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As filed with the Securities and Exchange Commission on April 16, 1999
File Nos. 333-50529;
811-08759
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. __ / /
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Post-Effective Amendment No. 3 / X /
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REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 / X /
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Amendment No. 5 / X /
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BARR ROSENBERG VARIABLE INSURANCE TRUST
(Exact Name of Registrant as Specified in Charter)
c/o AXA Rosenberg Investment Management LLC
Four Orinda Way, Building E
Orinda, CA 94563
(Address of Principal Executive Offices) (Zip code)
925-254-6464
(Registrant's Telephone Number, including Area Code)
Name and address
of agent for service: Copies to:
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Kenneth Reid J.B. Kittredge, Esq.
AXA Rosenberg Investment Ropes & Gray
Management LLC One International Place
Four Orinda Way Boston, MA 02110-2624
Building E
Orinda, CA 94563
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective:
/ X / Immediately upon filing pursuant to paragraph (b)
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/ / On _________ pursuant to paragraph (b)
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/ / 60 days after filing pursuant to paragraph (a)(1)
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/ / On _________ pursuant to paragraph (a)(1)
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/ / 75 days after filing pursuant to paragraph (a)(2)
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/ / On _________ pursuant to paragraph (a)(2)
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If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
--- previously filed post-effective amendment.
NOTE: This Amendment relates solely to shares of beneficial interest in the
Barr Rosenberg VIT Market Neutral Fund. Information contained in the
Registration Statement relating to the other series of the Registrant is
neither amended nor superseded hereby.
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BARR ROSENBERG VARIABLE INSURANCE TRUST
BARR ROSENBERG VIT MARKET NEUTRAL FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-925-254-6464
APRIL 16, 1999
The Barr Rosenberg VIT Market Neutral Fund seeks to increase the value
of your investment in bull markets and in bear markets through strategies
designed to maintain limited net exposure to stock market risk. The Fund's
investment adviser is AXA Rosenberg Investment Management LLC. We are
offering shares of the Fund exclusively for sale to insurance company
separate accounts.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF
THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIME.
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TABLE OF CONTENTS
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Page
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RISK/RETURN SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PRINCIPAL INVESTMENT STRATEGIES. . . . . . . . . . . . . . . . . . . . . . 4
PRINCIPAL RISKS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
PERFORMANCE INFORMATION FROM THE ADVISER'S OTHER
MARKET NEUTRAL ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . . 8
THE ADVISER'S GENERAL INVESTMENT PHILOSOPHY. . . . . . . . . . . . . . . . 10
FUND MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
HOW THE FUND PRICES ITS SHARES . . . . . . . . . . . . . . . . . . . . . . 16
PURCHASING FUND SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . 17
REDEEMING FUND SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES . . . . . . . . . . . . . 19
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RISK/RETURN SUMMARY
INVESTMENT OBJECTIVE
The Fund seeks to increase the value of your investment in bull markets and
in bear markets through strategies designed to maintain limited net exposure to
stock market risk.
SUMMARY OF PRINCIPAL INVESTMENT STRATEGIES
The Fund seeks to achieve its investment objective by buying stocks that
its investment adviser believes are undervalued and by "selling short" stocks
that its investment adviser believes are overvalued. The Fund invests only
in stocks that are principally traded in the markets of the United States.
By buying and selling short different stocks, the Fund attempts to limit
the effect on its performance of general U.S. stock market movements. Because
the Fund uses long and short positions in this way, the Fund expects that its
shares will increase in value if its long portfolio outperforms its short
portfolio. By contrast, the Fund expects that its shares will decline in
value if its short portfolio outperforms its long portfolio.
SUMMARY OF PRINCIPAL RISKS
As with any stock mutual fund, you may lose money if you invest in the
Fund. The principal risks that could adversely affect the value of the Fund's
shares and cause you to lose money on your investment include:
- - MANAGEMENT RISK. Although the Fund's investment strategy seeks to limit
the risk associated with investing in the equity market, an investment in
the Fund will be subject to various risks, including the risk of poor stock
selection by the investment adviser. Because the investment adviser could
make poor investment decisions about both the long and the short positions
of the Fund, the Fund's potential losses exceed those of conventional
stock mutual funds that hold only long portfolios.
- - PORTFOLIO RISK. Although the Fund seeks to have approximately equal dollar
amounts invested in long and short positions, there is a risk that the
Fund's investment adviser will fail to construct a portfolio of long and
short positions that has limited exposure to general U.S. stock market
movements, capitalization or other risk factors.
- - RISK OF SHORT SALES. This is the risk that the Fund will incur a loss by
buying a stock at a higher price than the price at which the Fund
previously sold the security short.
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PERFORMANCE INFORMATION
The Fund has not yet begun operation and therefore has no performance
history.
PRINCIPAL INVESTMENT STRATEGIES
The investment objective of the Fund is to seek to increase the value of
your shares while maintaining limited net exposure to general equity market
risk. The Fund seeks a total return greater than the return on 3-month U.S.
Treasury Bills. The Fund attempts to achieve its objective by taking long
positions in stocks principally traded in the markets of the United States
that the Fund's investment adviser, AXA Rosenberg Investment Management LLC
(the "Adviser"), has identified as undervalued and short positions in such
stocks that the Adviser has identified as overvalued. By taking long and
short positions in different stocks, the Fund attempts to limit the effect of
general stock market movements on the Fund's performance. It is expected that
the Fund can achieve a positive return if the Fund's long portfolio
outperforms its short portfolio. Conversely, it is expected that the Fund
will incur losses if the Fund's long portfolio underperforms its short
portfolio. The Adviser will determine the size of each long or short
position by analyzing the tradeoff between the attractiveness of each
position and its impact on the risk characteristics of the overall portfolio.
The Fund seeks to construct a diversified portfolio that has limited net
exposure to the U.S. equity market generally and to specific industries,
specific capitalization ranges and other risk factors. It is currently
expected that the long and short positions of the Fund will be invested
primarily in small capitalization stocks and smaller mid-capitalization
stocks. For purposes of the preceding sentence, the 200 stocks principally
traded in the markets of the United States with the largest market
capitalizations are considered large capitalization stocks, the next 800
largest stocks are considered mid-capitalization stocks and all other stocks
are considered small capitalization stocks. Stocks of companies with
relatively small market capitalizations tend to be less liquid and more
volatile than stocks of companies with relatively large market
capitalizations.
The Adviser uses the return that an investor could achieve through an
investment in 3-month U.S. Treasury Bills as a benchmark against which to
measure the Fund's performance. The Adviser attempts to achieve returns for
the Fund's shareholders that exceed the benchmark. An investment in the
Fund is different from an investment in 3-month U.S. Treasury Bills because,
among other things, Treasury Bills are backed by the full faith and credit of
the U.S. Government, Treasury Bills have a fixed rate of return, investors in
Treasury Bills do not risk losing their investment, and an investment in the
Fund is more volatile than an investment in Treasury Bills.
To meet margin requirements related to short sales or redemption requests,
or for investment purposes, the Fund may also temporarily hold a portion of its
assets in full faith and credit obligations of the United States government
(e.g., U.S. Treasury Bills) and in short-term notes, commercial paper or other
money market instruments of high quality (i.e., rated at least "A-2" or "AA" by
Standard & Poor's ("S&P") or Prime 2 or "Aa" by Moody's Investors
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Service, Inc. ("Moody's")) issued by companies having an outstanding debt issue
rated at least "AA" by S&P or at least "Aa" by Moody's, or determined by the
Adviser to be of comparable quality to any of the foregoing.
The Fund's long and short positions may involve without limit equity
securities of foreign issuers that are principally traded in the markets of the
United States. See "Principal Risks - Special Risks of Foreign Investments."
The Fund will not invest in equity securities that are principally traded
outside of the United States.
PRINCIPAL RISKS
INVESTMENT RISKS
The value of Fund shares may increase or decrease depending on external
conditions affecting the Fund's portfolio. These conditions depend upon
market, economic, political, regulatory and other factors. Investment in
shares of the Fund is more volatile and risky than some other forms of
investment. Also, the Fund's long positions may decline in value at the same
time that the market value of securities sold short increases, thereby
increasing the magnitude of the loss that you may suffer on your investment
as compared to other stock mutual funds.
Although the Fund's investment strategy seeks to minimize the risk
associated with investing in the equity market, an investment in the Fund
will be subject to various risks, including the risk of poor stock selection
by the Adviser. The Adviser may fail to purchase and sell short different
stocks such that the long positions outperform the short positions. Also,
the Adviser may fail to construct a portfolio that has limited exposure to
general equity market risk or that has limited exposure to specific
industries, specific capitalization ranges and certain other risk factors.
An investment in the Fund is different from an investment in 3-month U.S.
Treasury Bills because, among other differences, Treasury Bills are backed by
the full faith and credit of the U.S. Government, Treasury Bills have a fixed
rate of return, investors in Treasury Bills do not risk losing their investment,
and an investment in the Fund is more volatile than an investment in Treasury
Bills.
RISKS OF SHORT SALES
When the Adviser believes that a security is overvalued, it may sell the
security short by borrowing it from a third party and selling it at the then
current market price. The Fund will incur a loss if the price of the borrowed
security increases between when the Fund sells it and when the Fund replaces it.
The Fund may gain if the price of the borrowed security decreases during that
period of time. The Fund cannot guarantee that it will be able to replace a
security at any particular time or at an acceptable price.
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During the time the Fund is short a security, it is always subject to the
risk that the security's lender will terminate the loan at a time when the Fund
is unable to borrow the same security from another lender. If this happens, the
Fund must buy the replacement share immediately at its then market value or "buy
in" by paying the lender an amount equal to the price required to purchase the
security to close out the short position. The Fund's gain on a short sale is
limited by the price at which it sold the borrowed security. By contrast, its
loss on a short sale is limited only by the maximum attainable price of the
security less the price at which it was sold.
Short sales also involve other costs. The Fund must repay to the lender
any dividends or interest that accrue while it is holding a security sold short.
To borrow the security, the Fund also may be required to pay a premium. The
Fund also will incur transaction costs in effecting short sales. The amount of
any ultimate gain for the Fund resulting from a short sale will be decreased,
and the amount of any ultimate loss for the Fund will be increased, by the
amount of premiums, dividends, interest or expenses the Fund may be required to
pay in connection with a short sale.
Until the Fund replaces a borrowed security, it will maintain daily a
segregated account with its Custodian containing cash, U.S. Government
securities, or other liquid securities. The amount deposited in the segregated
account plus any amount deposited as collateral with a broker or other custodian
will at least equal the current market value of the security sold short.
Depending on the arrangements made with such broker or custodian, the Fund might
not receive any payments (including interest) on collateral deposited with the
broker or custodian. The Fund will not make a short sale if after giving effect
to the sale the market value of all securities sold short would exceed 100% of
the value of the Fund's net assets.
SPECIAL RISKS OF FOREIGN INVESTMENTS
Although it invests only in securities principally traded in U.S. markets,
the Fund may invest in stocks of foreign companies that trade on U.S. markets.
Investments in securities of foreign issuers involve certain risks that
generally do not apply to investments in securities of U.S. issuers. These
include risks of adverse changes in foreign economic, political, regulatory and
other conditions, changes in currency exchange rates or exchange control
regulations (including currency blockage). A foreign government may expropriate
or nationalize invested assets, or impose withholding taxes on dividend or
interest payments. The Fund may be unable to obtain and enforce judgments
against foreign entities. Furthermore, issuers of foreign securities are
subject to different, and often less comprehensive, accounting, reporting and
disclosure requirements than domestic issuers. In certain countries, legal
remedies available to investors may be more limited than those available with
respect to investments in the United States or other countries. The securities
of some foreign companies may be less liquid and at times more volatile than
securities of comparable U.S. companies.
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RISKS OF REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements, by which the Fund will
purchase a security and obtain a simultaneous commitment from the seller to
repurchase the security from the Fund at an agreed-upon price and date (usually
seven days or less from the date of original purchase). The resale price will
exceed the purchase price and reflect an agreed-upon market rate which is
unrelated to the coupon rate of the purchased security. Entering into
repurchase agreements allows the Fund to earn a return on temporarily available
cash. Although the underlying security may be a bill, certificate of
indebtedness, note or bond issued by an agency, authority or instrumentality of
the U.S. Government, the obligation of the seller is not guaranteed by the U.S.
Government. There is a risk, therefore, that the seller will fail to honor its
repurchase obligation. If this happened, the Fund would try to exercise its
legal rights, including possibly its right to sell the underlying security in
the market. However, the Fund may be subject to various delays and risks of
loss, including possible declines in the value of the underlying security,
inability to enforce its rights, and enforcement-related expenses.
RISKS OF LENDING PORTFOLIO SECURITIES
The Fund may lend its portfolio securities to broker-dealers. These loans
will be secured by cash or U.S. Government securities at all times equal to or
greater than the market value of the securities loaned. When the collateral is
cash, the Fund may invest the cash collateral in interest bearing, short-term
securities. When the collateral is U.S. Government securities, the Fund usually
receives a fee from the borrower. The borrower pays to the Fund any dividends or
interest received on the securities loaned.
Any voting rights or rights to consent with respect to the loaned
securities pass to the borrower. The Fund retains the right, however, to
require the return of the borrowed securities at any time on reasonable notice.
The Fund will exercise that right in order to regain its ability to vote on or
consent to any matters which materially affect the investment. The Fund may
also require the return of the borrowed securities in order to sell them. The
risks in lending portfolio securities include possible delay in recovery of the
securities or possible loss of rights in the collateral should the borrower fail
financially. However, such loans will be made only to broker-dealers that the
Adviser believes to be of relatively high credit standing.
RISKS OF ILLIQUID SECURITIES
The Fund may purchase "illiquid securities," so long as no more than 15% of
the Fund's net assets would be invested in such securities after giving effect
to a purchase. These are securities which cannot be sold or disposed of in the
ordinary course of business within seven days at approximately the price at
which the Fund has valued them. Because there is no consistent market demand
for illiquid securities, investment in illiquid securities carries the risk that
the Fund may be forced to sell them at a discount from the last offer price.
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PORTFOLIO TURNOVER
Portfolio turnover related considerations will not limit or constrain the
Adviser's investment decisions. The rate of the Fund's portfolio turnover may
vary significantly from time to time depending on the volatility of economic and
market conditions. Although the rate of portfolio turnover is difficult to
predict, under normal circumstances the annual turnover rate of the Fund's
portfolio should not exceed 150%. It is, however, impossible to predict
portfolio turnover in future years. High portfolio turnover involves
correspondingly greater brokerage commissions, dealer markup and other
transaction costs for the Fund. Such costs will reduce the Fund's return.
RISK OF YEAR 2000 PROBLEMS
Many services provided to the Fund depend on the smooth functioning of
computer systems. Many systems in use today cannot distinguish between the year
1900 and the year 2000. Any failure of the service systems to process
information properly could have an adverse impact on the Fund's operations and
the services it provides to shareholders. The Adviser, Transfer Agent,
Custodian, Administrator and certain other service providers to the Fund have
reported that each is working toward minimizing the risks associated with the
so-called "year 2000 problem." However, the Fund and the Adviser cannot be
certain that they can correct the problem in all respects and that such problems
will not adversely affect the Fund's operations and the services it provides to
shareholders.
PERFORMANCE INFORMATION FROM THE ADVISER'S OTHER MARKET
NEUTRAL ACCOUNTS
AXA Rosenberg Investment Management LLC also serves as adviser to other
accounts (the "Market Neutral Accounts") that have investment objectives,
policies and strategies that are substantially similar to those of the Fund.
THE INFORMATION BELOW SHOULD NOT BE CONSIDERED A PREDICTION OF THE FUTURE
PERFORMANCE OF THE FUND. The performance of the Fund may be higher or lower
than the performance of the Market Neutral Accounts. The performance
information shown below is based on a composite of all of the accounts of the
Adviser and its predecessor with substantially similar investment objectives,
policies and strategies as the Fund and has been adjusted to give effect to
the estimated annualized expenses (without giving effect to any expense
waivers or reimbursements) of the Fund during its first fiscal year. All but
one of the Market Neutral Accounts were not registered under the Investment
Company Act of 1940 (the "1940 Act") and therefore were not subject to
certain investment restrictions imposed by the 1940 Act. If those Market
Neutral Accounts had been registered under the 1940 Act, their performance
and the composite performance might have been adversely affected. In
addition, all but one of the Market Neutral Accounts were not subject to
Subchapter M of the Internal Revenue Code. If those Market Neutral Accounts
had been subject to Subchapter M, their performance might have been adversely
affected. In addition, separate account fees and charges will be charged by
the insurance company to investor accounts. These fees and charges would
have adversely affected an investor's return on the Market Neutral Accounts.
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The following table compares the average annual total return for a
composite of the Market Neutral Accounts with the average annual total return
on 3-month U.S. Treasury bills. The table shows the returns for the
one-year, three-year, five-year and since-inception periods ending December 31,
1998.
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ONE-YEAR PERIOD THREE-YEAR PERIOD FIVE-YEAR PERIOD PERIOD FROM
ENDING ENDING ENDING FEBRUARY 28, 1989 TO
DECEMBER 31, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998 DECEMBER 31, 1998
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Market Neutral
Accounts. . . . . . . 2.59% 14.21% 11.70% 7.55%
3-month U.S.
Treasury Bills. . . . 4.96% 5.10% 5.02% 5.31%
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An investment in the Fund is different from an investment in 3-month
U.S. Treasury Bills because, among other things, Treasury Bills are backed by
the full faith and credit of the U.S. Government, Treasury Bills have a fixed
rate of return, investors in Treasury Bills do not bear the risk of losing
their investment, and an investment in the Fund is more volatile than an
investment in Treasury Bills.
The Adviser will reduce its management fee and bear certain expenses until
further notice to limit the Fund's total annual operating expenses (exclusive of
nonrecurring account fees, extraordinary expenses and dividends and interest
paid on securities sold short) to 2.00% of the Fund's average daily net assets.
If this limitation were used in calculating the average annual total return of
the composite of the Adviser's other market neutral accounts, the returns would
have been 2.80%, 14.44%, 11.92% and 7.76% for the one-year, three-year,
five-year and since-inception periods ending December 31, 1998.
There have been three modifications to the Adviser's market neutral
strategy since its inception in 1989. First, the Adviser's predecessor
incorporated its Earnings Change Model and Investor Sentiment Model into its
market neutral strategy in October 1992 and April 1993. The second change to
the Adviser's market neutral strategy occurred in July 1995, when the
Adviser's predecessor focused its strategy on medium and smaller
capitalization companies. See "Principal Investment Strategies." Prior to
such date, the Adviser's predecessor had applied its market neutral strategy
to companies across the capitalization spectrum (i.e., large, medium and
small capitalization companies). Since the inception of the market neutral
strategy, however, the Adviser and its predecessor have maintained long and
short positions of approximately the same dollar amount within a given
capitalization sector. The Fund reserves the freedom to invest in stocks of
companies of any capitalization to meet risk/return objectives and liquidity
needs. The third enhancement to the Adviser's market neutral strategy
occurred in approximately October 1998, when the Adviser's predecessor
combined the Earnings Change Model and the Investor Sentiment Model into the
Near-Term Prospects Model. See "The Adviser's General Investment Philosophy
- - Stock Selection." Despite the three enhancements to the Adviser's market
neutral strategy since 1989, the Fund will have investment objectives,
policies and strategies substantially similar to those of the Market Neutral
Accounts.
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THE ADVISER'S GENERAL INVESTMENT PHILOSOPHY
INVESTMENT PHILOSOPHY
The Adviser is a value investor. The Adviser believes that often the
market price of a company's stock imperfectly reflects the company's fundamental
value, that is, the actual present value of the company's expected future
earnings. The market at times values some stocks above and others below their
fundamental values. The Adviser believes that in time the market prices will
move toward the fundamental values as investors gain more information about the
inaccurately valued companies. Therefore, the Adviser believes that if the
Adviser can correctly determine fundamental values before the market corrects
for mispricing and apply a disciplined investment process to select those stocks
that are undervalued (in the case of purchases) and overvalued (in the case of
short sales), the Fund will outperform the benchmark over time.
The premise of the Adviser's investment philosophy is that the price of a
company's stock reflects the market's assessment of how well the company is
positioned to generate future earnings and/or future cash flow. The Adviser
identifies and purchases those stocks which are undervalued (i.e., they are
currently cheaper than similar stocks with the same characteristics) and engages
in short sales with respect to those stocks that are overvalued (i.e., they are
currently more expensive than similar stocks with the same characteristics). The
Adviser believes that the market will recognize the "better value" and that the
mispricing will be corrected as the stocks in the Fund's portfolio are purchased
or sold by other investors.
In determining whether or not a stock is attractive, the Adviser considers
the company's current estimated fundamental value as determined by the Adviser's
proprietary Appraisal Model and Near-Term Prospects Model. The Adviser
identifies and causes the Fund to purchase an undervalued stock and to hold it
in the Fund's portfolio until the market recognizes and corrects for the
misvaluation. Conversely, the Adviser identifies and causes the Fund to sell
short an overvalued stock.
DECISION PROCESS
The Adviser's decision process operates through on-going research and
portfolio management. The Adviser continually researches and analyzes the more
than 12,000 securities in the global universe, both fundamentally and
technically, and determines the risk characteristics of the benchmark. The
Adviser optimizes each portfolio's composition, executes trades, and monitors
performance and trading costs.
The essence of the Adviser's approach is attention to important aspects of
the investment process. Typically, this involves attention to the following
considerations: (1) accurate and timely data on a large universe of companies;
(2) subtle methods through which to describe value and predict changes in value;
and (3) insightful definitions of similar businesses. The Adviser
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collects, checks and structures the input data on which its investment models
rely. The Adviser believes that if the data is correct, the recommendations made
by the system will be sound.
