions you paid under your Equitable variable
life insurance policy or variable annuity contract or certificate have been
allocated at your direction to the investment divisions of a separate account
or accounts of Equitable (the "Separate Accounts"). The Separate Account
divisions invest in corresponding Portfolios of The Hudson River Trust, a
mutual fund (the "Trust").
As a contractowner or policyowner ("Policyowner") of record at the close
of business on January 15, 1997 (the "Record Date"), you are entitled to
instruct Equitable as to how it should vote on certain proposals to be
considered at a Special Meeting of the Trust's shareholders.
The Special Meeting will be held at 1345 Avenue of the Americas, New York,
NY 10105, on March 17, 1997, at 11:00 a.m. You are entitled to provide
Equitable with voting instructions on the following proposals to be voted
upon:
1. To approve a new investment advisory agreement, relating to each of the
Portfolios, between the Trust and Alliance Capital Management L.P.;
2. To elect two additional members of the Trust's Board of Trustees; and
3. To approve the amendment and restatement of the Trust's Agreement and
Declaration of Trust.
Attached to this notice are the Information Statement of Equitable and the
Proxy Statement of the Trust. You are urged to read both of these statements
prior to completing your ballot.
IT IS IMPORTANT THAT YOUR POLICY, CONTRACT OR CERTIFICATE BE REPRESENTED.
PLEASE PROMPTLY MARK YOUR VOTING INSTRUCTIONS ON THE ENCLOSED BALLOT; THEN,
SIGN, DATE AND MAIL IT IN THE ACCOMPANYING ENVELOPE. NO POSTAGE IS REQUIRED
IF MAILED IN THE UNITED STATES. YOUR PROMPT RESPONSE WILL HELP AVOID THE
UNNECESSARY EXPENSE OF A FURTHER SOLICITATION OF BALLOTS.
PAULINE SHERMAN
Secretary
New York, NY
February ,7, 1997
THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
-----------------------------------------------------------------------------
INFORMATION STATEMENT
REGARDING A SPECIAL MEETING OF THE
SHAREHOLDERS OF THE HUDSON RIVER TRUST
-----------------------------------------------------------------------------
February ,7, 1997
GENERAL
This information statement is furnished by The Equitable Life Assurance
Society of the United States ("Equitable"), a New York stock life insurance
company, to owners of its variable life insurance policies and variable
annuity contracts and certificates ("Policyowners") who had net premiums
allocated to the investment divisions of certain of Equitable's Separate
Accounts (the "Separate Accounts") on January 15, 1997 (the "Record Date").
Each Separate Account is registered with the Securities and Exchange
Commission as an investment company in unit investment trust form.
The assets in each investment division of the Separate Accounts are invested
in series of shares of beneficial interest relating to corresponding
portfolios of The Hudson River Trust, a mutual fund (the "Trust").
Equitable is required to offer Policyowners the opportunity to instruct
Equitable, as owner of all Trust shares held by the Separate Accounts, as to
how it should vote on three proposals to be considered at the Special Meeting
of the Shareholders of The Hudson River Trust referred to in the preceding
notice and at any adjournments (the "Special Meeting").
The proposals to be considered at the Special Meeting are discussed in the
Trust's Proxy Statement which is enclosed. Policyowners are urged to read the
enclosed Proxy Statement prior to completing the ballot.
Equitable is a wholly-owned subsidiary of The Equitable Companies
Incorporated, a publicly owned holding company. The principal executive
offices of The Equitable Companies Incorporated and Equitable are located at
787 Seventh Avenue, New York, New York 10019 and 1290 Avenue of the Americas,
New York, NY 10104.New York 10104, respectively.
This Information Statement and the accompanying ballot are being mailed to
Policyowners on or about February ,7, 1997.
HOW TO INSTRUCT EQUITABLE
To instruct Equitable as to how to vote the shares of beneficial interest
of the Trust (the "Shares") held in the investment divisions of a Separate
Account, Policyowners are asked to promptly mark their voting instructions on
the enclosed ballot; then, sign, date and mail it in the accompanying
postage-paid envelope.
IF A BALLOT IS NOT MARKED TO INDICATE VOTING INSTRUCTIONS BUT IS
SIGNED, DATED AND RETURNED, IT WILL BE TREATED AS AN INSTRUCTION TO
VOTE THE SHARES FOR EACH OF THE PROPOSALS.
The number of Shares held in each investment division of a Separate
Account for which a Policyowner may provide voting instructions (in the
aggregate, "Shares Attributable to Policyowners") was determined as of the
Record Date by dividing (i) a policy's Account Value (minus any policy
indebtedness) allocable to that division by (ii) the net asset value of one
share of the corresponding portfolio of the Trust.
At any time prior to Equitable's voting of the Shares held in an
investment division of a Separate Account at the Special Meeting, a
Policyowner may revoke his or her ballot with respect to that division by
written notice to the Secretary of Equitable or by properly executing a
later-dated ballot.
VOTING PRIVILEGES OF OTHERS
The Trust also sells Shares to separate accounts of insurance companies
unaffiliated with Equitable (together with Equitable, the "Shareholders").
Currently, Equitable owns more than [99.7%]approximately 99.7% of the Trust Shares and,
therefore, may be deemed to control the Trust.
Equitable will attend the Special Meeting. It is expected that each of the
other Shareholders will also offer its contractowners the opportunity to
provide voting instructions in a manner similar to the opportunity being
provided to you.
HOW EQUITABLE WILL VOTE
The Shares Attributable to Policyowners in each division of a Separate
Account for which Equitable receives no voting instructions in time will be
voted by Equitable for or against approval of a proposal, or as an
abstention, in the same proportion as the Shares Attributable to Policyowners
for which Equitable receives voting instructions. Shares attributable to
amounts retained by Equitable in each division of the Separate Accounts will
be voted in the same proportion as votes cast by contractowners of all
Shareholders in respect of such division of a Separate Account.
OTHER MATTERS
Equitable is not aware of any matters, other than the specified proposals,
to be acted on at the Special Meeting. If any other matters come before the
Special Meeting, Equitable will vote the Shares upon such matters in its
discretion.
Ballots may be solicited by employees of Equitable and its subsidiaries.
The solicitation will be by mail and may also be by telephone, telegram or
personal interview. Equitable reserves the right to vote for adjournment of
the Special Meeting for the purpose of further solicitation of ballots.
Pauline Sherman
Secretary
PLEASE PROMPTLY MARK YOUR VOTING INSTRUCTIONS ON THE ENCLOSED BALLOT; THEN
SIGN, DATE AND MAIL IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. IT IS IMPORTANT
THAT YOUR POLICY, CONTRACT OR CERTIFICATE BE REPRESENTED.
THE HUDSON RIVER TRUST
1345 Avenue of the Americas
New York, New York 10105
--------------------------------------------
Notice of Special Meeting of Shareholders
------------------------
February ,7, 1997
--------------------
To Shareholders of The Hudson River Trust:
A Special Meeting of Shareholders (the "Special Meeting") of the thirteen
portfolios (the "Portfolios") constituting The Hudson River Trust (the
"Trust") will be held at 1345 Avenue of the Americas, [33rd]33rd Floor, New York,
New York 10105, on March 17, 1997 at [11:11:00 a.m.], Eastern time, for the
following purposes:
1. To approve a new investment advisory agreement, relating to each of the
Portfolios, between the Trust and Alliance Capital Management L.P., the
form of which is set forth in Appendix A to the attached Proxy
Statement, as described in Part I of the attached Proxy Statement;
2. To elect two additional members of the Trust's Board of Trustees, as
described in Part II of the attached Proxy Statement;
3. To approve the amendment and restatement of the Trust's Agreement and
Declaration of Trust, the proposed form of which is set forth in
Appendix B to the attached Proxy Statement, as described in Part III of
the attached Proxy Statement; and
4. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
By order of the Board of Trustees
EDMUND P. BERGAN, JR.
Secretary
February ,7, 1997
THE HUDSON RIVER TRUST
1345 Avenue of the Americas
New York, New York 10105
---------------------------------------------
PROXY STATEMENT
---------------------------------------------
The Hudson River Trust (the "Trust") serves as an investment vehicle for
use in connection with variable life insurance contracts and variable annuity
certificates and contracts (collectively, the "Contracts") issued by The
Equitable Life Assurance Society of the United States ("Equitable") and
insurance companies unaffiliated with Equitable (collectively, together with
Equitable, the "Variable Insurers"). Consequently, as used herein, the term
"shareholder" refers to each of the Variable Insurers that has invested in
the Trust. As a technical matter, the Variable Insurers hold Trust shares in
their respective separate accounts in which contributions and premiums
received under the Contracts are initially invested; these separate accounts
in turn purchase Trust shares, as described in the Trust's prospectus. The
Trust expects that the Variable Insurers will offer to the owners of the
Contracts (the "Contractowners") the right to give such Variable Insurers
instructions as to how those shares of a Portfolio (as defined below)
attributable to their Contracts should be voted.
This Proxy Statement is being furnished on behalf of the Board of Trustees
of the Trust to the shareholders of the Trust for their use in obtaining
instructions from the Contractowners as to how to vote on the proposals to be
considered at the special meeting of shareholders of the Trust to be held at
1345 Avenue of the Americas, [33rd]33rd Floor, New York, New York 10105, on March
17, 1997 at [11:11:00 a.m.], Eastern time and at any adjournments thereof (the
"Special Meeting"). It is expected that the Variable Insurers will each
attend the Special Meeting in person or by proxy and will vote shares of the
Trust held by them in accordance with voting instructions received from
Contractowners and in accordance with voting procedures established by the
Trust. The Trust expects that all shares of a Portfolio attributable to
Contracts for which no voting instructions have been received by the Variable
Insurers or shares attributable to amounts retained by the Variable Insurers
in their respective separate accounts will be voted for, against or withheld
from voting on any proposal in the same proportions as are the shares for
which voting instructions have been received by the Variable Insurers from
Contractowners. The number of shares for which a Contract owner has the right
to give voting instructions with respect to the Special Meeting or any
adjournment thereof was determined as of January 15, 1997 (the "Record
Date").
This Proxy Statement is being mailed to shareholders on or about February
,7, 1997. Proxies executed by shareholders may be revoked at any
1
time before they are exercised by a written revocation received by the
Secretary of the Trust, by properly executing a later-dated proxy or by
attending the meeting and voting in person.
The Trust expects that information statements and ballots, prepared for
use by the Variable Insurers, as well as this Proxy Statement, will be mailed
to the Contractowners by the Variable Insurers on or about February ,7, 1997
in order to obtain voting instructions from the Contractowners.
A copy of the Annual Report of the Trust for the fiscal year ended
December 31, 1995, including financial statements, has previously been
furnished to the shareholders. An Annual Report of the Trust for the fiscal
year ended December 31, 1996 will be mailed to shareholders on or about
February 28, 1997. The Trust will furnish, without charge, to any of its
shareholders upon request, a copy of the 1995 Annual Report and, when
available, a copy of the 1996 Annual Report. Such requests may be directed to
the Trust at 1345 Avenue of the Americas, New York, New York 10105 (tel:
1-800- ).1-800-221-5672).
Shares of the Trust are divided into thirteen series, each representing
shares of a portfolio of the Trust (collectively, the "Portfolios" and,
individually, a "Portfolio"). The Portfolios are: International, Global,
Aggressive Stock, Common Stock, Growth and Income, Growth Investors,
Balanced, Conservative Investors, High Yield, Quality Bond, Intermediate
Government Securities, Equity Index and Money Market.
All shareholders are entitled to vote on the following matters described
in this Proxy Statement:
o the approval of a new investment advisory agreement relating to each of
the Portfolios, as described in Part I of this Proxy Statement;
o the election of two additional Trustees of the Trust, as described in
Part II of this Proxy Statement; and
o the amendment and restatement of the Trust's Agreement and Declaration
of Trust, as described in Part III of this Proxy Statement.
All shares of the Trust (including all Portfolios) will vote together as a
single class with respect to election of Trustees. The shares of each
Portfolio will vote separately with respect to approval of the investment
advisory agreement as it relates to that Portfolio and with respect to the
amendment and restatement of the Trust's Agreement and Declaration of Trust.
Although the Trust offers two classes of shares (Class IA and Class IB
shares) on behalf of certain Portfolios (Global, Aggressive Stock, Common
Stock, Growth Investors, High Yield and Money Market), for purposes of voting
on the
2
investment advisory agreement and the amendment and restatement of the
Trust's Agreement and Declaration of Trust, Class IA and Class IB shares of a
PortfoliosPortfolio will vote together as a single class. If the shareholders of any
Portfolio do not approve the proposed investment advisory agreement, the
current investment advisory agreement will remain in effect with respect to
that particular Portfolio. In such event, the Trustees will take such further
action as they deem to be in the best interests of the shareholders of that
Portfolio.
Each whole share is entitled to one vote as to each matter with respect to
which it is entitled to vote as described above, and each fractional share is
entitled to a proportionate fractional vote. Votes cast by proxy or in person
by shareholders at the Special Meeting will be counted by persons appointed
as election inspectors for the Special Meeting. As of January 15, 1997, there
were the following number of issued and outstanding shares of each Portfolio:
PORTFOLIO NO. OF CLASS IA SHARES NO. OF CLASS IB SHARES
- -------------------------------- ---------------------- ----------------------
International .......... 13,576,413
Global ................. 59,340,239 37,615
Aggressive Stock ....... 108,159,652 47,252
Common Stock ........... 364,299,145 173,345
Growth and Income ...... 18,219,047
Growth Investors ....... 76,022,918 51,016
Balanced ............... 98,263,067
Conservative Investors 25,009,348
High Yield ............. 20,514,870 90,296
Quality Bond ........... 16,350,175
Intermediate Government
Securities ............ 9,567,121
Equity Index ........... 25,986,405
Money Market ........... 45,301,882 518,550
I. APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENT
As indicated above, the Trustees of the Trust are proposing that
shareholders of each Portfolio approve a new investment advisory agreement
(the "New Advisory Agreement") between the Trust and Alliance Capital
Management L.P. ("Alliance"), relating to each Portfolio, effective on May 1,
1997. Alliance, a publicly-traded Delaware limited partnership, currently
serves as investment adviser to the Trust pursuant to an investment advisory
agreement between the Trust, on behalf of each Portfolio, and Alliance (the
"Current Advisory Agreement"). The New Advisory Agreement would replace the
Current Advisory Agreement. As described more fully below, under the terms of
the New Advisory Agreement (i) each Portfolio would
3
adopt a new fee schedule that differs from the fee schedule currently in
place for the Trust and (ii) Alliance would contract to provide a scope of
services less extensive than is provided under the Current Advisory
Agreement.
DESCRIPTION OF NEW ADVISORY AGREEMENT AND CURRENT ADVISORY AGREEMENT.
Certain information about the New Advisory Agreement, including the
compensation to be paid to Alliance and the services to be provided
thereunder, are described below. The description of the New Advisory
Agreement is qualified in its entirety by reference to the form of New
Advisory Agreement set forth in Appendix A to this Proxy Statement.
Information regarding the Current Advisory Agreement, including a description
of the principal differences between the Current Advisory Agreement and the
New Advisory Agreement, is also provided below. Additional information about
Alliance is set forth below under "Other Information."
NEW ADVISORY AGREEMENT. Pursuant to the New Advisory Agreement, subject to
the approval and supervision of the Trust's Trustees, Alliance would continue
to exercise overall responsibility for the investment and reinvestment of the
Trust's assets. Alliance would also furnish continuously an investment
program for each Portfolio and place all orders for the purchase and sale of
each Portfolio's portfolio securities. In the performance of its duties,
Alliance is required to comply with the provisions of the Agreement and
Declaration of Trust and By-laws of the Trust (each as amended from time to
time) and each Portfolio's stated investment objectives, policies and
restrictions and must use its best efforts to safeguard and promote the
welfare of each Portfolio and must comply with other policies which the
Trustees may from time to time determine. Alliance, at its expense, is also
obligated to furnish each of the Portfolios with all necessary office space
and equipment, bookkeeping and clerical services (but not accounting
services) required for it to perform its investment advisory and portfolio
management services and to pay all salaries, fees and expenses of officers
and Trustees of the Trust who are affiliated with Alliance.
Under the New Advisory Agreement, the Trust would bear all expenses not
expressly specified therein as being borne by Alliance, whereas under the
Current Agreement, Alliance bears all expenses not expressly specified as
being borne by the Trust. To the extent expenses not previously borne by the
Trust are borne by it in the future, the direct operating expenses of the
Trust are expected to increase. Under both agreements the expenses borne by
the Trust include or could include taxes; brokerage commissions; interest
charges; securities lending fees; fees and expenses of the registration or
qualification of a Portfolio's securities under federal or state securities
laws; fees of the Portfolio's custodian, transfer agent, independent
accountants and legal
4
counsel; all expenses of shareholders' and trustees' meetings; all expenses
of the preparation, typesetting, printing and mailing to existing
shareholders of
4
prospectuses, prospectus supplements, statements of
additional information, proxy statements, and annual and semi-annual reports;
any proxy solicitor's fees and expenses; costs of fidelity bonds and
Trustees' liability insurance premiums as well as extraordinary expenses such
as indemnification payments or damages awarded in litigation or settlements
made; any membership fees of the Investment Company Institute and similar
organizations; costs of maintaining the Trust's corporate existence and the
compensation of Trustees who are not directors, officers, or employees of
Alliance or its affiliates.
The New Advisory Agreement provides that Alliance, subject to the
provisions of the Agreement and Declaration of Trust of the Trust and the
Investment Company Act of 1940 Act,(the "1940 Act"), may, at its expense, select
and contract with one or more investment advisers (each, a "Sub-Adviser") for
the Portfolios to perform some or all of the services for which it is
responsible (and any related facilities or services for which it is
responsible). Alliance is required to compensate any Sub-Adviser of the
Portfolios for its services to the Portfolios. Alliance may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected. No Sub-Adviser is proposed for any
Portfolio and, under current law, any such Sub-Adviser would have to be
approved by the shareholders of that Portfolio and by the Trustees.
The New Advisory Agreement provides that it will, unless sooner terminated
in accordance with the agreement, continue in effect for a period of two
years from its effective date and thereafter on an annual basis with respect
to each Portfolio, provided such continuance is approved at least annually by
the vote of a majority of the Trustees of the Trust who are not interested
persons of the Trust, Alliance or any Sub-Adviser (such Trustees to be
referred to hereafter as "Independent Trustees") and either (a) by the vote
of a majority of the Board of Trustees of the Trust, or (b) by vote of a
majority of the outstanding voting shares of each Portfolio. Any approval of
the New Advisory Agreement by the holders of a majority of the outstanding
voting shares of a particular Portfolio would be effective for these purposes
notwithstanding (a) that the agreement has not been approved by the holders
of a majority of the outstanding voting shares of any other Portfolio or (b)
that the agreement has not been approved by the vote of a majority of the
outstanding voting shares of the Trust. The New Advisory Agreement provides
that it terminates automatically in the event of its assignment by Alliance.
In addition, the New Advisory Agreement provides that it may not be amended
as to any Portfolio unless the amendment is approved by the majority vote of
the Independent Trustees of the Trust and, if required by law, a majority
vote of the outstanding shares of such Portfolio.
5
The New Advisory Agreement may be terminated at any time, without the
payment of any penalty, (i) by the Trust by vote of a majority of the Board
5
of Trustees, on not more than 60 days' written notice to Alliance, (ii) with
respect to a particular Portfolio, by a vote of a majority of the outstanding
shares of that Portfolio, on not more than 60 days' written notice to
Alliance, or (iii) by Alliance on not more than 60 days' written notice to
the Trust.
The New Advisory Agreement provides that Alliance shall not be subject to
any liability arising out of any act or omission in connection with its
rendering services under the 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 the
agreement.
CURRENT ADVISORY AGREEMENT. Each of the Trust's Portfolios is deemed to
have a separate agreement with Alliance, although the terms of these separate
agreements are contained in one document. The Current Advisory Agreement is
dated as of July 22, 1993. Since that date, the Current Advisory Agreement
has been amended to reflect the addition of several new Portfolios. Pursuant
to the Current Advisory Agreement, Alliance, subject to the control and
supervision of the Trustees of the Trust, provides or arranges to provide
portfolio management services and certain accounting and other non-advisory
services for each Portfolio. The Current Advisory Agreement was most recently
approved by the shareholders of the Quality Bond, Growth & Income, Equity
Index and International Portfolios on June 23, 1993, June 23, 1993, December
10, 1993 and December 14, 1994, respectively, in connection with the initial
organization of each of those Portfolios. Shareholders of each of the
remaining Portfolios approved the Current Advisory Agreement on April 23,
1993 in connection with the acquisition by Alliance of Equitable Capital
Management Corporation, the Trust's prior investment adviser. The Trustees of
the Trust last approved the continuance of the Current Advisory Agreement at
a meeting held on June 7, 1996.
DIFFERENCES BETWEEN NEW ADVISORY AGREEMENT AND CURRENT ADVISORY
AGREEMENT. Except as described below, the New Advisory Agreement is similar
in all material respects to the Current Advisory Agreement, including with
respect to terms relating to the provision of portfolio management services
to the Portfolios, approval, renewal and termination of the New Advisory
Agreement and the liability of Alliance thereunder.
The principal differences between the New Advisory Agreement and Current
Advisory Agreement are as follows:
(1) At the Portfolios' respective asset levels on September 30, 1996, the
advisory fees payable to Alliance under the New Advisory Agreement with
respect to each Portfolio compared to those fees paid to
6
Alliance under the Current Agreement are (i) higher for six of the
Portfolios (Global, Aggressive Stock, Common Stock, Growth Investors,
6
Balanced and High Yield), (ii) the same for three of the Portfolios
(International, Growth & Income and Intermediate Government Securities),
and (iii) lower for the remaining four Portfolios (Conservative Investors,
Quality Bond, Equity Index and Money Market). In addition, all of the
Portfolios will have break-points at different asset levels than under the
current fee schedule. As a result, each Portfolio's effective advisory fee
rate will be affected differently by changes in the Portfolio's assets
under the New Advisory Agreement than it would under the Current Advisory
Agreement. For a complete description of these break-points, see the table
appearing under the heading "Comparison of Compensation Payable under the
New Advisory Agreement and Current Advisory Agreement and Overall
Portfolio Expenses under Current and Proposed Fee Structures."
(2) The services required to be provided by Alliance under the New
Advisory Agreement are less extensive than the services required to be
provided by Alliance under the Current Advisory Agreement. Alliance will
no longer be required to provide, or arrange to provide, at no additional
charge, non-advisory services, such as accounting and other clerical
services (other than investor services), to the Trust. Under the New
Advisory Agreement, Alliance would be responsible solely for providing or
arranging to provide portfolio management services on behalf of the
Portfolios. The Trust would be free to contract with Alliance or
third-parties to provide accounting and other non-advisory services.
(3) The New Advisory Agreement will be dated on or about May 1, 1997 and
its initial term will run through April 30, 1999.
COMPARISON OF COMPENSATION PAYABLE UNDER THE NEW ADVISORY AGREEMENT AND
CURRENT ADVISORY AGREEMENT AND OVERALL PORTFOLIO EXPENSES UNDER CURRENT AND
PROPOSED FEE STRUCTURES.
The following sets forth the compensation payable to Alliance under the
Current Advisory Agreement and under the New Advisory Agreement (fees under
the agreements being payable at the stated annual rates expressed as a
percentage of the average daily net asset value of each Portfolio):
7
FEE UNDER CURRENT
ADVISORY AGREEMENT
FEE UNDER NEW ADVISORY AGREEMENT
(AS A PERCENTAGE OF (AS A PERCENTAGE OF
PORTFOLIO AVERAGE DAILY NET ASSETS)
AVERAGE DAILY NET ASSETS)
- ---------------------------------- ---------------------------------------
------------------------------------------------------
FIRST NEXT OVER
FIRST NEXT NEXT NEXT
$350 $400 $750
$750 $750 $1 $2.5
MILLION MILLION MILLION
MILLION MILLION BILLION BILLION THEREAFTER
--------- ------------ --------------
--------- --------- --------- --------- ----------
Global ............................ .550% .525% .500%
.675% .600% .550% .530% .520%
Aggressive Stock .................. .500% .475% .450%
.625% .575% .525% .500% .475%
Common Stock ...................... .400% .375% .350%
.475% .425% .375% .355% .345%*
Growth Investors .................. .550% .525% .500%
.550% .500% .450% .425% .400%
Balanced .......................... .400% .375% .350% .450% .400% .350% .325% .300%
Conservative Investors ............ .550% .525% .500%
.475% .425% .375% .350% .325%
High Yield ........................ .550% .525% .500%
.600% .575% .550% .530% .520%
Intermediate Government Securities .500% .475% .450%
.500% .475% .450% .430% .420%
Money Market ...................... .400% .375% .350% .350% .325% .300% .280% .270%
FIRST NEXT
$500 $500 OVER
MILLION MILLION $1 BILLION
--------- ------------ --------------
--------- --------- --------- ---------
------------
Growth and Income ................. .550% .525% .500%
.550% .525% .500% .480% .470%
Quality Bond ...................... .550% .525% .500% .525% .500% .475% .455% 0.445%
FIRST NEXT
$750 $750 OVER
MILLION MILLION $1.5 BILLION
--------- ------------ --------------
Equity Index ...................... .350% .300% .250%
.325% .300% .275% .255% .245%
FIRST
$500 NEXT OVER
MILLION $1 BILLION $1.5 BILLION
--------- ------------ --------------
International ..................... .900% .850% .800%
(RESTUBBED TABLE CONTINUED FROM ABOVE)
FEE UNDER NEW ADVISORY AGREEMENT
(AS A PERCENTAGE OF
PORTFOLIO AVERAGE DAILY NET ASSETS)
- ---------------------------------- --------------------------------------------------------
FIRST NEXT NEXT NEXT
$750 $750 $1 $2.5
MILLION MILLION BILLION BILLION THEREAFTER
--------- --------- --------- --------- ------------
Global ............................ .675% .600% .550% .530% .520%
Aggressive Stock .................. .625% .575% .525% .500% .475%
Common Stock ...................... .475% .425% .375% .355% .345%*
Growth Investors .................. .550% .500% .450% .425% .400%
Balanced .......................... .450% .400% .350% .325% .300%
Conservative Investors ............ .475% .425% .375% .350% .325%
High Yield ........................ .600% .575% .550% .530% .520%
Intermediate Government Securities .500% .475% .450% .430% .420%
Money Market ...................... .350% .325% .300% .280% .270%
Growth and Income ................. .550% .525% .500% .480% .470%
Quality Bond ...................... .525% .500% .475% .455% 0.445%
Equity Index ...................... .325% .300% .275% .255% .245%
International ..................... .900% .825% .800% .780% .770%
- ------------
* On assets in excess of $10 billion, the management fee for the Common
Stock Portfolio is reduced to 0.335% of average daily net assets.
8
The following table sets forth for each Portfolio a comparison of the
actual aggregate fees paid to Alliance during the fiscal year ended December
31, 1996 under the Current Advisory Agreement, for portfolio management,
accounting and other non-advisory services, with the aggregate fees that
would have been paid to Alliance, for portfolio management services only,
during such fiscal year had the New Advisory Agreement been in effect.
INCREASE (DECREASE) IN
FEES
FEES THAT WOULD HAVE BEEN PAID UNDER NEW ADVISORY
ACTUAL FEES PAID UNDER CURRENT UNDER THE NEW ADVISORY AGREEMENT STATED AS A % OF
ADVISORY AGREEMENT FOR AGREEMENT FOR FISCAL YEAR FEES PAID UNDER CURRENT
PORTFOLIO FISCAL YEAR ENDED 12/31/96 ENDED 12/31/96 ADVISORY AGREEMENT
- ---------------------------------- ------------------------------ ------------------------------ --------------------------
INTERNATIONAL ..................... $ 875,316 $ 875,316 0.0%
GLOBAL ............................ 4,491,125 5,462,757 21.6
AGGRESSIVE STOCK .................. 15,504,789 18,724,744 20.8
COMMON STOCK ...................... 20,314,128 21,933,290 8.0
GROWTH AND INCOME ................. 864,549 864,549 0.0
GROWTH INVESTORS .................. 5,816,056 5,966,511 2.6
BALANCED .......................... 5,820,114 6,684,292 14.8
CONSERVATIVE INVESTORS ............ 1,517,920 1,310,107 (13.7)
HIGH YIELD ........................ 856,390 935,117 9.2
QUALITY BOND ...................... 935,462 891,291 (4.7)
INTERMEDIATE GOVERNMENT SECURITIES 399,460 399,460 0.0
EQUITY INDEX ...................... 1,034,043 961,724 (7.0)
MONEY MARKET ...................... 1,472,114 1,290,035 (12.4)
9
As indicated above, the scope of services provided under the New Advisory
Agreement is less extensive than under the Current Advisory Agreement.
Consequently, if the New Advisory Agreement is adopted, the Trust will be
free to contract, at its own expense, with Alliance or third-partiesthird parties to
provide non-advisory services currently required to be provided by Alliance
or its affiliates. In that case, the overall expenses borne by the Portfolio
could increase. The current expectation is that Alliance will continue to
perform the same non-advisory services, except for accounting services, that
it currently provides to the Trust, and that there will still be no separate
charge for these non-advisory services. These services include provision of
office space and equipment, bookkeeping and clerical services required to
perform portfolio management services (which Alliance will be required to
provide non-advisory services currently required to be provided by Alliance
or its affiliates. In that case, the overall expenses borne by the Portfolio
could increase. The current expectation is that Alliance will continue to
perform the same non-advisory services, except for accounting services, that
it currently provides to the Trust, and that there will still be no separate
charge for these non-advisory services. These services include provision of
office space and equipment, bookkeeping and clerical services required to
perform portfolio management services (which Alliance will be required to
provide at its own expense); furnishing statistical information with respect
to existing or potential investments; and preparation of financial statements
for the Trust's prospectuses, statements of additional information and
semi-annual reports. The tables provided below compare estimated overall
recurring Portfolio expenses under the Current and New Advisory Agreements.
The tables provided below compare estimated overall
recurring Portfoliodo not reflect separate account expenses, under the Current and New Advisory Agreements.
The tables do not reflect separate account expenses, including sales loads.
INTERNATIONAL PORTFOLIO
ANNUAL PORTFOLIO ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES
----------------------------
CURRENT(1) PRO FORMA(2)
Advisory Fee ........................... 0.90% 0.90%
0.90%
12b-1 Fees ............................. 0% 0%
0%
Accounting and Other Expenses .......... 0.16% 0.18%
TOTAL PORTFOLIO OPERATING EXPENSES .... 1.06% 1.08%
Accounting and Other Expenses .......... 0.16% 0.18%
TOTAL PORTFOLIO OPERATING EXPENSES .... 1.06% 1.08%
- ------------
Footnotes appear on page 14.
10
GLOBAL PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES CLASS IB SHARES
------------------------ ------------------------
CURRENT(1) PRO FORMA(2) CURRENT(1) PRO FORMA(2)
---------- ------------ ---------- ------------
Advisory Fee ............. 0.53% 0.65% 0.53% 0.65%
12b-1 Fees ............... 0% 0% 0.25% 0.25%
Accounting and Other
Expenses ................ 0.07% 0.08% 0.08% 0.08%
TOTAL PORTFOLIO OPERATING
EXPENSES ................ 0.60% 0.73% 0.86% 0.98%
AGGRESSIVE STOCK PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES CLASS IB SHARES
------------------------ ------------------------
CURRENT(1) PRO FORMA(2) CURRENT(1) PRO FORMA(2)
---------- ------------ ---------- ------------
Advisory Fee ............. 0.46% 0.55% 0.46% 0.55%
12b-1 Fees ............... 0% 0% 0.25% 0.25%
Accounting and Other
Expenses ................ 0.02% 0.03% 0.02% 0.03%
TOTAL PORTFOLIO OPERATING
EXPENSES ................ 0.48% 0.58% 0.73% 0.83%
COMMON STOCK PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES CLASS IB SHARES
------------------------ ------------------------
CURRENT(1) PRO FORMA(2) CURRENT(1) PRO FORMA(2)
---------- ------------ ---------- ------------
Advisory Fee ............. 0.36% 0.38% 0.36% 0.38%
12b-1 Fees ............... 0% 0% 0.25% 0.25%
Accounting and Other
Expenses ................ 0.02% 0.03% 0.02% 0.03%
TOTAL PORTFOLIO OPERATING
EXPENSES ................ 0.38% 0.41% 0.63% 0.66%
- ------------
Footnotes appear on page 14.