STOCK SELECTION
The Adviser's stock selection process begins with two analytical devices:
the Appraisal Model and the Near-Term Prospects Model. The Appraisal Model
analyzes a company's fundamental value as compared with other similar
businesses. The Near-Term Prospects Model attempts to assess a company's
potential for short-term earnings growth.
The Adviser's Appraisal Model forms the heart of the fundamental valuation
process. Through the Model, the Adviser analyzes companies in the United States
and Canada in a single, unified model. The Appraisal Model discriminates where
the two markets are substantially different and yet compares companies in the
two markets according to their degrees of similarity. To maximize its basis for
comparative valuation, the Adviser analyzes European and Asian companies (other
than Japanese companies) in a nearly global model, including the United States
and Canada but not Japan. Japanese companies are analyzed in an independent
national model. To ensure meaningful comparisons, the Appraisal Model makes
adjustments for the various accounting standards which apply in different
markets.
To determine the relative value of a stock, the Adviser compares
similar companies. The Adviser believes that, in any group of similar
companies, there are some that are overvalued, some that are undervalued, and
some that are correctly valued by the market. The Adviser identifies the
market's valuation errors by thoroughly analyzing fundamental company data.
After identifying the valuation errors, the Adviser exploits both under- and
overvaluations through purchases and short sales, respectively.
The Appraisal Model classifies companies into one or more of 166 groups of
"similar" businesses. The Model breaks down each company into its individual
business segments and compares each segment with similar segments of other
companies doing business in the same geographical market. In most cases, the
comparison also includes companies with similar segments in different markets.
The Adviser uses available data to appraise the company's assets, operating
earnings and sales within each business segment. The Adviser then integrates the
segment appraisals into balance sheet, income statement and sales valuation
models for the total company. In doing so, it adjusts the segment appraisals to
include appraisals for variables which apply only to the total company, such as
taxes, capital structure, and pension funding. The result is a single valuation
for each of the companies followed.
The Adviser's Near-Term Prospects model attempts to predict the earnings
growth of companies over a one-year period. It examines measures of company
profitability and investor sentiment towards a company such as broker
recommendations, analyst earnings estimates and the company's prior market
performance. The Adviser combines the results of this Model with the results of
the Appraisal Model to measure the attractiveness of a stock for purchase or
sale.
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OPTIMIZATION
The Adviser's portfolio optimization system attempts to construct a Fund
portfolio that will outperform the Fund's benchmark, while maintaining portfolio
risk characteristics similar to those of the benchmark. The optimizer
simultaneously considers both the results of the Adviser's stock selection
models and the applicable risk in determining the benefit to a portfolio of a
particular transaction. No transaction will be executed unless the opportunity
offered by a purchase or sale candidate sufficiently exceeds the potential of an
existing holding to justify the transaction costs.
TRADING
The Adviser's trading system aggregates the transactions which the stock
selection models have recommended for the Fund. It then determines whether the
Fund should follow each recommendation in light of the particular stock's
liquidity, the expected transaction costs, and general market conditions. It
then relays target price information to a trader for each stock considered for
purchase or sale. Trades are executed through any one of four trading
strategies: traditional brokerage, networks, accommodation, and package or
"basket" trades.
The network arrangements the Adviser has developed with Instinet Matching
System (IMS), Portfolio System for Institutional Trading (POSIT), the Arizona
Stock Exchange (AZX), and Optimark Trading System (OPTIMARK) allow the Fund to
trade large volumes of stock at one time with little or no price disturbance and
low commission rates.
Accommodative trading, also known as the Adviser's "match system," allows
institutional buyers and sellers of stock to present electronically lists of
stocks that interest them to the Adviser each morning. Any matches between the
interest lists and the Adviser's own recommended trades are signaled to the
Adviser's traders. Because the broker is doing agency business and has a client
on the other side of the trade, the Adviser expects that the other side will be
accommodative in the price. The Adviser's objective in using this match system
is to execute most trades on the Adviser's side of the bid/ask spread so as to
minimize market impact.
Package trades allow the Adviser to trade large lists of orders
simultaneously using state-of-the-art tools such as the Instinet Real-Time
System, Instinet Order Matching System and Lattice Trading System. Those tools
provide order entry, negotiation and execution capabilities, either directly to
other institutions or electronically to the floor of the exchange. The
advantages of using such systems include increased speed of execution, low
commissions, anonymity and very low market impact.
The Adviser continuously monitors trading costs to determine the impact of
commissions and price disturbances on the Fund's portfolio.
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FUND MANAGEMENT
The Fund's trustees oversee the general conduct of the Fund's business.
INVESTMENT ADVISER
As of January 1, 1999, AXA Rosenberg Investment Management LLC (the
"Adviser") has succeeded Rosenberg Institutional Equity Management ("RIEM") as
the Trust's investment adviser. The Adviser is responsible for making
investment decisions for the Fund and managing the Fund's other affairs and
business, subject to the supervision of the Board of Trustees. The Adviser
provides investment advisory services to a number of institutional investors and
several mutual funds. As with the Adviser's predecessor RIEM in the past, the
Fund will pay the Adviser a management fee for these services equal to 1.90% of
its average daily net assets on a quarterly basis. The Adviser will reduce its
management fee and bear certain expenses until further notice to limit the
Fund's total annual operating expenses (exclusive of nonrecurring account fees,
extraordinary expenses and dividends and interest paid on securities sold short)
to 2.00% of the Fund's average daily net assets.
PORTFOLIO MANAGER
Management of the Fund's portfolio is overseen by the Adviser's executive
officers who are responsible for the design and maintenance of the Adviser's
portfolio system, and by a portfolio manager who is responsible for research and
monitoring the Fund's characteristic performance against the benchmark and for
monitoring cash balances. Barr Rosenberg, the Director of Research of the
Adviser and the Chairman of AXA Rosenberg Group LLC, the parent of the Adviser,
Kenneth Reid, the Chief Executive Officer of the Adviser, and F. William Jump,
Jr., the portfolio manager, are responsible for the day-to-day management of the
Fund's portfolio. Dr. Rosenberg and Dr. Reid both have been employed by the
Adviser or its predecessor since 1985. Mr. Jump has had numerous
responsibilities including trading, applications programming, new product
development and portfolio engineering since he joined the Adviser's predecessor
in 1990. He received a B.A. from Swarthmore College in 1977 and a M.B.A. from
the Wharton School, University of Pennsylvania in 1983.
EXECUTIVE OFFICERS
The biography of each of the executive officers of the Adviser is set forth
below. Kenneth Reid is also a Trustee of the Trust.
BARR ROSENBERG. Dr. Rosenberg is the Director of Research of the Adviser,
Chairman of AXA Rosenberg Group LLC, the parent of the Adviser, and Managing
Director of Barr Rosenberg Research Center LLC. As such, he has ultimate
responsibility for the Adviser's securities valuation and portfolio optimization
systems used to manage the Fund and for the implementation of the decisions
developed therein. His area of special concentration is the design of the
Adviser's proprietary securities valuation model.
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Dr. Rosenberg earned a B.A. degree from the University of California,
Berkeley, in 1963. He earned an M.Sc. from the London School of Economics in
1965, and a Ph.D. from Harvard University, Cambridge, Massachusetts, in 1968.
From 1968 until 1983, Dr. Rosenberg was a Professor of Finance, Econometrics,
and Economics at the School of Business Administration at the University of
California, Berkeley. Concurrently, from 1968 until 1974, Dr. Rosenberg worked
as a consultant in applied decision theory in finance, banking and medicine. In
1975, he founded Barr Rosenberg Associates, a financial consulting firm (now
known as BARRA) where he was a managing partner, and later chief scientist until
his departure in 1986. Dr. Rosenberg, the founder of the Berkeley Program in
Finance, has experience in the modeling of complex processes with substantial
elements of risk. From 1985 to 1998, he was the founder and Managing General
Partner of Rosenberg Institutional Equity Management, the predecessor company to
the Adviser.
KENNETH REID. Dr. Reid is the Chief Executive Officer of the Adviser. His
work is focused on the design and estimation of the Adviser's valuation models
and he has primary responsibility for analyzing the empirical evidence that
validates and supports the day-to-day recommendations of the Adviser's
securities valuation models. Patterns of short-term price behavior discussed by
Dr. Reid as part of his Ph.D. dissertation have been refined and incorporated
into the Adviser's proprietary valuation and trading systems.
Dr. Reid earned both a B.A. degree (1973) and an M.D.S. (1975) from Georgia
State University, Atlanta. In 1982, he earned a Ph.D. from the University of
California, Berkeley, where he was awarded the American Bankers Association
Fellowship. From 1981 until June 1986, Dr. Reid worked as a consultant at BARRA
in Berkeley, California. His responsibilities included estimating
multiple-factor risk models, designing and evaluating active management
strategies, and serving as an internal consultant on econometric matters in
finance. From 1986 to 1998, Dr. Reid was a general partner of Rosenberg
Institutional Equity Management.
WILLIAM RICKS. Dr. Ricks is the Chief Investment Officer of the Adviser.
His primary responsibilities are the various aspects of the investment process:
trading, operations, portfolio engineering, and portfolio construction. He is
responsible for the implementation of the investment strategies that are
designed by the Research Center.
Dr. Ricks earned a B.S. from the University of New Orleans, Louisiana and a
Ph.D. from the University of California, Berkeley in 1980. He worked as a
senior accountant for Ernst & Ernst in New Orleans from 1974 to 1976. He was a
financial and managerial accounting instructor at the University of California,
Berkeley from 1978 to 1979, after which he was an associate professor of finance
and accounting at Duke University until 1989. From 1989 to 1998, he was a
research associate, a portfolio engineer and the Director of Accounting Research
at Rosenberg Institutional Equity Management.
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INDEPENDENT TRUSTEES
William F. Sharpe, Nils H. Hakansson and Dwight M. Jaffee are the Trustees
of the Trust who are not "interested persons" (as defined in the 1940 Act) of
the Trust or the Adviser.
Dr. Sharpe is the STANCO 25 Professor of Finance at Stanford University's
Graduate School of Business. He is best known as one of the developers of the
Capital Asset Pricing Model, including the beta and alpha concepts used in risk
analysis and performance measurement. He developed the widely-used binomial
method for the valuation of options and other contingent claims. He also
developed the computer algorithm used in many asset allocation procedures.
Dr. Sharpe has published articles in a number of professional journals. He has
also written six books, including PORTFOLIO THEORY AND CAPITAL MARKETS,
(McGraw-Hill, 1970), ASSET ALLOCATION TOOLS, (Scientific Press, 1987),
FUNDAMENTALS OF INVESTMENTS (with Gordon J. Alexander and Jeffery Bailey,
Prentice-Hall, 1993) and INVESTMENTS (with Gordon J. Alexander and Jeffery
Bailey, Prentice-Hall, 1995). Dr. Sharpe is a past President of the American
Finance Association. He is currently Chairman of Financial Engines
Incorporated, an electronic investment advice company. He has also served as
consultant to a number of corporations and investment organizations. He is also
a member of the Board of Trustees of Smith Breeden Trust, an investment company,
and a director at CATS Software and Stanford Management Company. He received
the Nobel Prize in Economic Sciences in 1990.
Professor Hakansson is the Sylvan C. Coleman Professor of Finance and
Accounting at the Haas School of Business, University of California, Berkeley.
He is a former member of the faculty at UCLA as well as at Yale University. At
Berkeley, he served as Director of the Berkeley Program in Finance (1988-1991)
and as Director of the Professional Accounting Program (1985-1988). Professor
Hakansson is a Certified Public Accountant and spent three years with Arthur
Young & Company prior to receiving his Ph.D. from UCLA in 1966. He has twice
been a Visiting Scholar at Bell Laboratories in New Jersey and was, in 1975, the
Hoover Fellow at the University of New South Wales in Sydney and, in 1982, the
Chevron Fellow at Simon Fraser University in British Columbia. In 1984,
Professor Hakansson was a Special Visiting Professor at the Stockholm School of
Economics, where he was also awarded an honorary doctorate in economics. He is
a past president of the Western Finance Association (1983-1984). Professor
Hakansson has published a number of articles in academic journals and in
professional volumes. Many of his papers address various aspects of asset
allocation procedures as well as topics in securities innovation, information
economics and financial reporting. He has served on the editorial boards of
several professional journals and been a consultant to the RAND Corporation and
a number of investment organizations. Professor Hakansson is a member of the
board of two foundations and a past board member of SuperShare Service
Corporation and of Theatrix Interactive, Inc. He is also a Fellow of the
Accounting Researchers International Association and a member of the Financial
Economists Roundtable.
Professor Jaffee is the Willis H. Booth Professor of Banking and Finance at
the Haas School of Business, University of California, Berkeley. He was
previously a Professor of Economics at Princeton University for many years,
where he served as the Vice Chairman of the faculty. At Berkeley, he serves on
a continuing basis as the Co-chairman of the Fisher Center for
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<PAGE>
Real Estate and Urban Economics and as the Director of the UC Berkeley-St.
Petersburg University (Russia) School of Management Program. He has been a
Visiting Professor at many Universities around the world, most recently at the
University of Aix/Marseille in France and at the European University in Florence
Italy. Professor Jaffee has authored 5 books and numerous articles in academic
and professional journals. His research has focused on 3 key financial markets:
business lending, real estate finance, and catastrophe insurance. His current
research is focused on methods for securitizing real estate finance and
catastrophe insurance risks, and on the impact of international trade on the
U.S. computer industry. He has served on the editorial boards of numerous
academic journals, and has been a consultant to a number of U.S. government
agencies and to the World Bank. In the past, Professor Jaffee has been a member
of the Board of Directors of various financial institutions, including the
Federal Home Loan Bank of New York. He is currently a Visiting Scholar at the
Federal Reserve Bank of San Francisco.
HOW THE FUND PRICES ITS SHARES
The price of the Fund's shares is based on its net asset value as next
determined after receipt of a purchase order. See "Determination of Net Asset
Value."
For purposes of calculating the purchase price of Fund shares, if it does
not reject a purchase order, the Trust considers an order received on the day
that it receives a check or money order on or before 4:00 p.m., New York Time.
If the Trust receives the payment after the deadline, it will base the purchase
price of Fund shares on the next determination of net asset value of Fund
shares.
The Trust reserves the right, in its sole discretion, to suspend the
offering of shares of the Fund or to reject purchase orders when the Adviser
believes that suspension or rejection would be in the best interests of the
Trust.
Purchases of the Fund's shares may be made in full or in fractional shares
of the Fund calculated to three decimal places. In the interest of economy and
convenience, the Trust will not issue certificates for shares.
DETERMINATION OF NET ASSET VALUE
The Trust will determine the Fund's net asset value per share once on each
day on which the New York Stock Exchange is open. It will make the
determination at 4:00 p.m., New York Time. The Fund expects that the days,
other than weekend days, that the New York Stock Exchange will not be open are
Good Friday, Memorial Day, Independence Day (observed), Labor Day, Thanksgiving
Day, Christmas Day, New Year's Day, Martin Luther King, Jr. Day and
Washington's Birthday. The Trust calculates the net asset value per share of the
Fund by dividing the total market value of the Fund's assets, less any
applicable liabilities, by the number of outstanding shares of the Fund.
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<PAGE>
The Trust will value portfolio securities listed on an exchange for which
market quotations are available at the last quoted sale price on each business
day. The Trust will value any security for which there is no reported sale on a
given day at the most recent quoted bid price (for long securities) or at the
most recent quoted ask price (for securities sold short). A bid price is that
price which a prospective buyer has offered and an ask price is that price which
a prospective seller has demanded for a given security. A buyer or seller may
"quote" a price even though the sale in question may not actually be
consummated. The Trust will value any security which is listed on the NASDAQ
National Market and which traded on a particular day at the closing price. The
Trust will value any security which is listed on NASDAQ and which does not trade
on a particular day at the most recent quoted bid price.
The Trust takes price information on listed securities from the closing
price on the exchange where the security is primarily traded. The Trust values
unlisted securities for which market quotations are readily available at the
most recent quoted bid price (for long securities) or at the most recent quoted
ask price (for securities sold short). The Trust may value debt obligations
with sixty days or less remaining until maturity at their amortized cost. Other
assets and securities for which no quotations are readily available are valued
at fair value as determined in good faith by the Trustees of the Trust or by
persons acting at their direction.
PURCHASING FUND SHARES
Only a separate account of an insurance company which participates in
Fund investments may purchase shares of the Fund. You may buy shares of the
Fund only through your policy or contract with a participating insurance
company. You should read this prospectus in conjunction with the prospectus
or other disclosure documents of the separate account of the specific
insurance product which accompanies this prospectus. The minimum initial
investment in the Fund is $1,000, and the minimum subsequent investment in
the Fund is $500.
In conformance with Rule 12b-1 under the 1940 Act, the Trust has adopted a
written distribution and service plan. Pursuant to this plan, the Fund is
authorized to pay certain fees for the sale and distribution of its shares and
for services provided to its shareholders. No payments are currently being made
under the plan. However, under the plan, the Fund could pay distribution and
service fees at an annual rate not to exceed .25% of the Fund's average daily
assets. Because these fees would be paid out of the Fund's assets, over time
these fees would increase the cost of your investment and could cost more than
paying other types of sales charges.
REDEEMING FUND SHARES
As a shareholder in the Fund, you have the right to ask the Fund at any
time to redeem your shares, that is, buy your shares back from you. The Trust
will redeem shares at the net asset value next determined after a redemption
request is received. See "How the Fund Prices Its
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<PAGE>
Shares - Determination of Net Asset Value" and the prospectus or other
disclosure documents of the separate account of the specific insurance
product that accompanies this prospectus. The value of shares redeemed may
be more or less than the original cost of those shares, depending on the
market value of the investment securities held by the Fund at the time of the
redemption.
The Fund reserves the right to redeem in kind. This means that, if the
Adviser determines that it would not be in the best interests of the remaining
shareholders of the Fund to make a redemption payment in cash, the Fund may pay
the redemption price partly or entirely in readily marketable securities held by
the Fund. We will value all securities used to redeem Fund shares in accordance
with the Fund's procedures for valuation described under "How the Fund Prices
Its Shares - Determination of Net Asset Value." The Adviser will select
securities to use for redemption of Fund shares in light of the Fund's
objective. Those selections generally will not reflect a PRO RATA distribution
of each security held in the Fund's portfolio. Investors may incur brokerage
charges on the sale of any securities received in payment of redemptions.
The Trust may suspend the right of redemption and may postpone payment for
more than seven days when any of the following occurs: (1) the New York Stock
Exchange is closed for other than weekends or holidays (if the rules of the
Securities and Exchange Commission permit), (2) trading on the Exchange is
restricted, (3) an emergency makes it impracticable for the Fund to dispose of
its securities or to determine fairly the value of its net assets, or (4) any
other event for which the Securities and Exchange Commission permits delay for
the protection of investors.
DISTRIBUTIONS
The Fund intends to distribute to its insurance company separate accounts
as dividends substantially all of its net investment income (which comes from
dividends, interest it receives from its investments, and net short-term capital
gains). The Fund also intends to distribute substantially all of its net
long-term capital gains, if any, after deducting any available capital loss
carry-overs. The Fund will declare and pay distributions of its dividends and
interest and distribute net short-term capital gains and net long-term gains all
on an annual basis unless the Trustees determine that it should do so more
frequently where permitted by applicable regulations.
SHAREHOLDER OPTIONS
The Fund will pay all dividends and distributions in additional Fund shares
at net asset value unless an election is made by a particular separate account
to receive distributions in cash.
TAXES
The Fund intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended, and to meet
all other
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<PAGE>
requirements necessary to avoid precipitating federal income taxes on income and
gains it distributes to insurance company separate accounts.
Generally, owners of variable annuity and variable life contracts are not
taxed currently on income or gains realized with respect to such contracts.
However, some distributions from such contracts may be taxable at ordinary
income tax rates. In addition, distributions made to an owner who is younger
than 59 1/2 may be subject to a 10% penalty tax. Investors should ask their own
tax advisers for more information on their own tax situations, including
possible foreign, state or local taxes.
In order for investors to receive the favorable tax treatment available to
holders of variable annuity and variable life contracts, the separate accounts
underlying such contracts, as well as the Portfolios in which such accounts
invest, must meet certain diversification requirements. Each Portfolio intends
to comply with these requirements. If a Portfolio does not meet such
requirements, income allocable to the contracts would be taxable currently to
the holders of such contracts.
Fund investments in foreign securities may be subject to withholding taxes
at the source on dividend or interest payments. In that case, the Fund's yield
on those securities would be decreased.
The above information constitutes a general summary of the federal
income tax consequences of investing in the Fund. Please refer to the
prospectus or other disclosure documents for your separate account and
variable contract for information regarding the federal income tax treatment
of variable contracts in general and of distributions to your separate
account in particular. See "Income Dividends, Distributions and Tax Status"
in the Fund's Statement of Additional Information for more information on
taxes.
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
The Trust is designed to serve and presently intends to serve as a
funding vehicle for insurance company separate accounts associated with
variable annuity contracts and variable life insurance policies. This means
that participating insurance companies will invest money from separate
accounts of various annuity contracts and life insurance policies in the Fund
to provide for future benefits. You should consult the prospectus or other
disclosure documents issued by the relevant insurance company for more
information about a separate account.
All shares of the Fund have identical voting rights. Shares are freely
transferable, are entitled to dividends as declared by the Trustees, and are
entitled to receive the net assets of the Fund's portfolio upon liquidation.
The Trust does not generally hold annual meetings of shareholders and will do so
only when required by law. Shareholders holding a majority of the outstanding
shares may remove Trustees by votes cast in person or by proxy at a meeting of
shareholders or by written consent.
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<PAGE>
In the future, the Trust may offer shares of the Fund directly to qualified
pension and profit-sharing plans.
Although conflicts of interest could arise from the sale of Fund shares to
variable annuity contract-owners and variable life insurance policy-owners of
affiliated and unaffiliated insurance companies, the Trust currently does not
foresee any related disadvantages to policy-owners and contract-owners. This is
because the Trust offers its shares to separate accounts of various insurance
companies only to serve as the investment medium for their variable products.
Nevertheless, the Trustees intend to monitor events in order to identify any
material irreconcilable conflicts of interest which may arise. Should such a
conflict arise, the Trustees will determine what action, if any, should be taken
in response. If such a conflict were to occur, one or more insurance companies'
separate accounts might be required to withdraw their investments in the Fund.
This might force the Fund to sell portfolio securities at disadvantageous
prices.
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust may, however, be terminated at any time by vote of at least two-thirds
of the outstanding shares of each series of the Trust.
Under certain circumstances, shareholders could be held personally
liable for the obligations of the Trust. However, the Trust believes that the
chance of resulting financial loss for a shareholder is remote since that
type of liability may arise only in very limited circumstances.
20
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(Back cover)
The Fund's statement of additional information ("SAI") dated April 16,
1999 contains additional information about the Fund. It is incorporated by
reference into this prospectus, which means that it is part of this
prospectus for legal purposes. Additional information about the Fund's
investments is available in the Fund's annual and semi-annual reports to
shareholders. The Fund has no performance history because it had not yet
begun operations as of the date of this prospectus. You may obtain free
copies of the SAI and the Fund's annual and semi-annual reports, request
other information about the Fund, or make shareholder inquiries by writing to
the Trust at the address below or by telephoning 1-800-447-3332.
The SAI has been filed with the Commission. You may review and copy
information about the Fund, including the SAI, at the Commission's Public
Reference Room in Washington, D.C. You may call the Commission at
1-800-SEC-0330 for information about the operation of the Public Reference Room.
The Commission maintains a World Wide Web site at http://www.sec.gov, which
contains reports and other information about the Fund. You may also obtain
copies of these materials, upon payment of a duplicating fee, by writing the
Public Reference Section of the Commission, Washington, D.C. 20549-6009.
ADDRESS CORRESPONDENCE TO:
Barr Rosenberg Variable Insurance Trust
P.O. Box 182495
Columbus, Ohio 43219-2495.
1-800-447-3332
Shareholder Services
1-800-447-3332
Additional Information about the Adviser may be found on the
World Wide Web at http://www.axarosenberg.com
ADVISER
AXA Rosenberg Investment Management LLC
Four Orinda Way, Building E
Orinda, CA 94563
ADMINISTRATOR, TRANSFER AND DIVIDEND PAYING AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, OH 43219
CUSTODIAN OF ASSETS
Custodial Trust Company
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<PAGE>
101 Carnegie Center
Princeton, NJ 08540
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
333 Market Street
San Francisco, CA 94105
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
Investment Company Act File No. 811-08759
<PAGE>
BARR ROSENBERG VARIABLE INSURANCE TRUST
BARR ROSENBERG VIT MARKET NEUTRAL FUND
STATEMENT OF ADDITIONAL INFORMATION
APRIL 16, 1999
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information relates to and should be read in conjunction
with the prospectus of the Barr Rosenberg VIT Market Neutral Fund of Barr
Rosenberg Variable Insurance Trust dated April 16, 1999 (the "Prospectus").
You may obtain a copy of the Prospectus from Barr Rosenberg Variable Insurance
Trust, 3435 Stelzer Road, Columbus, Ohio 43219.
<PAGE>
TABLE OF CONTENTS
PAGE
----
INVESTMENT STRATEGIES AND RESTRICTIONS . . . . . . . . . . . . . . . . . . . ..3
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS . . . . . . . . . . . . . . . ..6
MANAGEMENT OF THE TRUST. . . . . . . . . . . . . . . . . . . . . . . . . . . ..8
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . . . . . . . . . . . . . .11
PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
TOTAL RETURN CALCULATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .15
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES . . . . . . . . . . . . . . .17
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . .19
PURCHASE AND REDEMPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . .20
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
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INVESTMENT STRATEGIES AND RESTRICTIONS
The investment objective and principal investment strategies of the Barr
Rosenberg VIT Market Neutral Fund (the "Fund") of Barr Rosenberg Variable
Insurance Trust (the "Trust") are, in the Prospectus, summarized under the
heading "Risk/Return Summary" and described in more detail under the heading
"Principal Investment Strategies."
The following is an additional description of certain investment strategies
of the Fund.
SHORT SALES
The Fund will seek to realize additional gains through short sales. Short
sales are transactions in which the Fund sells a security it does not own in
anticipation of a decline in the value of that security relative to the long
positions held by the Fund. To complete such a transaction, the Fund must
borrow the security to make delivery to the buyer. The Fund then is obligated
to replace the security borrowed by purchasing it at the market price at or
prior to the time of replacement. The price at such time may be more or less
than the price at which the security was sold by the Fund. Until the security
is replaced, the Fund is required to repay the lender any dividends or interest
that accrue during the period of the loan. To borrow the security, the Fund
also may be required to pay a premium, which would increase the cost of the
security sold. The net proceeds of the short sale will be retained by the
broker (or by the Fund's custodian in a special custody account), to the extent
necessary to meet margin requirements, until the short position is closed out.
The Fund also will incur transaction costs in effecting short sales.
The Fund will incur a loss as a result of the short sale if the price of
the security increases between the date of the short sale and the date on which
the Fund replaces the borrowed security. The Fund may realize a gain if the
security declines in price between those dates. The amount of any ultimate gain
for the Fund will be decreased, and the amount of any ultimate loss increased,
by the amount of the premium, dividends, interest or expenses the Fund may be
required to pay in connection with a short sale. There can be no assurance that
the Fund will be able to close out a short position at any particular time or at
an acceptable price.
PORTFOLIO TURNOVER
A change in securities held by the Fund is known as "portfolio turnover"
and almost always involves the payment by the Fund of brokerage commissions or
dealer markup and other transaction costs on the sale of securities as well as
on the reinvestment of the proceeds in other securities. Portfolio turnover is
not a limiting factor with respect to investment decisions. As disclosed in the
Prospectus, high portfolio turnover involves correspondingly greater brokerage
commissions and other transaction costs, which will be borne directly by the
Fund. See "Portfolio Transactions."
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NOTICE ON SHAREHOLDER APPROVAL
Unless otherwise indicated in the Prospectus or this Statement of
Additional Information, the investment objective and policies of the Fund may be
changed without shareholder approval.
INVESTMENT POLICIES AND RESTRICTIONS
Without a vote of the majority of the outstanding voting securities of the
Fund, the Trust will not take any of the following actions with respect to the
Fund:
(1) Borrow money in excess of 10% of the value (taken at the lower of
cost or current value) of the Fund's total assets (not including the amount
borrowed) at the time the borrowing is made, and then only from banks as a
temporary measure to facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely disposition of
portfolio investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are purchased.
Such borrowings involve risk because, so long as the loan is outstanding,
the lender will be secured by the assets of the Fund and will have first
rights to those assets. Short sales and related borrowings of securities
are not subject to this restriction.
(2) Pledge, hypothecate, mortgage or otherwise encumber its assets in
excess of 10% of the Fund's total assets (taken at cost) and then only to
secure borrowings permitted by Restriction 1 above. (For the purposes of
this restriction, collateral arrangements with respect to options, short
sales, stock index, interest rate, currency or other futures, options on
futures contracts and collateral arrangements with respect to initial and
variation margin are not deemed to be a pledge or other encumbrance of
assets. Collateral arrangements with respect to swaps and other
derivatives are also not deemed to be a pledge or other encumbrance of
assets.) Pledging, hypothecating, mortgaging or otherwise encumbering Fund
assets involves risk because the pledgee or mortgagee will have first
rights to those assets for the duration of the encumbrance.
(3) Purchase securities on margin, except such short-term credits as
may be necessary for the clearance of purchases and sales of securities.
(For this purpose, the deposit or payment of initial or variation margin in
connection with futures contracts or related options transactions is not
considered the purchase of a security on margin.)
(4) Make short sales of securities or maintain a short position if,
when added together, more than 100% of the value of the Fund's net assets
would be (i) deposited as collateral for the obligation to replace
securities borrowed to effect short sales, and (ii) allocated to segregated
accounts in connection with short sales. Short sales "against the box" are
not subject to this limitation.
(5) Underwrite securities issued by other persons except to the
extent that, in connection with the disposition of its portfolio
investments, the Fund may be deemed to be an underwriter under federal
securities laws.
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<PAGE>
(6) Purchase or sell real estate, although it may purchase securities
of issuers which deal in real estate, including securities of real estate
investment trusts, and may purchase securities which are secured by
interests in real estate.
(7) Concentrate more than 25% of the value of its total assets in any
one industry.
(8) Invest in securities of other investment companies, except to the
extent permitted by the Investment Company Act of 1940, as amended (the
"1940 Act"), or by an exemptive order issued by the Securities and Exchange
Commission.
(9) Purchase or sell commodities or commodity contracts except that
each of the Funds may purchase and sell stock index and other financial
futures contracts and options thereon.
(10) Make loans, except by purchase of debt obligations or by entering
into repurchase agreements or through the lending of the Fund's portfolio
securities.
(11) Issue senior securities. (For the purpose of this restriction
none of the following is deemed to be a senior security: any pledge or
other encumbrance of assets permitted by restriction (2) above; any
borrowing permitted by restriction (1) above; short sales permitted by
restriction (4) above; any collateral arrangements with respect to short
sales, swaps, options, future contracts and options on future contracts and
with respect to initial and variation margin; and the purchase or sale of
options, future contracts or options on future contracts.)
It is contrary to the present policy of the Fund, which may be changed by
the Trustees of the Trust without shareholder approval, to:
(a) Invest in warrants or rights (other than warrants or rights
acquired by the Fund as a part of a unit or attached to
securities at the time of purchase).
(b) Write, purchase or sell options on particular securities (as
opposed to market indices).
(c) Buy or sell oil, gas or other mineral leases, rights or royalty
contracts.
(d) Make investments for the purpose of exercising control of a
company's management.
(e) Invest in (a) securities which at the time of investment are not
readily marketable and (b) repurchase agreements maturing in more
than seven
-5-
<PAGE>
days if, as a result, more than 15% of the Fund's net assets
(taken at current value) would then be invested in such
securities.
Unless otherwise indicated, all percentage limitations on investments set
forth herein and in the Prospectus will apply at the time of the making of an
investment and shall not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of such investment.
The phrase "shareholder approval," as used in the Prospectus and herein,
and the phrase "vote of a majority of the outstanding voting securities," as
used herein, means the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares of the Fund or the Trust, as the case may be, or (2) 67%
or more of the shares of the Fund or the Trust, as the case may be, present at a
meeting if more than 50% of the outstanding shares are represented at the
meeting in person or by proxy.
INCOME DIVIDENDS, DISTRIBUTIONS AND TAX STATUS
The tax status of the Fund and the distributions which it may make are
summarized in the Prospectus under the headings "Distributions" and "Taxes." The
Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). In
order to qualify as a "regulated investment company" and to qualify for the
special tax treatment accorded regulated investment companies and their
shareholders, the Fund must, among other things, (a) derive at least 90% of its
gross income from dividends, interest, payments with respect to certain
securities loans, gains from the sale or other disposition of securities or
foreign currencies or other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such securities or currencies; (b) diversify its holdings so that,
at the close of each quarter of its taxable year, (i) at least 50% of the value
of its total assets consists of cash, cash items, U.S. Government securities,
securities of other regulated investment companies, and other securities limited
generally with respect to any one issuer to not more than 5% of the total assets
of the Fund and not more than 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its total assets is invested
in the securities of any issuer (other than U.S. Government securities or
securities of other regulated investment companies); and (c) distribute annually
at least 90% of the sum of its taxable net investment income, its net tax-exempt
income (if any), and, the excess, if any, of net short-term capital gains over
net long-term capital losses for such year. To the extent the Fund qualifies
for treatment as a regulated investment company, the Fund will not be subject to
federal income tax on income paid to its shareholders in the form of dividends
or capital gain distributions.
If a Fund failed to qualify under Subchapter M as a regulated investment
company accorded special tax treatment in any taxable year, the Fund would be
subject to tax on its taxable income at corporate rates, and all distributions
from earnings and profits, including any distributions of net tax-exempt income
and net long-term capital gains, would be taxable to
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<PAGE>
shareholders as ordinary income. In addition, the Fund could be required to
recognize unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying as a regulated investment company
that is accorded special tax treatment.
Section 817(h) of the Code requires that the investments of a segregated
asset account (a "Separate Account") of an insurance company be "adequately
diversified" as provided therein or in accordance with U.S. Treasury Regulations
in order for the account to serve as the basis for variable annuity contracts
("VA contracts") or variable life insurance policies ("VLI policies"). The Fund
intends to comply with applicable requirements so that the Fund's investments
are "adequately diversified" for this purpose. Section 817(h) and the U.S.
Treasury Regulations issued thereunder provide the manner in which a segregated
asset account will treat investments in a regulated investment company for
purposes of the diversification requirements. If the Fund satisfies certain
conditions, a segregated asset account owning shares of the Fund will be treated
as owning multiple investments consisting of the account's proportionate share
of each of the assets of the Fund. The Fund intends to satisfy these conditions
so that the shares of the Fund owned by a segregated asset account of an
insurance company depositor will be treated as multiple investments. If,
however, the Fund is not "adequately diversified" within the meaning of Section
817(h) of the Code, the VA contracts and VLI policies supported by the Fund
would not be treated as annuity or life insurance contracts, as the case may be,
for any period (or subsequent period) during which the Fund is not "adequately
diversified."
As described in the Prospectus under the heading "Distributions," the Fund
intends to pay out substantially all of its ordinary income and net short-term
capital gains, and to distribute substantially all of its net capital gains, if
any, after giving effect to any available capital loss carryover. Net capital
gain is the excess of net gains from assets held for more than one year over net
losses from capital assets held for not more than one year. In order to avoid
an excise tax imposed on certain undistributed income, the Fund must distribute
prior to each calendar year end without regard to the Fund's fiscal year end (i)
98% of the Fund's ordinary income, and (ii) 98% of the Fund's capital gain net
income, if any, realized in the one-year period ending on October 31.
Assuming that the Separate Accounts meet the requirements of Section 817,
distributions from the Fund will not be subject to federal income tax currently
on dividends or distributions from the Fund. Each organization or entity should
review its own circumstances and the federal tax treatment of its income.
Investment in an entity that qualifies as a "passive foreign investment
company" under the Code could subject the Fund to a U.S. federal income tax or
other charge on certain "excess distributions" with respect to the investment
and on the proceeds from the disposition of the investment; however, this tax
can be avoided by making an election to mark such investments to market
annually. Other elections may also be available.
-7-
<PAGE>
THE TAX DISCUSSION SET FORTH ABOVE IS A SUMMARY INCLUDED FOR GENERAL
INFORMATION PURPOSES ONLY. PLEASE REFER TO THE PROSPECTUS OR OTHER
DISCLOSURE DOCUMENTS FOR THE SEPARATE ACCOUNTS AND THE VARIABLE CONTRACT FOR
INFORMATION REGARDING THE FEDERAL INCOME TAX TREATMENT OF VARIABLE CONTRACTS
IN GENERAL AND DISTRIBUTIONS TO THE SEPARATE ACCOUNT IN PARTICULAR. THIS
DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING.
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for generally overseeing the
conduct of Fund business. Subject to such policies as the Trustees may
determine, the Trust's investment adviser, AXA Rosenberg Investment Management
LLC (the "Adviser"), furnishes a continuing investment program for the Fund and
makes investment decisions on its behalf. Subject to the control of the
Trustees, the Adviser also manages the Fund's other affairs and business.
The Trustees and officers of the Trust and their principal occupations
during the past five years are as follows:
Barr M. Rosenberg (56) Director of Research, AXA Rosenberg Investment
Vice President Management LLC, January 1999 to present; Chairman,
AXA Rosenberg Group LLC, January 1999 to present;
Director, Barr Rosenberg Research Center LLC,
January 1999 to present; Managing General Partner
and Chief Investment Officer, Rosenberg
Institutional Equity Management, January 1985 to
December 1998.
Kenneth Reid* (49) Chief Executive Officer, AXA Rosenberg Investment
President, Trustee Management LLC, January 1999 to present; General
Partner and Director of Research, Rosenberg
Institutional Equity Management, June 1986 to
December 1998.
Marlis S. Fritz (49) Global Marketing Director, AXA Rosenberg
Vice President Group LLC, January 1999 to present;
General Partner and Director of Marketing,
Rosenberg Institutional Equity Management, April
1985 to December 1998.
Nils H. Hakansson (61) Sylvan C. Coleman Professor of Finance and
Trustee Accounting, Haas School of Business, University of
California, Berkeley, June 1969 to present;
Director, Supershare
-8-
<PAGE>
Services Corporation (investment management), Los
Angeles, California, November 1989 to 1995.
William F. Sharpe (64) STANCO 25 Professor of Finance, Stanford Trustee
University, September 1995 to present; Professor
of Finance, Stanford University, September 1992 to
September 1995; Timken Professor Emeritus of
Finance, Stanford University, September 1989 to
September 1992; Timken Professor of Finance,
Stanford University, September 1970 to September
1989; Chairman, Financial Engines Incorporated,
Los Altos, California (electronic investment
advice), March 1996 to present.
Dwight M. Jaffee (55) Professor of Finance and Real Estate, Haas School
Trustee of Business, University of California, Berkeley,
California, July 1991 to present.
Po-Len Hew (32) Director of Finance, AXA Rosenberg Global Services
Treasurer LLC, January 1999 to present; Chief Financial
Officer, Rosenberg Institutional Equity
Management, April 1994 to December 1998;
Accounting Manager, Rosenberg Institutional Equity
Management, October 1989 to December 1998.
Sara Ronan (39) Global Services Coordinator and Paralegal, AXA
Clerk Rosenberg Global Services LLC, January 1999 to
present; Paralegal, Rosenberg Institutional Equity
Management, September 1997 to December 1998;
Director of Marketing, MIG Realty Advisors,
January 1996 to September 1997; Vice President,
Liquidity Financial Advisors, May, 1985 to January
1996.
Edward H. Lyman (55) Chief Operating Officer, AXA Rosenberg Group LLC,
Vice President January 1999 to present; Chief Executive Officer,
AXA Rosenberg Global Services LLC, January 1999 to
present; Executive Vice President, Barr Rosenberg
Investment Management, Inc. and General Counsel to
the Rosenberg Group of companies, 1990 to present.
Richard L. Saalfeld (55) President and Chief Executive Officer, Barr
President Rosenberg Mutual Funds, January 1999 to present;
President and Chief Executive Officer of mutual
fund unit of Rosenberg Institutional Equity
Management, June 1996 to December
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<PAGE>
1998; Consultant to Rosenberg Institutional Equity
Management, September 1995 to May 1996; Chairman
and Chief Executive Officer of CoreLink Resources,
Inc. (mutual fund marketing organization),
Concord, California, April 1993 to August 1995;
Consultant, December 1992 to March 1993.
Harold L. Arbit (51) Managing Director, Barr Rosenberg Mutual Funds,
Vice President January 1999 to present; Vice President and
Partner, Rosenberg Alpha L.P., 1984 to present.
F. William Jump, Jr. (42) Strategy Engineer, AXA Rosenberg Investment
Vice President Management, LLC, January 1999 to present;
Portfolio Engineer, Rosenberg Institutional Equity
Management, August 1990 to December 1998.
- ---------------------
* Trustee who is an "interested person" (as defined in the 1940 Act) of the
Trust or the Adviser.
The mailing address of each of the officers and Trustees is c/o Barr
Rosenberg Variable Insurance Trust, 3435 Stelzer Road, Columbus, OH 43219.
The principal occupations of the officers and Trustees for the last five
years have been with the employers as shown above, although in some cases they
have held different positions with such employers.
The Trust pays the Trustees other than those who are interested persons
of the Trust or Adviser an annual fee of $7590 plus $825 per Fund for each
meeting attended. The Trust does not pay any pension or retirement benefits
for its Trustees. The Trust does not pay any compensation to officers or
Trustees of the Trust other than those Trustees who are not interested
persons of the Trust or Adviser. The following table sets forth information
concerning the estimated total compensation paid to each of the Trustees who
are not interested persons of the Trust or Adviser in the year ended March 31,
2000:
-10-
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
(3) (5)
(2) PENSION OR RETIREMENT (4) ESTIMATED TOTAL
(1) ESTIMATED AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL COMPENSATION
NAME OF PERSON, COMPENSATION AS PART OF BENEFITS FROM FUND AND
POSITION FROM FUND (a) TRUST EXPENSES UPON RETIREMENT FUND COMPLEX (a)
-------- --------- -------------- --------------- ------------
<S> <C> <C> <C> <C>
Nils H. Hakansson $11,715.00 $0 $0 $82,005.00
Trustee
William F. Sharpe $11,715.00 $0 $0 $82,005.00
Trustee
Dwight M. Jaffee $11,715.00 $0 $0 $82,005.00
Trustee
</TABLE>
(a) Estimated compensation payable to the independent Trustees for service
during the current fiscal year. The figures in column (2) "Estimated
Aggregate Compensation from Fund" represent the amounts estimated to be
paid to the Trustees as compensation from the Fund during the fiscal year
ending on March 31, 2000. The figures in column (5) "Estimated Total
Compensation From Fund and Fund Complex" represent the amounts paid to the
Trustees as compensation from the fund complex of seven funds during the
fiscal year ending on March 31, 2000.
Messrs. Rosenberg, Reid, Arbit, Lyman, Saalfeld and Jump and Ms. Fritz,
Ronan and Hew, each being an officer or employee of the Adviser or its
affiliates, will each benefit from the management fees paid by the Trust to the
Adviser, but receive no direct compensation from the Trust.