11
GROWTH AND INCOME PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES
----------------------------
CURRENT(1) PRO FORMA(2)
------------ --------------
Advisory Fee ...................... 0.55% 0.55%
12b-1 Fees ........................ 0% 0%
Accounting and Other Expenses .... 0.03% 0.05%
TOTAL PORTFOLIO OPERATING
EXPENSES ......................... 0.58% 0.60%
GROWTH INVESTORS PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES CLASS IB SHARES
------------------------ ------------------------
CURRENT(1) PRO FORMA(2) CURRENT(1) PRO FORMA(2)
---------- ------------ ---------- ------------
Advisory Fee ............. 0.52% 0.53% 0.52% 0.53%
12b-1 Fees ............... 0% 0% 0.25% 0.25%
Accounting and Other
Expenses ................ 0.05% 0.06% 0.07% 0.06%
TOTAL PORTFOLIO OPERATING
EXPENSES ................ 0.57% 0.59% 0.84% 0.84%
BALANCED PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES
----------------------------
CURRENT(1) PRO FORMA(2)
------------ --------------
Advisory Fee ...................... 0.37% 0.42%
12b-1 Fees ........................ 0% 0%
Accounting and Other Expenses .... 0.04% 0.05%
TOTAL PORTFOLIO OPERATING
EXPENSES ......................... 0.41% 0.47%
- ------------
Footnotes appear on page 14.
12
CONSERVATIVE INVESTORS PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES
----------------------------
CURRENT(1) PRO FORMA(2)
------------ --------------
Advisory Fee ...................... 0.55% 0.48%
12b-1 Fees ........................ 0% 0%
Accounting and Other Expenses .... 0.06% 0.07%
TOTAL PORTFOLIO OPERATING
EXPENSES ......................... 0.61% 0.55%
HIGH YIELD PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES CLASS IB SHARES
------------------------ ------------------------
CURRENT(1) PRO FORMA(2) CURRENT(1) PRO FORMA(2)
---------- ------------ ---------- ------------
Advisory Fee ............. 0.55% 0.60% 0.55% 0.60%
12b-1 Fees ............... 0% 0% 0.25% 0.25%
Accounting and Other
Expenses ................ 0.04% 0.06% 0.02% 0.06%
TOTAL PORTFOLIO OPERATING
EXPENSES ................ 0.59% 0.66% 0.82% 0.91%
QUALITY BOND PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES
----------------------------
CURRENT(1) PRO FORMA(2)
------------ --------------
Advisory Fee ...................... 0.55% 0.53%
12b-1 Fees ........................ 0% 0%
Accounting and Other Expenses .... 0.04% 0.05%
TOTAL PORTFOLIO OPERATING
EXPENSES ......................... 0.59% 0.58%
- ------------
Footnotes appear on page 14.
13
INTERMEDIATE GOVERNMENT SECURITIES PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES
----------------------------
CURRENT(1) PRO FORMA(2)
------------ --------------
Advisory Fee ...................... 0.50% 0.50%
12b-1 Fees ........................ 0% 0%
Accounting and Other Expenses .... 0.06% 0.09%
TOTAL PORTFOLIO OPERATING
EXPENSES ......................... 0.56% 0.59%
EQUITY INDEX PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES
----------------------------
CURRENT(1) PRO FORMA(2)
------------ --------------
Advisory Fee ...................... 0.35% 0.33%
12b-1 Fees ........................ 0% 0%
Accounting and Other Expenses .... 0.04% 0.05%
TOTAL PORTFOLIO OPERATING
EXPENSES ......................... 0.39% 0.38%
MONEY MARKET PORTFOLIO
ANNUAL PORTFOLIO OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
CLASS IA SHARES CLASS IB SHARES
------------------------ ------------------------
CURRENT(1) PRO FORMA(2) CURRENT(1) PRO FORMA(2)
---------- ------------ ---------- ------------
Advisory Fee ............. 0.40% 0.35% 0.40% 0.35%
12b-1 Fees ............... 0% 0% 0.25% 0.25%
Accounting and Other
Expenses ................ 0.03% 0.04% 0.02% 0.04%
TOTAL PORTFOLIO OPERATING
EXPENSES ................ 0.43% 0.39% 0.67% 0.64%
- ------------
(1) Under Current Advisory Agreement. Total Portfolio Operating Expenses
for Class IA Shares are based on actual expenses for the fiscal year
ended December 31, 1996. Total Portfolio Operating Expenses for Class
IB Shares are based on annualized expenses for the period from October
2, 1996 (commencement of operations) to December 31, 1996.
(2) Under New Advisory Agreement based on (a) Portfolio average net assets
during the fiscal year ended December 31, 1996, (b) actual non-advisory
expenses for the fiscal year ended December 31, 1996 and (c) any
recurring increasechange in expenses attributable to the proposed fee structureschedule
and/or accounting services. Non-recurring costs associated with the
solicitation of voting instructions are not reflected in the expenses
shown. See "Other Information -- Solicitation of Voting Instructions"
below.
14
MANAGEMENT FEE SCHEDULES OF OTHER ALLIANCE FUNDS WITH SIMILAR INVESTMENT
OBJECTIVES. The Trust is required under applicable regulations of the
Securities and Exchange Commission to provide the management fee schedules of
other mutual funds managed by Alliance that have investment objectives
similar to those of the Portfolios. Accordingly, this information is provided
in the following table, notwithstanding Alliance's belief that the management
fee schedules of these mutual funds, many of which do not serve as investment
vehicles for use in connection with variable life insurance contracts and
variable annuity certificates and contracts, may not be comparable to those
of the Portfolios:
GROWTH FUNDS--INVESTMENT OBJECTIVES
SIMILAR TO THE COMMON STOCK AND AGGRESSIVE
STOCK PORTFOLIOS FEE SCHEDULE
- ------------------------------------------------ ----------------------------
The Alliance Fund, Inc. ......................... 0.75% up to $500 Million
0.65% over $500 Million
and up to $1 Billion
0.55% over $1 Billion
Alliance Quasar Fund, Inc. ...................... 1.00%
The Alliance Portfolios ("TAP")--
Growth Fund .................................... 0.75%
Alliance Premier Growth Fund, Inc. .............. 1.00%
Alliance Variable Products Series Fund, Inc.
("AVP")--Quasar Portfolio* ..................... 1.00%
AVP--Growth Portfolio* .......................... 0.75%
AVP--Premier Growth Portfolio* .................. 1.00%
FLEXIBLY MANAGED FUNDS--INVESTMENT
OBJECTIVES SIMILAR TO THE BALANCED, CONSERVATIVE
INVESTORS AND GROWTH INVESTORS PORTFOLIOS FEE SCHEDULE
- --------------------------------------------------- -----------------------------
Alliance Balanced Shares, Inc. ..................... 0.625% up to $200 Million
0.500% over $200 Million
and up to $400 Million
0.450% over $400 Million
TAP--Strategic Balanced Fund** ..................... 0.75%
TAP--Conservative Investors Fund** ................. 0.75%
TAP--Growth Investors Fund** ....................... 0.75%
AVP--Conservative Investors Portfolio* ............. 0.75%
AVP--Growth Investors Portfolio* ................... 0.75%
INTERNATIONAL FUNDS--INVESTMENT
OBJECTIVES SIMILAR TO THE GLOBAL AND
INTERNATIONAL PORTFOLIOS FEE SCHEDULE
- ------------------------------------------ ----------------------------
Alliance International Fund ............... 1.00% up to $500 Million
0.75% over $500 Million
AVP--International Portfolio* ............. 1.00%
- ------------
Footnotes appear on page 16.
15
MONEY MARKET FUNDS
--INVESTMENT OBJECTIVES SIMILAR TO THE
MONEY MARKET PORTFOLIO FEE SCHEDULE
- ------------------------------------------- -------------------------------------
Alliance Capital Reserves .................. 0.50% for the first $1.25 Billion
0.49% on the next $250 Million,
0.48% on the next $250 Million,
0.47% on the next $250 Million,
0.46% on the next $1 Billion
0.45% on amounts over $3 Billion
AVP--Money-Market Portfolio* ............... 0.50%
GOVERNMENT FUNDS--INVESTMENT
OBJECTIVES SIMILAR TO THE INTERMEDIATE
GOVERNMENT SECURITIES PORTFOLIO FEE SCHEDULE
- -------------------------------------------- ----------------------------
TAP--Short-Term U.S. Government Fund** ..... 0.55%
Alliance Bond Fund, Inc.--
U.S. Government Portfolio .................. 0.60% up to $500 Million
0.50% over $500 Million
AVP--U.S. Government/High Grade Securities
Portfolio* ................................. 0.60%
Alliance Limited Maturity
Government Fund, Inc. ...................... 0.65%
- ------------
* Subject to an expense limitation currently in effect limiting total
fund expenses to 0.95% of average net assets.
** Subject to an expense limitation currently in effect limiting total
fund expenses, excluding 12b-1 fees, to 1.10% of average net assets.
BASIS FOR THE TRUSTEES' RECOMMENDATION. In approving the New Advisory
Agreement, the Trustees of the Trust, including the Independent Trustees,
requested and evaluated information provided by Alliance which, in their
opinion, constituted all the information reasonably necessary for the
Trustees to form a judgment as to whether the New Advisory Agreement would be
in the best interests of the Portfolios and their shareholders.
In recommending that shareholders approve the New Advisory Agreement, the
Trustees took into account all factors which they deemed relevant, including:
(i) the advisory fees and other expenses that would be paid by the Portfolios
under the New Advisory Agreement as compared to those of similar portfolios
managed by other investment advisers; (ii) the nature, quality and extent of
the portfolio management and non-advisory services furnished by Alliance to
the Portfolios; (iii) Alliance's need to maintain and enhance its ability to
retain and attract capable personnel to serve the Portfolios; (iv) the nature
of Alliance's research capability and the related benefits to the Portfolios,
(v) the fact that, with respect to portfolio managementmanage-
16
ment services, the New Advisory Agreement would, except as described herein,
have terms and conditions substantially similar to those of the Current
Advisory Agreement; (vi) brokerage and research services received by Alliance
as described more fully below under "Other Information -- Brokerage and
Research Services"; (vii) the relationship of the proposed advisory fee
structure to the fee structures of comparable mutual funds and the impact of
the proposed changes in advisory fees on each Portfolio's expense ratio;
(viii) the fact that the Trust will bear a portion of the costs of this proxy
solicitation; (ix) the performance of the Portfolios; and (x) the increased
cost and complexity of providing portfolio management services.
The Trustees considered the payments made or to be made to affiliates of
Alliance or third-parties for services other than investment advisory
services, particularly for accounting services. Alliance has informed the
Trustees that, in its opinion, accounting services for the Trust would best
be performed by a third-party service provider because such a service
provider would offer greater flexibility in the design and modification of
accounting systems. Additionally, outsourcing would permit Alliance's
accounting professionals to concentrate their efforts on accounting
supervision and compliance. Alliance has informed the Trust that it intends
to recommend that the Trust's accounting services be performed by Chase
Manhattan Bank pursuant to a sub-accounting arrangement with Alliance and has
indicated that it expects the cost for such services will initially be
approximately $750,000 per annum in the aggregate for the Trust as a whole,
and will be allocated among the Portfolios in part by reference to the number
of Portfolios and in part by assets.
The Trustees also took into account the profits of Alliance in providing
services to the Portfolios and pro forma projections (similar to those set
forth 15
above) with respect to the total expenses (as a percentage of total net
assets) expected to be borne by each Portfolio if the New Advisory Agreement
were adopted by the Portfolios. The Trustees also took into account other
benefits received from the Trust by affiliates of Alliance.
In particular, the Trustees considered that shareholders of the
Conservative Investors, Quality Bond, Equity Index and Money Market
Portfolios would be expected to receive under the New Advisory Agreement an
immediate reduction from the level of total expenses borne by the Portfolios
during the most recently completed fiscal year, and that, at December 31,
1996 asset levels, shareholders of the International, Growth & Income and
Intermediate Government Securities Portfolios would bear substantially the
same level of investment advisory fees under the New Advisory Agreement.
The Trustees also considered that shareholders of the Global, Aggressive
Stock, Common Stock, Growth Investors, Balanced and High Yield Portfolios
17
would be subject under the New Advisory Agreement to an immediate increase in
the level of total annual investment advisory fees. In considering the
proposed fee increase, the Trustees placed primary emphasis upon the nature
and quality of the services being provided on behalf of these Portfolios by
Alliance, taking into account the relative complexity of managing the
Portfolios. The Trustees believe that the proposed fee increase will, over
the long term, enable Alliance to continue to provide high-quality investment
advisory services to the Portfolios at reasonable fee rates and that the fee
structure will allow Alliance to provide portfolio management and
non-advisory services (other than accounting) to the Portfolios at levels
consistent with the increased demands of today's investment advisory
marketplace.
With respect to the services to be provided on behalf of each Portfolio,
the Trustees determined that the compensation to be paid to Alliance under
the New Advisory Agreement is fair and reasonable, and that the New Advisory
Agreement will allow Alliance to receive fees for its services that are
competitive with fees paid by other mutual funds to other investment
managers.
REQUIRED VOTE. Approval of the proposal set forth in Part I with respect
to each Portfolio will require the affirmative vote of a "majority of the
outstanding voting securities" of the applicable Portfolio, which means the
affirmative vote of the lesser of (i) more than 50% of the outstanding shares
of the Portfolio, or (ii) 67% or more of the shares of the Portfolio present
at the Meeting if more than 50% of the Portfolio's outstanding shares are
present at the Special Meeting in person or by proxy. Abstentions will have
the effect of a vote against the proposal set forth in Part I. If the
shareholders of any Portfolio do not approve the New Advisory Agreement, the
Current Advisory Agreement will remain in effect with respect to that
particular Portfolio. In such event, the Trustees will take such further
action as they deem to be in the best interests of the shareholders of that
Portfolio.
16
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF EACH PORTFOLIO
VOTE FOR APPROVAL OF THE NEW ADVISORY AGREEMENT.
II. ELECTION OF TRUSTEES
The Trustees of the Trust are proposing that shareholders elect Peter D.
Noris and Clifford L. Michel as Trustees. Messrs. Noris and Michel are at
present Trustees of the Trust, having been appointed Trustees by the other
Trustees. Although such election is not required by law, the Trustees of the
Trust have determined that it is in the best interests of the Trust to ask
the Trust's shareholders to vote on the election of Messrs. Noris and Michel
at the Special Meeting, when the shareholders of the Trust are required to
act on another matter. The Trustees believe that by acting on their election
now, the
18
Trust may delay the time at which another shareholder meeting is required for
purpose of electing Trustees, thereby saving the expense associated with
holding such a meeting.
If elected at the Special Meeting, Messrs. Noris and Michel will continue
to serve as Trustees. The term of office of each person elected as a Trustee
will be until his or her successor is elected and qualified. The Trust's
Declaration of Trust does not provide for the annual election of Trustees.
However, in accordance with the 1940 Act (i) the Trust will hold a
shareholders' meeting for the election of Trustees at such time as less than
a majority of the Trustees holding office has been elected by shareholders
and (ii) if, as a result of a vacancy in the Board of Trustees, less than
two-thirds of the Trustees holding office have been elected by the
shareholders, that vacancy may only be filled by a vote of the shareholders.
In addition, the Trust's current Agreement and Declaration of Trust provides
that Trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares and filed with the Trust's
custodian or by a vote of the holders of two-thirds of the outstanding shares
at a meeting duly called for the purpose, which meeting shall be held upon
the written request of the holders of not less than 10% of the outstanding
shares. The Trustees also have adopted a retirement policy pursuant to which
each Trustee is generally required to retire at the end of the calendar year
in which he or she reaches his or her 76th birthday.
Each of the nominees has agreed to serve as a Trustee if elected. If
either of the nominees should be unavailable for election at the time of the
meeting (which is not presently anticipated), the shareholders may vote for
other persons in their discretion.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT THE SHAREHOLDERS OF THE TRUST VOTE
FOR THE ELECTION OF MESSRS. NORIS AND MICHEL.
1719
Although only Messrs. Noris and Michel are proposed for election as
additional Trustees at this time by the Trust's shareholders, information
with respect to these nominees and all of the other existing Trustees,
including their ages and a description of their principal occupations, is
listed below. Except as shown below, each nominee's or Trustee's principal
occupation and business experience for the last five years has been with the
employers indicated, although in some cases the Trustee may have held
different positions with such employers.
NAME, AGE AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ---------------------------- -------------------------------------------------
Clifford L. Michel (57) Partner of the law firm of Cahill Gordon &
Cahill Gordon & Reindel Reindel since January 1972. President, Chief
80 Pine Street Executive Officer and Director of Wenonah
New York, NY 10005 Development Company (investment holding company).
since 1976. Director since 1987 and Member of the
Human Resources, Environmental and Safety, and
Executive Committees since 1987 of Placer Dome
Inc. (mining). Director, Faber-Castell
Corporation from 1988-1994 (writing instruments).
President of Board of Trustees of St. Mark's
School from 1988 to 1993. Chairman of the Board
of Trustees and
Vice Chairman of Morristown Memorial Hospital (and
Memorial Health Foundation) from 1991 to 1996.