INVESTMENT ADVISORY AND OTHER SERVICES
MANAGEMENT CONTRACT
As disclosed in the Prospectus under the heading "Management of the Trust,"
under a management contract (the "Management Contract") between the Trust, on
behalf of the Fund, and the Adviser, subject to the control of the Trustees of
the Trust and such policies as the Trustees may determine, the Adviser will
furnish continuously an investment program for the Fund and will make investment
decisions on behalf of the Fund and place all orders for the purchase and sale
of portfolio securities. Subject to the control of the Trustees, the Adviser
furnishes office space and equipment, provides certain bookkeeping and clerical
services and pays all salaries, fees and expenses of officers and Trustees of
the Trust who are affiliated with the Adviser.
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<PAGE>
As disclosed in the Prospectus, the Fund has agreed to pay the Adviser a
quarterly management fee at the annual percentage rate of the Fund's average
daily net assets set forth in the Prospectus. The Adviser has informed the
Trust that it will voluntarily waive some or all of its management fees under
the Management Contract and, if necessary, will bear certain expenses of the
Fund until further notice so that the Fund's total annual operating expenses
(exclusive of nonrecurring account fees, and extraordinary expenses and
dividends and interest paid on securities sold short) will not exceed the
percentage of the Fund's average daily net assets set forth in the Prospectus.
In addition, the Adviser's compensation under the Management Contract is subject
to reduction to the extent that in any year the expenses of the Fund (including
investment advisory fees but excluding taxes, portfolio brokerage commissions
and any distribution expenses paid by a class of shares of the Fund pursuant to
a distribution plan or otherwise) exceed the limits on investment company
expenses imposed by any statute or regulatory authority of any jurisdiction in
which shares of the Fund are qualified for offer and sale.
The Management Contract provides that the Adviser shall not be subject to
any liability to the Trust or to any shareholder of the Trust in connection with
the performance of its services thereunder in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties thereunder.
The Management Contract will continue in effect for a period no more than
one year from the date of its execution, and renewals thereof must be approved
by (i) vote, cast in person at a meeting called for that purpose, of a majority
of those Trustees who are not "interested persons" of the Adviser or the Trust,
and by (ii) the majority vote of either the full Board of Trustees or the vote
of a majority of the outstanding shares of the Fund. The Management Contract
automatically terminates on assignment, and is terminable on not more than 60
days' notice by the Trust to the Adviser. In addition, the Management Contract
may be terminated on not more than 60 days' written notice by the Adviser to the
Trust.
The Manager is wholly owned by Axa Rosenberg Group LLC, a holding company
for the AXA Rosenberg businesses. Axa Rosenberg Group LLC is contractually
controlled by AXA-IM Rose Inc, a holding company. AXA-IM Rose Inc. is wholly
owned by AXA-IM Holdings U.S. Inc., a U.S. intermediate holding company. AXA-IM
Holdings U.S. Inc. is wholly owned by AXA Investment Managers S.A., a French
holding company for the AXA investment management businesses, which, in turn, is
owned, collectively, by AXA Assurances IARD, S.A., a French property and
casualty insurance company, and AXA-UAP, a French holding company. AXA
Assurances IARD, S.A. is owned, collectively, by AXA France Assurance, a French
insurance holding company, and UAP Incendie Accidents, a French casualty and
insurance company, each of which, in turn, is wholly owned by AXA-UAP. Finaxa,
a French holding company, beneficially owns more than 25% of the voting
securities of ("Controls") AXA-UAP. Mutuelles Axa, a group of four French
mutual insurance companies, one of which Controls Finaxa, acting as a group,
Control both AXA-UAP and Finaxa. Each of these entities may be deemed a
controlling person of the Manager.
-12-
<PAGE>
As discussed in this Statement of Additional Information under the heading
"Management of the Trust," Kenneth Reid is a Trustee of the Trust and the Chief
Executive Officer of the Manager; Barr M. Rosenberg is a Vice President of the
Trust and the Director of Research of the Manager. Dr. Rosenberg, Dr. Reid and
Marlis S. Fritz, the former general partners of RIEM, may be deemed to be
controlling persons of the Manager as a result of their interest in AXA
Rosenberg Group LLC, the parent of the Manager.
ADMINISTRATIVE SERVICES
The Trust has entered into a Fund Administration Agreement with BISYS Fund
Services (the "Administrator") pursuant to which the Administrator provides
certain management and administrative services necessary for the Fund's
operations including: (i) general supervision of the operation of the Fund
including coordination of the services performed by the Fund's investment
adviser, transfer agent, custodian, independent accountants and legal counsel,
regulatory compliance, including the compilation of information for documents
such as reports to, and filings with, the SEC and state securities commissions,
and preparation of proxy statements and shareholder reports for the Fund; (ii)
general supervision relative to the compilation of data required for the
preparation of periodic reports distributed to the Fund's officers and Board of
Trustees; and (iii) furnishing office space and certain facilities required for
conducting the business of the Fund. For these services, the Administrator is
entitled to receive a fee, payable monthly, at the annual rate of 0.15% of the
average daily net assets of the Trust. The Trust has also entered into a Fund
Accounting Agreement with BISYS Fund Services, Inc. (the "Fund Accountant")
pursuant to which the Fund Accountant provides certain accounting services
necessary for the Fund's operations. For these services, the Fund Accountant is
entitled to receive an annual fee of $30,000.
DISTRIBUTION AND SERVICE PLAN
Solely for the purpose of compensating for services and expenses primarily
intended to result in the sale of Fund shares, such shares are subject to an
annual Distribution and Service Fee of up to 0.25% of the average daily net
assets of the Fund in accordance with a Distribution and Service Plan (the
"Distribution and Service Plan") adopted by the Trust pursuant to Rule 12b-1
promulgated under the 1940 Act. Activities for which the Fund may reimburse
include, but are not limited to, the development and implementation of direct
mail promotions and advertising for the Fund, the preparation, printing and
distribution of prospectuses for the Fund to recipients other than existing
shareholders, and contracting with one or more wholesalers of the Fund's shares.
The Distribution and Service Plan is of the type known as a "compensation" plan.
This means that, although the Trustees of the Trust are expected to take into
account the expenses of the fees' recipient or recipients in their periodic
review of the Distribution and Service Plan, the fees are payable to compensate
the recipient or recipients for services rendered even if the amount paid
exceeds the expenses of the recipient or recipients. No payments currently are
being made under the plan. It is anticipated that, to the extent that the Fund
pays Distribution and Service Fees, those payments will encourage sales
-13-
<PAGE>
of Fund shares, which will increase the Fund's net asset value, resulting in
lower expenses per share.
CUSTODIAL ARRANGEMENTS
Custodial Trust Company ("CTC"), Princeton, NJ 08540, is the Trust's
custodian. As such, CTC holds in safekeeping certificated securities and cash
belonging to the Trust and, in such capacity, is the registered owner of
securities in book-entry form belonging to the Fund. Upon instruction, CTC
receives and delivers cash and securities of the Fund in connection with Fund
transactions and collects all dividends and other distributions made with
respect to Fund portfolio securities.
INDEPENDENT ACCOUNTANTS
The Trust's independent accountants are PricewaterhouseCoopers LLP, 333
Market Street, San Francisco, California 94105. PricewaterhouseCoopers LLP
conducts an annual audit of the Trust's financial statements, assists in the
preparation of the Trust's federal and state income tax returns and the Trust's
filings with the Securities and Exchange Commission, and consults with the Trust
as to matters of accounting and federal and state income taxation.
TRANSFER AND DIVIDEND-PAYING AGENT
The Trust's administrator and transfer and dividend-paying agent is BISYS
Fund Services Ohio, Inc., 3435 Stelzer Road, Columbus, OH 43219.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS
The purchase and sale of portfolio securities for the Fund and for the
other investment advisory clients of the Adviser are made by the Adviser with a
view to achieving each client's investment objective. For example, a particular
security may be purchased or sold on behalf of certain clients of the Adviser
even though it could also have been purchased or sold for other clients at the
same time.
Likewise, a particular security may be purchased on behalf of one or more
clients when the Adviser is selling the same security on behalf of one or more
other clients. In some instances, therefore, the Adviser, acting for one
client, may sell indirectly a particular security to another client. It also
happens that two or more clients may simultaneously buy or sell the same
security, in which event purchases or sales are effected prorata on the basis of
cash available or other equitable basis so as to avoid any one account being
preferred over any other account.
-14-
<PAGE>
BROKERAGE AND RESEARCH SERVICES
Transactions on stock exchanges and other agency transactions involve the
payment of negotiated brokerage commissions. Such commissions vary among
different brokers. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid for such
securities usually includes an undisclosed dealer commission or mark up. In
placing orders for the portfolio transactions of the Fund, the Adviser will seek
the best 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. The determination of what may constitute best price and
execution by a broker-dealer in effecting a securities transaction involves a
number of considerations, including, without limitation, the overall net
economic result to the Fund (involving price paid or received and any
commissions and other costs paid), the efficiency with which the transaction is
effected, the ability to effect the transaction at all where a large block is
involved, availability of the broker to stand ready to execute possibly
difficult transactions in the future and the financial strength and stability of
the broker. Because of such factors, a broker-dealer effecting a transaction
may be paid a commission higher than that charged by another broker-dealer.
Most of the foregoing are judgmental considerations.
Over-the-counter transactions often involve dealers acting for their own
account. It is the Adviser's policy to place over-the-counter market orders for
the Fund with primary market makers unless better prices or executions are
available elsewhere.
Although the Adviser does not consider the receipt of research services as
a factor in selecting brokers to effect portfolio transactions for the Fund, the
Adviser will receive such services from brokers who are expected to handle a
substantial amount of the Fund's portfolio transactions. Research services may
include a wide variety of analyses, reviews and reports on such matters as
economic and political developments, industries, companies, securities and
portfolio strategy. The Adviser uses such research in servicing other clients
as well as the Trust.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, as
amended, and subject to such policies as the Trustees of the Trust may
determine, the Adviser may pay an unaffiliated broker or dealer that provides
"brokerage and research services" (as defined in that Act) to the Adviser an
amount of commission for effecting a portfolio investment transaction in excess
of the amount of commission another broker or dealer would have charged for
effecting that transaction.
TOTAL RETURN CALCULATIONS
The Fund computes its average annual total return by determining the
average annual compounded rates of return during specified periods that would
equate the initial amount invested in a particular share class to the ending
redeemable value of such investment in the class, according to the following
formula:
P(1 + T) TO THE POWER OF n = ERV
-15-
<PAGE>
Where:
T = Average annual total return
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of a period at the end of such period
P = A hypothetical initial payment of $1,000
n = Number of years
The calculation of average annual total return assumes that any dividends
and distributions are reinvested immediately, rather than paid to the investor
in cash. The ending redeemable value (variable "ERV" in the formula) is
determined by assuming complete redemption of the hypothetical investment and
the deduction of all nonrecurring charges at the end of the period covered by
the computations.
Unlike bank deposits or other investments that pay a fixed yield or return
for a stated period of time, the return for the Fund will fluctuate from time to
time and does not provide a basis for determining future returns. Average
annual total return is based on many factors, including market conditions, the
composition of the Fund's portfolio and the Fund's operating expenses.
PERFORMANCE COMPARISONS
Investors may judge the performance of the Fund by comparing it to the
performance of other mutual fund portfolios with comparable investment
objectives and policies through various mutual fund or market indices such as
those prepared by Dow Jones & Co., Inc. and Standard & Poor's Corporation and to
data prepared by Lipper Analytical Services, Inc., a widely-recognized
independent service which monitors the performance of mutual funds. Comparisons
may also be made to indices or data published in MONEY MAGAZINE, FORBES,
BARRON'S, THE WALL STREET JOURNAL, MORNINGSTAR, INC., IBBOTSON ASSOCIATES,
CDA/WIESENBERGER, THE NEW YORK TIMES, BUSINESS WEEK, U.S.A. TODAY, INSTITUTIONAL
INVESTOR and other periodicals. In addition to performance information, general
information about the Fund that appears in a publication such as those mentioned
above may be included in advertisements, sales literature and reports to
shareholders. The Fund may also include in advertisements and reports to
shareholders information discussing the performance of the Adviser in comparison
to other investment advisers and to other institutions.
From time to time, the Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
shareholders: (1) discussions of general economic or financial principles
(such as the effects of inflation, the power of compounding and the benefits
of dollar cost averaging); (2) discussions of general economic trends; (3)
presentations of
-16-
<PAGE>
statistical data to supplement such discussions; (4) descriptions of past or
anticipated portfolio holdings for the Fund; (5) descriptions of investment
strategies for the Fund; (6) descriptions or comparisons of various investment
products, which may or may not include the Fund; (7) comparisons of investment
products (including the Fund) with relevant market or industry indices or other
appropriate benchmarks; (8) discussions of fund rankings or ratings by
recognized rating organizations; and (9) testimonials describing the experience
of persons that have invested in the Fund. The Trust may also include
calculations, such as hypothetical compounding examples, which describe
hypothetical investment results in such communications. Such performance
examples will be based on an express set of assumptions and are not indicative
of the performance of the Fund.
DESCRIPTION OF THE TRUST AND OWNERSHIP OF SHARES
The Trust is a diversified open-end management investment company and was
organized as a Massachusetts business trust under the laws of the Commonwealth
of Massachusetts on March 2, 1998.
A copy of the Trust's Agreement and Declaration of Trust dated March 1,
1998, as amended (the "Declaration of Trust"), is on file with the Secretary of
The Commonwealth of Massachusetts. The fiscal year of the Trust ends on March
31. The Trust changed its name to "Barr Rosenberg Variable Insurance Trust"
from "Barr Rosenberg Variable Trust" on March 27, 1998.
Interests in the Trust's portfolios are currently represented by shares
of one series, the Barr Rosenberg VIT Market Neutral Fund, issued pursuant to
the Declaration of Trust. The rights of shareholders and powers of the
Trustees of the Trust with respect to shares of the Barr Rosenberg VIT Market
Neutral Fund are described in the Prospectus.
The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest. Interests in the Fund are
represented by shares of the Fund. The Declaration of Trust also permits the
Trustees, without shareholder approval, to subdivide any series of Fund shares
into various sub-series of shares with such preferences and other rights as the
Trustees may designate. While the Trustees have no current intention to exercise
this power, it is intended to allow them to provide for an equitable allocation
of the impact of any future regulatory requirements which might affect various
classes of shareholders differently. The Trustees may also, without shareholder
approval, establish one or more additional separate portfolios for investments
in the Trust, or terminate a series of the Trust.
The Declaration of Trust provides for the perpetual existence of the Trust.
The Trust may, however, be terminated at any time by vote of at least two-thirds
of the outstanding shares of the Trust. All shares of the Fund represent
interests in the assets of the Fund and have identical dividend, liquidation and
other rights and the same terms and conditions.
-17-
<PAGE>
Because Rosenberg Institutional Equity Management, the predecessor of the
Adviser, provided the initial capital for the Fund, the Adviser may be deemed to
control the Fund because it beneficially owns more than 25% the Fund's shares.
As a result, it may not be possible for matters subject to a vote of a majority
of the outstanding voting securities of the Fund to be approved without the
affirmative vote of the Adviser, and it may be possible for such matters to be
approved by the Adviser without the affirmative vote of any other shareholder.
VOTING RIGHTS
Shareholders are entitled to one vote for each full share held (with
fractional votes for fractional shares held) and will vote (to the extent
provided herein) in the election of Trustees and the termination of the Trust
and on other matters submitted to the vote of shareholders.
There will normally be no meetings of shareholders for the purpose of
electing Trustees, except that 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 have 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, 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.
Upon written request by the holders of at least 1% of the outstanding shares
stating that such shareholders wish to communicate with the other shareholders
for the purpose of obtaining the signatures necessary to demand a meeting to
consider removal of a Trustee, the Trust has undertaken to provide a list of
shareholders or to disseminate appropriate materials (at the expense of the
requesting shareholders). Except as set forth above, the Trustees shall
continue to hold office and may appoint successor Trustees. Voting rights are
not cumulative.
No amendment may be made to the Declaration of Trust without the
affirmative vote of a majority of the outstanding shares of the Trust except (i)
to change the Trust's name or to cure technical problems in the Declaration of
Trust and (ii) to establish, designate or modify new and existing series,
sub-series or classes of shares of any series of Trust shares or other
provisions relating to Trust shares in response to applicable laws or
regulations.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by the Trust or
the Trustees. The Declaration of Trust provides for indemnification out of all
the property of the Fund for all loss and expense of any shareholder of that
Fund held personally liable for the obligations of
-18-
<PAGE>
the Trust. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is considered remote since it is limited to
circumstances in which the disclaimer is inoperative and the Fund is unable to
meet its obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing
in the Declaration of Trust protects a Trustee against any liability to which
the Trustee would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office. The Declaration of Trust also provides for
indemnification by the Trust of the Trustees and the officers of the Trust
against liabilities and expenses reasonably incurred in connection with
litigation in which they may be involved because of their offices with the
Trust, except if it is determined in the manner specified in the Declaration
of Trust that such Trustees are liable to the Trust or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties. In addition, the Adviser has agreed to indemnify
each Trustee who is not "an interested person" of the Trust to the maximum
extent permitted by the 1940 Act against any liabilities arising by reason of
such Trustee's status as a Trustee of the Trust.
The officers and trustees of the Trust, as a group, own less than 1% of the
outstanding shares of the Trust.
DETERMINATION OF NET ASSET VALUE
As indicated in the Prospectus, the net asset value of the Fund is
determined as of 4:00 p.m., New York Time on each day on which the New York
Stock Exchange is open for trading.
The Trust expects that the days, other than weekend days, that the New York
Stock Exchange will not be open are Independence Day (observed), Labor Day,
Thanksgiving Day, Christmas Day, New Year's Day, Martin Luther King, Jr. Day,
Washington's Birthday, Good Friday and Memorial Day.
Portfolio securities listed on a securities exchange for which market
quotations are available are valued at the last quoted sale price on each
business day, or, if there is no such reported sale, at the most recent quoted
bid price. Price information on listed securities is generally taken from the
closing price on the exchange where the security is primarily traded. Unlisted
securities for which market quotations are readily available are valued at the
most recent quoted bid price, except that debt obligations with sixty days or
less remaining until maturity may be valued at their amortized cost.
Exchange-traded options, futures and options on futures are valued at the
settlement price as determined by the appropriate clearing corporation. Other
assets and securities for which no quotations are readily available are valued
at fair value as determined in good faith by the Trustees of the Trust or by
persons acting at their direction.
-19-
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
The procedures for purchasing shares of the Fund and for determining the
offering price of such shares are described in the Prospectus.
FINANCIAL STATEMENTS
The financial statement in this Statement of Additional Information has
been audited by PricewaterhouseCoopers LLP, independent accountants, and has
been so included in reliance upon the report of said firm, which report is given
upon their authority as experts in auditing and accounting.
<TABLE>
<CAPTION>
Barr Rosenberg VIT Market Neutral Fund
Statement of Assets and Liabilities
November 16, 1998
<S> <C>
ASSETS:
Cash $ 100,000
Total Assets 100,000
LIABILITIES:
-
----------
NET ASSETS: $ 100,000
----------
----------
NET ASSETS CONSIST OF:
Capital $ 100,000
----------
----------
----------
NET ASSETS: $ 100,000
----------
----------
----------
SHARES OUTSTANDING: $ 10,000
----------
----------
NET ASSET VALUE:
Offering and redemption price per share $ 10.00
----------
----------
</TABLE>
See notes to Statement of Assets and Liabilities.
-20-
<PAGE>
BARR ROSENBERG VIT MARKET NEUTRAL FUND
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
November 16, 1998
1. ORGANIZATION
The Barr Rosenberg Variable Insurance Trust (the "Trust") was organized as
a Massachusetts business trust on March 1, 1998. The Trust is a
diversified open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). There are an unlimited
number of authorized units of beneficial interest ("shares") of the Trust
which may be divided into an unlimited number of series of shares.
Currently, there is one series; the Barr Rosenberg VIT Market Neutral Fund
(the "Fund").
The objective of the Fund is to seek long term capital appreciation, while
maintaining minimal exposure to general equity market risk. The Fund seeks
to achieve its objective by taking long positions in stocks principally
traded in the markets of the United States that Rosenberg Institutional
Equity Management (the "Manager") has identified as undervalued and short
positions in such stocks that the Manager has identified as overvalued.
2. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION EXPENSE. All costs incurred by the Trust in connection with
the organization of the Fund and the initial public offering of shares of
the Fund, principally professional fees and printing, were paid on behalf
of the Trust by the Manager.
FEDERAL INCOME TAXES: The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and to make the requisite distributions of taxable income to its
shareholders which will be sufficient to relieve it from all or
substantially all federal income taxes.
USE OF ESTIMATES: Estimates and assumptions are required to be made
regarding assets and liabilities when financial statements are prepared.
Changes in the economic environment, financial markets and any other
parameters used in determining these estimates could cause actual results
to differ from these amounts.
3. RELATED PARTY TRANSACTIONS
Rosenberg Institutional Equity Management (the "Manager") will serve as the
investment adviser of the Fund. Under the terms of an investment advisory
agreement between the Trust and the Manager , the Manager will be entitled
to receive fees based on a percentage of the average net assets of the
Fund. The Fund will pay the Manager an annual rate of 1.90% of the Fund's
average daily net assets. The Manager has undertaken to waive its
management fee and bear certain expenses in order to limit the total annual
operating expenses to 2.00% of the Funds average daily net assets.
<PAGE>
As part of the Fund's organization the Fund has issued in a private
placement 10,000 shares of beneficial interest to the Manager at $10.00 a
share.
BISYS Fund Services Ohio, Inc. ("BISYS"), a wholly-owned subsidiary of
The BISYS Group, Inc., will serve as the administrator for the Fund.
BISYS Fund Services Ohio, Inc. will serve as transfer agent for and
provide fund accounting services to the Trust.
Certain officers of the Trust are affiliated with the Manager or BISYS.