Director, Vice Chairman and Treasurer of Atlantic
Health Systems, Inc. and Atlantic Hospital since
1996.
18
*Peter D. Noris (41) Executive Vice President (since May 1995) and Chief Investment
The Equitable Life Assurance Chief Investment Officer of Equitable since May 1995; prior
Assurance(since July
Society of the thereto,United States 1995); Executive Vice President, of Salomon Brothers Inc.,
United States from 1992 to 1995. Principal of Equity Division,The Equitable
787 Seventh Avenue Morgan Stanley & Co. Inc., from 1984 to 1992.Companies Incorporated ("Equitable Companies")
New York, NY 10019 (since May 1995); Director of Equitable Variable Life Insurance
Company ("Equitable Variable"), from September
1995 through December 1996, and Equitable Real
Estate Investment Management, Inc. since
September 1995 and Alliance Capital
Management Corporation ("ACMC"), the general
partner of Alliance, since July 1995. Prior
thereto, Vice President of Salomon Brothers Inc.,
from 1992 to 1995. Principal of Morgan Stanley &
Co. Inc., from 1984 to 1992.
20
NAME, AGE AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ---------------------------- -------------------------------------------------
*John D. Carifa (51) President, Chief Operating Officer and a Director
Alliance Capital Management of ACMC; Chairman and Chief Executive Officer of
L.P. Alliance's Mutual Fund Division. Currently a
1345 Avenue of the Americas Director and Trustee of all other registered
New York, NY 10105 investment companies (the "Alliance Mutual
Funds") sponsored by Alliance, and Director of
Frontier Trust Company, a subsidiary of
Equitable.
Richard W. Couper (74) President Emeritus and Trustee of the Woodrow Wilson National
The Burke Library National Fellowship Foundation and President Emeritus of
Hamilton College Emeritus of the New York Public Library.
P.O. Box 345
Clinton, NY 13323-0345
Brenton W. Harries (68) Director of Enhance Reinsurance Co. since
14 Wilson Point Road December 1986. Mr. Harries was also President and
Wilton Point Chief Executive Officer, Global Electronic
South Norwalk, CT 06854 Markets Company from August 1985 to October 1986.
19
Howard E. Hassler (Chairman) Currently a consultant specializing in retailing,
(67) finance and real estate. Former Chairman and
200 East 57th Street Chief Executive Officer of Brooks Fashion Stores,
Penthouse D Inc. (specialty clothing stores); Former
New York, NY 10022 Chairman, President and Chief Operating Officer
of Allied Stores Corporation (department and
specialty stores), 1987; Executive Vice President
and Director, Allied Stores Corporation from June
1984 to June 1987.
William L. Mannion (66) Retired. Former Group Senior Vice President of
45 Bonnie Way Operations of American Ultramar Limited until
Allendale, NJ 07401 December 31, 1986.
21
NAME, AGE AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ---------------------------- -------------------------------------------------
Alton G. Marshall (75) Senior Fellow, Nelson A. Rockefeller Institute of
136 E. 79th Street Government since January 1991. President of Alton
New York, NY 10021 Alton G. Marshall Associates, Inc., New York, New York,
a real estate investment corporation, since 1981;
Director of EQK Partners, Atlanta, Georgia, since
1984; Director, New York State Electric & Gas
Corp., since 1971; Director and Chairman of the
Executive Committee of Lincoln Savings Bank since
January 1991, and Chairman and Chief Executive
Officer of such bank from March 1984 through
December 1990.
Donald J. Robinson (62) Senior Partner andof the law firm of Orrick,
666 Fifth Avenue Herrington & Sutcliffe from July 1987 to December
19th Floor 1994; Member of the Executive Committee of 599 Lexington Avenue the law firm of Orrick, Herrington & Sutcliffe
New York, NY 1002210103 firm from July 1987January to December 1994. Of1994; Senior
Counsel of the firm since January 1995. Trustee
of the Museum of the City of New York from 1977
to 1995.
- ------------
* Mr. Noris and Mr. Carifa are both "interested persons" (as defined in
the 1940 Act) of the Trust. Mr. Noris is deemed an "interested person"
of the Trust by virtue of his position as an officer of Equitable and a
director of ACMC, and Mr. Carifa is deemed an "interested person" by
virtue of his position as an officer and director of ACMC and Alliance.
2022
Messrs. Couper, Harries and Robinson are Trustees (but not "interested
persons") of The Alliance Portfolios, one of the Alliance Mutual Funds.
Mr.Messrs. Michel and Robinson isare also a directordirectors or trusteetrustees (but not
an "interested person"persons") of 37 other Alliance Mutual Funds. Mr. Hassler is also
a director (but not an "interested person") of Alliance Real Estate
Investment Fund, Inc. Mr. Marshall is an independent general partner (but not
an "interested person") of Equitable Capital Partners, L.P. and Equitable
Capital Partners (Retirement Fund), L.P., both of which are business
development companies registered under the 1940 Act. Mr. Michel is a trustee and/or director and member of the
Audit and Nominating Committees and of 37 other Alliance Mutual Funds.
In May 1993, at the initiative of representatives of creditors and
shareholders, Mr. Hassler was appointed Chief Executive Officer and Chairman
of the Board of Directors of Brooks Fashion Stores in an effort to prevent a
second bankruptcy of that company. The effort was unsuccessful and in June
1993, Brooks Fashion Stores filed for bankruptcy protection. As of October
1994, Mr. Hassler resigned as Chairman and Chief Executive Officer.
Shareholdings of Nominees, Trustees and Officers. As of December 31, 1996,
the nominees, Trustees and officers of the Trust did not own any shares of
the Trust directly because such shares are offered only to the Variable
Insurers. The nominees, Trustees and officers are entitled to give voting
instructions with respect to less than 1% of the outstanding shares of the
Trust.
Trustees' and Officers' Compensation. Each Trustee, other than those who
are "interested persons" of the Trust (as defined in the 1940 Act), receives
an annual fee of $29,000 plus an additional fee of $4,000 for each board
meeting and $2,000 per committee meeting attended. The meeting fee paid to
the Trustee acting as chairman of the meeting is increased by 50%. The
Chairman of the Board receives an additional annual retainer of $7,000.
Trustees receive $1,000 for each day spent performing special services
requested by the Chairman or the President of the Trust, and reimbursement
for expenses in connection with performance of regular and special services.
For the fiscal year ended December 31, 1996, the Trustees met six times (not
including four committee meetings) and each Trustee attended all meetings of
the Board and the committees of which such Trustee was a member. Trustees'
fees and expenses totaling $413,068 were paid or were payable by the Trust
for the fiscal year ended December 31, 1996. As required by the Federal
securities laws, the following chart summarizes the Trustees' compensation:
2123
TRUSTEE COMPENSATION TABLE
TOTAL
PENSION OR COMPENSATION
RETIREMENT FROM THE ALLIANCE
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL FUND COMPLEX,
COMPENSATION AS PART OF TRUST BENEFITS UPON INCLUDING THE
TRUSTEES AND NOMINEES FROM THE TRUST EXPENSES RETIREMENT TRUST(1)TRUST (1)
- --------------------- -------------- ---------------- ---------------- -----------------
John D. Carifa ....... $ -0- $-0- $-0- $ -0-
Richard W. Couper ... $ 59,000(2)$59,000 2 $-0- $-0- $ 85,000
Brenton W. Harries .. $ 59,000$59,000 $-0- $-0- $ 86,000
Howard E. Hassler ... $ 85,000$85,000 $-0- $-0- $ 86,750
William L. Mannion .. $ 66,000(2)$66,000 2 $-0- $-0- $ 66,000
Alton G. Marshall ... $ 61,000$61,000 $-0- $-0- $ 133,500134,500
Clifford L. Michel .. $ 20,068(3)$20,068 3 $-0- $-0- $ 146,068
Peter D. Noris ....... $ -0- $-0- $-0- $ -0-
Donald J. Robinson .. $ 63,000(2)$63,000 2 $-0- $-0- $ 137,250
- --------------------------
(1) As of December 31, 1996, there were 107 Alliance Mutual Funds.
(2) Completely deferred.
(3) Appointed as a Trustee on October 16, 1996.
2224
Information Regarding Officers of the Trust. The executive officers of the
Trust, their ages, positions with the Trust and terms of office and their
principal occupation and business experience for the last five years are as
follows:
POSITION WITH THE PRINCIPAL OCCUPATION DURING
NAME AND AGE POSITION WITH THE TRUST LAST FIVE YEARS
- ------------------------------- ------------------------------------------------- --------------------------------------
James M. Benson (50) ........... President and Chief Chief Executive Officer, Equitable
Executive Officer (February 1996 to present); Director
and President, Equitable (February
1994 to present); Director and Senior
Executive Vice President, Equitable
Companies (February 1994 to present);
Chief Operating Officer, Equitable
Companies (February 1996 to present);
President, Chief Executive Officer and
Director, Equitable Variable (until
December 1996); Chief Operating
Officer, Equitable (February 1994 to
February 1996); Senior Executive Vice
President, Equitable (April 1993 to
February 1994); President, Management
Compensation Group (1983 to February
1993); Director, Association for
Advanced Life Underwriting, Health
Plans, Inc. (August 1988 to present);
Hospital for Special Surgery (April
1996 to present); Director, ACMC and other
Equitable-affiliated companies
(October 1993 to present), Equitable
Distributors, Inc. (May 1996 to
present), and AXA Re Life Insurance
Company (January 1995 to present).
Mark D. Gersten (46) ........... Treasurer and Chief Senior Vice President, Alliance Fund
Financial Officer Services, Inc. (AFS)("AFS"), with which he
has been associated since prior to
1991.
Laura Mah (41) ................. Controller and Chief Vice President, ACMC (July 1993 to
Accounting Officer to present); Equitable Capital Management
Corporation (ECMC)("ECMC") (April 1989 to
July 1993).
23
PRINCIPAL OCCUPATION DURING
NAME AND AGE POSITION WITH THE TRUST LAST FIVE YEARS
- ------------------------------- --------------------------- --------------------------------------
Bruce Calvert (49) ............. Vice President Vice Chairman and Chief Investment
Officer of ACMC, with which he has
been associated since prior to 1991.
25
POSITION WITH THE PRINCIPAL OCCUPATION DURING
NAME AND AGE TRUST LAST FIVE YEARS
- ------------------------------- ---------------------- --------------------------------------
Kathleen A. Corbet (36) ........ Vice President Senior Vice President, ACMC (July 1993
to present); Executive Vice President,
ECMC (June 1992 to July 1993); Senior
Vice President, ECMC (May 1991 to June
1992); Managing Director, ECMC
(September 1988 to May 1991).
Nelson R. Jantzen (52) ......... Vice President Senior Vice President, ACMC (July 1993
to present); Executive Vice President,
ECMC (June 1992 to July 1993); Senior
Vice President, ECMC (February 1990 to
June 1992); Managing Director, ECMC
(January 1987 to February 1990).
Director, Equitable Capital DHO Ltd.
(November 1990 to July 1993);
Secretary and Treasurer, Equitable
Capital Diversified Holdings L.P. II
(February 1990 to July 1993);
Secretary and Treasurer, Equitable
Capital Diversified Holdings L.P. I
(May 1989 to July 1993); Investment
Officer, Equitable Variable (February
1977 to July 1993); Investment
Officer, Equitable (February 1977 to
July 1993.)
Barbara J. Krumsiek (44) ...... Vice President Senior Vice President, Alliance Fund
Distributors Inc. (AFD)("AFD") (July 1993
to present); Director, EQ Financial
Consultants, Inc. ("EQF") (March 1992
to present); Executive Vice President,
ECMC (June 1992 to July 1993); Senior
Vice President, ECMC (March 1987 to
June 1992).
Wayne D. Lyski (55) ............ Vice President Executive Vice President, ACMC, with
which he has been associated since
prior to 1991.
24
PRINCIPAL OCCUPATION DURING
NAME AND AGE POSITION WITH THE TRUST LAST FIVE YEARS
- ------------------------------- --------------------------- --------------------------------------
Michael S. Martin (50) ......... Vice President Senior Vice President, Equitable (June
1985 to present); Chairman, EQF (May
1992 to present); Director, EQF (March
1992 to present); Chief Executive
Officer, EQF (January 1994 to present);
Director, The Equitable of
Colorado, Inc. ("Colorado") (January
1995 to present) and Equitable
Underwriting and Sales Agency
(Bahamas) Limited (January 1995 to
present); formerly, Vice President,
Equitable Variable (May 1996 to
December 1996); Chairman and Chief
Executive Officer, EquiSource of New
York (January 1992 to October 1994)
and Frontier (April 1992 to October
1994); Director, Vice President and Treasurer,
Equitable Distributors, Inc. (August
1993 to February 1995). Director of
several Equitable-affiliated
companies.
26
POSITION WITH THE PRINCIPAL OCCUPATION DURING
NAME AND AGE TRUST LAST FIVE YEARS
- ------------------------------- ---------------------- --------------------------------------
Samuel B. Shlesinger (49) ..... Vice President Senior Vice President, Equitable
(November 1986 to present); Senior
Vice President, Equitable Variable
(February 1988 to December 1996);
President and Chief Executive Officer,
Equitable of Colorado (October 1985 to
present).
Alden M. Stewart (51) .......... Vice President Executive Vice President, ACMC (July
1993 to present); ECMC since prior to
1991.
Edmund P. Bergan, Jr. (46) .... Secretary Senior Vice President and General
Counsel, AFD, with which he has been
associated since prior to 1991.
None of the executive officers of the Trust receives compensation from the
Trust for his or her services as such officers. To the extent they hold
positions with Alliance and its affiliates, the executive officers and
interested Trustees may be said to benefit from the Current Advisory
Agreement and/or the New Advisory Agreement.
The Declaration of Trust of the Trust provides that the Trustees will not
be subject to personal liability. However, nothing in the Declaration of
Trust protects a Trustee against any liability to which the Trustee would
otherwise
25
be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office. The Declaration of Trust of the Trust provides for
indemnification by the Trust of the Trustees and the officers, provided that
the person to be indemnified is vindicated on the merits or is determined by
the Trustees or counsel to have acted in good faith and in a manner in, or
not opposed to, the best interests of the Trust. Equitable, at its expense,
currently provides liability insurance for the benefit of the Trustees and
Trust officers.
Committees of the Board. The Trust has a standing Audit Committee
consisting of Messrs. Mannion, Couper, Harries, Hassler, Marshall and
Robinson. The Audit Committee's function is to recommend to the Board of
Trustees a firm of independent auditors to conduct the annual audit of the
Trust's financial statements; review with such firm the outline, scope and
results of this annual audit; and review the performance and fees charged by
the independent auditors for professional services. In addition, the
Committee meets with the independent auditors and representatives of
management to review accounting activities and areas of financial reporting
and control. The Audit Committee met two times during the fiscal year ended
December 31, 1996.
27
The Trust has a Nominating Committee consisting of Messrs. Hassler, Couper
and Robinson. This Committee considers individuals for nomination as Trustees
of the Trust. The Nominating Committee does not consider nominees recommended
by shareholders (i.e., the Variable Insurers). During the fiscal year ended
December 31, 1996, the Nominating Committee met once.
The Trust has a Valuation Committee consisting of Messrs. Harries, Mannion
and Noris. This Committee determines the value of any of the Trust's
securities and assets for which market quotations are not readily available
or for which valuation cannot otherwise be provided. During the fiscal year
ended December 31, 1996, the Valuation Committee met once.
The Trust has a Compensation Committee consisting of Messrs. Robinson,
Hassler and Mannion. The Compensation Committee's function is to review the
Trustees' compensation arrangements. The Compensation Committee did not meet
during the fiscal year ended December 31, 1996.
The Trust has a Conflicts Committee consisting of Messrs. Hassler and
Robinson. The Conflicts Committee's function is to take any action necessary
to resolve conflicts among shareholders. The Conflicts Committee did not meet
during the fiscal year ended December 31, 1996.
REQUIRED VOTE. The election of Trustees will be by a plurality vote of all
shares of the Trust (including all Portfolios) voting together as a single
class 26
if a quorum is present at the meeting. The Trust's By-Laws define a
"quorum" as a majority of the shares entitled to vote. Neither withholding authority
to vote nor abstentionsAbstentions will not
have any effect on the outcome of the voting for the election of Trustees.
III. APPROVAL OF AMENDMENT AND RESTATEMENT OF AGREEMENT AND DECLARATION OF
TRUST
DECLARATION OF TRUST. The Trust was organized as a Massachusetts business
trust on July 10, 1987, pursuant to an Agreement and Declaration of Trust
dated July 10, 1987 (the "Current Declaration").