Such persons are not paid directly by the Trust for serving in those
capacities.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of
Barr Rosenberg VIT Market Neutral Fund
In our opinion, the accompanying statement of assets and liabilities present
fairly, in all material respects, the financial position of Barr Rosenberg VIT
Market Neutral Fund (the "Fund") at November 16, 1998, in conformity with
generally accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
San Francisco, California
November 16, 1998
<PAGE>
PART C.
OTHER INFORMATION --
THE BARR ROSENBERG VIT MARKET NEUTRAL FUND ONLY
ITEM 23. EXHIBITS.
(a) (1) Agreement and Declaration of Trust of the Registrant --
incorporated by reference to the Registration Statement filed on
April 20, 1998;
(2) Amendment No. 1 to Agreement and Declaration of Trust of the
Registrant -- incorporated by reference to the Registration
Statement filed on April 20, 1998;
(b) By-Laws of the Registrant --incorporated by reference to the
Registration Statement filed on April 20, 1998;
(c) None;
(d) Management Contract between the Registrant on behalf of its Barr
Rosenberg VIT Market Neutral Fund and AXA Rosenberg Investment
Management LLC - incorporated by reference to Post-Effective
Amendment No. 1 to the Registration Statement filed on
February 16, 1999;
(e) None;
(f) None;
(g) (1) Custody Agreement between the Registrant and Custodial Trust
Company -- filed herewith;
(2) Special Custody Account Agreement among the Registrant,
Custodial Trust Company and Bear, Stearns Securities Corp. --
filed herewith;
(h) (1) Transfer Agency Agreement between the Registrant and BISYS Fund
Services Ohio, Inc. -- incorporated by reference to Pre-
Effective Amendment No. 1 to the Registration Statement filed
on October 30, 1998;
<PAGE>
(2) Notification of Expense Limitation by AXA Rosenberg Investment
Management LLC to the Barr Rosenberg VIT Market Neutral Fund --
incorporated by reference to Post-Effective Amendment No. 1 to
the Registration Statement filed on February 16, 1999;
(3) Fund Administration Agreement between the Registrant and BISYS
Fund Services Ohio, Inc. -- incorporated by reference to Pre-
Effective Amendment No. 1 to the Registration Statement filed
on October 30, 1998;
(4) Fund Accounting Agreement between the Registrant and BISYS Fund
Services Ohio, Inc. -- incorporated by reference to
Pre-Effective Amendment No. 1 to the Registration Statement filed
on October 30, 1998;
(i) Opinion of Ropes & Gray -- incorporated by reference to
Pre-Effective Amendment No. 2 to the Registration Statement filed
on October 30, 1998;
(j) Consent of PricewaterhouseCoopers LLP -- filed herewith;
(k) None;
(l) Investment letter regarding initial capital --incorporated by
reference to Pre-Effective Amendment No. 2 to the Registration
Statement filed on October 30, 1998;
(m) Distribution and Service Plan of the Registrant -- filed
herewith;
(n) Not Applicable;
(o) Not Applicable;
(p) (i) Power of Attorney of Po-Len Hew --incorporated by
reference to the Registration Statement filed on April
20, 1998;
(ii) Power of Attorney of Nils H. Hakansson -- incorporated
by reference to Pre-Effective Amendment No. 1 to the
Registration Statement filed on October 30, 1998
(iii) Power of Attorney of William F. Sharpe -- incorporated
by reference to Pre-Effective Amendment No. 1 to the
Registration Statement filed on October 30, 1998;
-2-
<PAGE>
(iv) Power of Attorney of Dwight M. Jaffee -- incorporated
by reference to Post-Effective Amendment No. 1 to
the Registration Statement filed on February 16, 1999;
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
The Board of Trustees of Registrant is substantially similar to the
Board of Trustees of other Funds advised by AXA Rosenberg Investment
Management LLC. In addition, the officers of these Funds are
substantially identical. Nonetheless, the Registrant takes the
position that it is not under common control with these other Funds
since the power residing in the respective boards and officers arises
as the result of an official position with the respective Funds.
ITEM 25. INDEMNIFICATION.
(a) Indemnification
Article VIII of the Registrant's Agreement and Declaration of Trust
reads as follows (referring to the Registrant as the "Trust"):
ARTICLE VIII
Indemnification
SECTION 1. TRUSTEES, OFFICERS, ETC. The Trust shall indemnify
each of its Trustees and officers (including persons who serve at the
Trust's request as 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 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. 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
-3-
<PAGE>
disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to 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.
SECTION 2. COMPROMISE PAYMENT. As to any matter disposed of
(whether by a compromise payment, pursuant to a consent decree or
otherwise) without an adjudication by a court, or by any other body
before which the proceeding was brought, that such Covered Person is
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 his or her office, indemnification
shall be provided if (a) approved, after notice that it involves such
indemnification, by at least 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) upon a determination, based
upon a review of readily available facts (as opposed to a full trial
type inquiry) that such Covered Person is not 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 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 indemnification would not protect such Person against
any liability to the Trust to which he would otherwise 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.
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 to
have been 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.
SECTION 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
-4-
<PAGE>
"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 1940 Act (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; provided, however, that the Trust shall not purchase or
maintain any such liability insurance in contravention of applicable
law, including without limitation the 1940 Act.
SECTION 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 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.
* * * * *
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(b) Insurance
-5-
<PAGE>
The Trust maintains Professional Liability Insurance for each of its
directors and officers. The Trust's policy is carried by the American
International Specialty Lines Insurance Company and insures each
director and officer against professional liability for decisions made
in connection with the Trust, to the extent permitted by the 1940 Act,
up to a maximum of $3,000,000.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.
AXA Rosenberg Investment Management LLC (the "Adviser") was organized as
a limited liability company under the laws of the State of Delaware in 1998,
and is registered as an investment adviser under the Investment Advisers Act
of 1940. The Manager provides investment advisory services to a substantial
number of institutional investors and to the six series of Barr Rosenberg
Series Trust, an open-end management investment company.
Set forth below are the substantial business engagements during at least
the past two fiscal years of each director or officer of the Adviser:
Name and Position with Adviser Business and Other Connections
- ------------------------------ ------------------------------
Barr M. Rosenberg General Partner, Rosenberg Alpha L.P.
Director of Research (formerly RBR Partners (limited partner
of Manager)), 12 El Sueno, Orinda,
California, December 1984 to present;
Chairman of the Board, Rosenberg
Management Company S.A., 2 Place Winston
Churchill, L-1340 Luxembourg, April 1989
to present; Chairman of the Board,
Rosenberg U.S. Japan Management Company
S.A., 2 Place Winston Churchill, L-1340
Luxembourg, July 1989 to present.
Chairman of the Board, Rosenberg Global
Management Company, S.A., 2 Place
Winston Churchill, L-1340 Luxemburg,
April 1990 to present; Director and
Chairman of the Board, Rosenberg Nomura
Asset Management Company, Ltd., Dai-Ichi
Edobashi Bldg., 1-11-1 Nihonbashi
Chuo-Ku, Tokyo 103, Japan; Chairman of
the Board and Director of Barr Rosenberg
Investment Management, Inc., 4 Orinda
Way, Orinda, California, February 1990
to present. Chairman, Barr Rosenberg
European Management, Ltd., 9A Devonshire
-6-
<PAGE>
Square, London EC2M 4LY, United Kingdom,
March 1990 to present. Chairman, AXA
Rosenberg Group LLC, January 1999 to
present; Director, Barr Rosenberg
Research Center LLC, January 1999 to
present; Managing General Partner
and Chief Investment Officer, Rosenberg
Institutional Equity Management, January
1985 to December 1998.
Kenneth Reid Director, Barr Rosenberg Investment
Chief Executive Officer Management, Inc., 4 Orinda Way, Orinda,
California, February 1990 to present;
General Partner and Director of
Research, Rosenberg Institutional Equity
Management, June 1986 to December 1998.
William Ricks Director of Accounting Research,
Chief Investment Adviser Portfolio Engineer and Research
Associate, Rosenberg Institutional
Equity Management, 1989 to 1998.
Cecelia Baron Marketing Director, Rosenberg
Marketing Director Institutional Equity Management, 1993 to
1998; Vice president and Manager of
Business Development, Fischer Francis
Trees & Watts, New York, 1985 to 1993.
-7-
<PAGE>
ITEM 27. PRINCIPAL UNDERWRITERS.
Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The account books and other documents required to be maintained under
Section 31(a) of the Investment Company Act of 1940, as amended, and the Rules
thereunder will be maintained at the offices of:
1) Barr Rosenberg Variable Insurance Trust
3435 Stelzer Road
Columbus, Ohio 43219
Rule 31a-1 (b)(1),(2),(3), (4), (5), (6), (7), (8), (9), (10), (11)
Rule 31a-2 (a)
2) AXA Rosenberg Investment Management LLC
Four Orinda Way
Building E
Orinda, CA 94563
Rule 31a-1 (f)
Rule 31a-2 (e)
ITEM 29. MANAGEMENT SERVICES.
None.
ITEM 30. UNDERTAKINGS.
The Registrant undertakes to comply with the last three paragraphs of
Section 16(c) of the Investment Company Act of 1940 as though such provisions of
the Act were applicable to the Trust.
-8-
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of the
Registrant is on file with the Secretary of The Commonwealth of Massachusetts
and notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and that the obligations of or arising out of this instrument are not binding
for any of the trustees or shareholders individually but are binding only upon
the assets and property of the Registrant.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Fund certifies that it meets all of the
requirements for effectiveness of this Amendment to its Registration
Statement under Rule 485(b) under the Securities Act of 1933 and has duly
caused this Post-Effective Amendment No. 3 to its Registration Statement to
be signed on its behalf by the undersigned, duly authorized, in the City of
Orinda, and the State of California, on the 15th day of April, 1999.
BARR ROSENBERG VARIABLE INSURANCE
TRUST
By: KENNETH REID
-------------------------------------
Kenneth Reid
President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment to its Registration Statement has been signed below by the following
persons in the capacities indicated and on the 15th day of April, 1999.
SIGNATURE TITLE DATE
--------- ----- ----
KENNETH REID President and Trustee April 15, 1999
---------------- (principal executive officer)
Kenneth Reid
Po-Len Hew* Treasurer April 15, 1999
- ------------------------ (principal financial and
Po-Len Hew accounting officer)
William F. Sharpe* Trustee April 15, 1999
- ------------------------
William F. Sharpe
Nils H. Hakansson* Trustee April 15, 1999
- ------------------------
Nils H. Hakansson
Dwight M. Jaffee* Trustee April 15, 1999
- ------------------------
Dwight M. Jaffee
*By: KENNETH REID
----------------------
Kenneth Reid
Attorney-in-Fact
Date: April 15, 1999
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
23(g)(1) Custody Agreement between the Registrant
and Custodial Trust Company
23(g)(2) Special Custody Account Agreement among
the Registrant, Custodial Trust Company
and Bear, Stearns Securities Corp.
23(j) Consent of PricewaterhouseCoopers LLP
23(m) Distribution and Service Plan
<PAGE>
CUSTODY AGREEMENT
AGREEMENT, dated as of October 30, 1998, by and between BARR ROSENBERG
VARIABLE INSURANCE TRUST (the "Trust"), a business trust organized and existing
under the laws of The Commonwealth of Massachusetts, acting with respect to and
on behalf of each of the series of the Trust that are identified on Exhibit A
hereto, as amended from time to time (each, a "Portfolio"), and CUSTODIAL TRUST
COMPANY, a bank organized and existing under the laws of the State of New Jersey
(the "Custodian").
WHEREAS, the Trust desires that the securities, funds and other assets
of the Portfolios be held and administered by Custodian pursuant to this
Agreement;
WHEREAS, each Portfolio is an investment portfolio represented by a
series of Shares included among the shares of beneficial interest issued by the
Trust, an open-end management investment company registered under the 1940 Act;
WHEREAS, Custodian represents that it is a bank having the
qualifications prescribed in the 1940 Act to act as custodian for management
investment companies registered under the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Trust and Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following terms, unless the
context otherwise requires, shall mean:
1.1 "AUTHORIZED PERSON" means any person authorized by resolution of
the Board of Trustees to give Oral Instructions and Written Instructions on
behalf of the Trust and identified, by
<PAGE>
name or by office, in Exhibit B hereto or any person designated to do so by an
investment adviser of any Portfolio who is named by the Trust in Exhibit C
hereto.
1.2 "BOARD OF TRUSTEES" means the Board of Trustees of the Trust or,
when permitted under the 1940 Act, the Executive Committee thereof, if any.
1.3 "BOOK-ENTRY SYSTEM" means a book-entry system maintained by a
Federal Reserve Bank for securities of the United States government or of
agencies or instrumentalities thereof (including government-sponsored
enterprises).
1.4 "BUSINESS DAY" means any day on which banks in the State of New
Jersey and New York are open for business.
1.5 "CUSTODY ACCOUNT" means, with respect to a Portfolio, the account
in the name of such Portfolio, which is provided for in Section 3.2 below.
1.6 "DOMESTIC SECURITIES DEPOSITORY" means The Depository Trust Company
and any other clearing agency registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, which acts as a securities
depository.
1.7 "ELIGIBLE DOMESTIC BANK" means a bank as defined in the 1940 Act.
1.8 "ELIGIBLE FOREIGN CUSTODIAN" means any banking institution, trust
company or other entity (including any Foreign Securities Depository)
incorporated or organized under the laws of a country other than the United
States which is eligible under the 1940 Act to act as a custodian for securities
and other assets of a Portfolio held outside the United States.
1.9 "FOREIGN CUSTODY MANAGER" has the same meaning as in the 1940 Act.
1.10 "FOREIGN SECURITIES DEPOSITORY" means a foreign securities
depository or clearing agency that qualifies as an Eligible Foreign Custodian as
defined in the 1940 Act.
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1.11 "MASTER REPURCHASE AGREEMENT" means the Master Repurchase
Agreement of even date herewith between the Trust and Bear, Stearns & Co. Inc.
as it may from time to time be amended.
1.12 "MASTER SECURITIES LOAN AGREEMENT" means the Master Securities
Loan Agreement of even date herewith between the Trust and Bear, Stearns
Securities Corp. as it may from time to time be amended.
1.13 "1940 ACT" means the Investment Company Act of 1940, as amended,
and the rules and regulations thereunder.
1.14 "ORAL INSTRUCTIONS" means instructions orally transmitted to and
received by Custodian which are (a) reasonably believed by Custodian to have
been given by an Authorized Person and (b) completed in accordance with
Custodian's reasonable requirements from time to time as to content of
instructions and their manner and timeliness of delivery by the Trust.
1.15 "PROPER INSTRUCTIONS" means Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by the Trust and Custodian.
1.16 "SECURITIES DEPOSITORY" means any Domestic Securities
Depository or Foreign Securities Depository.
1.17 "SHARES" means, with respect to a Portfolio, those shares in a
series or class of beneficial interests of the Trust that represent interests in
such Portfolio.
1.18 "WRITTEN INSTRUCTIONS" means written communications received by
Custodian that are (a) reasonably believed by Custodian to have been signed or
sent by an Authorized Person, (b) sent or transmitted by letter, facsimile,
central processing unit connection, on-line terminal or magnetic
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tape, and (c) completed in accordance with Custodian's reasonable requirements
from time to time as to content of instructions and their manner and timeliness
of delivery by the Trust.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 APPOINTMENT. The Trust hereby appoints Custodian as custodian of
all such securities, funds and other assets of each Portfolio as may be
acceptable to Custodian and from time to time delivered to it by the Trust or
others for the account of such Portfolio.
2.2 ACCEPTANCE. Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF SECURITIES, FUNDS AND OTHER ASSETS
3.1 SEGREGATION. All securities and non-cash property of a Portfolio in
the possession of Custodian (other than securities maintained by Custodian with
a sub-custodian appointed pursuant to this Agreement or in a Securities
Depository or Book-Entry System) shall be physically segregated from other such
securities and non-cash property in the possession of Custodian. All cash,
securities and other non-cash property of a Portfolio shall be identified as
belonging to such Portfolio.
3.2 CUSTODY ACCOUNT. (a) Custodian shall open and maintain in its trust
department a custody account in the name of each Portfolio, subject only to
draft or order of Custodian, in which Custodian shall enter and carry all
securities, funds and other assets of such Portfolio which are delivered to
Custodian and accepted by it.
(b) If, with respect to any Portfolio, Custodian at any time fails to
receive any of the documents referred to in Section 3.10(a) below, then, until
such time as it receives such document,
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it shall not be obligated to receive any securities into the Custody Account of
such Portfolio and shall be entitled to return to such Portfolio any securities
that it is holding in such Custody Account.
3.3 SECURITIES IN PHYSICAL FORM. Custodian may, but shall not be
obligated to, hold securities that may be held only in physical form.
3.4 DISCLOSURE TO ISSUERS OF SECURITIES. Custodian is authorized to
disclose the Trust's and any Portfolio's names and addresses, and the securities
positions in such Portfolio's Custody Account, to the issuers of such securities
when requested by them to do so.
3.5 APPOINTMENT OF DOMESTIC SUB-CUSTODIANS. Custodian may at any time
and from time to time, subject to the Trust=s prior approval, appoint and
employ, and at any time, in its sole discretion, cease to employ, any Eligible
Domestic Bank qualified to act as custodian for management investment companies
registered under the 1940 Act as sub-custodian to hold securities and other
assets of a Portfolio that are maintained in the United States and to carry out
such other provisions of this Agreement as it may determine. The appointment of
any such sub-custodian shall be at Custodian's expense and shall not relieve
Custodian of any of its obligations or liabilities under this Agreement.
3.6 APPOINTMENT OF FOREIGN SUB-CUSTODIANS. (a) At any time and from
time to time, Custodian may, in its discretion, appoint and employ in accordance
with the 1940 Act (i) any overseas branch of any Eligible Domestic Bank, or (ii)
any Eligible Foreign Custodian selected by the Foreign Custody Manager, in each
case as a foreign sub-custodian for securities and other assets of a Portfolio
that are maintained outside the United States, provided that the employment of
any such overseas branch has been approved by the Fund, and provided that, in
the case of any such Eligible Foreign Custodian, the Foreign Custody Manager has
approved, in writing, the agreement (and/or, in the case of a Foreign Securities
Depository, the rules and/or established practices or procedures thereof)
pursuant to which Custodian employs such Eligible Foreign Custodian.
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(b) Set forth on Exhibit D hereto, with respect to each Portfolio, are
the foreign sub-custodians (including Foreign Securities Depositories) that
Custodian may employ pursuant to Section 3.6(a) above. Exhibit D shall be
revised from time to time as foreign sub-custodians are added or deleted.
(c) If the Trust proposes to have a Portfolio make an investment which
is to be held in a country in which Custodian does not have appropriate
arrangements in place with a foreign sub-custodian selected by the Foreign
Custody Manager, then the Trust shall inform Custodian sufficiently in advance
of such investment to allow Custodian to put such arrangements in place.
(d) Notwithstanding anything to the contrary in Section 8.1 below or
elsewhere in this Agreement, Custodian shall have no greater liability to any
Portfolio or the Trust for the actions or omissions of any foreign sub-custodian
appointed pursuant to this Agreement than any such foreign sub-custodian has to
Custodian, and Custodian shall not be required to discharge any such liability
which may be imposed on it unless and until such foreign sub-custodian has
effectively indemnified Custodian against it or has otherwise discharged its
liability to Custodian in full.
(e) Upon the request of the Foreign Custody Manager, Custodian shall
furnish to the Foreign Custody Manager (but no more often than once per year)
information concerning all foreign sub-custodians appointed pursuant to this
Agreement which shall be similar in kind and scope to any such information that
may have been furnished to the Foreign Custody Manager in connection with the
initial approval by the Foreign Custody Manager of the agreements pursuant to
which Custodian employs such foreign sub-custodians or as otherwise required by
the 1940 Act.
3.7 APPOINTMENT OF OTHER AGENTS. Custodian may employ other suitable
agents, which may include affiliates of Custodian such as Bear, Stearns & Co.
Inc. ("Bear Stearns") or Bear, Stearns Securities Corp. ("BS Securities"), both
of which are securities broker-dealers, provided, however, that Custodian shall
not employ (a) BS Securities to hold any collateral pledged by BS Securities
under the Master Securities Loan Agreement or any other securities loan
agreement between the Trust and BS Securities, whether now or hereafter in
effect, or (b) Bear Stearns to hold any securities
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purchased from Bear Stearns under the Master Repurchase Agreement or any other
repurchase agreement between the Trust and Bear Stearns, whether now or
hereafter in effect, and Custodian shall not employ any agent that would subject
a Portfolio to any special audits or other requirements pursuant to Rule 17f-1
under the 1940 Act. The appointment of any agent pursuant to this Section 3.7
shall not relieve Custodian of any of its obligations or liabilities under this
Agreement.
3.8 BANK ACCOUNTS. In its discretion and from time to time Custodian
may open and maintain one or more demand deposit accounts with any Eligible
Domestic Bank (any such accounts to be in the name of Custodian and subject only
to its draft or order), provided, however, that the opening and maintenance of
any such account shall be at Custodian's expense and shall not relieve Custodian
of any of its obligations or liabilities under this Agreement.
3.9 DELIVERY OF ASSETS TO CUSTODIAN. Provided they are acceptable to
Custodian, the Trust shall deliver to Custodian the securities, funds and other
assets of each Portfolio, including without limitation (a) payments of income,
payments of principal and capital distributions received by such Portfolio with
respect to securities, funds or other assets owned by such Portfolio at any time
during the term of this Agreement, and (b) funds received by such Portfolio for
the issuance, at any time during such term, of Shares of such Portfolio.
Custodian shall not be under any duty or obligation to require the Trust to
deliver to it any securities or other assets owned by a Portfolio and shall have
no responsibility or liability for or on account of securities or other assets
not so delivered.
3.10 DOMESTIC SECURITIES DEPOSITORIES AND BOOK-ENTRY SYSTEMS. Custodian
and any sub-custodian appointed pursuant to Section 3.5 above may deposit and/or
maintain securities of any Portfolio in a Domestic Securities Depository or in a
Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of securities of a Portfolio in any Domestic
Securities Depository or Book-Entry System, the Trust shall deliver to Custodian
a resolution of the Board of Trustees, certified by an officer of the Trust,
authorizing and instructing Custodian (and any sub-custodian appointed pursuant
to Section 3.5 above) on an on-going basis to deposit in such Domestic
Securities
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Depository or Book-Entry System all securities eligible for deposit therein and
to make use of such Domestic Securities Depository or Book-Entry System to the
extent possible and practical in connection with the performance of its
obligations hereunder (or under the applicable sub-custody agreement in the case
of such sub-custodian), including, without limitation, in connection with
settlements of purchases and sales of securities, loans of securities, and
deliveries and returns of collateral consisting of securities.
(b) Securities of a Portfolio kept in a Book-Entry System or Domestic
Securities Depository shall be kept in an account ("Depository Account") of
Custodian (or of any sub-custodian appointed pursuant to Section 3.5 above) in
such Book-Entry System or Domestic Securities Depository which includes only
assets held by Custodian (or such sub-custodian) as a fiduciary, custodian or
otherwise for customers (i.e., a non-proprietary account).
(c) The records of Custodian with respect to securities of a Portfolio
that are maintained in a Book-Entry System or Domestic Securities Depository
shall at all times identify such securities as belonging to such Portfolio.
(d) If securities purchased by a Portfolio are to be held in a
Book-Entry System or Domestic Securities Depository, Custodian (or any
sub-custodian appointed pursuant to Section 3.5 above) shall pay for such
securities upon (i) receipt of advice from the Book-Entry System or Domestic
Securities Depository that such securities have been transferred to the
Depository Account, and (ii) the making of an entry on the records of Custodian
(or of such sub-custodian) to reflect such payment and transfer for the account
of such Portfolio. If securities sold by a Portfolio are held in a Book-Entry
System or Domestic Securities Depository, Custodian (or such sub-custodian)
shall transfer such securities upon (A) receipt of advice from the Book-Entry
System or Domestic Securities Depository that payment for such securities has
been transferred to the Depository Account, and (B) the making of an entry on
the records of Custodian (or of such sub-custodian) to reflect such transfer and
payment for the account of such Portfolio.
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(e) Custodian shall provide the Trust with copies of any report
obtained by Custodian (or by any sub-custodian appointed pursuant to Section 3.5
above) from a Book-Entry System or Domestic Securities Depository in which
securities of a Portfolio are kept on the internal accounting controls and
procedures for safeguarding securities deposited in such Book-Entry System or
Domestic Securities Depository.
(f) At its election, the Trust shall be subrogated to the rights of
Custodian (or of any sub-custodian appointed pursuant to Section 3.5 above) with
respect to any claim against a Book-Entry System or Domestic Securities
Depository or any other person for any loss or damage to a Portfolio arising
from the use of such Book-Entry System or Domestic Securities Depository, if and
to the extent that such Portfolio has not been made whole for any such loss or
damage.
3.11 RELATIONSHIP WITH SECURITIES DEPOSITORIES. No Book-Entry System,
Securities Depository, or other securities depository or clearing agency
(whether foreign or domestic) which it is or may become standard market practice
to use for the comparison and settlement of trades in securities shall be an
agent or sub-contractor of Custodian for purposes of Section 3.7 above or
otherwise.
3.12 PAYMENTS FROM CUSTODY ACCOUNT. Upon receipt of Proper Instructions
with respect to a Portfolio but subject to its right to foreclose upon and
liquidate collateral pledged to it pursuant to Section 9.3 below, Custodian
shall make payments from the Custody Account of such Portfolio, but only in the
following cases, provided, FIRST, that there are sufficient funds in such
Custody Account to make such payments, whether belonging to such Portfolio or
advanced to it by Custodian in its sole and absolute discretion as set forth in
Section 3.18 below, and, SECOND, that after the making of such payments, such
Portfolio would not be in violation of any margin or other requirements agreed
upon pursuant to Section 3.18 below:
(a) For the purchase of securities for such Portfolio but only (i) in
the case of securities (other than options on securities, futures contracts and
options on futures contracts), against the delivery to Custodian (or any
sub-custodian appointed pursuant to this Agreement) of such securities
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registered as provided in Section 3.20 below or in proper form for transfer or,
if the purchase of such securities is effected through a Book-Entry System or
Domestic Securities Depository, in accordance with the conditions set forth in
Section 3.10 above, and (ii) in the case of options, futures contracts and
options on futures contracts, against delivery to Custodian (or such
sub-custodian) of evidence of title thereto in favor of such Portfolio, the
Custodian, any such sub-custodian, or any nominee referred to in Section 3.20
below;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 3.13(f) below, of securities owned by such Portfolio;
(c) For transfer in accordance with the provisions of any agreement
among the Trust, Custodian and a securities broker-dealer, relating to
compliance with rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with transactions of such
Portfolio;
(d) For transfer in accordance with the provisions of any agreement
among the Trust, Custodian and a futures commission merchant, relating to
compliance with the rules of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations) regarding margin
or other deposits in connection with transactions of such Portfolio;
(e) For the funding of any time deposit (whether certificated or not)
or other interest-bearing account with any banking institution (including
Custodian), provided that Custodian shall receive and retain such certificate,
advice, receipt or other evidence of deposit (if any) as such banking
institution may deliver with respect to any such deposit or account;
(f) For the purchase from a banking or other financial institution of
loan participations, but only if Custodian has in its possession a copy of the
agreement between the Trust and such banking or other financial institution with
respect to the purchase of such loan participations and provided
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that Custodian shall receive and retain such participation certificate or other
evidence of participation (if any) as such banking or other financial
institution may deliver with respect to any such loan participation;
(g) For the purchase and/or sale of foreign currencies or of options to
purchase and/or sell foreign currencies, for spot or future delivery, for the
account of such Portfolio pursuant to contracts between the Trust and any
banking or other financial institution (including Custodian, any sub-custodian
appointed pursuant to this Agreement and any affiliate of Custodian);
(h) For transfer to a securities broker-dealer as margin for a short
sale of securities for such Portfolio, or as payment in lieu of dividends paid
on securities sold short for such Portfolio;
(i) For the payment of amounts in respect of equity swap contracts
entered into by such Portfolio;
(j) For the payment as provided in Article IV below of any dividends,
capital gain distributions or other distributions declared on the Shares of such
Portfolio;
(k) For the payment as provided in Article IV below of the redemption
price of the Shares of such Portfolio;
(l) For the payment of any expense or liability incurred by such
Portfolio, including but not limited to the following payments for the account
of such Portfolio: interest, taxes, and administration, investment advisory,
distribution, servicing, accounting, auditing, transfer agent, custodian,
trustee and legal fees, and other operating expenses of such Portfolio; in all
cases, whether or not such expenses are to be in whole or in part capitalized or
treated as deferred expenses; and
(m) For any other proper purpose, but only upon receipt of Proper
Instructions, specifying the amount and purpose of such payment, certifying such
purpose to be a proper purpose of such Portfolio, and naming the person or
persons to whom such payment is to be made.
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3.13 DELIVERIES FROM CUSTODY ACCOUNT. Upon receipt of Proper
Instructions with respect to a Portfolio but subject to its right to foreclose
upon and liquidate collateral pledged to it pursuant to Section 9.3 below,
Custodian shall release and deliver securities and other assets from the Custody
Account of such Portfolio, but only in the following cases, provided, FIRST,
that there are sufficient amounts and types of securities or other assets in
such Custody Account to make such delivery, and, SECOND, that after the making
of such delivery, such Portfolio would not be in violation of any margin or
other requirements agreed upon pursuant to Section 3.18 below:
(a) Upon the sale of securities for the account of such Portfolio but,
subject to Section 3.14 below, only against receipt of payment therefor or, if
such sale is effected through a Book-Entry System or Domestic Securities
Depository, in accordance with the provisions of Section 3.10 above;
(b) To an offeror's depository agent in connection with tender or other
similar offers for securities of such Portfolio; provided that, in any such
case, the funds or other consideration for such securities is to be delivered to
Custodian;
(c) To the issuer thereof or its agent when such securities are called,
redeemed or otherwise become payable, provided that in any such case the funds
or other consideration for such securities is to be delivered to Custodian;
(d) To the issuer thereof or its agent for exchange for a different
number of certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new securities
are to be delivered to Custodian;
(e) To the securities broker through whom securities are being sold for
such Portfolio, for examination in accordance with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the issuer of
such securities, or pursuant to provisions for conversion contained in such
securities, or pursuant to any deposit agreement,
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including surrender or receipt of underlying securities in connection with the
issuance or cancellation of depository receipts; provided that, in any such
case, the new securities and funds, if any, are to be delivered to Custodian;
(g) In the case of warrants, rights or similar securities, to the
issuer of such warrants, rights or similar securities, or its agent, upon the
exercise thereof, provided that, in any such case, the new securities and funds,
if any, are to be delivered to Custodian;
(h) To the borrower thereof, or its agent, in connection with any loans
of securities for such Portfolio pursuant to any securities loan agreement
entered into by the Trust, but only against receipt by Custodian of such
collateral as is required under such securities loan agreement;
(i) To any lender, or its agent, as collateral for any borrowings from
such lender by such Portfolio that require a pledge of assets of such Portfolio,
but only against receipt by Custodian of the amounts borrowed;
(j) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of such Portfolio or the Trust;
(k) For delivery in accordance with the provisions of any agreement
among the Trust, Custodian and a securities broker-dealer, relating to
compliance with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection with
transactions of such Portfolio;
(l) For delivery in accordance with the provisions of any agreement
among the Trust, Custodian, and a futures commission merchant, relating to
compliance with the rules of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations) regarding margin
or other deposits in connection with transactions of such Portfolio;
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(m) For delivery to a securities broker-dealer as margin for a short
sale of securities for such Portfolio;
(n) To the issuer of American Depositary Receipts or International
Depositary Receipts (hereinafter, collectively, "ADRs") for such securities, or
its agent, against a written receipt therefor adequately describing such
securities, provided that such securities are delivered together with
instructions to issue ADRs in the name of Custodian or its nominee and to
deliver such ADRs to Custodian;
(o) In the case of ADRs, to the issuer thereof, or its agent, against a
written receipt therefor adequately describing such ADRs, provided that such
ADRs are delivered together with instructions to deliver the securities
underlying such ADRs to Custodian or an agent of Custodian; or
(p) For any other proper purpose, but only upon receipt of Proper
Instructions, specifying the securities or other assets to be delivered, setting
forth the purpose for which such delivery is to be made, certifying such purpose
to be a proper purpose of such Portfolio, and naming the person or persons to
whom delivery of such securities or other assets is to be made.
3.14 DELIVERY PRIOR TO FINAL PAYMENT. When instructed by the Trust to
deliver securities of a Portfolio against payment, Custodian shall be entitled,
but only if in accordance with generally accepted market practice, to deliver
such securities prior to actual receipt of final payment therefor and,
exclusively in the case of securities in physical form, prior to receipt of
payment therefor. In any such case, such Portfolio shall bear the risk that
final payment for such securities may not be made or that such securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and Custodian shall have no liability for any of the foregoing.
3.15 CREDIT PRIOR TO FINAL PAYMENT. In its sole discretion and from
time to time, Custodian may credit the Custody Account of a Portfolio, prior to
actual receipt of final payment thereof, with (a) proceeds from the sale of
securities of such Portfolio which it has been instructed to deliver against
payment, (b) proceeds from the redemption of securities or other assets in such
Custody
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Account, and (c) income from securities, funds or other assets in such Custody
Account. Any such credit shall be conditional upon actual receipt by Custodian
of final payment and may be reversed if final payment is not actually received
in full. Custodian may, in its sole discretion and from time to time, permit a
Portfolio to use funds so credited to its Custody Account in anticipation of
actual receipt of final payment. Any funds so used shall constitute an advance
subject to Section 3.18 below.
3.16 DEFINITION OF FINAL PAYMENT. For purposes of this Agreement,
"final payment" means payment in funds which are (or have become) immediately
available, under applicable law are irreversible, and are not subject to any
security interest, levy, lien or other encumbrance.
3.17 PAYMENTS AND DELIVERIES OUTSIDE UNITED STATES. Notwithstanding
anything to the contrary that may be required by Section 3.12 or Section 3.13
above, or elsewhere in this Agreement, in the case of securities and other
assets maintained outside the United States and in the case of payments made
outside the United States, Custodian and any sub-custodian appointed pursuant to
this Agreement may receive and deliver such securities or other assets, and may
make such payments, in accordance with the laws, regulations, customs,
procedures and practices applicable in the relevant local market outside the
United States;
3.18 CLEARING CREDIT. Custodian may, in its sole discretion and from
time to time, advance funds to the Trust to facilitate the settlement of a
Portfolio's transactions in the Custody Account of such Portfolio. Any such
advance (a) shall be repayable immediately upon demand made by Custodian, (b)
shall be fully secured as provided in Section 9.3 below, and (c) shall bear
interest at such rate, and be subject to such other terms and conditions, as
Custodian and the Trust may agree.
3.19 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. Unless otherwise
instructed by the Trust, Custodian shall with respect to all securities and
other assets held for a Portfolio:
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(a) Subject to Section 8.4 below, receive into the Custody Account of
such Portfolio any funds or other property, including payments of principal,
interest and dividends, due and payable on or on account of such securities and
other assets;
(b) Deliver securities of such Portfolio to the issuers of such
securities or their agents for the transfer thereof into the name of such
Portfolio, Custodian or any of the nominees referred to in Section 3.20 below;
(c) Endorse for collection, in the name of such Portfolio, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or securities in temporary form for
securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the federal income tax laws of the United States, or the laws
or regulations of any other taxing authority, in connection with the transfer of
such securities or other assets or the receipt of income or other payments with
respect thereto;
(f) Receive and hold for such Portfolio all rights and similar
securities issued with respect to securities or other assets of such Portfolio;
(g) As may be required in the execution of Proper Instructions,
transfer funds from the Custody Account of such Portfolio to any demand deposit
account maintained by Custodian pursuant to Section 3.8 above; and
(h) In general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase and transfer of, and other
dealings in, such securities and other assets.
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3.20 REGISTRATION AND TRANSFER OF SECURITIES. All securities held for a
Portfolio that are issuable only in bearer form shall be held by Custodian in
that form, provided that any such securities shall be held in a Securities
Depository or Book-Entry System if eligible therefor. All other securities and
all other assets held for a Portfolio may be registered in the name of (a)
Custodian as agent, (b) any sub-custodian appointed pursuant to this Agreement,
(c) any Securities Depository, or (d) any nominee or agent of any of them. The
Trust shall furnish to Custodian appropriate instruments to enable Custodian to
hold or deliver in proper form for transfer, or to register as in this Section
3.20 provided, any securities or other assets delivered to Custodian which are
registered in the name of a Portfolio.
3.21 RECORDS. (a) Custodian shall maintain complete and accurate
records with respect to securities, funds and other assets held for a Portfolio,
including (i) journals or other records of original entry containing an itemized
daily record in detail of all receipts and deliveries of securities and all
receipts and disbursements of funds; (ii) ledgers (or other records) reflecting
(A) securities in transfer, if any, (B) securities in physical possession, (C)
monies and securities borrowed and monies and securities loaned (together with a
record of the collateral therefor and substitutions of such collateral), (D)
dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) canceled checks and bank records related thereto. Custodian
shall keep such other books and records with respect to securities, funds and
other assets of a Portfolio which are held hereunder as the Trust may reasonably
request or as may be required by the 1940 Act.
(b) All such books and records maintained by Custodian for a Portfolio
shall (i) be maintained in a form acceptable to the Trust and in compliance with
the rules and regulations of the Securities and Exchange Commission, (ii) be the
property of such Portfolio and at all times during the regular business hours of
Custodian be made available upon request for inspection by duly authorized
officers, employees or agents of the Trust (including without limitation
independent auditors of the Trust) and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained under the 1940 Act,
be preserved for the periods prescribed therein.
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3.22 ACCOUNT REPORTS BY CUSTODIAN. Custodian shall furnish the Trust
with a daily activity statement, including a summary of all transfers to or from
the Custody Account of each Portfolio (in the case of securities and other
assets maintained in the United States, on the day following such transfers). At
least monthly and from time to time, Custodian shall furnish the Trust with a
detailed statement of the securities, funds and other assets held for each
Portfolio under this Agreement.
3.23 OTHER REPORTS BY CUSTODIAN. Custodian shall provide the Trust with
such reports as the Trust may reasonably request from time to time on the
internal accounting controls and procedures for safeguarding securities which
are employed by Custodian or any sub-custodian appointed pursuant to this
Agreement.
3.24 PROXIES AND OTHER MATERIALS. (a) Unless otherwise instructed by
the Trust, Custodian shall promptly deliver to the Trust all notices of
meetings, proxy materials (other than proxies) and other announcements, which it
receives regarding securities held by it in the Custody Account of a Portfolio.
Whenever Custodian or any of its agents receives a proxy with respect to
securities in the Custody Account of a Portfolio, Custodian shall promptly
request instructions from Trust on how such securities are to be voted, and
shall give such proxy, or cause it to be given, in accordance with such
instructions. If Trust timely informs Custodian that Trust wishes to vote any
such securities in person, Custodian shall promptly seek to have a legal proxy
covering such securities issued to Trust. Unless otherwise instructed by the
Trust, neither Custodian nor any of its agents shall exercise any voting rights
with respect to securities held hereunder.
(b) Unless otherwise instructed by the Trust, Custodian shall promptly
transmit to the Trust all other written information received by Custodian from
issuers of securities held in the Custody Account of any Portfolio. With respect
to tender or exchange offers for such securities or rights offerings in
connection therewith, Custodian shall promptly transmit to the Trust all written
information received by Custodian from the issuers of the securities whose
tender or exchange is sought and from the party (or its agents) making the
tender or exchange offer or from the issuers of the securities with respect to
which the rights offering is being made. If the Trust desires to take action
with respect to any tender offer, exchange offer, rights offering or other
similar transaction,
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the Trust shall notify Custodian (i) in the case of securities maintained
outside the United States, such number of Business Days prior to the date on
which Custodian is to take such action as will allow Custodian to take such
action in the relevant local market for such securities in a timely fashion, and
(ii) in the case of all other securities, at least three Business Days prior to
the date on which Custodian is to take such action.
3.25 CO-OPERATION. Custodian shall cooperate with and supply necessary
information to the entity or entities appointed by the Trust to keep or audit
the books of account of a Portfolio, to record the owners of the Portfolios=
Shares and/or to compute the value of the assets of a Portfolio.
ARTICLE IV
REDEMPTION OF PORTFOLIO SHARES;
DIVIDENDS AND OTHER DISTRIBUTIONS
4.1 TRANSFER OF FUNDS. From such funds as may be available for the
purpose in the Custody Account of a Portfolio, and upon receipt of Proper
Instructions specifying that the funds are required to redeem Shares of such
Portfolio or to pay dividends or other distributions to holders of Shares of
such Portfolio, Custodian shall transfer each amount specified in such Proper
Instructions to such account of such Portfolio or of an agent thereof (other
than Custodian), at such bank, as the Trust may designate therein with respect
to such amount.
4.2 SOLE DUTY OF CUSTODIAN. Custodian's sole obligation with respect to
the redemption of Shares of a Portfolio and the payment of dividends and other
distributions thereon shall be its obligation set forth in Section 4.1 above,
and Custodian shall not be required to make any payments to the various holders
from time to time of Shares of a Portfolio nor shall Custodian be responsible
for the payment or distribution by the Trust, or any agent designated in Proper
Instructions given pursuant to Section 4.1 above, of any amount paid by
Custodian to the account of the Trust or such agent in accordance with such
Proper Instructions.
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ARTICLE V
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions to do so, Custodian shall establish
and maintain a segregated account or accounts for and on behalf of any
Portfolio, into which account or accounts may be transferred funds and/or
securities, including securities maintained in a Securities Depository:
(a) in accordance with the provisions of any agreement among the Trust,
Custodian and a securities broker-dealer (or any futures commission merchant),
relating to compliance with the rules of The Options Clearing Corporation or of
any registered national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection with
transactions of such Portfolio,
(b) for purposes of segregating funds or securities in connection with
securities options purchased or written by such Portfolio or in connection with
financial futures contracts (or options thereon) purchased or sold by such
Portfolio,
(c) which constitute collateral for loans of securities made by such
Portfolio,
(d) for purposes of compliance by such Portfolio with requirements
under the 1940 Act for the maintenance of segregated accounts by registered
management investment companies in connection with reverse repurchase
agreements, when-issued, delayed delivery and firm commitment transactions,
short sales of securities, and any other appropriate transactions, and
(e) for other proper purposes, but only upon receipt of Proper
Instructions, specifying the purpose or purposes of such segregated account and
certifying such purposes to be proper purposes of such Portfolio.
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ARTICLE VI
CERTAIN REPURCHASE TRANSACTIONS
6.1 TRANSACTIONS. If and to the extent that the necessary funds and
securities of a Portfolio have been entrusted to it under this Agreement, and
subject to Custodian's right to foreclose upon and liquidate collateral pledged
to it pursuant to Section 9.3 below, Custodian, as agent of such Portfolio,
shall from time to time (and unless the Trust gives it Proper Instructions to do
otherwise) make for the account of such Portfolio the transfers of funds and
deliveries of securities which such Portfolio is required to make pursuant to
the Master Repurchase Agreement and shall receive for the account of such
Portfolio the transfers of funds and deliveries of securities which the seller
under the Master Repurchase Agreement is required to make pursuant thereto.