Concurrently with the approval of the new investment advisory contract for
the Portfolios of the Trust, the Trustees of the Trust are proposing that
shareholders approve an Amended and Restated Declaration of Trust (the
"Proposed Declaration"). Except as otherwise noted below, the provisions of
the Proposed Declaration are substantially similar to those of the Current
Declaration of the Trust. The full text of the Proposed Declaration is
attached as Appendix B to this Proxy Statement, and qualifies in its entirety
the description of the Proposed Declaration set forth in this Proxy
Statement.
28
Because the Trust will remain a Massachusetts business trust,
interpretation of the Proposed Declaration will continue to be governed by
Massachusetts law. In addition, the Trust's operations will remain subject to
the provisions of the 1940 Act and the rules promulgated thereunder. Certain
differences between the Current Declaration and the Proposed Declaration are
summarized below.
SHAREHOLDER VOTING REQUIREMENTS--GENERALLY. The Current Declaration sets
forth the specific matters on which shareholders are entitled to vote, the
size of vote required for approval of each such matter (i.e., plurality,
majority, two-thirds majority, etc.), the circumstances under and method by
which the shareholders may call and hold meetings, and other information
concerning shareholders' general voting rights. The Proposed Declaration
states that shareholders shall have such power to vote as is provided for in,
and may hold meetings and take actions pursuant to, the provisions of the
proposed Bylaws (the "Proposed Bylaws"), which have been unanimously approved
by the Trustees and which would become effective upon a favorable vote of the
shareholders of the Trust on this Proposal. The Proposed Bylaws, in turn,
provide all details regarding (i) the matters on which shareholders are
entitled to vote, (ii) the size of vote required for approval of each matter
and (iii) the circumstances in which shareholders may call and hold meetings.
The Proposed Bylaws provide shareholders with voting powers which, with
certain exceptions as described in greater detail below, are substantially
similar to the powers provided for in the Current Declaration.
27
Under the Proposed Bylaws, shareholders have the power to vote (i) for the
election of Trustees, provided, however, that no meeting of shareholders is
required to be called for the purpose of electing Trustees unless and until
such time as less than a majority of the Trustees have been elected by the
shareholders; (ii) with respect to any manager or sub-adviser to the extent
required by the 1940 Act; (iii) with respect to the termination of the Trust;
(iv) with respect to amendments to the Declaration of Trust; (v) to the same
extent as the stockholders of a Massachusetts business corporation as to
whether an action should be brought derivatively or as a class action on
behalf of the Trust and its shareholders; and (vi) with respect to such
additional matters relating to the Trust as may be required by law, the
relevant declaration of trust and by-laws or any registration statement of
the Trust, or as the Trustees consider necessary or desirable. Under the
Current Declaration, shareholders have the same voting rights and, in
addition, also have the power to vote for the removal of Trustees. The
Proposed Declaration provides that the Trustees have the authority to remove
a Trustee.
The Current Declaration contains several provisions, including rules for
the election of officers and the requirements for shareholder meetings,
29
including notice, record date, proxies, quorums and reports, which are
substantially the same as the corresponding provisions of the Proposed
Bylaws.
The Proposed Bylaws may be amended or repealed, in whole or in part, by a
majority of the Trustees then in office at any meeting of the Trustees, or by
one or more writings signed by such a majority. Although no shareholder vote
would be required to amend any portion of the Proposed Bylaws, including
portions setting forth shareholder voting rights, the Trust would still be
subject to shareholder rights required to be given by the 1940 Act and the
rules and regulations thereunder, the SEC, and/or any applicable state laws.
Thus, under current law, (i) Trustees must be elected by shareholders under
certain circumstances, (ii) investment advisory contracts for each Portfolio
must still be approved by a vote of at least a majority of the Portfolio's
outstanding voting securities, (iii) distribution plans for each Portfolio
must still be approved by a vote of at least a majority of outstanding voting
securities of the Portfolio's relevant class, and (iv) auditors must still be
selected annually at an annual meeting of shareholders if such a meeting is
held.
The Current Declaration provides that on any matter submitted to a vote,
shares shall be voted with respect to individual Portfolios, except that (i)
when required by the 1940 Act, shares shall be voted in the aggregate, and
(ii) when the Trustees determine that a matter affects the interests of fewer
than all series (or classes), only such series (or classes) may vote. The
Proposed 28
Declaration includes no comparable provision; however, the Trust's
Proposed Bylaws provide that on any matter submitted to a vote, all shares of
each series or class will be voted as a single class, except that when the
Trustees determine that a matter affects the interests of fewer than all
series (or classes), only such series (or classes) may vote. Pursuant to Rule
18f-3 under the 1940 Act, each class of shares of the Trust has exclusive
voting rights on any matter submitted to shareholders that relates solely to
its distribution arrangements, including its distribution fees, if any.
It is expected that, by providing for shareholder voting and meeting
rights in the Proposed Bylaws, rather than the Proposed Declaration, the
Trustees will have added flexibility in managing the Trust's affairs.
SHAREHOLDER VOTING REQUIREMENTS--AMENDMENTS TO THE DECLARATION OF
TRUST. The Current Declaration provides that any amendment thereto may be
adopted by a majority vote of the outstanding shares of each Portfolio at any
shareholder meeting or, in the absence of a meeting, by an instrument in
writing signed by a majority of the then Trustees when authorized to do so by
the vote of a majority of the shares of each Portfolio entitled to vote. With
30
respect to amendments which would change the rights of any shares of the
Trust by reducing the amount payable thereon upon liquidation of the Trust,
or by diminishing or eliminating voting rights thereto, the Current
Declaration requires a vote of two-thirds of the shares of each class
affected. The Proposed Declaration provides that any amendment thereto that
materially and adversely affects the rights of shareholders may be adopted
only by an instrument in writing signed by a majority of the then Trustees
when authorized to do so by a vote of a majority of the outstanding shares of
the Trust entitled to vote.
SHAREHOLDER VOTING REQUIREMENTS--MERGER, CONSOLIDATION, SALE OF
ASSETS. The Trust's Current Declaration provides that shareholders shall have
the power to vote with respect to any proposed transaction in which the
Trust, or any one or more of its Portfolios, merges into or consolidates with
any other corporation, association, trust or other organization, or sells,
leases or exchanges substantially all of the assets of one or more of the
Trust's Portfolios. Under the Current Declaration, any such consolidation,
merger or sale requires approval by affirmative vote of not less than
two-thirds of any affected Portfolio. Under the Proposed Declaration, the
Board may, in its discretion, submit such matters to shareholders for
approval. If any such matter were referred to shareholders for approval, the
required vote would be as determined by the Trustees, and may be an
affirmative vote of a plurality of a quorum (i.e., 25% of the shares entitled
to vote) of shareholders would be required.shareholders.
It is expected that, by requiring only a plurality vote of shareholders,
the Trustees will have added flexibility in considering any such
consolidation, merger or sale.
29
STANDARDS IN RESPECT OF ADVISORY AND DISTRIBUTION CONTRACTS. The Current
Declaration provides that all advisory and distribution contracts entered
into with certain interested persons of the Trust must, inter alia, be
"reasonable and fair" when entered into. It is unclear how this contractual
provision would be interpreted by a court of competent jurisdiction. Under
precedent dealing with Massachusetts corporations, a party defending the
fairness of an interested transaction has the burden of proof and the statute
of limitations on a contract is generally six years. While there is no
comparable provision in the Proposed Declaration, if the Proposed Declaration
were approved all advisory and distribution contracts entered into by the
Trust would remain subject to the requirements of the 1940 Act and the rules
and regulations thereunder and any applicable state laws. For example,
Section 36 of the 1940 Act imposes a fiduciary duty on advisers and their
affiliates with respect to the compensation for services that they receive
from registered investment companies such as the Trust. In a claim for
excessive advisory or distribution fees under Section 36 of the 1940 Act, the
plaintiff
31
bears the burden of proof and the statute of limitations is one year.
Appellate court precedent provides that the principal factor to be considered
in determining the reasonableness of an advisory fee under the 1940 Act is
whether the fee is "so disproportionately large that it bears no relationship
to the services rendered and could not have been the product of arms-lengtharm's-length
bargaining."
PROCEDURE FOR ADVISORY AND OTHER CONTRACTS. The Current Declaration
provides that each advisory, administrative, distribution and management
contract must be consistent with, and areis subject to, the requirements of
Section 15 of the 1940 Act. Section 15 includes provisions requiring, inter
alia, initial approval of all investment advisory contracts by shareholders
and independent trustees of a mutual fund such as the Trust and annual
approval thereafter by the independent trustees. The Trust believes this
provision of the Current Declaration is intended merely to confirm applicable
provisions of law and, therefore, the relation of this provision to other
than advisory or distribution contracts it is not entirely clear. The
Proposed Declaration has no comparable provision.
INDEMNIFICATION OF TRUSTEES AND OFFICERS. The Proposed Declaration
clarifies the procedures for determining whether a trustee, officer, or other
person acting under his or her direction (a "Covered Person") is entitled to
indemnification by the Trust. The Current Declaration provides that any
Covered Person and, if the Trustees so decide, any person who has rendered
investment advisory, management or administrative services to the Trust, is
entitled to indemnification against all liability and reasonable expenses in
connection with any claim, action, suit or proceeding brought against such
30
person provided that (1) such person is vindicated upon a final determination
of such claim, action, suit or proceeding or (2) in the absence of such final
determination, it is determined by the Trustees or counsel that (a) such
person acted in good faith and in a manner hesuch person reasonably believed to
be in the best interests of the Trust and (b) that indemnification is in the
best interests of the Trust. The Current Declaration also provides that a
Covered Person is not entitled to indemnification in a criminal proceeding
unless such Covered Person had no reasonable cause to believe that his or her
conduct was unlawful.
The Proposed Declaration provides in general that a Covered Person is
entitled to indemnification except with respect to any matter, whether civil
or criminal, whether brought on behalf of the Trust or otherwise, as to which
such person shall have been finally adjudicated in any action, suit or other
proceeding to be liable to the Trust or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office. Under the Proposed
32
Declaration, as to any matter disposed of without an adjudication, a Covered
Person may be entitled to indemnification if (a) approved by at least a
majority of the disinterested Trustees or (b), in the opinion of counsel, the
Covered Person would not be protected from any liability to the Trust due to
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties of such Covered Person's office.
Under the Current Declaration, in connection with any derivative suit
brought by a Shareholder, indemnification of a Covered Person extends only to
disbursements, and does not include any judgments, fines or amounts paid in
settlement. Under the Proposed Declaration, a Covered Person may be
indemnified against all liabilities and expenses, including but not limited
to reasonable counsel fees, amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, whether such action, suit or proceeding
is brought by the Trust, a shareholder or otherwise.
The Securities and Exchange Commission has expressed its view that, in
circumstances where there is no final adjudication, indemnification may be
limited by the 1940 Act and a substantial body of jurisprudence suggests that
indemnification of certain liabilities under the federal securities laws may
be unenforceable.
BASIS FOR THE TRUSTEES' RECOMMENDATION. In recommending approval of the
amendment and restatement of the Trust's Agreement and Declaration of Trust,
the Trustees of the Trust, including the Independent Trustees, took into
account all factors which they deemed relevant, including: (i) the increased
flexibility in managing the affairs of the Trust afforded to the Trustees by
the Proposed Declaration, (ii) the clarification of certain provisions of the
Current Declaration, and (iii) the effect of the proposal on the rights of
Shareholders.
REQUIRED VOTE. Approval of the proposed amendment and restatement of the
Trust's Agreement and Declaration of Trust set forth in this Part III will
require the affirmative vote of two-thirds of the shares of each Portfolio.
31
Abstentions will have the effect of a vote against the proposed amendment and
restatement of the Trust's Agreement and Declaration of Trust.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS VOTE FOR THE
AMENDMENT AND RESTATEMENT OF THE TRUST'S AGREEMENT AND DECLARATION OF TRUST.
IV. OTHER INFORMATION
CERTAIN OWNERSHIP OF TRUST SHARES
As noted above, the Trust sells shares only in connection with Contracts
issued by the Variable Insurers. As of December 31, 1996, Equitable and its
33
wholly-owned subsidiary at that time, Equitable Variable, owned approximately
[99.7]%99.7% of the Trust's outstanding shares. Equitable Variable was merged into
Equitable effective January 1, 1997.
As indicated on page 1, the Trust expects that the Variable Insurers will
offer to Contractowners the right to give such Variable Insurers instructions
as to how those shares of a Portfolio attributable to their Contracts should
be voted. The following table identifies each person known by the Trust to
own Contracts entitling that person to give voting instructions regarding
more than 5% of the outstanding shares of a Portfolio as of December 31,
1996:
MONEY MARKETGLOBAL QUALITY BOND GLOBALMONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------ ------------------------- ------------------------
UNITS % OF UNITS % OF UNITS % OF
OWNED PORTFOLIO OWNED PORTFOLIO OWNED PORTFOLIO
----------- ----------- ------------ ----------- ----------- -----------
Boatmen's Trust Co.* 11,227,106 68.7
Equitable Realty
Assets Corp. ....... 3,542,076 6.0 7,381,855 16.1 3,542,076 6.0
- --------------------------
* Boatmen's Trust Co., Trustee under Master Trust Agreement for
Southwestern Bell Corporation Deferred Compensation Plans and other
Executive Benefit Plans.
The principal addressaddresses of Boatmen's Trust Co. and Equitable Realty Assets
Corp. are 175 East Houston Street, San Antonio, Texas and 9000 Central Park
Avenue, Atlanta, Georgia, respectively.
ALLIANCE CAPITAL MANAGEMENT L.P.
Alliance, an investment adviser registered with the SEC under the
Investment Advisers Act of 1940, has served as the investment adviser to the
Trust since July 22, 1993. Alliance is a major international investment
adviser that serves its clients, who primarily are major corporate employee
benefit funds, public employee retirement systems, investment companies,
founda-
32
tionsfoundations and endowment funds, with a staff of more than 1,450 employees
operating out of domestic offices and the overseas offices of subsidiaries in
London, England; Tokyo, Japan; Vancouver and Toronto, Canada; and Melbourne,
Australia. Alliance's principal executive officer is Dave H. Williams, its
Chairman and Chief Executive Officer.
Alliance is a publicly-traded Delaware limited partnership whose limited
partnership interests, represented by units, are listed on the New York Stock
Exchange. As of [MarchMarch 1, 1996], Alliance Capital Management Corporation
("ACMC")1996, ACMC and Equitable Capital Management
Corporation, each a wholly-owned direct or indirect subsidiary of Equitable,
34
owned in the aggregate approximately [57.6]%57.6% of the issued and outstanding
units representing assignments of beneficial ownership of limited partnership
interests in Alliance ("Units"), and approximately [32.4]%32.4% and [10.0]%10.0% of the
Units were owned by the public and employees of Alliance and its
subsidiaries, respectively. ACMC, the sole general partner of, and the owner
of a 1% general partnership interest in, Alliance, is a wholly-owned
subsidiary of Equitable Investment Corporation, (EIC), which in turn is wholly-owned
by Equitable Holding Corporation, (EHC), a wholly-owned subsidiary of Equitable. The
principal offices of Alliance and ACMC are located at 1345 Avenue of the
Americas, New York, New York 10105.
Equitable, which is a New York life insurance company and one of the
largest life insurance companies in the United States, is a wholly-owned
subsidiary of The Equitable Companies, Incorporated (The Equitable Companies),
a publicly-owned holding company. The
principal offices of The Equitable Companies and Equitable are located at 787
Seventh Avenue, New York, New York 10019.10019 and 1290 Avenue of the Americas, New
York, New York 10104, respectively.
AXA, a French insurance holding company, currently owns approximately
63.9% of the outstanding voting shares of common stock of The Equitable
Companies. As a majority shareholder of The Equitable Companies, AXA is able
to exercise significant influence over the operations and capital structure
of The Equitable Companies, Equitable and their subsidiaries. AXA is the
holding company for an international group of insurance and related financial
services companies. AXA is the eleventh largest insurance group in the world
based on worldwide revenues in 1994 and the second largest French insurance
group based on worldwide gross premiums in 1994. AXA is also engaged in asset
management, investment banking, securities trading and financial services
activities principally in the United States, as well as in Western Europe and
the Asia Pacific area.
DISTRIBUTION
EQF and Equitable Distributors, Inc. ("EDI"), each an indirect,
wholly-owned subsidiary of Equitable, are the principal underwriters of the
Trust's Class IA and Class IB shares, respectively. The principal offices of
EQF and EDI are located at 1755 Broadway, New York, New York 10019 and 787
Seventh Avenue, New York, New York 10019, respectively.