Custodian shall make and receive all such transfers and deliveries pursuant to,
and subject to the terms and conditions of, the Master Repurchase Agreement.
6.2 COLLATERAL. Custodian shall daily mark to market the securities
purchased under the Master Repurchase Agreement and held in the Custody Account
of a Portfolio, and shall give to the seller thereunder any such notice as may
be required thereby in connection with such mark-to-market.
6.3 EVENTS OF DEFAULT. Custodian shall promptly notify the Trust of any
event of default under the Master Repurchase Agreement (as such term "event of
default" is defined therein) of which it has actual knowledge.
6.4 MASTER REPURCHASE AGREEMENT. Custodian hereby acknowledges its
receipt from the Trust of a copy of the Master Repurchase Agreement. The Trust
shall provide Custodian, prior to the effectiveness thereof, with a copy of any
amendment to the Master Repurchase Agreement.
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ARTICLE VII
CERTAIN SECURITIES LENDING TRANSACTIONS
7.1 TRANSACTIONS. If and to the extent that the necessary funds and
securities of a Portfolio have been entrusted to it under this Agreement, and
subject to Custodian's right to foreclose upon and liquidate collateral pledged
to it pursuant to Section 9.3 below, Custodian, as agent of such Portfolio,
shall from time to time (and unless the Trust gives it Proper Instructions to do
otherwise) make for the account of such Portfolio the transfers of funds and
deliveries of securities which such Portfolio is required to make pursuant to
the Master Securities Loan Agreement and shall receive for the account of such
Portfolio the transfers of funds and deliveries of securities which the borrower
under the Master Securities Loan Agreement is required to make pursuant thereto.
Custodian shall make and receive all such transfers and deliveries pursuant to,
and subject to the terms and conditions of, the Master Securities Loan
Agreement.
7.2 COLLATERAL. Custodian shall daily mark to market, in the manner
provided for in the Master Securities Loan Agreement, all loans of securities
which may from time to time be outstanding thereunder.
7.3 DEFAULTS. Custodian shall promptly notify the Trust of any default
under the Master Securities Loan Agreement (as such term "default" is defined
therein) of which it has actual knowledge.
7.4 MASTER SECURITIES LOAN AGREEMENT. Custodian hereby acknowledges its
receipt from the Trust of a copy of the Master Securities Loan Agreement. The
Trust shall provide Custodian, prior to the effectiveness thereof, with a copy
of any amendment to the Master Securities Loan Agreement.
ARTICLE VIII
CONCERNING THE CUSTODIAN
8.1 STANDARD OF CARE. Notwithstanding any other provisions of this
Agreement, Custodian shall be held to the exercise of reasonable care in
carrying out its obligations under this Agreement, and shall be without
liability to any Portfolio or the Trust for any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability or claim which does not
arise from willful
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misfeasance, bad faith or negligence on the part of Custodian. In no event shall
Custodian be liable for special, incidental or consequential damages, even if
Custodian has been advised of the possibility of such damages, or be liable in
any manner whatsoever for any action taken or omitted upon instructions from an
Authorized Person of the Trust or any authorized agent of the Trust in
conformity with such instructions.
8.2 ACTUAL COLLECTION REQUIRED. So long as and to the extent that it is
in the exercise of reasonable care, Custodian shall not be liable for, or
considered to be the custodian of, any funds belonging to a Portfolio or any
money represented by a check, draft or other instrument for the payment of
money, until Custodian or its agents actually receive such funds or collect on
such instrument.
8.3 NO RESPONSIBILITY FOR TITLE, ETC. So long as and to the extent that
it is in the exercise of reasonable care, Custodian shall not be responsible for
the title, validity or genuineness of any assets or evidence of title thereto
received or delivered by it or its agents.
8.4 LIMITATION ON DUTY TO COLLECT. Custodian shall promptly notify the
Trust whenever any money or property due and payable from or on account of any
securities or other assets held hereunder for a Portfolio is not timely received
by it. Custodian shall not, however, be required to enforce collection, by legal
means or otherwise, of any such money or other property not paid when due, but
will use commercially reasonable efforts to obtain such money or property and
shall receive the proceeds of such collections as may be effected by it or its
agents in the ordinary course of Custodian's custody and safekeeping business or
of the custody and safekeeping business of such agents.
8.5 EXPRESS DUTIES ONLY. Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against Custodian. Custodian shall have no discretion whatsoever with respect to
the management, disposition or investment of the Custody Account of any
Portfolio and is not a fiduciary to any Portfolio or the Trust. In particular,
Custodian shall not
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be under any obligation at any time to monitor or to take any other action with
respect to compliance by any Portfolio or the Trust with the 1940 Act, the
provisions of the trust's trust instruments or by-laws, or any Portfolio's
investment objectives, policies and limitations as in effect from time to time.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION. Each Portfolio shall indemnify and hold harmless
Custodian, any sub-custodian appointed pursuant to this Agreement and any
nominee of any of them, from and against any loss, damages, cost, expense
(including reasonable attorneys' fees and disbursements), liability (including,
without limitation, liability arising under the Securities Act of 1933, the
Securities Exchange Act of 1934, the 1940 Act, and any federal, state or foreign
securities and/or banking laws) or claim arising directly or indirectly (a) from
the fact that securities or other assets in the Custody Account of such
Portfolio are registered in the name of any such nominee, or (b) from any action
or inaction, with respect to such Portfolio, by Custodian or such sub-custodian
or nominee (i) at the request or direction of or in reliance on the advice of an
Authorized Person of the Trust or any of its authorized agents, or (ii) upon
Proper Instructions, or (c) generally, from the performance of its obligations
under this Agreement with respect to such Portfolio, provided that Custodian,
any such sub-custodian or any nominee of any of them shall not be indemnified
and held harmless from and against any such loss, damage, cost, expense,
liability or claim arising from willful misfeasance, bad faith or negligence on
the part of Custodian or any such sub-custodian or nominee.
9.2 INDEMNITY TO BE PROVIDED. If the Trust requests Custodian to take
any action with respect to securities or other assets of a Portfolio, which may,
in the opinion of Custodian, result in Custodian or its nominee becoming liable
for the payment of money or incurring liability of some other form, Custodian
shall not be required to take such action until such Portfolio shall have
provided indemnity therefor to Custodian in an amount and form satisfactory to
Custodian.
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9.3 SECURITY. As security for the payment of any present or future
obligation or liability of a Portfolio arising under Section 3.18 hereof to
Custodian (but not to any affiliate of Custodian or any other person), the Trust
hereby pledges to Custodian all securities, funds and other assets of every kind
which are in such Custody Account or otherwise held for such Portfolio pursuant
to this Agreement in an amount not to exceed the total amount advanced under
Section 3.18 hereof, and hereby grants to Custodian a lien, right of set-off and
continuing security interest in such securities, funds and other assets.
ARTICLE X
FORCE MAJEURE
Custodian shall not be liable for any failure or delay in performance
of its obligations under this Agreement arising out of or caused, directly or
indirectly, by circumstances beyond its reasonable control.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
11.1 REPRESENTATIONS WITH RESPECT TO PORTFOLIOS. The Trust represents
and warrants that (a) it has all necessary power and authority to perform the
obligations hereunder of each Portfolio, (b) the execution and delivery by it of
this Agreement, and the performance by it of the obligations hereunder of each
Portfolio, have been duly authorized by all necessary action and will not
violate any law, regulation, charter, by-law, or other instrument, restriction
or provision applicable to it or such Portfolio or by which it or such
Portfolio, or their respective assets, may be bound, and (c) this Agreement
constitutes a legal, valid and binding obligation of the Trust, enforceable
against the Portfolios in accordance with its terms.
11.2 REPRESENTATIONS OF CUSTODIAN. Custodian represents and warrants
that (a) it has all necessary power and authority to perform its obligations
hereunder, (b) the execution and delivery by it of this Agreement, and the
performance by it of its obligations hereunder, have been duly authorized by all
necessary action and will not violate any law, regulation, charter, by-law, or
other
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instrument, restriction or provision applicable to it or by which it or its
assets may be bound, and (c) this Agreement constitutes a legal, valid and
binding obligation of it, enforceable against it in accordance with its terms.
ARTICLE XII
COMPENSATION OF CUSTODIAN
Each Portfolio shall pay Custodian such fees and charges as are set
forth in Exhibit E hereto, as such Exhibit E may from time to time be amended in
writing by Custodian and the Trust. Any annual fee payable by a Portfolio shall
be calculated on the basis of the total market value of the assets in the
Custody Account of such Portfolio as determined on the last Business Day of the
month for which such fee is charged; and such fee, and any transaction charges
payable by such Portfolio, shall be paid monthly by automatic deduction from
such Custody Account. Out-of-pocket expenses incurred by Custodian in the
performance of its services hereunder, and all other proper charges and
disbursements of the Custody Account of any Portfolio, shall be charged to such
Custody Account by Custodian and paid therefrom.
ARTICLE XIII
TAXES
13.1 TAXES PAYABLE BY PORTFOLIOS. Any and all taxes, including any
interest and penalties with respect thereto, which may be levied or assessed
under present or future laws in respect of the Custody Account of any Portfolio
or any income thereof shall be charged to such Custody Account by Custodian and
paid therefrom.
13.2 TAX RECLAIMS. Custodian shall exercise, on behalf of any
Portfolio, any tax reclaim rights of such Portfolio which arise in connection
with foreign securities in the Custody Account of such Portfolio.
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ARTICLE XIV
AUTHORIZED PERSONS; NOTICES
14.1 AUTHORIZED PERSONS. Custodian may rely upon and act in accordance
with any notice, confirmation, instruction or other communication received by it
from the Trust which is reasonably believed by Custodian to have been given or
signed on behalf of the Trust by one of the Authorized Persons designated by the
Trust in Exhibit B hereto, as it may from time to time be revised. The Trust may
revise Exhibit B hereto at any time by notice in writing to Custodian given in
accordance with Section 14.4 below, but no revision of Exhibit B hereto shall be
effective until Custodian actually receives such notice.
14.2 INVESTMENT ADVISERS. Custodian may also act in accordance with any
Written or Oral Instructions given with respect to a Portfolio which are
reasonably believed by Custodian to have been given or signed by one of the
persons designated from time to time by any of the investment advisers of such
Portfolio who are specified in Exhibit C hereto (if any) as it may from time to
time be revised. The Trust may revise Exhibit C hereto at any time by notice in
writing to Custodian given in accordance with Section 14.4 below, and each
investment adviser specified in Exhibit C hereto (if any) may at any time by
like notice designate an Authorized Person or remove an Authorized Person
previously designated by it, but no revision of Exhibit C hereto (if any) and no
designation or removal by such investment adviser shall be effective until
Custodian actually receives such notice.
14.3 ORAL INSTRUCTIONS. Custodian may rely upon and act in accordance
with Oral Instructions. All Oral Instructions shall be confirmed to Custodian in
Written Instructions. However, if Written Instructions confirming Oral
Instructions are not received by Custodian prior to a transaction, it shall in
no way affect the validity of the transaction authorized by such Oral
Instructions or the authorization given by an Authorized Person to effect such
transaction. Custodian shall incur no liability to any Portfolio or the Trust in
acting upon Oral Instructions. To the extent such Oral Instructions vary from
any confirming Written Instructions, Custodian shall advise the
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Trust of such variance but unless confirming Written Instructions are timely
received, such Oral Instructions shall govern.
14.4 ADDRESSES FOR NOTICES. Unless otherwise specified herein, all
demands, notices, instructions, and other communications to be given hereunder
shall be sent, delivered or given to the recipient at the address, or the
relevant telephone number, set forth after its name hereinbelow:
IF TO THE TRUST:
Barr Rosenberg Variable Insurance Trust for [INSERT NAME OF FUND]
4 Orinda Way, Bldg E Orinda, CA 94563
Attention: EDWARD H. LYMAN
Telephone: (510) 254-6464
Facsimile: (510) 253-0141
IF TO CUSTODIAN:
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540-6231
Attention: VICE PRESIDENT - TRUST OPERATIONS
Telephone: (609) 951-2320
Facsimile: (609) 951-2327
or at such other address as either party hereto shall have provided to the other
by notice given in accordance with this Section 14.4. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
14.5 REMOTE CLEARANCE. Written Instructions for the receipt, delivery
or transfer of securities may include, and Custodian shall accept, Remote
Clearance Instructions (as defined hereinbelow) and Bulk Input Instructions (as
defined hereinbelow), provided that such Instructions are given in accordance
with the procedures prescribed by Custodian from time to time as to content of
instructions and their manner and timeliness of delivery by Customer. Custodian
shall be entitled to conclusively assume that all Remote Clearance Instructions
and Bulk Input Instructions have been
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given by an Authorized Person, and Custodian is hereby irrevocably authorized to
act in accordance therewith. For purposes of this Agreement, "Remote Clearance
Instructions" means instructions that are input directly via a remote terminal
which is located on the premises of the Trust, or of an investment adviser named
in Exhibit C hereto, and linked to Custodian; and "Bulk Input Instructions"
means instructions that are input by bulk input computer tape delivered to
Custodian by messenger or transmitted to it via such transmission mechanism as
the Trust and Custodian shall from time to time agree upon.
ARTICLE XV
TERMINATION
Either party hereto may terminate this Agreement with respect to one or
more of the Portfolios by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than thirty
(30) days after the date of the giving of such notice. Upon the date set forth
in such notice this Agreement shall terminate with respect to each Portfolio
specified in such notice, and Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on that date (a) deliver directly to the
successor custodian or its agents all securities (other than securities held in
a Book-Entry System or Securities Depository) and other assets then owned by
such Portfolio and held by Custodian as custodian, and (b) transfer any
securities held in a Book-Entry System or Securities Depository to an account of
or for the benefit of such Portfolio, provided that such Portfolio shall have
paid to Custodian all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled.
ARTICLE XVI
LIMITATION OF LIABILITIES
To the extent that the trustees of the Trust are regarded as entering
into this Agreement, they do so only as trustees of the Trust and not
individually. The obligations under this Agreement of the Trust or any Portfolio
shall not be binding upon any trustee, officer or employee of the Trust
individually, or upon any holder of Shares individually, but shall be binding
only upon the assets and property of such Portfolio. Such trustees, officers,
employees and holders, when acting in such capacities, shall not be personally
liable under this Agreement, and Custodian shall look solely to
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the assets and property of each Portfolio for the performance of this Agreement
with respect to such Portfolio and the payment of any claim against such
Portfolio under this Agreement.
ARTICLE XVII
MISCELLANEOUS
17.1 BUSINESS DAYS. Nothing contained in this Agreement shall require
Custodian to perform any function or duty on a day other than a Business Day.
17.2 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
conflict of law principles thereof.
17.3 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for a Portfolio and such other printed
matter as merely identifies Custodian as custodian for a Portfolio. The Trust
shall submit printed matter requiring approval to Custodian in draft form,
allowing sufficient time for review by Custodian and its counsel prior to any
deadline for printing.
17.4 NO WAIVER. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
17.5 AMENDMENTS. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
17.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
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17.7 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
17.8 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; PROVIDED, HOWEVER, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party. Any
purported assignment in violation of this Section 17.8 shall be void.
17.9 JURISDICTION. Any suit, action or proceeding with respect to this
Agreement may be brought in the Supreme Court of the State of New York, County
of New York, in the United States District Court for the Southern District of
New York, in the Superior Court of the State of California or in the United
States District Court for the Northern District of California and the parties
hereto hereby submit to the non-exclusive jurisdiction of such courts for the
purpose of any such suit, action or proceeding, and hereby waive for such
purpose any other preferential jurisdiction by reason of their present or future
domicile or otherwise.
17.10 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its representative
thereunto duly authorized, all as of the day and year first above written.
BARR ROSENBERG VARIABLE
INSURANCE TRUST
By: /s/ EDWARD H. LYMAN
--------------------------------
Title: Vice President
CUSTODIAL TRUST COMPANY
By: /s/ RONALD D. WATSON
--------------------------------
Title: President
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EXHIBIT A
PORTFOLIOS
- Barr Rosenberg VIT Market Neutral Fund
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EXHIBIT B
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Trust to administer the Custody Accounts of the Portfolios.
Name Signature
Ana Zaldua /s/ ANA ZALDUA
- ------------------------------------ ------------------------------------
Cammie Howard /s/ CAMMIE HOWARD
- ------------------------------------ ------------------------------------
Dorothy Militar /s/ DOROTHY MILITAR
- ------------------------------------ ------------------------------------
Francis William Jump /s/ FRANCIS WILLIAM JUMP
- ------------------------------------ ------------------------------------
Sharon Wong /s/ SHARON WONG
- ------------------------------------ ------------------------------------
- - -
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EXHIBIT C
INVESTMENT ADVISERS
ALL PORTFOLIOS
Rosenberg Institutional Equity Management
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EXHIBIT D
APPROVED FOREIGN SUB-CUSTODIANS AND SECURITIES DEPOSITORIES
ALL PORTFOLIOS
Foreign Sub-custodian Country(ies) Securities Depositories
- --------------------- ------------ -----------------------
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EXHIBIT E
CUSTODY FEES AND TRANSACTION CHARGES
All fees and charges set forth in this Exhibit E shall be calculated
and paid in the manner provided in Article XII above. For purposes of
calculating the annual fee hereinafter provided for and charging the
transactions fees hereinafter provided for, all assets held in the account
established for the Barr Rosenberg VIT Market Neutral Fund (the "Portfolio")
pursuant to the Special Custody Agreement among the The Barr Rosenberg Variable
Insurance Trust, Custodian and Bear Stearns, dated as of October 30, 1998,
shall be deemed to be held in the Custody Account of the Portfolio under this
Agreement and all transactions in such assets shall be deemed to have occurred
in such Custody Account. The Trust shall pay Custodian the following fees for
assets maintained in the Custody Account and charges for transactions by such
Portfolio, all such fees and charges to be payable monthly:
(1) an annual fee consisting of the total of 0.04% (4 basis points) per
annum of the first $50 million of assets in the Custody Account of such
Portfolio, 0.02% (2 basis points) per annum of the next $150 million of such
assets and 0.01% (1 basis point) per annum of the amount of such assets in
excess of $200 million;
(2) a transaction charge for each repurchase transaction in the Custody
Account of such Portfolio which represents a cash sweep investment for such
Portfolio's account, computed at a rate of 0.10% (ten basis points) per annum on
the amount of the purchase price paid by such Portfolio in such repurchase
transaction;
(3) a charge of $10 for each "free" transfer of funds from the Custody
Account of such Portfolio; and
(4) a service charge for each holding of securities or other assets of
such Portfolio that are sold by way of private placement or in such other manner
as to require services by Custodian which
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in its reasonable judgment are materially in excess of those ordinarily required
for the holding of publicly traded securities in the United States.
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SPECIAL CUSTODY ACCOUNT AGREEMENT
(Short Sales)
AGREEMENT (the "Agreement") dated as of October 30, 1998, by and
among Custodial Trust Company, in its capacity as custodian hereunder (the
"Bank"), Barr Rosenberg Variable Insurance Trust, on behalf of its Barr
Rosenberg VIT Market Neutral Fund (the "Customer"), and Bear, Stearns
Securities Corp. (the "Broker").
WHEREAS, Broker is a securities broker-dealer and is a
member of several national securities exchanges; and
WHEREAS, Customer desires from time to time to execute various
securities transactions, including short sales (which are permitted by
Customer's investment policies), and in connection therewith has executed
Broker's Customer Agreement which provides for margin transactions; and
WHEREAS, to facilitate Customer's transactions in short sales of
securities, Customer and Broker desire to establish procedures for the
compliance by Broker with the provisions of Regulation T of the Board of
Governors of the Federal Reserve System and other applicable requirements (the
"Margin Rules"); and
WHEREAS, to assist Broker and Customer in complying with the Margin
Rules, Bank is prepared to act as custodian to hold Collateral as defined below.
NOW THEREFORE, be it agreed as follows:
1. DEFINITIONS
As used herein, the following terms have the following meanings:
(a) "Adequate Margin" in respect of short sales shall mean such
collateral as is adequate in Broker's reasonable judgment
under the Margin Rules and the internal policies of Broker,
the latter of which shall be subject to modification by Broker
in its sole and absolute discretion upon prior notice given
orally to Customer and Bank.
(b) "Advice from Broker" or "Advice" means a written
notice sent to Customer and Bank or transmitted by a
facsimile sending device, except that Advice for
initial or additional Collateral or with respect to
Broker's ability to effect a short sale for the
Customer may be given orally. With respect to any
short sale or Closing Transaction, the Advice from
Broker shall mean a standard confirmation in use by
Broker and sent or transmitted to Customer and Bank.
With respect to substitutions or releases of
Collateral, Advice from Broker means a written notice
signed by
<PAGE>
Broker and sent or transmitted to Customer and Bank. An
authorized agent of Broker will certify to Customer and Bank
the names and signatures of those employees who are
authorized to sign Advice from Broker, which certification
may be amended from time to time. When used herein, the term
"Advise" means the act of sending an Advice from Broker.
(c) "Closing Transaction" is a transaction in which Customer
purchases securities which have been sold short.
(d) "Collateral" shall mean cash or U.S. Government securities or
other marginable securities acceptable to Broker.
(e) "Insolvency" means that (A) an order, judgment or
decree has been entered under the bankruptcy,
reorganization, compromise, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or
similar law (herein called the "Bankruptcy law") of
any competent jurisdiction adjudicating the
Customer insolvent; or (B) the Customer has
petitioned or applied to any tribunal for, or
consented to the appointment of, or taking
possession by, a trustee, receiver, liquidator or
similar official, of the Customer, or commenced a
voluntary case under the Bankruptcy Law of the United
States or any proceedings relating to the Customer
under the Bankruptcy Law of any other competent
jurisdiction, whether now or hereinafter in effect;
or (C) any such petition or application has been
filed, or any such proceedings commenced, against
the Customer and the Customer by any act has
indicated its approval thereof, consent thereto or
acquiescence therein, or an order for relief has been
entered in an involuntary case under the Bankruptcy
Law of the United States, as now or hereinafter
constituted, or an order, judgment or decree has
been entered appointing any such trustee, receiver,
liquidator or similar official, or approving the
petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect
for more than 60 days.
(f) "Instructions from Customer" or "Instructions" means
a request, direction or certification in writing
signed by Customer and delivered to Bank and Broker
or transmitted by a facsimile sending device. An
officer of Customer will certify to Bank and Broker
the names and signatures of those persons authorized
to sign the instructions, which certification may be
amended from time to time. When used herein, the
term "Instruct" shall mean the act of sending an
Instruction from Customer.
(g) "Receipt of Payment" means receipt by Bank, of (1) a certified
or official bank check or wire transfer to Bank; (2) a written
or telegraphic advice from a registered clearing agency that
funds have been or will be credited to the account of Bank; or
(3) a transfer of funds from any of Broker's accounts
maintained at Bank.
2
<PAGE>
(h) "Receipt of Securities" means receipt by Bank, of (1)
securities in proper form for transfer; or (2) a written or
telegraphic advice from a registered clearing agency that
securities have been credited to the account of Bank for the
Special Custody Account.
(i) "Special Custody Account" shall have the meaning assigned to
that term in Section 2 hereof.
2. SPECIAL CUSTODY ACCOUNT
(a) OPENING CUSTODY ACCOUNT. Bank shall open an account
on its books entitled "Special Custody Account for
Bear, Stearns Securities Corp. as Pledgee of Barr
Rosenberg Variable Insurance Trust, on behalf of its
Barr Rosenberg VIT Market Neutral Fund" (the "Special
Custody Account") and shall hold therein all
securities and similar property as shall be received
and accepted by it therein pursuant to this
Agreement. Customer agrees to instruct Bank in
Instructions from Customer as to cash and specific
securities which Bank is to identify on its books and
records as pledged to Broker as Collateral in the
Special Custody Account. Customer agrees that the
value of such cash and securities shall be at least
equal in value to what Broker shall initially and
from time to time Advise Customer in an Advice from
Broker is necessary to constitute Adequate Margin.
Such Collateral (i) will be held by Bank for Broker
as agent of Broker, (ii) may be released only in
accordance with the terms of this Agreement, and
(iii) except as required to be released hereunder to
Broker, shall not be made available to Broker or any
other person claiming through Broker, including the
creditors of the Broker. In the event Customer
wishes to add another series of Barr Rosenberg
Variable Insurance Trust to this Agreement, the
title of such account shall be appended to this
Agreement as a schedule.
(b) SECURITY INTEREST. Customer hereby grants a
continuing security interest to Broker in the
Collateral in the Special Custody Account. To
perfect Broker's security interest, Bank will hold
the Collateral in the Special Custody Account,
subject to the interest therein of Broker as the
pledgee and secured party thereof in accordance with
the terms of this Agreement. Such security interest
will terminate at such time as Collateral is
released as provided herein. Bank shall have no
responsibility for the validity or enforceability of
such security interest.
(c) CONFIRMATION. Bank will confirm in writing to Broker and
Customer all pledges, releases or substitutions of Collateral
and will supply Broker and Customer with a monthly statement
of Collateral and transactions in the Special Custody Account
for such month. Bank will also advise Broker upon request of
the kind and amount of Collateral pledged to Broker.
3
<PAGE>
(d) EXCESS COLLATERAL. Upon the request of Customer, Broker shall
Advise Bank and Customer of any excess of Collateral in the
Special Custody Account. Such excess shall at Customer's
request be transferred therefrom upon Advice from Broker.
Customer represents and warrants to Broker that securities
included at any time in the Collateral shall be in good
deliverable form (or bank shall have the unrestricted power to
put such securities into good deliverable form) in accordance
with the requirements of such exchanges as may be the primary
market or markets for such securities.
(e) ACCOUNTS AND RECORDS. Bank will maintain accounts and records
for the Collateral in the Special Custody Account as more
fully described in sub-paragraph 5(a) below. The Collateral
shall at all times remain the property of the Customer subject
only to the extent of the interest and rights therein
of Broker as the pledgee thereof.
3. ORIGINAL AND VARIATION MARGIN ON SHORT SALES
(a) SHORT SALES. From time to time, Customer may place orders with
Broker for the short sale of securities. Prior to the
acceptance of such orders Broker will Advise Customer of
Broker's ability to borrow such securities or other properties
and acceptance of short sale orders will be contingent upon
same.
(b) OPEN SHORT SALES BALANCE. Broker shall, based on the
closing market price on each business day, compute
the aggregate net credit or debit balance on
Customer's open short sales and advise Customer
and/or Customer's designated agent by 11:00 A.M. New
York time on the next business day (the
"Determination Day") of the amount of the net debit
or credit, as the case may be. If a net debit
balance exists on the Determination Day, Customer
will cause an amount equal to such net debit balance
to be paid to Broker by the close of business on the
Determination Day. If a net credit balance exists
on the Determination Day, Broker will pay such credit
balance to Customer by the close of business on the
Determination Day. As Customer's open short
positions are marked-to- market each business day,
payments will be made by or to Customer to reflect
changes (if any) in the credit or debit balances.
Broker will charge interest on debit balances, and
Broker will pay interest on credit balances.
Balances will be appropriately adjusted when short
sales are closed out.
4. PLACING ORDERS
It is understood and agreed that Customer, when placing with Broker any
order to sell short for Customer's account, will designate the order as such and
hereby authorizes Broker to mark such order as being "short", and when placing
with Broker any order to sell long for Customer's account, will designate the
order as such and hereby authorizes Broker to mark such order as being "long".
4
<PAGE>
Any sell order which Customer shall designate as being for long account as above
provided is for securities then owned by Customer and, if such securities are
not then deliverable by Broker from any account of Customer, the placing of such
order shall constitute a representation by Customer that it is impracticable for
Customer then to deliver such securities to Broker but that Customer shall
deliver them by the settlement date or as soon as possible thereafter.
5. RIGHTS AND DUTIES OF THE BANK
(a) GENERALLY. The Bank shall receive and hold in the
Special Custody Account, as custodian upon the terms
of this Agreement, all Collateral deposited and
maintained pursuant to the terms of this Agreement
and, except as provided in sub-paragraph 5(b) below,
shall receive and hold all monies and other property
paid, distributed or substituted in respect of such
Collateral or realized on the sale or other
disposition of such Collateral; provided, however,
that the Bank shall have no duty to require any
money or securities to be delivered to it or to
determine that the amount and form of assets
delivered to it comply with any applicable
requirements. Collateral held in the Special Custody
Account shall be released only in accordance with this
Agreement or as required by applicable law. The Customer
warrants its authority to deposit in such account any money,
securities and other property received by the Bank. The Bank
may hold the securities in the Special Custody Account in
bearer, nominee, book entry, or other form and in a depository
or clearing corporation, with or without indicating that the
securities are held hereunder; provided, however, that all
securities held in the Special Custody Account shall be
identified on the Bank's records as subject to this Agreement
and shall be in a form that permits transfer without
additional authorization or consent of the Customer.
(b) DIVIDENDS AND INTEREST. Any interest, dividends or other
distributions paid with respect to the Collateral held in the
Special Custody Account shall be retained therein as
additional Collateral.
(c) REPORTS. The Bank shall provide Broker and Customer
with written confirmation of each transfer into and
out of the Special Custody Account, in each case as
promptly as practical, but in any event not later
than the next business day. The Bank also shall
render to the Broker and the Customer and/or
Customer's designated agent a monthly statement of
the Collateral held in the Special Custody Account.
In addition, the Bank will advise the Broker and the
Customer and/or Customer's designated agent, upon
request of the Broker or Customer, at any time of the
type and amount of Collateral held in the account;
provided, however, that the Bank shall have no
responsibility for making any determination as to
the value of such Collateral.
5
<PAGE>
(d) LIMITATION OF BANK'S LIABILITY. The Bank's duties
and responsibilities under this Agreement are as set
forth herein. The Bank shall act only upon receipt
of Advice from Broker regarding release or
substitution of Collateral. The Bank shall not be
liable or responsible for anything done, or omitted
to be done by it in good faith and in the absence of
negligence and may rely and shall be protected in
acting upon any notice, instruction or other
communication which it reasonably believes to be
genuine and authorized. As between Customer and the
Bank, the terms of the Custodian Agreement entered
into thereby shall apply with respect to the
responsibilities of the Bank and any losses or
liabilities of such parties arising out of matters
covered by this Agreement. As between the Bank and
Broker, Broker shall indemnify and hold the Bank
harmless with regard to any losses or liabilities of
the Bank (including counsel fees) imposed on or
incurred by the Bank arising out of any action or
omission of the Bank in accordance with any Advice,
notice or instruction of Broker under this
Agreement. In matters concerning or relating to
this Agreement, the Bank shall not be responsible for
compliance with any statute or regulation regarding
the establishment or maintenance of margin credit,
including but not limited to Regulations T or X of
the Board of Governors of the Federal Reserve System,
or with any rules or regulations of the Office of
the Controller of the Currency (or the Securities and
Exchange Commission). With respect to all securities, however
registered, it is understood that all voting rights and other
rights and powers shall be exercised exclusively by Customer.
Bank's only duty with respect thereto shall be to mail to
Customer any documents received, including proxy statements
and offering circulars, with any proxies for securities
registered in a nominee name executed by such nominee. The
Bank shall not be liable to any party for any acts or
omissions of the other parties to this Agreement.
(e) COMPENSATION. Bank shall be paid as compensation for its
services pursuant to this Agreement such compensation as may
from time to time be agreed upon in writing between Customer
and Bank.
6. DELIVERY OF COLLATERAL TO BROKER
In the event of any failure by Customer to timely comply with any
obligation on Customer's part to be performed or observed under this Agreement
or the Customer Agreement, including, but not limited to, the obligation to
maintain Adequate Margin, or in the event of Customer's Insolvency, Broker may
effect a Closing Transaction or buy-in of any securities of which Customer's
account may be short, provided that Broker shall first use reasonable efforts to
(i) give notice to Customer specifying such default (which notice may be by
telegraph, facsimile transmission or hand delivery) and (ii) hold a discussion
with Customer regarding such default and Broker's intended actions in response
thereto. Notwithstanding the foregoing, neither notice nor a discussion shall be
required in the event market conditions render same impracticable in the
reasonable discretion of Broker. In the event of any default
6
<PAGE>
as aforesaid, after making a reasonable attempt to give notice to and hold a
discussion with Customer (subject to market conditions as set forth above),
Broker shall also have the right to sell any and all Collateral in the Special
Custody Account and to give Advice to Bank to deliver such Collateral free of
payment to Broker, which Advice shall state that, pursuant to this Agreement,
the condition precedent to Broker's right to receive such Collateral free of
payment has occurred. The Bank will provide immediate telephone notice to
Customer of any receipt by Bank of Advice from Broker to deliver Collateral free
of payment, and shall promptly effect delivery of Collateral to Broker. Subject
to applicable requirements of the New York Uniform Commercial Code, such sale or
purchase may be made according to Broker's judgement and may be made at Broker's
discretion, on the principal exchange or other market for such securities, or in
the event such principal market is closed, in a manner commercially reasonable
for such securities.
7. LIMITATION OF BROKER LIABILITY
Broker shall not be liable for any losses, costs, damages, liabilities
or expenses suffered or incurred by Customer as a result of any transaction
executed hereunder, or any other action taken or not taken by Broker hereunder
for Customer's account at Customer's direction or otherwise, except to the
extent that such loss, cost, damage, liability or expense is the result of
Broker's own negligence, recklessness, willful misconduct or bad faith. With
respect to all securities in the Special Custody Account, it is understood that
all voting rights and other rights and powers shall be exercised exclusively by
Customer, and that Broker shall have no responsibilities in connection
therewith, whether pertaining to the delivery of proxy statements or offering
circulars or otherwise.
Notwithstanding the foregoing, no party to this Agreement shall be liable
for any losses caused directly or indirectly by any inability of such party to
perform occasioned by suspension of trading, wars, civil disturbances, strikes,
natural calamities, labor or material shortages, government restrictions, acts
or omissions of exchanges, specialists, markets, clearance organizations or
information providers, delays in mails, delays or inaccuracies in the
transmission of orders or information, governmental, exchange or self-regulatory
organization laws, rules or actions, or any other causes beyond such party's
control, or for any consequential, incidental, punitive, special or indirect
damages, economic loss or lost profits, even if such party has been advised of
the possibility of such damages or loss.
8. CUSTOMER REPRESENTATION
Customer represents and warrants that the Collateral will not be
subject to any other liens or encumbrances other than those granted to the Bank
under the Custodian Agreement.
9. TERMINATION
Any of the parties hereto may terminate this Agreement by 30 days'
notice in writing to the other parties hereto; provided, however, that the
status of any short sales, and of Collateral held at
7
<PAGE>
the time of such notice to margin such short sales shall not be affected by such
termination until the release of such Collateral pursuant to applicable law or
regulations or rules of any self regulatory organization to which the Broker is
subject. In the event of the release of Collateral, the Collateral shall be
transferred to Customer.
10. NOTICE
Written communications hereunder shall be telegraphed, sent by
facsimile transmission or hand delivered as required herein, when another method
of delivery is not specified, may be mailed first class postage prepaid, except
that written notice of termination shall be sent by certified mail, addressed:
(a) if to Bank, to:
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540
Attention: Vice President - Trust Operations
Telephone: (609) 951-2320
Facsimile: (609) 951-2327
(b) if to Customer, to:
Barr Rosenberg Variable Insurance Trust
4 Orinda Way, Building E
Orinda, California 95463
Attention: Edward H. Lyman
Telephone: (510) 254-6464
Facsimile: (510) 253-0141
(c) if to Broker, to:
Bear, Stearns Securities Corp.
245 Park Avenue
New York, New York 10167
Attention: Michael Minikes, Treasurer
Telephone: 212-272-2089
Facsimile: 212-272-3099
8
<PAGE>
11. CONTROLLING LAW
The construction and enforcement of this Agreement shall be subject to
and governed by the laws of the State of New York.
12. LIMITATION OF LIABILITY
To the extent that the trustees of Barr Rosenberg Variable Insurance
Trust are regarded as entering into this Agreement, they do so only as trustees
thereof and not individually. The obligations under this Agreement of Barr
Rosenberg Variable Insurance Trust or Barr Rosenberg VIT Market Neutral Fund
shall not be binding upon any trustee, officer or employee of Barr Rosenberg
Variable Insurance Trust individually, or upon any holder of shares issued by
Barr Rosenberg Variable Insurance Trust individually, but shall be binding only
upon the assets and property of Barr Rosenberg VIT Market Neutral Fund. Such
trustees, officers, employees and holders, when acting in such capacities, shall
not be personally liable under this Agreement, and Broker and Bank shall look
solely to the assets and property of Barr Rosenberg VIT Market Neutral Fund for
the performance of this Agreement thereby and for the payment of any claim
against Barr Rosenberg VIT Market Neutral Fund pertaining to this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their duly authorized officers as of the day and year first above
written.
BARR ROSENBERG VARIABLE INSURANCE TRUST
ON BEHALF OF ITS
BARR ROSENBERG VIT MARKET NEUTRAL FUND
By: /s/ KENNETH REID
-----------------------------------
Name: Kenneth Reid
Title: President & Trustee
CUSTODIAL TRUST COMPANY
By: /s/ KEVIN DARMODY
-----------------------------------
Name: Kevin Darmody
Title: Senior Vice President
BEAR, STEARNS SECURITIES CORP.
By: /s/ MICHAEL MINIKES
-----------------------------------
Name: Michael Minikes
Title: Treasurer
10
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 3 to the Registration
Statement on Form N-1A of our report dated November 16, 1998, relating to the
Statement of Assets and Liabilities of Barr Rosenberg VIT Market Neutral Fund,
which appears in such Statement of Additional Information. We further consent
to the reference to us under the headings "Independent Accountants" and
"Financial Statements" in the Statement of Additional Information and
"Independent Accountants" in the Prospectus.
/S/ PricewaterhouseCoopers LLP
San Francisco, California
April 15, 1999
<PAGE>
BARR ROSENBERG VARIABLE INSURANCE TRUST
Distribution and Shareholder Service Plan
(Effective as of February 22, 1999)
This Plan (the "PLAN"), as amended from time to time, constitutes the
Distribution and Shareholder Service Plan with respect to shares of BARR
ROSENBERG VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"TRUST").
SECTION 1. The Trust may pay a fee (the "DISTRIBUTION AND SERVICE FEE")
for services rendered and expenses borne in connection with the distribution
of shares of the Trust and/or in connection with the provision of direct
client service, maintenance and reporting services ("SHAREHOLDER SERVICES")
to holders of shares of the Trust, including, but not limited to:
teleservicing support in connection with the series of shares of beneficial
interest of the Trust (each a "FUND" and, collectively, the "FUNDS");
delivery of current Trust prospectuses, reports, notices, proxies, and proxy
statements and other informational materials; facilitation of the tabulation
of votes of owners of variable annuity contracts or variable life insurance
contracts that comprise the Trust's separate shareholder accounts ("VARIABLE
CONTRACTS") in the event of a Trust shareholder vote; maintenance of Variable
Contract records reflecting shares purchased and redeemed and share balances,
and the conveyance of that information to the Trust as may be reasonably
requested; provision of support services, including providing information
about the Trust and its Funds and answering questions concerning the Trust
and its Funds; provision and administration of variable contract features for
the benefit of variable contract owners in connection with the Funds. The
Distribution and Service Fee may be paid at an annual rate with respect to
each Fund not to exceed 0.25% of a Fund's average daily net assets. Subject
to such limits and subject to the provisions of Section 8 hereof, the
Distribution and Service Fee shall be as approved from time to time by (a)
the Trustees of the Trust and (b) the Independent Trustees of the Trust, and
may be paid in respect of services rendered and expenses borne in the past as
to which no Distribution and Service Fee was paid on account of such
limitation. If at any time this Plan shall not be in effect with respect to
all Funds of the Trust, the Distribution and Service Fee shall be computed on
the basis of net assets of those Funds for which the Plan is in effect. The
Distribution and Service Fee shall be accrued daily and paid monthly or at
such other intervals as the Trustees shall determine.
SECTION 2. The Distribution and Service Fee may be spent by its
recipient(s) on any activities or expenses primarily intended to result in
the sale of shares of the Trust and/or in connection with the provision of
Shareholder Services to holders of shares of the Trust. Such permissible
activities, expenses and services include, without limitation, compensation
to, and expenses (including overhead and telephone expenses) of, financial
consultants or other employees of a recipient of the Distribution
<PAGE>
and Service Fee, printing of prospectuses and reports for other than existing
shareholders, advertising, preparing, printing and distributing sales
literature and forwarding communications from the Trust to shareholders. A
recipient's expenditures may include, without limitation, compensation to,
and expenses (including telephone and overhead expenses) of, financial
consultants or other employees of such recipient who aid in the processing of
purchase or redemption requests for Trust shares or the processing of
dividend payments with respect to Trust shares, who provide information
periodically to shareholders showing their accounts' positions in a Fund's
shares, who forward communications from the Trust to shareholders, who render
ongoing advice concerning the suitability of particular investment
opportunities offered by the Trust in light of a shareholder's needs, who
respond to inquiries from shareholders relating to such services, or who
train personnel in the provision of such services.
SECTION 3. This Plan shall not take effect until it has been approved,
together with any related agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be required by Section 12(b) of
the Investment Company Act of 1940, as amended (the "ACT"), or the rules and
regulations thereunder), of both (a) the Trustees of the Trust, and (b) the
Independent Trustees of the Trust cast in person at a meeting called for the
purpose of voting on this Plan or such agreement or agreements.
SECTION 4. This Plan shall continue in effect for a period of more than
one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval
of this Plan in Section 3. It is acknowledged that a recipient of the
Distribution and Service Fee may expend or impute interest expense in respect
of activities or expenses under this Plan and the Trustees and the
Independent Trustees may give such weight to such interest expense as they
determine in their discretion.
SECTION 5. Any person authorized to direct the disposition of monies
paid or payable by the Trust pursuant to this Plan or any related agreement
shall provide to the Trustees of the Trust, and the Trustees shall review, at
least quarterly, a written report of the amounts so expended and the purposes
for which such expenditures were made.
SECTION 6. This Plan may be terminated at any time with respect to any
Fund by vote of a majority of the Independent Trustees, or by vote of a majority
of the outstanding voting securities of that Fund.
SECTION 7. All agreements with any person relating to implementation of
this Plan with respect to any Fund shall be in writing, and any agreement
related to this Plan with respect to any Fund shall provide:
A. That such agreement may be terminated at any time, without payment
of any penalty, by vote of a majority of the Independent Trustees or
by vote
-2-
<PAGE>
of a majority of the outstanding voting securities of such Fund, on
not more than 60 days' written notice to any other party to the
agreement; and
B. That such agreement shall terminate automatically in the event of
its assignment.
SECTION 8. This Plan may not be amended to increase materially the
Distribution and Service Fee permitted pursuant to Section 1 hereof without
approval in the manner provided in Section 3 hereof, and all material amendments
to this Plan shall be approved in the manner provided for approval of this Plan
in Section 3 hereof.
SECTION 9. As used in this Plan, (a) the term "Independent Trustees"
shall mean those Trustees of the Trust who are not interested persons of the
Trust, and have no direct or indirect financial interest in the operation of
this Plan or any agreements related to it, and (b) the terms "assignment",
"interested person" and "majority of the outstanding voting securities" shall
have the respective meanings specified in the Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
SECTION 10. This Plan has been adopted pursuant to Rule 12b-1 under the
Act and is designed to comply with all applicable requirements imposed under
such Rule. All Distribution and Service Fees shall be deemed to have been paid
under this Plan and pursuant to clause (b) of such Rule.
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