BROKERAGE AND RESEARCH SERVICES
Under the New Advisory Agreement, decisions with respect to the purchase
and sale of each Portfolio's securities will be made by Alliance, 33
which is
also responsible for implementing these decisions, including the
35
allocation of portfolio brokerage and principal transactions and the
negotiation of commissions. It is expected that securities will ordinarily be
purchased in the primary markets, whether over-the-counter or listed, and
that listed securities may be purchased in the over-the-counter market if
that market is deemed the primary market.
Transactions on stock exchanges involve the payment of brokerage
commissions. In transactions on stock exchanges in the United States, these
commissions are negotiated, whereas on many foreign stock exchanges these
commissions are fixed. However, brokerage commission rates in certain
countries in which the Portfolios may invest may be discounted for certain
large domestic and foreign investors such as the Portfolios. A number of
foreign banks and brokers will be used for execution of each Portfolio's
portfolio transactions. In the case of securities traded in the foreign and
domestic over-the-counter markets, there is generally no stated commission,
but the price usually includes an undisclosed commission or mark-up. In
underwritten offerings, the price generally includes a disclosed fixed
commission or discount.
Alliance may, in the allocation of brokerage business, take into
consideration research and other brokerage services provided by brokers and
dealers to Equitable or Alliance. The research services include economic,
market, industry and company research material. Based upon an assessment of
the value of research and other brokerage services provided, proposed
allocations of brokerage for commission transactions are periodically
prepared internally. In limited cases, certain brokers have been advised
informally that, although the Trust is under no legal obligation, an attempt
will be made to meet the internally proposed level of allocated brokerage
business to the broker for brokerage and research services over a period of
time.
Commissions charged by brokers which provide research services may be
somewhat higher than commissions charged by brokers which do not provide
them. As permitted by Section 28(e) of the Securities Exchange Act of 1934
and by policies adopted by the Trustees, Alliance may cause the Trust to pay
a broker-dealer which provides brokerage and research services to Alliance an
amount of commission for effecting a securities transaction for the Trust in
excess of the commission another broker-dealer would have charged for
effecting that transaction.
Alliance does not engage brokers whose commissions it believes to be
unreasonable in relation to services provided. The overall reasonableness of
commissions paid will be evaluated by rating brokers on such general factors
as execution capabilities, quality of research (that is, quantity and quality
of 34
information provided, diversity of sources utilized, nature and frequency
of
36
communication, professional experience, analytical ability and professional
stature of the broker) and financial standing, as well as the net results of
specific transactions, taking into account such factors as price, promptness,
size of order and difficulty of execution. The research services obtained
will, in general, be used by Alliance for the benefit of all accounts for
which it makes investment decisions. However, although some of these services
are of value to Alliance in advising various of its clients, although not all of these
services are necessarily useful and of value in advising any particular
Portfolio of the Trust. The receipt of research services from brokers will
tend to reduce Alliance's expenses in managing the Portfolios.
During the fiscal year ended December 31, 1996, the Trust paid brokerage
commissions with respect to each of the Portfolios as specified below:
PORTFOLIO
- -------------------------------------------
International ..................... $ 749,780
Global ............................ $ 2,858,906
Aggressive Stock .................. $10,082,741
Common Stock ...................... $ 6,005,202
Growth & Income ................... $ 387,559
Growth Investors .................. $ 3,369,117
Balanced .......................... $ 3,895,582
Conservative Investors ............ $ 408,954
High Yield ........................ $ --
Quality Bond ...................... $ --
Intermediate Government Securities $ 608
Equity Index ...................... $ 137,104
Money Market ...................... $ --
Of the $27,895,553 aggregate brokerage commissions paid by the Trust
during the fiscal year ended December 31, 1996, $25,576,822 were paid to
brokers relating to transactions, aggregating $12,956,909,742, which were
directed to such brokers in part for research services provided by them.
BROKERAGE TRANSACTIONS WITH AFFILIATES
To the extent permitted by law, the Trust may engage in brokerage
transactions with an affiliate of Alliance, Donaldson, Lufkin & Jenrette,
Inc. ("DLJ"), with brokers who are DLJ affiliates, or with unaffiliated
brokers who trade or clear through DLJ. The 1940 Act generally prohibits the
Trust from engaging in securities transactions with DLJ or its affiliates, as
principal, unless pursuant to an exemptive order from the SEC. The Trust may
apply for such exemptive relief. The Trust has adopted procedures, prescribed
by the 1940 Act, which are reasonably designed to provide that any
commissions or
37
other remuneration it pays to DLJ or its affiliates do not exceed the usual
and customary broker's commission.
35
Also, due to securities law limitations,
the Trust will limit purchases of securities in a public offering, if such
securities are underwritten, in whole or in part, by DLJ or its affiliates.
During the years ended December 31, 1994 December 31, 1995, and December 31, 1996,1995, the Trust
paid no brokerage commissions to DLJ.DLJ or its affiliates, and during the year
ended December 31, 1996, the Trust paid $2,500 to Autranet, Inc., an
affiliate of DLJ, in accordance with the procedures described above.
OTHER BUSINESS
The Trustees know of no other business to be brought before the meeting.
However, if any other matters properly come before the meeting, it is
expected that the shareholders will vote on such matters in their discretion.
SOLICITATION OF VOTING INSTRUCTIONS
In addition to the solicitation of voting instructions by mail or
expedited delivery service, Trustees of the Trust and employees and agents of
Equitable and Alliance may solicit voting instructions in person or by
telephone. Alliance and Equitable have agreed with the Trust to share the
cost of solicitation. Alliance and Equitable have agreed to pay the cost of
mailing this Proxy Statement to Contract owners and the cost of telephone or
in person solicitation (currently not expected to exceed $ ).$1,000,000). The
balance of the total cost of solicitation cost (currently not expected not to exceed
$ )$800,000) will be borne by the Trust and allocated among the Portfolios based
in part on relative assets and in part on the number of Portfolios.
DATE FOR RECEIPT OF PROPOSALS FOR SUBSEQUENT MEETINGS OF SHAREHOLDERS
Neither the Current Declaration nor the Proposed Declaration provides for
annual meetings of shareholders and the Trust does not currently intend to
hold such a meeting unless required by law. Proposals of shareholders and
Contractowners for inclusion in the Trust's proxy statement for any
subsequent meeting must be received by the Trust a reasonable period of time
prior to any such meeting.
ADJOURNMENT
One or more adjournments of the meeting may be proposed for a period or
periods of not more than 90 days in the aggregate to permit further
solicitation with respect to any proposal for which sufficient votes in favor
of such proposal have not been received by the time scheduled for the Special
Meeting. Any such adjournment will require the affirmative vote of a majority
38
of the votes cast on the question at the session of the meeting to be
adjourned. The shareholders are expected to vote in favor of such adjournment
those shares which they are entitled to vote in favor of such proposal. They
are expected to vote against such adjournment those shares required to be
voted against such proposal.
February ,7, 1997
3639
APPENDIX A
INVESTMENT ADVISORY AGREEMENT
AGREEMENT executed as of , 1997, between THE HUDSON RIVER TRUST, a
Massachusetts business trust (the "Trust"), on behalf of its portfolio series
listed on Schedule 1 hereto (each, a "Portfolio" and collectively, the
"Portfolios"), and ALLIANCE CAPITAL MANAGEMENT L.P. (the "Adviser").
Witnesseth:
That in consideration of the mutual covenants herein contained, it is
agreed as follows:
1. SERVICES TO BE RENDERED BY ADVISER TO THE TRUST
(a) Subject always to the control of the Trustees of the Trust, the
Adviser will, at its expense, furnish continuously an investment program for
each Portfolio, will make investment decisions on behalf of each Portfolio
and will, subject to the provisions of paragraph (c), place all orders for
the purchase and sale of each Portfolio's portfolio securities. Subject
always to the control of the Trustees of the Trust, the Adviser will also
manage, supervise and conduct the other affairs and business of the Trust and
the Portfolios and matters incidental thereto. In the performance of its
duties, the Adviser will comply with the provisions of the Agreement and
Declaration of Trust and By-laws of the Trust and each Portfolio's stated
investment objectives, policies and restrictions and will use its best
efforts to safeguard and promote the welfare of the Trust and the Portfolios
and to comply with other policies which the Trustees may from time to time
determine.
(b) The Adviser, at its expense, will furnish all necessary office space
and equipment, bookkeeping and clerical services (but not accounting
services) required for it to perform its duties hereunder and will pay all
salaries, fees and expenses of officers and Trustees of the Trust who are
affiliated with the Adviser.
(c) In the selection of brokers, dealers, or futures commissions merchants
(collectively, "brokers") and the placing of orders for the purchase and sale
of portfolio investments for each Portfolio, the Adviser shall seek to obtain
the most favorable price and execution available, except to the extent it may
be permitted to pay higher brokerage commissions for brokerage and research
services as described below. In using its best efforts to obtain for each
Portfolio the most favorable price and execution available, the Adviser,
bearing in mind each Portfolio's best interest at all times, shall consider
all factors it deems relevant, including, by way of illustration, price, the
size of the
A-1
transaction, the nature of the market for the security, the amount of the
commission, the timing of the transaction taking into account market prices
and trends, the reputation, experience and financial stability of the broker
involved and the quality of service rendered by the broker in other
transactions. Subject to such policies as the Trustees may determine, the
Adviser shall not be deemed to have acted unlawfully or to have breached any
duty created by this Agreement or otherwise solely by reason of its having
caused any Portfolio to pay a broker that provides brokerage and research
services to the Adviser an amount of commission for effecting a portfolio
investment transaction in excess of the amount of commission another broker
would have charged for effecting that transaction, if the Adviser determines
in good faith that such amount of commission was reasonable in relation to
the value of the brokerage and research services provided by such broker,
viewed in terms of either that particular transaction or the Adviser's
overall responsibilities with respect to such Portfolio and to other clients
of the Adviser as to which the Adviser exercises investment discretion.
(d) Subject to the provisions of the Agreement and Declaration of Trust of
the Trust and the Investment Company Act of 1940, the Adviser, at its
expense, may select and Agreementcontract with one or more investment advisers (the
"Sub-Adviser") for any Portfolio to perform some or all of the services for
which it is responsible pursuant to paragraph (a) of this Section 1 (and any
related facilities or services for which it is responsible under paragraph
(b) of this Section 1). The Adviser will compensate any Sub-Adviser of such
Portfolio for its services to such Portfolio. The Adviser may terminate the
services of any Sub-Adviser at any time in its sole discretion, and shall at
such time assume the responsibilities of such Sub-Adviser unless and until a
successor Sub-Adviser is selected.
(e) The Adviser shall not be obligated to pay any expenses of or for the
Trust or any Portfolio not expressly assumed by the Adviser pursuant to this
Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees, officers and
employees of the Trust may be a shareholder, director, officer or employee
of, or be otherwise interested in, the Adviser, and in any person
controlling, controlled by or under common control with the Adviser, and that
the Adviser and any person controlling, controlled by or under common control
with the Adviser may have an interest in the Trust or in any Portfolio. It is
also understood that the Adviser and persons controlling, controlled by or
under common control with the Adviser have and may have advisory, management
service, distribution or other contracts with other organizations and
persons, and may have other interests and businesses.
A-2
3. COMPENSATION TO BE PAID BY THE TRUST TO THE ADVISER
The Trust, on behalf of the Portfolios, will pay to the Adviser as
compensation for the Adviser's services rendered, for the facilities
furnished and for the expenses borne by the Adviser pursuant to Section 1, a
fee computed and paid monthly at the annual rates applicable to the average
daily net asset value of each Portfolio set forth on Schedule 1 hereto. Such
fee computed with respect to the net asset value of a Portfolio shall be paid
from the assets of such Portfolio. Such average daily net asset value of each
Portfolio shall be determined by taking an average of all of the
determinations of such net asset value during such month at the close of
business on each business day during such month while this Agreement is in
effect. Such fee shall be payable for each month within five (5) business
days after the end of such month.
In the event that expenses of any Portfolio for any fiscal year (not
including any distribution expenses paid by such Portfolio pursuant to any
distribution plan) should exceed the expense limitation on investment company
expenses enforced by any statute or regulatory authority of any jurisdiction
in which shares of such Portfolio are qualified for offer and sale, the
compensation due the Adviser for such fiscal year shall be reduced by the
amount of such excess by a reduction or refund thereof. In the event that the
expenses of any Portfolio exceed any expense limitation which the Adviser
may, by written notice to the Trust, voluntarily declare to be effective with
respect to such Portfolio, subject to such terms and conditions as the
Adviser may prescribe in such notice, the compensation due the Adviser shall
be reduced, and, if necessary, the Adviser shall bear the expenses of such
Portfolio to the extent required by such expense limitation.
If the Adviser shall serve for less than the whole of a month, the
foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS AGREEMENT; AMENDMENTS OF THIS AGREEMENT
This Agreement shall automatically terminate, without the payment of any
penalty, in the event of its assignment; and this Agreement shall not be
amended as to any Portfolio unless such amendment is approved at a meeting by
the affirmative vote of a majority of the outstanding shares of such
Portfolio, and by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the Trustees of the
Trust who are not interested persons of the Trust or of the Adviser or of any
Sub-Adviser of the Trust. Shareholders of a Portfolio not affected by any
such amendment shall have no right to vote with respect to such amendment.
A-3
5. EFFECTIVE PERIOD AND TERMINATION OF THIS AGREEMENT
This Agreement shall become effective upon its execution, and shall remain
in full force and effect as to a particular Portfolio continuously thereafter
(unless terminated automatically as set forth in Section 4) until terminated
as follows:
(a) Either party hereto may at any time terminate this Agreement as to any
Portfolio on not more than sixty days' written notice delivered or mailed by
registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by the
affirmative vote of a majority of the outstanding shares of such Portfolio,
and (ii) a majority of the Trustees of the Trust who are not interested
persons of the Trust or of the Adviser, by vote cast in person at a meeting
called for the purpose of voting on such approval, do not specifically
approve at least annually the continuance of this Agreement, then this
Agreement shall automatically terminate with respect to such Portfolio at the
close of business on the second anniversary of its execution, or upon the
expiration of one year from the effective date of the last such continuance,
whichever is later; provided, however, that if the continuance of this
Agreement is submitted to the shareholders of such Portfolio for their
approval and such shareholders fail to approve such continuance of this
Agreement as provided herein, the Adviser may continue to serve hereunder in
a manner consistent with the Investment Company Act of 1940 and the rules and
regulations thereunder.
Action by the Trust under (a) above may be taken either (i) by vote of a
majority of its Trustees or (ii) by the affirmative vote of a majority of the
outstanding shares of the relevant Portfolio affected.
Termination of this Agreement pursuant to this Section 5 shall be without
the payment of any penalty.
6. CERTAIN INFORMATION
The Adviser shall promptly notify the Trust in writing of the occurrence
of any of the following events: (a) the Adviser shall fail to be registered
as an investment adviser under the Investment Advisers Act of 1940, as
amended from time to time, and under the laws of any jurisdiction in which
the Adviser is required to be registered as an investment adviser in order to
perform its obligations under this Agreement, (b) the Adviser shall have been
served or otherwise have notice of any action, suit, proceeding, inquiry or
investigation at law or in equity, before or by any court, public board or
body, involving the affairs of the Trust and (c) there shall be any change in
the "control" (as defined in the Investment Company Act of 1940) of the
Adviser.
A-4
7. CERTAIN DEFINITIONS
For the purposes of this Agreement, the "affirmative vote of a majority of
the outstanding shares" of the Portfolio means the affirmative vote, at a
duly called and held meeting of shareholders of such Portfolio, (a) of the
holders of 67% or more of the shares of such Portfolio present (in person or
by proxy) and entitled to vote at such meeting, if the holders of more than
50% of the outstanding securities of the Portfolio entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders of more than
50% of the outstanding shares of the Portfolio entitled to vote at such
meeting, whichever is less.
For the purposes of this Agreement, the terms "affiliated person,"
"control," "interested person" and "assignment" shall have their respective
meanings defined in the Investment Company Act of 1940 and the rules and
regulations thereunder, subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the rules and
regulations thereunder; and the term "brokerage and research services" shall
have the meaning given in the Securities Exchange Act of 1934 and the rules
and regulations thereunder.
8. NONLIABILITY OF ADVISER
In the absence of willful misfeasance, bad faith or gross negligence on
the part of the Adviser, or reckless disregard of its obligations and duties
hereunder, the Adviser shall not be subject to any liability to the Trust, to
any Portfolio, or to any shareholder of any Portfolio, for any act or
omission in the course of, or connected with, rendering services hereunder.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND
SHAREHOLDERS
A copy of the Agreement and Declaration of Trust of the Trust is on file
with the Secretary of State of The Commonwealth of Massachusetts, and notice
is hereby given that this instrument is executed on behalf of the Trustees of
the Trust as Trustees and not individually and that the obligations of this
instrument are not binding upon any of the Trustees or shareholders
individually, but are binding only upon the assets and property of each of
the respective Portfolios.
A-5
IN WITNESS WHEREOF, THE HUDSON RIVER TRUST and ALLIANCE CAPITAL
MANAGEMENT L.P. have each caused this instrument to be signed in duplicate on
its behalf by its duly authorized representative, all as of the day and year
first above written.
THE HUDSON RIVER TRUST
By
---------------------------------------------------------------------------------------
Name:
Title:
ALLIANCE CAPITAL MANAGEMENT L.P.
By
---------------------------------------------------------------------------------------
Name:
Title:
A-6
SCHEDULE 1
TO
INVESTMENT ADVISORY AGREEMENT
THE HUDSON RIVER TRUST
FEE SCHEDULE
(AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS)
FIRST NEXT NEXT NEXT
$750 MILLION $750 MILLION $1 BILLION $2.5 BILLION THEREAFTER
-------------- -------------- ------------ -------------- ------------
International .................... 0.900% 0.825% 0.800% 0.780% 0.770%
Global .................. 0.650% 0.575% 0.525% 0.505% 0.495................ 0.675% 0.600% 0.550% 0.530% 0.520%
Aggressive Stock .............. 0.625% 0.575% 0.525% 0.500% 0.475%
Common Stock ...................... 0.475% 0.425% 0.375% 0.355% 0.345%*
Growth & Income ................ 0.550% 0.525% 0.500% 0.480% 0.470%
Growth Investors .............. 0.550% 0.500% 0.450% 0.425% 0.400%
Balanced .............................. 0.450% 0.400% 0.350% 0.325% 0.300%
Conservative Investors . 0.475% 0.425% 0.375% 0.350% 0.325%
High Yield .......................... 0.600% 0.575% 0.550% 0.530% 0.520%
Quality Bond ...................... 0.525% 0.500% 0.475% 0.455% 0.445%
Intermediate
Government Securities .............Securities.. 0.500% 0.475% 0.450% 0.430% 0.420%
Equity Index ...................... 0.325% 0.300% 0.275% 0.255% 0.245%
Money Market ...................... 0.350% 0.325% 0.300% 0.280% 0.270%
- --------------------------
* On assets in excess of $10 billion, the management fee for the Common
Stock Portfolio is reduced to 0.335% of average daily net assets.
A-7
APPENDIX B
THE HUDSON RIVER TRUST
-------------------------------
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
-------------------------------
AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST made in this
day of January, 1997 (as so amended and restated, the "Declaration of
Trust"), by the Trustees hereunder, and by the holders of shares of
beneficial interest to be issued hereunder as hereinafter provided.
WHEREAS, pursuant to Section 10.3 of Article X of the Declaration of Trust
the Trustees of the Trust have determined that the Declaration of Trust
should be amended and restated; and
WHEREAS, the shareholders have duly approved this Declaration of Trust;
NOW,THEREFORE, the Trustees of this Trust direct that this Declaration of
Trust be filed with the Secretary of State of The Commonwealth of
Massachusetts and that this Declaration of Trust shall takehave effect as of the
date of filing.
WITNESSETH that
WHEREAS, this Trust was established on July 10, 1987 by an Agreement and
Declaration and Trust of the same date executed and delivered in Boston,
Massachusetts; and
WHEREAS, this Trust was formed to establish a trust fund for the purpose
of investing and reinvesting the assets of insurance company separate
accounts and such other assets as may be held by it; and
WHEREAS, the Trustees have agreed to manage all property coming into their
hands as trustees of a Massachusetts voluntary association with transferable
shares in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will hold all cash,
securities and other assets, which they may from time to time acquire in any
manner as Trustees hereunder IN TRUST to manage and dispose of the same upon
the following terms and conditions for the pro rata benefit of the holders
from time to time of Shares in this Trust as hereinafter set forth.
B-1
ARTICLE I
NAME AND DEFINITIONS
1.1 Name. This Trust shall be known as "The Hudson River Trust," and the
Trustees shall conduct the business of the Trust under that name or any other
name as they may from time to time determine.
1.2 Definitions. Whenever used herein, unless otherwise required by the
context or specifically provided:
1. The "Trust" refers to the Massachusetts business trust established
by Agreement and Declaration of Trust dated July 10, 1987, as
amended from time to time, and as amended and restated herein;
B-1
2. "Trustees" refers to the Trustees of the Trust named herein or
elected in accordance with Article IV;
3. "Shares" means the equal proportionate transferable units of
interest into which the beneficial interest in the Trust shall be
divided from time to time or, if more than one series or class of
Shares is authorized by the Trustees, the equal proportionate
transferable units into which each series or class of Shares shall
be divided from time to time;
4. "Shareholder" means a record owner of Shares;
5. The "1940 Act" refers to the Investment Company Act of 1940 and the
Rules and Regulations thereunder, all as amended from time to time;
6. The terms "Affiliated Person", "Assignment", "Commission",
"Interested Person", "Principal Underwriter" and "Majority
Shareholder Vote" (the 67% or 50% requirement of the third sentence
of Section 2(a)(42) of the 1940 Act, whichever may be applicable)
shall have the meanings given them in the 1940 Act;
7. "Declaration of Trust" shall mean this Amended and Restated
Agreement and Declaration of Trust as amended or restated from time
to time; and
8. "Bylaws" shall mean the Bylaws of the Trust as amended from time to
time.
B-2
ARTICLE II
PURPOSE OF TRUST
The purpose of the Trust is to provide investors a managed investment
primarily in securities, commodities and other investment media and to carry
on such other business as the Trustees may from time to time determine
pursuant to their authority under this Declaration of Trust.
ARTICLE III
SHARES
3.1 Division of Beneficial Interest. The Shares of the Trust shall be
issued with or without par value and shall be issued in one or more series as
the Trustees may, without shareholder approval, authorize. Each series shall
be preferred over all other series in respect of the assets allocated to that
series. The Shares of any series may be issued in two or more classes, as the
Trustees may, without Shareholder approval, authorize. Unless the Trustees
B-2
have authorized the issuance of Shares of a series in two or more classes,
each Share of a series shall represent an equal proportionate interest in the
assets and liabilities of the series with each other Share of the same
series, none having priority or preference over another. If the Trustees have
authorized the issuance of Shares of a series in two or more classes, then
the classes may have such variations as to dividend, redemption, and voting
rights, net asset values, expenses borne by the classes, and other matters as
the Trustees have authorized. The number of Shares authorized shall be
unlimited. The Trustees may from time to time divide or combine the Shares of
any series or of any class of a series into a greater or lesser number
without thereby changing the proportionate beneficial interests in the series
or class.
3.2 Ownership of Shares. The ownership of Shares shall be recorded on the
books of the Trust or a transfer or similar agent. No certificates certifying
the ownership of Shares shall be issued except as the Trustees may otherwise
determine from time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates, the transfer of
Shares and similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall be
conclusive as to who are the Shareholders of each series or class and as to
the number of Shares of each series or class held from time to time by each
Shareholder.
3.3 Investment in the Trust. The Trustees shall accept investments in the
Trust from such persons and on such terms and for such consideration, which
may consist of cash or tangible or intangible property or a combination
thereof, as they from time to time authorize.
B-3
All consideration received by the Trust for the issue or sale of Shares
of each series, together with all income, earnings, profits, and proceeds
thereof, including any proceeds derived from the sale, exchange or
liquidation thereof, and any funds or payments derived from any reinvestment
of such proceeds in whatever form the same may be shall irrevocably belong to
the series of Shares with respect to which the same were received by the
Trust for all purposes, subject only to the rights of creditors, and shall be
so handled upon the books of account of the Trust and are herein referred to
as "assets of" such series.
3.4 No Preemptive Rights. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities issued by the
Trust.
3.5 Status of Shares and Limitation of Personal Liability. Shares shall be
deemed to be personal property giving only the rights provided in this
instrument. Every shareholder by virtue of having become a Shareholder shall
be held to have expressly assented and agreed to the terms hereof and to have
B-3
become a party hereto. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to
the rights of said decedent under this Trust. Ownership of Shares shall not
entitle the Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or
for an accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor any officer,
employee or agent of the Trust shall have any power to bind personally any
Shareholder, nor except as specifically provided herein to call upon any
Shareholder for the payment of any sum of money or assessment whatsoever
other than such as the Shareholder may at any time personally agree to pay.
ARTICLE IV
THE TRUSTEES
4.1 Election. The number of Trustees shall be as provided in the Bylaws or
as fixed from time to time by the Trustees. The Shareholders may elect
Trustees at any meeting of Shareholders called by the Trustees for that
purpose. Each Trustee shall serve during the continued lifetime of the Trust
until he dies, resigns or is removed, or, if sooner, until the next meeting
of Shareholders called for the purpose of electing Trustees and the election
and qualification of his successor. Any Trustee may resign at any time by
written instrument signed by him and delivered to any officer of the Trust,
to each other Trustee or to a meeting of the Trustees. Such resignation shall
be
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effective upon receipt unless specified to be effective at some other time.
Except to the extent expressly provided in a written agreement with the
Trust, no Trustee resigning and no Trustee removed shall have any right to
any compensation for any period following his resignation or removal, or any
right to damages on account of such removal.
4.2 Effect of Death, Resignation, etc. of a Trustee. The death,
declination, resignation, retirement, removal or incapacity of the Trustees,
or any one of them, shall not operate to annul the Trust or to revoke any
existing agency created pursuant to the terms of this Declaration of Trust.
4.3 Powers. Subject to the provisions of this Declaration of Trust, the
business of the Trust shall be managed by the Trustees, and they shall have
all powers necessary or convenient to carry out that responsibility. Without
limiting the foregoing, the Trustees may adopt Bylaws not inconsistent with
this Declaration of Trust providing for the conduct of the business of the
Trust and may amend and repeal them to the extent that such Bylaws do not
reserve that right to the Shareholders; they may enlarge or reduce their
number, may
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fill vacancies in their number, including vacancies caused by
enlargement of their number, and may remove Trustees with or without cause;
they may elect and remove, with or without cause, such officers and appoint
and terminate such agents as they consider appropriate; they may appoint from
their own number, and terminate, any one or more committees, consisting of
two or more Trustees, including an executive committee which may, when the
Trustees are not in session, exercise some or all of the power and authority
of the Trustees as the Trustees may determine; they may employ one or more
custodians of the assets of the Trust and may authorize such custodians to
employ subcustodians and to deposit all or any part of such assets in a
system or systems for the central handling of securities, retain a transfer
agent or a Shareholder servicing agent, or both, provide for the distribution
of Shares by the Trust, through one or more principal underwriters or
otherwise, set record dates for the determination of Shareholders with
respect to various matters, and in general delegate such authority as they
consider desirable to any officer of the Trust, to any committee of the
Trustees and to any agent or employee of the Trust or to any such custodian
or underwriter.
Without limiting the foregoing, the Trustees shall have power and
authority:
(a) To invest and reinvest cash, and to hold cash uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, write options
on and lease any or all of the assets of the Trust;
(c) To act as a distributor of shares and as underwriter of, or broker or
dealer in, securities or other property;
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(d) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and deliver
proxies or powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper;
(e) To exercise powers and rights of subscription or otherwise which in
any manner arise out of ownership of securities;
(f) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form, or in the name of
the Trustees or of the Trust or in the name of a custodian, subcustodian or
other depository or a nominee or nominees or otherwise;
(g) To allocate assets, liabilities and expenses of the Trust to a
particular series or class of Shares or to apportion the same among two or
more series of classes of Shares, provided that any liabilities or expenses
incurred by a particular series or class of Shares shall be payable solely
out of the assets of that series or class.
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class;
(h) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or issuer, any security of which
is or was held in the Trust; to consent to any contract, lease, mortgage,
purchase or sale of property by such corporation or issuer; and to pay calls
or subscriptions with respect to any security held in the Trust;
(i) To join with other security holders in acting through a committee
depositary, voting trustee or otherwise, and in that connection to deposit
any security with, or transfer any security to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security (whether or not so deposited or transferred) as the
Trustees shall deem proper, and to agree to pay, and to pay, such portion of
the expenses and compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(j) To compromise, arbitrate or otherwise adjust claims in favor of or
against the Trust or any matter in controversy, including but not limited to
claims for taxes;
(k) To enter into joint ventures, general or limited partnerships and any
other combinations or associations;
(l) To borrow funds;
(m) To endorse or guarantee the payment of any notes or other obligations
of any person; to make contracts of guaranty or suretyship, or otherwise
assume liability for payment thereof; and to mortgage and pledge the Trust
property or any part thereof to secure any of or all such obligations;
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(n) To purchase and pay for entirely out of Trust property such insurance
as they may deem necessary or appropriate for the conduct of the business,
including without limitation, insurance policies insuring the assets of the
Trust and payment of distributions and principal on its portfolio
investments, and insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust individually against
all claims and liabilities of every nature arising by reason of holding,
being or having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such person as Shareholder,
Trustee, officer, employee, agent, investment adviser or manager, principal
underwriter, or independent contractor, including any action taken or omitted
that may be determined to constitute negligence, whether or not the Trust
would have the power to indemnify such person against such liability;
(o) To pay pensions for faithful service, as deemed appropriate by the
Trustees, and to adopt, establish and carry out pension, profit-sharing,
share
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bonus, share purchase, savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such retirement and
other benefits, for any or all of the Trustees, officers, employees and
agents of the Trust; and
(p) To engage in any other lawful act or activity in which corporations
organized under the Massachusetts Business Corporation Law may engage.
The Trustees shall not in any way be bound or limited by present or future
law or custom in regard to investments by trustees. Except as otherwise
provided herein or from time to time in the Bylaws, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting
of Trustees (a quorum being present), within or without Massachusetts,
including any meeting held by means of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting, or by written consents of a
majority of the Trustees then in office.
4.4 Payment of Expenses by Trust. The Trustees are authorized to pay or to
cause to be paid out of the principal or income of the Trust, or partly out
of principal and partly out of income, as they deem fair, all expenses, fees,
charges, taxes and liabilities incurred or arising in connection with the
Trust, in connection with the management thereof, or in connection with the
financing of the sale of Shares, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
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officers, employees, any investment adviser, manager, or sub-adviser,
principal underwriter, auditor, counsel, custodian, transfer agent,
shareholder servicing agent, and such other agents or independent contractors
and such other expenses and charges as the Trustees may deem necessary or
proper to incur; provided, however, that all expenses, fees, charges, taxes
and liabilities incurred or arising in connection with a particular series or
class of Shares as determined by the Trustees, shall be payable solely out of
the assets of that series or class.
4.5 Ownership of Assets of the Trust. Title to all of the assets of each
series of Shares and of the Trust shall at all times be considered as vested
in the Trustees.
4.6 Advisory, Management and Distribution. The Trustees may, at any time
and from time to time, contract for exclusive or nonexclusive advisory and/or
management services with any corporation, trust, association or other
organization (the "Manager"), including, without limitation, Alliance Capital
Management L.P., every such contract to comply with such requirements and
restrictions as may be set forth in the Bylaws; and any such
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contract may
provide for one or more Sub-advisers who shall perform all or part of the
obligations of the Manager under such contract and may contain such other
terms interpretive of or in addition to said requirements and restrictions as
the Trustees may determine, including, without limitation, authority to
determine from time to time what investments shall be purchased, held, sold
or exchanged and what portion, if any, of the assets of the Trust shall be
held uninvested and to make changes in the Trust's investments. The Trustees
may also, at any time and from to time, contract with the Manager or any
other corporation, trust, association or other organization, appointing it
exclusive or nonexclusive distributor or principal underwriter for the
Shares, every such contract to comply with such requirements and restrictions
as may be set forth in the Bylaws; and any such contract may contain such
other terms interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager, adviser,
principal underwriter or distributor or agent of or for any corporation,
trust, association, or other organization, or of or for any parent or
affiliate of any organization, with which an advisory or management contract,
or principal underwriter's or distributor's contract, or transfer,
shareholder servicing or other agency contract may have been or may hereafter
be made, or that any such organization, or any parent or affiliate thereof,
is a Shareholder or has an interest in the Trust, or that
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(ii) any corporation, trust, association or other organization with which
an advisory or management contract or principal underwriter's or
distributor's contract, or transfer, shareholder servicing or other agency
contract may have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or distributors contract, or
transfer, Shareholder servicing or other agency contract with one or more
other corporations, trusts, associations, or other organizations, or has
other business or interests shall not affect the validity of any such
contract or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability
to the Trust on its Shareholders.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Shareholders shall have such power to vote as is provided for in, and may
hold meetings and take actions pursuant to, the provisions of the Bylaws.
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ARTICLE VI
DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES
6.1 Distributions. The Trustees may each year, or more frequently if they
so determine, distribute to the Shareholders of each series or class of
Shares such income and capital gains, accrued or realized, as the Trustees
may determine, after providing for actual and accrued expenses and
liabilities (including such reserves as the Trustees may establish)
determined in accordance with good accounting practices. The Trustees shall
have full discretion to determine which items shall be treated as income and
which items as capital and their determination shall be binding upon the
Shareholders. Distributions of each year's income of each series or class of
Shares shall be distributed pro rata to Shareholders in proportion to the
number of Shares of each series or class held by each of them. Such
distributions shall be made in cash or Shares or a combination thereof as
determined by the Trustees. Any such distribution paid in Shares will be paid
at the net asset value thereof as determined in accordance with the Bylaws.
6.2 Redemptions and Repurchases. The Trust shall purchase such Shares as
are offered by any Shareholder for redemption, upon the presentation of any
certificate for the Shares to be purchased, a proper instrument of transfer
and a request directed to the Trust or a person designated by the Trust that
the Trust purchase such Shares, or in accordance with such other procedures
for redemption as the Trustees may from time to time authorize, and the Trust
will pay therefor the net asset value thereof, as next determined in
accordance with the Bylaws, less such redemption charge or fee as the
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Trustees may determine from time to time. Except as otherwise determined by
the Trustees, payment for said Shares shall be made by the Trust to the
Shareholder within seven days after the date on which the request is made.
The obligation set forth in this Section 2 is subject to the provision that
in the event that any time the New York Stock Exchange is closed for other
than customary weekends or holidays, or, if permitted by rules of the
Commission.
DuringCommission, during periods when trading on the Exchange is restricted or
during any emergency which makes it impractical for the Trust to dispose of
its investments or to determine fairly the value of its net assets, or during
any other period permitted by order of the Commission for the protection of
investors, such obligation may be suspended or postponed by the Trustees. The
Trust may also purchase or repurchase Shares at a price not exceeding the net
asset value of such Shares in effect when the purchase or repurchase or any
contract to purchase or repurchase is made.
6.3 Redemptions at the Option of the Trust. The Trust shall have the right
at its option and at any time to redeem Shares of any Shareholder at the net
asset value thereof as determined in accordance with the Bylaws: (i) if at
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such time such Shareholder owns fewer Shares than, or Shares having an
aggregate net asset value of less than, an amount determined from time to
time by the Trustees; or (ii) to the extent that such Shareholder owns Shares
of a particular series or class of Shares equal to or in excess of a
percentage of the outstanding Shares of that series or class determined from
time to time by the Trustees; or (iii) to the extent that such Shareholder
owns Shares of the Trust representing a percentage equal to or in excess of
such percentage of the aggregate number of outstanding Shares of the Trust or
the aggregate net asset value of the Trust determined from time to time by
the Trustees.
6.4 Dividends, Distributions, Redemptions and Repurchases. No dividend or
distribution (including, without limitation, any distribution paid upon
termination of the Trust or of any series) with respect to, nor any
redemption or repurchase of, the Shares of any series shall be effected by
the Trust other than from the assets of such series.
ARTICLE VII
COMPENSATION AND LIMITATION OF LIABILITY OF TRUSTEES
7.1 Compensation. The Trustees as such shall be entitled to reasonable
compensation from the Trust; they may fix the amount of their compensation.
Nothing herein shall in any way prevent the employment of any Trustee for
advisory, management, legal, accounting, investment banking, underwriting,
brokerage, or investment dealer or other services and payment for the same by
the Trust.
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7.2 Limitation of Liability. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any officer, agent,
employee, manager or principal underwriter of the Trust, nor shall any
Trustee be responsible for the act or omission of any other Trustee, but
nothing herein contained shall protect any Trustees against any liability to
which he or she would otherwise be subject by reason of wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his or her office.
Every note, bond, contract, instrument, certificate, Share or undertaking
and every other act or thing whatsoever executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall
be conclusively deemed to have been executed or done only in or with respect
to their or his or her capacity as Trustees or Trustee, and such Trustees or
Trustee shall not be personally liable thereon.
ARTICLE VIII
INDEMNIFICATION
8.1 Trustees, Officers, etc. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at the Trust's request as
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directors, officers or trustees of another organization in which the Trust
has any interest as a shareholder, creditor or otherwise) (hereinafter
referred to as a "Covered Person") against all liabilities and expenses,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees reasonably incurred by
any Covered Person in connection with the defense or disposition of any
action, suit or other proceeding, whether civil or criminal, before any court
or administrative or legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with which such Covered
Person may be or may have been threatened, while in office or thereafter, by
reason of being or having been such a Covered Person except with respect to
any matter as to which such Covered Person shall have been finally
adjudicated in any such action, suit or other proceeding (a) not to have
acted in good faith in the reasonable belief that such Covered Person's
action was in or not opposed to the best interestinterests of the Trust or (b) to be
liable to the Trust or its Shareholders by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including counsel fees so
incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), shall be
paid from time to time by the Trust in advance of the final disposition of
any such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such Covered Person to
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repay amounts so paid to the Trust if it is ultimately determined that
indemnification of such expenses is not authorized under this Article;
provided, however, that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust shall be insured
against losses arising from any such advance payments or (c) either a
majority of the disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office act on the matter), or
independent legal counsel in a written opinion, shall have determined, based
upon a review of readily available facts (as opposed to a full trial type
inquiry), that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Article.
8.2 Compromise Payment. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise) without an
adjudication in a decision on the merits by a court, or by any other body
before which the proceeding was brought, that such Covered Person either (a)
did not act in good faith in the reasonable belief that his action was in or
not opposed to the best interests of the Trust or (b) is liable to the Trust
or its Shareholders by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
or her office, indemnification shall be provided if (a) approved as in the
best interests of the Trust, after notice that it involves such
indemnification, by at least a majority of the disinterested
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Trustees acting
on the matter (provided that a majority of the disinterested Trustees then in
office act on the matter) upon a determination, based upon a review of
readily available facts (as opposed to a full trial type inquiry) that such
Covered Person acted in good faith in the reasonable belief that his action
was in or not opposed to the best interests of the Trust and is not liable to
the Trust or its Shareholders by reasons of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his or her office, or (b) there has been obtained an opinion in writing of
independent legal counsel, based upon a review of readily available facts (as
opposed to a full trial type inquiry) to the effect that such Covered Person
appears to have acted in good faith in the reasonable belief that his action
was in or not opposed to the best interests of the Trust and that such
indemnification would not protect such Person against any liability to the
Trust to which he would otherwise be subject by reason of wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office. Any approval pursuant to this Section shall not
prevent the recovery from any Covered Person of any amount paid to such
Covered Person in accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of competent
jurisdiction not to have acted in good faith in the reasonable belief that
such Covered Person's action was in or not opposed to the best
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interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
8.3 Indemnification Not Exclusive. The right of indemnification hereby
provided shall not be exclusive of or affect any other rights to which such
Covered Person may be entitled. As used in this Article VIII, the term
"Covered Person" shall include such person's heirs, executors and
administrators and a "disinterested Trustee" is a Trustee who is not an
"interested person" of the Trust as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, (or who has been exempted from
being an "interested person" by any rule, regulation or order of the
Commission) and against whom none of such actions, suits or other proceedings
or another action, suit or other proceeding on the same or similar grounds is
then or has been pending. Nothing contained in this Article shall affect any
rights to indemnification to which personnel of the Trust, other than
Trustees or officers, and other persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person.
8.4 Shareholders. In case any Shareholder or former Shareholder shall be
held to be personally liable solely by reason of his or her being or having
been a Shareholder and not because of his or her acts or omissions or for
some B-12
other reason, the Shareholder or former Shareholder (or his or her
heirs, executors, administrators or other legal representatives or in the
case of a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and indemnified against
all loss and expense arising from such liability, but only out of the assets
of the particular series of Shares of which he or she is or was a
Shareholder.
ARTICLE IX
MISCELLANEOUS
9.1 Trustees, Shareholders, etc. Not Personally Liable, Notice. All
persons extending credit to, contracting with or having any claim against the
Trust or a particular series of Shares shall look only to the assets of the
Trust or the assets of that particular series of Shares for payment under
such credit, contract or claim; and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or agents, whether past,
present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any liability to which
such Trustees would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee.
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Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officer or officers shall give notice
that this Declaration of Trust is on file with the Secretary of The
Commonwealth of Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustee or Trustees or as
officersofficer or officerofficers and not individually and that the obligations of such
instrument are not binding upon any of them or the Shareholders individually
but are binding only upon the assets and property of the Trust, and may
contain such further recitals as he or she or they may deem appropriate, but
the omission thereof shall not operate to bind any Trustee or Trustees or
officer ofor officers or Shareholder or Shareholders individually.
9.2 Trustee's Good Faith Action, Expert Advice, No Bond or Surety. The
exercise by the Trustees of their powers and discretion hereunder shall be
binding upon everyone interested. A Trustee shall be liable for his or her
own wilful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes of fact or
law. The Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust, and shall be under no
liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give any
bond as such, nor any surety if a bond is required.
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9.3 Liability of Third Persons Dealing with Trustees. No person dealing
with the Trustees shall be bound to make any inquiry concerning the validity
of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
9.4 Duration and Termination of Trust. Unless terminated as provided
herein, the Trust shall continue without limitation of time. The Trust may be
terminated at any time by the vote of Shareholders holding at least a
majority of the Shares of each series entitled to vote or by the Trustees by
written notice to the Shareholders. Any series of Shares may be terminated at
any time by vote of Shareholders holding at least a majority of the Shares of
such series entitled to vote or by the Trustees by written notice to the
Shareholders of such series.
Upon termination of the Trust or of any one or more series of Shares,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, of the Trust or of the
particular series as may be determined by the Trustees, the Trust shall, in
accordance with such procedures as the Trustees consider appropriate, reduce
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the remaining assets to distributable form in cash or shares or other
securities, or any combination thereof, and distribute the proceeds to the
Shareholders of the series involved, ratably according to the aggregate net
asset value of Shares of such series or class of Shares held by the several
Shareholders of such series or class of Shares on the date of termination.
9.5 Filing of Copies, References, Headings. The original or a copy of this
instrument and of each amendment hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this instrument
and of each amendment hereto shall be filed by the Trust with the Secretary
of The Commonwealth of Massachusetts and with the Boston City Clerk, as well
as any other governmental office where such filing may from time to time be
required. Anyone dealing with the Trust may rely on a certificate by an
officer of the Trust as to whether or not any such amendments have been made
and as to any matters in connection with the Trust hereunder, and, with the
same effect as if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any such
amendments. In this instrument and in any such amendment, references to this
instrument, and all expressions like "herein", "hereof" and "hereunder" shall
be deemed to refer to this instrument as amended or affected by any such
amendments. Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an original.
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9.6 Applicable Law. The original Declaration of Trust was executed and
delivered in The Commonwealth of Massachusetts, and the Trust was created
under and is to be governed by and construed and administered according to
the laws of said Commonwealth. The Trust shall be of the type commonly called
a Massachusetts business trust, and without limiting the provisions hereof,
the Trust may exercise all powers which are ordinarily exercised by such a
trust.
9.7 Amendments. This Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees when
authorized to do so by vote of Shareholders holding a majority of the Shares
of each series entitled to vote, except that an amendment which shall affect
the holders of one or more series of Shares but not the holders of all
outstanding series shall be authorized by vote of the Shareholders holding a
majority of the Shares entitled to vote of each series affected and no vote
of Shareholders of a series not affected shall be required. Any amendment
which shall affect the holders of Shares of one or more classes of a series
but not the holders of all Shares of a series shall be authorized by vote of
the Shareholders holding a majority of the Shares of such classes affected by
the amendment
B-15
voting together as a single class, and no vote of Shareholders of the classes
not affected shall be required. Amendments having the purpose of changing the
name of the Trust, of establishing, changing, or eliminating the par value of
the shares or of supplying any omission, curing any ambiguity or curing,
correcting or supplementing any defective or inconsistent provision contained
herein shall not require authorization by Shareholder vote. In addition to
the foregoing, the provisions of this Declaration of Trust may be amended for
any other reason at any time without the vote or consent of Shareholders, so
long as such amendment does not materially adversely affect the rights of any
Shareholder with respect to which such amendment is or purports to be
applicable and so long as such amendment is not in contravention of
applicable law, including the 1940 Act, by an instrument signed in writing by
a majority of thenthe Trustees (or by an officer of the Trust pursuant to a vote
of a majority of Trustees).
B-15B-16
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Declaration of Trust this day of January, 1997.
------------------------------------------
John D. Carifa
------------------------------------------
Peter D. Noris
------------------------------------------
Clifford L. Michel
------------------------------------------
Donald J. Robinson
------------------------------------------
Alton G. Marshall
------------------------------------------
Brenton W. Harries
------------------------------------------
Richard D. Couper
------------------------------------------
William L. Mannion
------------------------------------------
Howard E. Hassler
B-16
BALLOT
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
Special Meeting of the Shareholders of
THE HUDSON RIVER TRUST
The undersigned, the owner of one or more variable life insurance policies or
variable annuity contracts or certificates (the "Contracts") whose policy
account value is invested in one or more of the portfolios of The Hudson River
Trust (the "Trust"), hereby instructs The Equitable Life Assurance Society of
the United States ("Equitable"), the owner of all shares of the Trust
attributable to the Contracts and, therefore, a shareholder of the Trust, to
vote as indicated below on the specific proposals that will be considered at
the Special Meeting of the shareholders of each portfolio of the Trust, or any
adjournment thereof, as described in the Trust Proxy Statement, and to vote, in
its discretion, on such other matters as may properly come before such meeting.
This Ballot is solicited by Equitable as a shareholder of the Trust.
This Ballot has been personalized to reflect only those Trust portfolios to
which your Policy Account Value was allocated as of the Record Date.
This Ballot, when properly executed, will be voted in the manner directed
herein by the undersigned. IF YOU SIGN AND RETURN THIS BALLOT WITHOUT DIRECTING
US HOW TO VOTE, THIS BALLOT WILL BE VOTED FOR EACH OF THE PROPOSALS.
Receipt of the Notice of Meeting, Equitable Information
Statement and Trust Proxy Statement accompanying this
Ballot is acknowledged by the undersigned.
If you have changed your address, please cross out ABC Company
the old address and write in your new address. 100 Central Avenue
Detroit, MI 48201
111111111 0000 11111111111
THE TRUSTEES RECOMMEND THAT SHAREHOLDERS VOTE FOR THE FOLLOWING PROPOSALS.
Please mark your choices below X in blue or black ink, sign and fold the Ballot
and return as soon as possible in the enclosed envelope.
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1. Approval of new Investment Advisory Agreement.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
International [ ] [ ] [ ] Conservative Investors [ ] [ ] [ ]
Global [ ] [ ] [ ] High Yield [ ] [ ] [ ]
Aggressive
Stock [ ] [ ] [ ] Quality Bond [ ] [ ] [ ]
Common Stock [ ] [ ] [ ] Intermediate Government [ ] [ ] [ ]
-1-
3183753.04
Growth
& Income [ ] [ ] [ ] Securities [ ] [ ] [ ]
Growth
Investors [ ] [ ] [ ] Equity Index [ ] [ ] [ ]
Balanced [ ] [ ] [ ] Money Market [ ] [ ] [ ]
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2. Election of Trustees of the Trust.
Nominees for Trustee: Peter D. Noris and Clifford L. Michel
FOR WITHHOLD To withhold authority for either Nominee, print
[ ] [ ] that nominee's name on the following line.
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3. Approval of Amendment and Restatement of the Trust's Agreement and
Declaration of Trust.
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
International [ ] [ ] [ ] Conservative Investors [ ] [ ] [ ]
Global [ ] [ ] [ ] High Yield [ ] [ ] [ ]
Aggressive
Stock [ ] [ ] [ ] Quality Bond [ ] [ ] [ ]
Common Stock [ ] [ ] [ ] Intermediate Government [ ] [ ] [ ]
Growth
& Income [ ] [ ] [ ] Securities [ ] [ ] [ ]
Growth
Investors [ ] [ ] [ ] Equity Index [ ] [ ] [ ]
Balanced [ ] [ ] [ ] Money Market [ ] [ ] [ ]
- -------------------------------------------------------------------------------
Please mark, sign, date and mail your Ballot
in the enclosed postage-paid envelope.
Signature: __________________________________ Date: _______________
If joint owner, each should sign. When signing as executor,
trustee, etc. give full title as such.
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B-17